Defra
Air Quality Strategy
Review
Competition Effects of Measures in the Air
Quality Strategy Review
Draft Report
October 2005
Entec UK Limited
Report for
Defra
Emma Powell
Economic Advisor
Environment Protection Economics
Defra
5/F4 Ashdown House
123 Victoria Street
London SW1E 6DE
Air Quality Strategy
Review
Competition Effects of Measures in the Air
Quality Strategy Review
Main Contributors
Ben Grebot
Caspar Corden
Christoph Hugi
Michael Sorensen
Issued by
Draft Report
October 2005
Entec UK Limited
…………………………………………………………
Caspar Corden
Approved by
…………………………………………………………
Alistair Ritchie
Entec UK Limited
17 Angel Gate
City Road
London
EC1V 2SH
England
Tel: +44 (0) 207 843 1400
Fax: +44 (0) 207 843 1410
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Disclaimer
This report has been prepared in a working draft form and has not
been finalised or formally reviewed. As such it should be taken as
an indication only of the material and conclusions that will form
the final report. Any calculations or findings presented here may
be changed or altered and should not be taken to reflect Entec’s
opinions or conclusions.
Document Revisions
No
Details
Date
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i
Contents
1.
2.
Introduction
1
1.1
Review of the Air Quality Strategy
1
1.2
Approach to Competition Assessment
1
Summary of Competition Effects
3
2.1
Possible Impacts upon Competition
3
2.2
Implications for the Air Quality Strategy Review
5
Appendix A Detailed Analysis
Measures 1 & 2: Euro standards V & VI for new LDVs (2010) & HDVs
(2013)
A2
Measure 3B: Programme of incentives for early uptake of Euro V & VI
standards
A7
Measure 8: Retrofit of DPFs on HDVs & captive fleets
A12
Measure 9: Domestic combustion (fuel switching)
A15
Measure 12: Small combustion plants (20-50 MWth)
A18
Measure 14: Shipping measure through IMO
A21
Measure 22: All road user charging scheme
A25
Measure 23: Combined measure 3B plus 21 (updated LEV scenario –
replacement of petrol & diesel cars)
A27
Table A.1
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Summary of Competition Filter Questions
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1.
Introduction
1.1
Review of the Air Quality Strategy
Defra is currently undertaking a review of the Air Quality Strategy (AQSR). This has evaluated
a number of possible measures for achieving further improvements in air quality in terms of
their relative costs and benefits. Based on this evaluation, as well as other considerations, Defra
is developing a Regulatory Impact Assessment to accompany a consultation on the Review.
Under a contact with Defra for the preparation of regulatory environmental impact assessments
in relation to proposals for air quality legislation, Entec has produced this report to provide input
to the above Review in relation to the Competition Assessment aspects of the RIA.
The possible measures under the AQSR that are covered by this report include:
• Uptake of new ‘Euro’ standards for vehicles, in particular to control emissions of
PM and NOx in light and heavy duty vehicles, with a programme of incentives for
early uptake (measures 1, 2 and 3B).
• Requirements for retrofitting of diesel particulate filters on heavy duty vehicles,
buses and coaches (measure 8).
• Requiring a 100% switch in domestic combustion from coal to natural gas where
available and oil where not for Northern Ireland only (measure 9).
• Implementation of emission limits for NOx and SO2 from small combustion
installations after 2013, through a new directive expected to be introduced under
the Thematic Strategy (measure 12).
• Use of 1% sulphur fuel in the largest ships from 2010 and reducing NOx emissions
from new ships (measure 14).
• A road user charging scheme introduced from 2015 (measure 22).
• NOx reduction through uptake of low emission vehicles (measure 211).
1.2
Approach to Competition Assessment
An approach to undertaking such Competition Assessments is set out by the Cabinet Office2,
referring in turn to more detailed Guidelines for competition assessment set out by the Office of
Fair Trading3. The approach to undertaking the assessment has been agreed with Defra.
1
It is understood that measures 23, 25 and 27 are likely to be included. However, these are a
combination of other measures (measure 23 is a combination of 3B and 21; measure 25 is a
combination of 3B, 21 and 12; and measure 27 is a combination of 3B and 12).
2
http://www.cabinetoffice.gov.uk/regulation/ria/ria_guidance/index.asp.
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Given the tight timescales available for undertaking the work, the assessment has been
undertaken through applying the ‘competition filter’ set out in the OFT’s Guidelines and a more
detailed investigation into key specific issues where any competition effects may be likely to
arise. However, it has not been practicable to undertake a full, detailed competition assessment
across all affected markets. Therefore, the likely competition impacts have been assessed in
mainly qualitative terms based on a quantitative and qualitative understanding of the affected
markets, the current market structure and nature of competition and the likely positive and
negative impacts of the possible policy measures.
Where applicable, the more detailed aspects of the competition assessment have been
undertaken through:
• Developing an understanding of the markets involved based on a literature review;
• Undertaking a screening of potential effects upon competition based on an internal
brainstorming session;
• Incorporating information from relevant literature sources in order to better
characterise the potential effects on competition based on previous analyses; and,
• Identification of potential means of reducing any negative effects on competition.
This more detailed analysis, where deemed appropriate, has been based on the criteria set out in
section 5.39 of the OFT’s Guidelines, namely whether the measures will alter current market
structure; increase barriers to entry or exit; reduce the strength of competition; reduce
differentiation and customer choice; or restrict innovation.
Section 2 of this report provides a summary of the main conclusions of the work. Appendix A
includes details of the more detailed analysis undertaken for each measure.
Given that a full, detailed competition assessment has not been possible within the resources
and timescales of this study, there may be some potential adverse effects upon competition that
have not been identified or characterised. As such, the findings of this report should be
considered as a preliminary assessment of competition effects of measures in the AQSR.
3
http://www.oft.gov.uk/NR/rdonlyres/A7138977-6FE2-45DE-BE32-3AB6E767664A/0/oft355.pdf.
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2.
Summary of Competition Effects
2.1
Possible Impacts upon Competition
Only one measure (number 94) has been identified through the ‘competition filter’ as requiring a
more detailed assessment. However, the filter has identified a number of other areas where
competition may be affected and these have been explored in a little more detail.
Measures 1 & 2: New ‘Euro’ standards for light and heavy duty vehicles
The main markets affected would be vehicle & engine manufacturers/suppliers; manufacturers
& suppliers of exhaust after treatment systems; and owners/operators of vehicles. These
measures would not be expected to alter market structures in general, although if the standards
necessitate particular technologies, those producing alternative abatement techniques may be
excluded from the market. The strength of competition amongst manufacturers/suppliers could
potentially be affected, depending upon the technologies required. No significant effects on
innovation would be expected; indeed innovation by UK and EU firms may be stimulated by the
requirements.
Whilst the burden upon smaller manufacturers may be proportionately larger, it is envisaged
that the EU vehicle type approval framework directive could be employed, in order to limit the
effects of measures on manufacturers whose world-wide production is less than 500 units per
annum.
Measure 3B: Incentives for early uptake of ‘Euro’ standards
The key markets affected would be essentially the same as those for implementation of the
standards under measures 1 and 2. Such incentives would be unlikely to alter the current
vehicle and engine manufacture/supply market structure given that all suppliers would be
subject to the same requirements. Whilst such early incentives could create disparities between
the UK and other countries, it is understood that German, Austrian and Dutch governments have
already tabled plans for such fiscal incentives, with France and Sweden having expressed an
interest.
Manufacturers may also have to produce a greater range of models to satisfy both markets with
and without incentives for vehicles meeting the voluntary standards (with potentially significant
costs and higher unit costs due to smaller production runs). It may also prove difficult to pass
on cost increases to (non-EU) markets that are not subject to the same requirements.
In terms of suppliers of abatement equipment, firms that manufacture the required technologies
will have a competitive advantage over those that do not and could gain a greater market share
potentially reducing competition.
4
Measure 9: 100% switch in domestic combustion from coal to natural gas where available or oil where
not for Northern Ireland only.
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Firms owning/operating vehicles that are able to take advantage of these incentives (e.g. in fleet
renewal) may gain an advantage over those that are required to purchase vehicles after the
incentivisation period has ended (this might also mean slightly higher start-up costs for newentrants to the market, in the short-term at least).
Measure 8: Diesel particulate filters for heavy duty vehicles, buses, etc.
This is likely to be accomplished through incentive schemes; it will mainly affect suppliers of
abatement equipment and owners/operators of vehicles. The measure could potentially exclude
suppliers of alternative abatement technologies from the market. It should not reduce the
strength of competition between vehicle operators/owners, provided that it is voluntary and not
mandatory.
Measure 9: Domestic combustion (fuel switching)
A 100% switch in domestic combustion from coal to gas (or oil where applicable) would change
the structure of the domestic fuel supply market, forcing suppliers of coal and/or oil out of the
market. However, this should be seen in the context of a ‘business as usual’ (BAU) increase in
the proportion of gas in the UK’s domestic combustion fuel mix, to a point where gas
significantly dominates the fuel mix under BAU trends. Customer choice and differentiation
would be affected where usage of coal (or oil) is no longer allowable due to this policy, though
this represents a small and declining part of the overall market.
Measure 12: Small combustion plants
This measure would affect a range of markets and installations (such as power generation,
autogenerators, various industrial sources, public services and others), so it has not been
possible to define individual markets in any detail. The measure (introduced through a future
directive) should not affect market structures significantly since all EU-based firms would be
equally affected - though non-EU firms would not be affected. Those installations below the
minimum threshold for inclusion (<20MW) may gain an advantage over those above the
threshold.
Measure 14: Shipping measure to be introduced through the IMO
This measure would affect petroleum refineries producing fuel for shipping, bunker suppliers,
shipping operators, as well as ship and abatement technology manufacturers/suppliers.
However, it would affect all ships globally that are above the specified size threshold. It would
not be expected to affect market structure significantly, nor create significant barriers to
entering/exiting the market (though new firms may face higher initial capital outlay).
Measure 22: Road user charging scheme
This would affect owners and operators of vehicles. This could potentially affect market
structure, through imposing costs on lower-margin businesses that may be less able to bear
increases (assuming there is an associated increase in the overall cost of road
travel/distribution); this could also, therefore, reduce the strength of competition within a
market. There may also be a potential concern for treatment of non-UK vehicles on UK roads:
competition may be affected if all vehicles are not treated equally.
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Measure 23: Low emission vehicles
In addition to incentives for early uptake of ‘Euro’ standards (measure 3B), this measure would
incentivise replacement of certain petrol and diesel cars with low emission vehicles. It would
affect manufacturers/suppliers of vehicles/engines, as well as vehicle owners and operators.
In the short-term, this measure may favour the small number of companies currently supplying
LEVs to the UK market (though several other manufacturers are currently developing their own
models). In the longer term however, the number of firms manufacturing and supplying LEVs
should increase thus increasing the strength of competition, improving customer choice and
encouraging innovation.
2.2
Implications for the Air Quality Strategy Review
Of the potentially adverse effects upon competition identified, those that appear to be potentially
most significant are:
1. An increased reduction in the market for coal and oil used for domestic combustion, though
this should be seen in the context of the ongoing trend towards gas in this market. The
timing of requirements under this measure could take such existing trends into account.
2. Potential for additional costs for UK suppliers related to ‘Euro’ standards, particularly in
relation to supplying more than one market simultaneously (either those with and without
incentives or those not subject to Euro standards, such as those outside the EU). The
potential for harmonisation of requirements with other countries could, therefore, be
examined in order to reduce this type of impact.
3. Suppliers of alternative abatement equipment to that which may be required under the
measures (e.g. diesel particulate filters) could potentially be affected in terms of their ability
to compete in markets where particular technologies are specified/required. This could
potentially be avoided by providing equivalent incentives for measures that can achieve an
equivalent level of environmental benefit.
4. Non-EU firms may gain a competitive advantage through additional costs imposed upon EU
firms operating small combustion installations. The requirements of the possible Directive
are not expected to be introduced before around 2013, allowing time to consider possible
alignment with non-EU trading blocks.
5. Potential for differential impacts between UK and non-UK registered vehicles in the event
of a road-user charging scheme, as well as for reduced ability of lower-margin firms to
compete in the event of increased costs. Possible issues to consider are techniques for
charging non-UK registered vehicles whilst in the UK, as well as structuring the charging
system so as not to impose excessive burdens upon businesses likely to be most adversely
affected (and also to avoid social exclusion impacts).
6. Existing suppliers of Low Emission Vehicles (LEVs) may gain a competitive advantage
over other firms in the near-term, though many other firms are currently developing their
own vehicles. Given the likely timing over which measures will be introduced, this is not
expected to pose significant concerns as regards competition.
It is important to note that some of the measures proposed under the AQSR, and the resulting
implications for competition, may actually occur independently to the AQSR. For example, the
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proposed Euro standards (excluding any national incentive schemes) will be implemented at an
EU level (in the form of a directive) regardless of whether the AQSR and any of the proposed
measures are taken forward. Other measures that may also progress independently of the AQSR
include measures 12 (reduced NO2 and SO2 emissions from Small Combustion Plants) and 14
(lower fuel sulphur content and reduced NOx emissions from new ships) which are likely to be
implemented at an EU (directive) and global (via the IMO) level, respectively.
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Appendix A
Detailed Analysis
30 Pages
The following sections provide details of the analysis undertaken for each of the measures
considered within this project. The analysis has been undertaken in accordance with the Office
of Fair Trading Guidelines for Competition Assessment, which are referred to in the Cabinet
Office Regulatory Impact Assessment Guidance.
For each measure, the following information has been provided:
• A brief summary of the requirements of the measure, as currently foreseen;
• Information on the markets affected and current market structures, forming the
basis for the Competition Assessment;
• Details of the approach to and results of undertaking the ‘competition filter’,
responding to the questions outlined in Table A.1;
• A qualitative description of the expected impacts upon competition of the measure
(in accordance with key questions set out in the Office of Fair Trading guidelines).
Where the competition filter has indicated a higher potential for significant
detrimental effects on competition, this qualitative assessment has been undertaken
in greater detail.
Given the timescales available for undertaking this work, a full and detailed assessment across
all affected markets has not been undertaken. Competition impacts have been assessed in
mainly qualitative terms based on a qualitative and quantitative understanding of the affected
markets, current market structure and nature of competition.
Table A.1
Summary of Competition Filter Questions
Question
Answer
Yes/No
Q1: In the market(s) affected by the new regulation, does any firm have more than 10% market share?
Q2: In the market(s) affected by the new regulation, does any firm have more than 20% market share?
Q3: In the market(s) affected by the new regulation, do the largest three firms together have at least 50%
market share?
Q4: Would the costs of the regulation affect some firms substantially more than others?
Q5: Is the regulation likely to affect the market structure, changing the number or size of firms?
Q6: Would the regulation lead to higher set-up costs for new or potential firms that existing firms do not
have to meet?
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Question
Answer
Yes/No
Q7: Would the regulation lead to higher ongoing costs for new or potential firms that existing firms do not
have to meet?
Q8: Is the sector characterised by rapid technological change?
Q9: Would the regulation restrict the ability of firms to choose the price, quality, range or location of their
products?
Measures 1 & 2: Euro standards V & VI for new LDVs (2010)
& HDVs (2013)
Summary of Requirements
The European Commission is currently consulting on the next round of European vehicle
standards for LDVs (Euro V) and HDVs (Euro VI). The proposed measures are high and low
scenarios of what the new Euro standards are anticipated to require. Measure 1 (low scenario)
involves a 20% reduction in NOx emissions from all diesel LDVs, a 50% NOx reduction from
diesel HDVs and Diesel Particulate Filters (DPFs) on diesel LDVs. These would be introduced
in 2010 and 2013 for LDVs and HDVs, respectively. Measure 2 (high scenario) involves a 50%
reduction in NOx for petrol LDVs from 2010, a 40% reduction in NOx from all diesel LDVs
from 2010 and a 68% reduction from all LDVs from 2015, a 75% reduction in NOx from HDVs
and DPFs on all diesel vehicles (LDVs and HDVs). These would be introduced in 2010 for
LDVs (and 2015 for tighter NOx limits) and 2013 for HDVs. The durability of vehicles for both
the low and high scenarios is 100,000 km.
The proposed measure would affect vehicle, engine and exhaust after treatment manufacturers
and suppliers and owners and operators of vehicles.
Market definition and current market structure
Who is affected?
Vehicle & engine
manufacturers & suppliers
Manufacturers & suppliers
of exhaust after treatment
systems
Owners & operators of
vehicles
Who do they compete
against?
National, EU & global
National, EU & global
Mainly national (some EU)
Are competitors affected
by the regulation or not?
Yes. Euro standards must
be met by both EU and
non-EU manufacturers in
order to sell vehicles in the
EU market.
Yes. New Euro standards
should apply to all
manufacturers/suppliers of
exhaust after treatment
systems.
Scenarios involving
significant reductions in
NOx and/or PM limits for
diesel vehicles could
potentially disadvantage
manufacturers focusing on
those areas of production.
Some manufacturers may
be affected differently
depending upon the type of
systems they produce and
the requirements of the
new standards (for
example, if the new
standards for LDVs require
Yes (road transport). All
new vehicles bought after
2010 (LDVs) and 2013
(HDVs) will be compliant
with Euro V and VI,
respectively. Increased
vehicle costs.
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No (other forms of
transport). Euro standards
do not apply to air, rail or
waterway transport
although these sectors are
subject to their own
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What characterises the
market in terms of type of
competition: price,
quality of product or
reliability of supply?
Price and quality of
product.
particulate filters for new
diesel vehicles but not
SCR).
regulations which road
vehicles do not have to
comply with (for example,
the NRMM5 Directive
2004/26/EC).
Price and quality of
product.
Price and quality of
product.
Vehicle, engine and exhaust after treatment manufacturers and suppliers face competition from
EU and non-EU firms. Vehicle owners and operators, however, generally compete at a national
level although they may face some competition from other EU firms.
The vehicle and engine manufacture and supply market differs significantly between vehicle
types with many firms specialising in specific areas. In 2004, the Ford Group had approximately
19% of the UK car market (in terms of cars sold), the GM Group 13%, the Volkswagen AG
Group 13% and the PSA Group 11%. For commercial LDVs, Ford is again the market leader
with approximately 28% of the UK market in 2004 (in terms of commercial LDVs sold) and
Vauxhall is next with 15%. For commercial HDVs, DAF Trucks held approximately 22%
market share in 2004 (in terms of commercial HDVs sold), Mercedes 18% and Iveco 14%. For
buses, Volvo held approximately 27% market share (in terms of buses sold) in 2004, Transbus
24% and Scania 11%.
Competition filter
Vehicle & engine manufacturers & suppliers
Question
No.
1
2
5
Yes/No
Comments
YES (CARS)
In 2004 the Ford Group sold approximately 19% of all cars sold in the UK, the GM Group
13%, the Volkswagen AG Group 13% and the PSA Group 11%.
YES
(Commercial
LDVs)
In 2004 Ford sold approximately 28% of all commercial LDVs sold in the UK and
Vauxhall sold 15%.
YES
(Commercial
HDVs)
In 2004 DAF Trucks sold approximately 22% of all commercial HDVs in the UK,
Mercedes 18% and Iveco 14%.
YES (Buses)
In 2004 Volvo sold approximately 27% of all buses sold in the UK, Transbus 24% and
Scania 11%.
NO (CARS)
See above.
YES
(Commercial
LDVs)
See above.
YES
(Commercial
HDVs)
See above.
YES (Buses)
See above.
Non-Road Mobile Machinery
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Question
No.
Yes/No
Comments
NO
See above.
YES
(Commercial
LDVs)
The largest three firms (Ford, Vauxhall and Citroen) together have just over 50% market
share (in terms of number of vehicles sold in 2004).
YES
(Commercial
HDVs)
The largest three firms (DAF Trucks, Mercedes and Iveco) together have almost 54%
market share (in terms of number of vehicles sold in 2004)
YES (Buses)
The largest three firms (Volvo, Transbus and Scania) together have almost 62% market
share (in terms of number of vehicles sold in 2004).
4
NO
New Euro standards would apply equally to all vehicle and engine manufacturers and
suppliers. Cost impacts would generally be similar across all firms (although larger firms
with greater output may be able to reduce unit costs through bulk production) and the
market structure is unlikely to be affected.
5
NO
Given that requirements apply equally to all manufacturers, the measure is not likely to
change the market structure. Whilst the burden upon smaller manufacturers will be
larger, it is envisaged that new Euro standards would be formulated under the terms of
the EU vehicle type approval framework directive allowing Member States to limit the
effects of measures on manufacturers whose world-wide production is less than 500
units per annum.
6
NO
New Euro standards will not create higher costs (set-up or ongoing) for new
manufacturers than for existing manufacturers as the measure will apply to all firms.
7
NO
See (6) above.
8
NO
The motor vehicle market is not characterised by rapid technological change.
Technological development tends to be gradual and is generally in response to
legislation (for example, previous Euro standards).
9
NO
Although new Euro standards are likely to lead to an increase in the price of vehicles due
to the additional abatement technologies required manufacturers will still have the ability
to set their own prices. In addition the quality, range or location of products should not be
affected.
3
UK manufacturers should not be disadvantaged compared to firms in other countries that
supply to the UK market. However, it may not prove possible for firms to pass on
increases in production costs in markets outside the EU whilst retaining current market
share.
Manufacturers & suppliers of exhaust after treatment systems
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
The proposed Euro standards would not impose any costs on manufacturers and suppliers
of exhaust after treatment systems. Any additional costs of producing specific systems will
be passed onto the vehicle manufacturers.
5
YES
The new regulations could affect the market structure depending upon the specific
requirements of the standards. Some manufacturers may be affected differently depending
upon the type of systems they produce and the requirements of the new standards (for
example, if the new standards for LDVs require particulate filters for new diesel vehicles but
not SCR). Those firms that manufacture the required technologies will have a competitive
advantage over those that do not.
6
NO
The new regulations should not lead to higher costs (set up and ongoing) for new or
potential firms that existing firms do not have to meet.
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Question
No.
Yes/No
Comments
7
NO
See above.
8
NO
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards). The Euro standards in question have been under consideration
for some time and have been developed taking into account the technologies available from
manufacturers/suppliers.
9
NO
Firms will have to charge more for any new systems that are required by vehicle
manufacturers to meet the new regulations. However, these costs will be borne by the
vehicle manufacturers as they will be required to install systems that comply with the
regulations (though they may be able to pass on some or all of these costs).
The measures would, in fact, be expected to increase firms ability to price, quality and range
of their products.
The new measures should not restrict the ability of firms to choose the quality, range or
location of their products.
Owners & operators of vehicles (fleets)
Question
No.
Yes/No
Comments
1
NO
Large number of relatively small owners and operators of vehicles (haulage firms, delivery
companies, hire companies etc.).
2
NO
See above.
3
NO
See above.
4
YES
Owners and operators of vehicles will only be affected when renewing their fleet as
regulations only apply to new vehicles.
However, costs passed on from manufacturers to vehicle owners will affect those firms (e.g.
freight delivery) to a greater extent than firms using alternative forms of transport.
5
NO
The new Euro standards should not affect the market structure as owners and operators are
not obliged to renew their fleet.
6
YES
New or potential firms may incur higher set up costs (purchase of vehicles) than existing
firms if they start up shortly after the regulations come into place (2010 and/or 2013) and
purchase new vehicles.
7
NO
It is unlikely that ongoing costs will be higher for new or potential firms that existing firms do
not have to meet. However, there may be some additional maintenance/running costs
associated with vehicles meeting the new Euro standards if specific technologies are
required (for example, SCR requires a reducing agent such as urea). New or potential firms
will only incur these additional ongoing costs if they purchase new vehicles after these
regulations come into place and, in the longer-term, all firms will face these costs.
8
NO
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards).
9
NO
The measures should not affect the ability of firms to choose the price, quality, range or
location of their products.
Whilst no detailed information on the market for manufacturers and suppliers of exhaust after
treatment systems was available within the tight timescales of this study, a detailed competition
assessment is not required, given the number of negative answers in the competition filter.
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Impacts on competition
Would the proposed measure alter current market structure?
The proposed new Euro Standards are unlikely to alter the current vehicle and engine
manufacture and supply market structure as they would apply equally to all manufacturers and
suppliers (EU and non-EU) and the cost impacts would generally be similar across all firms
(although larger firms with greater output may be able to reduce unit costs through bulk
production). Although the burden upon smaller manufacturers may be proportionately larger, it
is envisaged that the EU vehicle type approval framework directive could be employed in order
to limit the effects of measures on manufacturers whose world-wide production is less than 500
units per annum.
For manufacturers and suppliers of exhaust after treatment systems, the new regulations could
potentially affect the market structure depending upon the specific requirements of the
standards. Some manufacturers may be affected differently depending upon the type of systems
they produce and the requirements of the new standards (for example, if the new standards for
LDVs require particulate filters for new diesel vehicles but not SCR). Those firms that
manufacture the required technologies will have a competitive advantage over those that do not.
Vehicle owners and operators should not be directly affected by the new Euro standards as they
have no obligation to renew their fleet(s).
Would the proposed measure increase barriers to entry or exit?
The proposed Euro Standards should not have any significant impact on barriers to entry or exit
of any of the markets identified above. The only potential impact may be that firms purchasing
vehicles after the standards come into force would face slightly higher set up costs than existing
firms.
Would the proposed measure reduce the strength of competition?
The strength of competition between vehicle and engine manufacturers and suppliers and
between vehicle owners and operators should not be affected by the proposed new Euro
Standards. However, the strength of competition between manufacturers and suppliers of
exhaust after treatment systems could potentially be affected depending upon the type of
systems required to comply with the new standards.
Would the proposed measure reduce differentiation and customer choice?
The proposed Euro standards would not reduce differentiation or customer choice.
Would the proposed measure restrict innovation?
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards). The proposed Euro standards should not restrict innovation as it
should encourage firms to develop and/or modify vehicles, engines and/or exhaust after
treatment systems in order to meet the standards.
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Measure 3B: Programme of incentives for early uptake of
Euro V & VI standards
Summary of Requirements
The proposed measure involves a programme of incentives to encourage the early uptake of
Euro V and VI compliant vehicles prior to the legislative deadline by which all new vehicles
must comply. This would be implemented based on the standards described in Measures 1 and 2
with incentives available from 2007 for LDVs and 2010 for HDVs. The exact details of any
programme of incentives are yet to be decided and could be implemented via existing fiscal
instruments (for example, company car tax), Vehicle Excise Duty (VED), enhanced capital
allowances or via a grants scheme. It is envisaged that any incentive would need to cover any
incremental technology/fuel costs.
The proposed measure would affect vehicle, engine and exhaust after treatment manufacturers
and suppliers and owners and operators of vehicles.
Market definition and current market structure
Who is affected?
Vehicle & engine
manufacturers & suppliers
Manufacturers & suppliers
of exhaust after treatment
systems
Owners & operators of
vehicles
Who do they compete
against?
National, EU & global
National, EU & global
Mainly national (some EU)
Are competitors affected
by the regulation or not?
Indirectly. A programme of
incentives for early uptake
of Euro V and VI standards
should encourage owners
and operators to purchase
these vehicles in advance
of the 2010 and 2013
legislative deadlines.
Indirectly. A programme of
incentives for early uptake
of Euro V and VI standards
should encourage owners
and operators to purchase
these vehicles in advance
of the 2010 and 2013
legislative deadlines.
Manufacturers and
suppliers would therefore
be at a competitive
advantage if they begin
producing Euro V and VI
compliant vehicles prior to
the legislative deadlines so
that they can capture those
owners and operators who
wish to take advantage of
the incentives on offer.
The demand for exhaust
after treatment systems
should be increased as
manufacturers and
suppliers are encouraged
to produce Euro V and VI
compliant vehicles prior to
the legislative deadlines.
Yes (road transport).
Depending upon how the
scheme is implemented (in
terms of availability and
levels of incentives) all
owners and operators of
vehicles could potentially
take advantage of the
incentives on offer to
purchase Euro V and VI
vehicles prior to the
legislative deadlines.
Euro standards must be
met by both EU and nonEU manufacturers in order
to sell vehicles in the EU
market so all firms would
be affected by the
regulation. UK firms may
be affected more
significantly, though similar
incentive schemes are
expected to be introduced
in other EU member states.
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Some manufacturers may
be affected differently
depending upon the type of
systems they produce and
the requirements of the
new standards (for
example, if the new
standards for LDVs require
particulate filters for new
diesel vehicles but not
SCR).
Euro V and VI vehicles are
likely to be more expensive
to purchase than earlier
Euro standards so those
firms able to take
advantage of the incentives
available may save costs in
the long run (i.e. by not
having to purchase
vehicles at full price after
the legislative deadlines).
No (other forms of
transport). Euro standards
do not apply to air, rail or
waterway transport
although these sectors are
subject to their own
regulations which road
vehicles do not have to
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comply with (for example,
the NRMM6 Directive
2004/26/EC).
Scenarios involving
significant reductions in
NOx and/or PM limits for
diesel vehicles could
potentially disadvantage
manufacturers focusing on
those areas of production.
What characterises the
market in terms of type of
competition: price,
quality of product or
reliability of supply?
Price and quality of
product.
Price and quality of
product.
Price and quality of
product.
Vehicle, engine and exhaust after treatment manufacturers and suppliers face competition from
EU and non-EU firms. Vehicle owners and operators, however, generally compete at a national
level although they may face some competition from other EU firms.
The vehicle and engine manufacture and supply market differs significantly between vehicle
types with many firms specialising in specific areas. In 2004, the Ford Group had approximately
19% of the UK car market (in terms of cars sold), the GM Group 13%, the Volkswagen AG
Group 13% and the PSA Group 11%. For commercial LDVs, Ford is again the market leader
with approximately 28% of the UK market in 2004 (in terms of commercial LDVs sold) and
Vauxhall is next with 15%. For commercial HDVs, DAF Trucks held approximately 22%
market share in 2004 (in terms of commercial HDVs sold), Mercedes 18% and Iveco 14%. For
buses, Volvo held approximately 27% market share (in terms of buses sold) in 2004, Transbus
24% and Scania 11%.
Competition filter
Vehicle & engine manufacturers & suppliers
Question
No.
1
2
6
Yes/No
Comments
YES (CARS)
In 2004 the Ford Group sold approximately 19% of all cars sold in the UK, the GM Group
13%, the Volkswagen AG Group 13% and the PSA Group 11%.
YES
(Commercial
LDVs)
In 2004 Ford sold approximately 28% of all commercial LDVs sold in the UK and
Vauxhall sold 15%.
YES
(Commercial
HDVs)
In 2004 DAF Trucks sold approximately 22% of all commercial HDVs in the UK,
Mercedes 18% and Iveco 14%.
YES (Buses)
In 2004 Volvo sold approximately 27% of all buses sold in the UK, Transbus 24% and
Scania 11%.
NO
See above.
YES
(Commercial
LDVs)
See above.
Non-Road Mobile Machinery
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Question
No.
Yes/No
Comments
YES
(Commercial
HDVs)
See above.
YES (Buses)
See above.
NO
See above.
YES
(Commercial
LDVs)
The largest three firms (Ford, Vauxhall and Citroen) together have just over 50% market
share (in terms of number of vehicles sold in 2004).
YES
(Commercial
HDVs)
The largest three firms (DAF Trucks, Mercedes and Iveco) together have almost 54%
market share (in terms of number of vehicles sold in 2004)
YES (Buses)
The largest three firms (Volvo, Transbus and Scania) together have almost 62% market
share (in terms of number of vehicles sold in 2004).
4
NO
New Euro standards would apply equally to all firms and they have the option of
choosing how far in advance of the legislative deadlines to manufacture Euro V and VI
vehicles. Cost impacts would generally be similar across all firms (although larger firms
with greater output may be able to reduce unit costs through bulk production) and the
market structure is unlikely to be affected.
5
NO
See above.
6
NO
New Euro standards and incentives for their purchase will not create higher costs (set-up
or ongoing) for new manufacturers than for existing manufacturers.
7
NO
See above. Ongoing costs for new manufacturers may actually be lower if, for example,
an older production line for vehicles compliant with less stringent standards were
required for existing manufacturers.
8
NO
The motor vehicle market is not characterised by rapid technological change.
Technological development tends to be gradual and is generally in response to
legislation (for example, previous Euro standards).
9
YES
Although new Euro standards are likely to lead to an increase in the price of vehicles due
to the additional abatement technologies required, manufacturers will still have the ability
to set their own prices.
3
However, manufacturers may have to produce a greater range of models to satisfy both
markets with and without incentives for vehicles meeting the voluntary standards. This
could involve significant costs to run separate production lines for products that differ in
terms of emissions standard. In addition unit cost increases would be higher due to
smaller production runs of compliant vehicles over which to recover development costs.
Depending on the level of any incentive offered, manufacturers might be able to recoup
their increased costs via higher pricing for compliant vehicles (taken directly from DfT
RIA on Euro V for LDVs).
Manufacturers & suppliers of exhaust after treatment systems
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
The proposed Euro standards and their incentives would not impose any additional costs on
manufacturers and suppliers of exhaust after treatment systems. Any additional costs of
producing specific systems will be passed onto the vehicle manufacturers.
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Question
No.
Yes/No
Comments
5
YES
The new regulations and any incentives to encourage their early uptake could affect the
market structure depending upon the specific requirements of the standards. Some
manufacturers may be affected differently depending upon the type of systems they
currently produce and the requirements of the new standards (for example, if the new
standards for LDVs require particulate filters for new diesel vehicles but not SCR). Those
firms that manufacture the required technologies will have a competitive advantage over
those that do not.
6
NO
The new regulations and any incentives to encourage their early uptake should not lead to
higher costs (set up and ongoing) for new or potential firms that existing firms do not have to
meet.
7
NO
See above.
8
NO
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards).
9
NO
Firms are likely to charge more for any new and/or specific systems that are required by
vehicle manufacturers to meet the new regulations. However, these costs will be borne by
the vehicle manufacturers as they will be required to install systems that comply with the
regulations.
The new regulations should not restrict the ability of firms to choose the quality, range or
location of their products.
Owners & operators of vehicles (fleets)
Question
No.
Yes/No
Comments
1
NO
Large number of relatively small owners and operators of vehicles (haulage firms, delivery
companies, hire companies etc.).
2
NO
See above.
3
NO
See above.
4
YES
Owners and operators of vehicles will only be affected when renewing their fleet as
regulations only apply to new vehicles.
However, costs passed on from manufacturers to vehicle owners will affect those firms (e.g.
freight delivery) to a greater extent than firms using alternative forms of transport.
5
YES/NO
The new Euro standards should not affect the market structure as owners and operators are
not obliged to renew their fleet. However, those firms that have the required investment to
take advantage of the incentives available and renew their fleet(s) prior to the legislative
deadlines could potentially save money in the long run (i.e. compared to those that do not
have the required investment to renew their fleets prior to the deadlines and therefore
cannot take advantage of the incentives available thus paying full price for Euro V and VI
compliant vehicles).
6
YES
New or potential firms may incur higher set up costs (purchase of vehicles) than existing
firms if they start up shortly after the regulations come into place (2010 and/or 2013) and
purchase new vehicles.
7
NO
It is unlikely that ongoing costs will be higher for new or potential firms than for existing
firms. However, there may be some additional maintenance/running costs associated with
vehicles meeting the new Euro standards if specific technologies are required (for example,
SCR requires a reducing agent such as urea). New or potential firms will only incur these
additional ongoing costs if they purchase new vehicles after these regulations come into
place and, in the longer-term, all firms will face these costs.
8
NO
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards).
9
NO
The measure should not affect the ability of firms to choose the price, quality, range or
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Question
No.
Yes/No
Comments
location of their products.
Whilst no detailed information on the market for manufacturers and suppliers of exhaust after
treatment systems was available within the tight timescales of this study, a detailed competition
assessment is not required, given the number of negative answers in the competition filter.
Impacts on competition
Would the proposed measure alter current market structure?
A programme of incentives for early uptake of Euro V and VI standards should encourage
owners and operators to purchase these vehicles in advance of the 2010 and 2013 legislative
deadlines. Manufacturers and suppliers would therefore be at a competitive advantage if they
begin producing Euro V and VI compliant vehicles prior to the legislative deadlines so that they
can capture those owners and operators who wish to take advantage of the incentives on offer.
Euro standards must be met by both EU and non-EU manufacturers in order to sell vehicles in
the EU market so all firms would be affected by the regulation. UK firms may be affected more
significantly, though similar incentive schemes are expected to be introduced in other EU
member states. Therefore, the proposed new Euro Standards are unlikely to alter the current
vehicle and engine manufacture and supply market structure.
For manufacturers and suppliers of exhaust after treatment systems, the new Euro standards,
plus any incentives for their purchase, could potentially affect the market structure depending
upon the specific requirements of the standards. Some manufacturers may be affected
differently depending upon the type of systems they produce and the requirements of the new
standards (for example, if the new standards for LDVs require particulate filters for new diesel
vehicles but not SCR). Those firms that manufacture the required technologies will therefore
have a competitive advantage over those that do not and could gain a greater market share.
Vehicle owners and operators should not be directly affected by the new Euro standards as they
have no obligation to renew their fleet(s). However, those firms that have the required
investment to take advantage of the incentives available and renew their fleet(s) prior to the
legislative deadlines could potentially save money in the long run (i.e. compared to those that do
not have the required investment to renew their fleets prior to the deadlines and therefore cannot
take advantage of the incentives available thus paying full price for Euro V and VI compliant
vehicles).
Would the proposed measure increase barriers to entry or exit?
The proposed programme of incentives should not have any significant impact on barriers to
entry or exit of any of the markets identified above. The only potential impact may be that firms
purchasing vehicles after the standards come into force and any incentives are no longer
available would face higher set up costs than existing firms and/or those who have taken
advantage of the incentives on offer.
Would the proposed measure reduce the strength of competition?
The strength of competition between vehicle and engine manufacturers and suppliers should not
be significantly affected by the proposed new Euro Standards plus any incentives for their
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purchase as they would apply equally to all firms. However, the strength of competition
between exhaust after treatment systems manufacturers and suppliers could potentially be
affected depending upon the type of systems required to comply with the new standards. In
addition, vehicle owners and operators that have the required investment to take advantage of
the incentives available and renew their fleet(s) prior to the legislative deadlines could
potentially save money in the long run.
Would the proposed measure reduce differentiation and customer choice?
The proposed measure should not reduce differentiation or customer choice.
Would the proposed measure restrict innovation?
The proposed measure should not restrict innovation as it should encourage firms to develop
and/or modify vehicles, engines and/or exhaust after treatment systems in order to meet the
standards and make them available before the legislative deadline.
Measure 8: Retrofit of DPFs on HDVs & captive fleets
Summary of Requirements
The proposed measure involves the retrofit of Diesel Particulate Filters (DPFs) on HDVs and
captive fleets (buses and coaches). The exact details of this measure, in terms of vehicles to be
targeted (for example, pre-Euro 3), whether it will be mandatory/voluntary and any incentive
schemes (if voluntary), are yet to be decided.
The proposed measure would affect DPF manufacturers and suppliers and owners and operators
of vehicles.
Market definition and current market structure
Who is affected?
Manufacturers & suppliers of exhaust after
treatment systems
Owners & operators of vehicles
Who do they compete
against?
National, EU & global
Mainly national (some EU)
Are competitors affected
by the regulation or not?
Yes. The retrofit of DPFs on HDVs and
captive fleets will lead to an increased
demand for approved systems.
Yes (HDVs and captive fleets). Depending
upon how the scheme is implemented (in
terms of availability, incentives etc.) all
owners and operators of HDVs and captive
fleets could potentially be affected by this
measure.
The impacts this will have on competition
will depend upon the types of systems that
different manufacturers and suppliers
produce and sell. For example, those
manufacturers/suppliers who produce
and/or sell DPFs will be at a competitive
advantage compared to those that do not.
If this measure were to be implemented as
part of the existing TransportEnergy
programme then up to 75% of the cost of
retrofit of a DPF can be claimed by the
vehicle owner/operator7.
If this measure is mandatory (e.g. for all
pre-Euro to Euro IV vehicles) then smaller
firms unable to afford the cost of retrofit
7
The TransportEnergy programme is currently suspended whilst the UK holds discussions with the EC
concerning this, and other, incentive programmes.
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and/or purchase of new vehicles may be
forced out of business. The scale of
impacts would be dependent upon the
level of incentives/grants available.
No (other forms of transport). The
proposed measure would not apply to air,
rail or waterway transport although these
sectors are subject to their own regulations
which road vehicles do not have to comply
with (for example, the NRMM8 Directive
2004/26/EC).
What characterises the
market in terms of type of
competition: price,
quality of product or
reliability of supply?
Price and quality of product.
Price and quality of product.
No detailed information on the market for manufacturers and suppliers of exhaust after
treatment systems was available within the tight timescales of this study and the vehicle owners
and operators market is made up of a large number of relatively small owners and operators of
vehicles such as haulage firms, delivery companies, hire companies etc.
Competition filter
Manufacturers & suppliers of exhaust after treatment systems
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO/YES
The proposed measure would not impose any additional costs on manufacturers and
suppliers of exhaust after treatment systems. The proposed measure would in fact increase
demand for DPFs.
However, firms manufacturing DPFs will gain a relative advantage over firms manufacturing
alternative means of exhaust gas treatment.
8
5
YES
This will depend upon the types of systems that different manufacturers and suppliers
produce and sell. For example, those manufacturers/suppliers who produce and/or sell
DPFs will gain a competitive advantage compared to those that do not.
6
NO
The proposed measure for retrofitting of HDVs and captive fleets with DPFs should not lead
to higher costs (set up and ongoing) for new or potential firms that existing firms do not have
to meet.
7
NO
See above.
8
NO
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards).
9
NO
The new regulations should not restrict the ability of firms to choose the price, quality, range
or location of their products.
Non-Road Mobile Machinery
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Owners & operators of vehicles
Question
No.
Yes/No
Comments
1
NO
Large number of relatively small owners and operators of vehicles (haulage firms, delivery
companies, hire companies etc.).
2
NO
See above.
3
NO
See above.
4
NO
Dependent upon the way in which the proposed measure is implemented (e.g. grants,
incentives, voluntary/mandatory). However it is unlikely to affect some firms substantially
more than others with respect to costs. Smaller companies may face relatively higher costs
for introduction but, provided the scheme is not mandatory, these firms will not actually need
to introduce DPFs.
5
YES/NO
Dependent upon the way in which the proposed measure is implemented (e.g.
grants/incentives, voluntary/mandatory).
If this measure is mandatory (e.g. for all pre-Euro to Euro IV vehicles) then smaller firms
unable to afford the cost of retrofit and/or purchase of new vehicles may be forced out of
business. The scale of impacts would be dependent upon the level of incentives/grants
available. If, however, the measure is voluntary then smaller firms will not be required to
retrofit their vehicles. Therefore the market structure will be unlikely to change.
6
NO
New firms will not face higher set-up costs compared to existing firms as a result of this
measure.
7
NO
New firms will not face higher ongoing costs compared to existing firms as a result of this
measure.
8
NO
The motor vehicle market is not characterised by rapid technological change. Technological
development tends to be gradual and is generally in response to legislation (for example,
previous Euro standards).
9
NO
The regulations should not affect the ability of firms to choose the price, quality, range or
location of their products.
Whilst no detailed information on the market for manufacturers and suppliers of exhaust after
treatment systems was available within the tight timescales of this study, a detailed competition
assessment is not required, given the number of negative answers in the competition filter.
Impacts on competition
Would the proposed measure alter current market structure?
The proposed measure should not alter the market structure for vehicle operators and owners,
provided it is voluntary and not mandatory. Firms that manufacture and supply exhaust after
treatment systems will be affected differently depending upon the types of systems that they
produce and sell. For example, those manufacturers/suppliers who produce and/or sell DPFs
will gain a competitive advantage compared to those that do not.
Would the proposed measure increase barriers to entry or exit?
Barriers to entry or exit should not be increased for either of the markets affected.
Would the proposed measure reduce the strength of competition?
The proposed measure should not reduce the strength of competition for vehicle operators and
owners, provided it is voluntary and not mandatory. Competition between firms that
manufacture and supply exhaust after treatment systems, however, may be affected as those
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manufacturers/suppliers who produce and/or sell DPFs will gain a competitive advantage
compared to those that do not.
Would the proposed measure reduce differentiation and customer choice?
The retrofit of DPFs on HDVs and captive fleets should not reduce differentiation or customer
choice.
Would the proposed measure restrict innovation?
The retrofit of DPFs on HDVs and captive fleets should not restrict innovation.
Measure 9: Domestic combustion (fuel switching)
Summary of Requirements
The proposed measure involves a 100% switch in domestic combustion from coal to natural gas,
or from coal to oil if natural gas is not available for Northern Ireland (NI) only. The way in
which this measure will be implemented has not yet been defined by Defra but is expected to
build upon work by local authorities on local air quality management and duties under the Clean
Air Act (it is not expected to be mandatory).
The measure will affect suppliers of natural gas, oil and coal. Manufacturers and suppliers of
boilers, stoves and fireplaces would also be indirectly affected by the proposed measure as it
should lead to an increased demand for new gas (or oil where applicable) appliances and
reduced demand for coal fireplaces or stoves.
Market definition and current market structure
Who is affected?
Producers and suppliers of fuel for
domestic use (coal, natural gas and
oil)
Manufacturers and suppliers of
gas/oil boilers
Who do they compete against?
National, EU & global
National & EU
Are competitors affected by the
regulation or not?
Yes. The proposed measure involves
a 100% switch from coal to natural
gas where available or oil if not for
Northern Ireland only. This measure
will therefore impact differently upon
competitors depending upon the
fuel(s) they produce / supply i.e.
suppliers dealing with natural gas, or
oil if in NI, will be at a competitive
advantage to those dealing with coal.
These firms will have to broaden the
markets they operate in to maintain
sales or accept a reduction in sales
and any consequent impacts of that.
Indirectly as proposed measure
should lead to increased demand for
new gas/oil boilers.
What characterises the market in
terms of type of competition: price,
quality of product or reliability of
supply?
Price and reliability of supply.
Price and quality of product.
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Domestic fuel producers and suppliers generally compete at a national level although they also
face competition from EU and non-EU firms.
The main final gas supplier in the UK held over 67% of the market share with respect to
domestic supply and consumption of gas in 20029.
Domestic coal comes from mines in Britain and other parts of the world, most notably
Columbia and Indonesia. There are over 1,100 approved coal merchants in the UK. There are
eight main coal producers in the UK, based on the number of members of the Confederation of
UK Coal Producers10. Small Business Service data indicate that there were approximately 40
companies undertaking mining and agglomeration of hard coal (SIC 101), of which the majority
were classified as small (over 50%)11.
In 2004, 1,041 thousand tonnes of oil equivalent (ktoe) of coal, 34,085 ktoe of natural gas and
2,719 ktoe (in 2003) of oil were consumed for domestic combustion in the UK. Domestic coal
consumption has fallen 67% since 1990 (93% since 1970) whilst domestic gas consumption has
risen 32% (232%)12.
The largest supplier of coal to domestic markets, RJB mining, is estimated to supply just under
30% of domestic coal13. Domestic coal use represents around 2% of total UK demand for coal
and around 6% of UK coal supply14, since the majority of coal is imported.
Competition filter
Domestic fuel producers and suppliers
Question
No.
Yes/No
Comments
1
YES
Main gas supplier holds market share of over 67% of domestic supply/consumption and gas
represents the greatest proportion of the market.
2
YES
See above.
3
YES
See above. Three largest suppliers are estimated to hold over 80% of the market share of
domestic supply/consumption of gas [insert reference to Ofgem and Oxera reports].
4
YES
The measure will affect producers and suppliers of coal to domestic markets negatively
(removing this part of the market) and will provide a benefit to suppliers of gas (and oil) to
domestic markets, as well as associated equipment.
5
YES
The proposed measure involves a 100% switch from coal to natural gas where available or
oil if not for Northern Ireland only. This measure will therefore impact differently upon
competitors depending upon the fuel(s) they produce i.e. suppliers dealing with natural gas,
9
Ofgem (2002): Competition in Gas and Electricity Supply, Separating Fact from Fiction.
10
www.coalpro.co.uk.
11
http://www.sbs.gov.uk/SBS_Gov_files/researchandstats/SMEStatsUK2004.xls.
12
http://www.dti.gov.uk/energy/inform/energy_consumption/table.shtml.
13
400 thousand tonnes per year (based on www.rjb.co.uk) out of the UK total domestic consumption of
1,359 thousand tonnes (http://www.dti.gov.uk/energy/inform/energy_stats/coal/dukes05_2_7.xls).
14
Based on http://www.dti.gov.uk/energy/inform/energy_stats/coal/dukes05_2_7.xls.
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Question
No.
Yes/No
Comments
or oil if in NI, will be at a competitive advantage to those dealing with coal. These firms will
have to bear the loss of this part of their portfolio, broaden the markets they operate in or
accept reduced sales and any consequent impacts of that.
6
NO
The regulation would not lead to higher costs (set-up or ongoing) for new or potential firms
compared to the costs for existing firms.
7
NO
See above.
8
NO
The market is fairly well established and not characterised by rapid technological change.
9
YES
The proposed measure will restrict firms from supplying coal for the domestic market. Those
firms currently supplying coal will have to refocus their markets on coal for other uses or on
gas and/or oil for domestic use (or accept reduced sales).
Manufacturers and suppliers of gas/oil boilers
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
The proposed measure should not affect some firms substantially more than others with
respect to costs. The proposed measure should lead to an increased demand for gas/oil
boilers.
5
NO
The market structure is not expected to be affected significantly because the quantity of coal
currently used in domestic combustion is small as compared to other fuels (notably gas).
6
NO
The regulation would not lead to higher costs (set-up or ongoing) for new or potential firms
compared to the costs for existing firms.
7
NO
See above.
8
NO
The market is fairly well established and not characterised by rapid technological change.
9
NO
The proposed measure would not stop firms providing products or services that they would
otherwise provide.
Whilst no detailed information on the market for suppliers of gas/oil boilers was available
within the tight timescales of this study, a detailed competition assessment is not required, given
the number of negative answers in the competition filter. For suppliers of fuels for domestic
use, however, the competition filter suggests possible significant effects on competition that
warrant further elaboration.
Impacts on competition
Would the proposed measure alter current market structure?
A 100% switch in domestic combustion from coal to gas (or oil where applicable) would clearly
force domestic coal (and oil in England, Wales and Scotland) producers and suppliers out of the
market (unless they already supply, or begin to supply, gas as well) leading to a more
concentrated market structure overall. The domestic gas market, which is already dominated by
one firm (over 67% of the market in 2002), would therefore grow to accommodate the resulting
new customers, though some other suppliers might enter the market.
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These changes in market structure should, however, be seen in the context of the recent changes
within the supply of fuel for domestic use which has decreased significantly in recent years.
This is expected to continue in the future as, for example, connection to natural gas supplies in
Northern Ireland increases.
Furthermore, domestic sales represent only a small proportion of total coal sales, with many of
the larger companies supplying coal to other uses. Companies with a higher than average share
of domestic coal sales will be the most affected.
Would the proposed measure increase barriers to entry or exit?
Potential entry points for entering the market would be reduced with no domestic coal market
and a relatively small domestic oil market. The proposed measure would benefit existing gas
suppliers enabling them to gain a greater market, though this would not of itself make it harder
for new firms to enter the market.
Would the proposed measure reduce the strength of competition?
The proposed measure may potentially reduce the number of competitors within the market as
domestic coal and some oil suppliers would be forced out of the market. However, it could also
lead to increased competition within the gas market itself where any new firms move into the
market.
Would the proposed measure reduce differentiation and customer choice?
The proposed measure would lead to a reduction in differentiation and customer choice as coal
(and oil in England, Scotland and Wales) could not be used for domestic combustion. This
would apply to up to 10% of the current domestic fuel market (of which coal represents 3% and
oil 7%).
Would the proposed measure restrict innovation?
A 100% switch from coal to gas (or oil where applicable) could reduce the incentive for
investment in clean coal technologies (for example, low sulphur coal). However, it would not
restrict innovation in the gas market.
Measure 12: Small combustion plants (20-50 MWth)
Summary of Requirements
The proposed measure involves a 50% reduction in NO2 and SO2 emissions from Small
Combustion Plants (SCPs) through combustion modification and a reduction in fuel sulphur
content. All SCPs with a capacity of 20-50 MWth will be required to meet the emission
reduction targets by the agreed deadlines (2013).
It is anticipated that this legislation may be developed at an EU level (i.e. as a Directive).
The measure will directly impact upon SCP owners and operators whilst abatement technology
and fuel suppliers would also be indirectly affected.
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Market definition and current market structure
Who is affected?
Small Combustion Plants (SCPs) with
a capacity of 20-50 MWth. Sources
considered to fall in the 20-50MW
category include power generation,
autogenerators, various industrial
sources, public services and others (a
diverse range of sectors).
Abatement technology and fuel
suppliers
Within the scope of this study, it has
not proved practicable to collate
detailed information on each market.
However, many such markets are
characterised by relatively high
numbers of small, medium and large
companies.
Who do they compete against?
National and EU
National, EU and global
Are competitors affected by the
regulation or not?
All SCPs with a capacity of 20-50
MWth will be required to meet the
emission reduction targets by the
agreed deadlines.
Indirectly. The proposed measure
would increase demand for NO2
abatement technology and low
sulphur fuel.
It is anticipated that this legislation
may be developed at an EU level (i.e.
as a Directive) therefore all SCPs
across Europe would be required to
comply.
Competitors that have a capacity just
below the threshold (for example, 19
MWth) would not be required to
comply with the requirements and
would therefore face lower costs than
those with a capacity above the
threshold (for example, 20MWth).
What characterises the market in
terms of type of competition: price,
quality of product or reliability of
supply?
Price and reliability of supply.
Price, quality of product and reliability
of supply.
It has not been possible to obtain detailed information on operators of SCPs or suppliers of
specific abatement technologies within the timescales for this project.
Competition filter
SCP operators
Question
No.
Yes/No
Comments
1
NO
Relatively high number of SCPs (20-50 MWth) in the UK based on the UK’s EU ETS
emission inventory. These fall into a wide range of sectors and are generally installed for
supplying on site energy rather than competing amongst themselves (see above).
2
NO
See above.
3
NO
See above.
4
YES/NO
The proposed measure would affect all SCPs with a capacity between 20 and 50 MWth.
NO2 and SO2 emissions would have to be reduced by combustion modification and reduced
sulphur content of fuel. The associated costs are likely to apply fairly equally to SCPs within
the capacity band (i.e. 20-50 MWth). However, SCPs with a capacity just below the
threshold (e.g. 19 MWth) would not be required to meet the legislation and would therefore
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Question
No.
Yes/No
Comments
not incur the associated costs. Larger combustion plants are already subject to related
requirements on emissions reductions.
5
NO
The proposed measure would apply equally to all SCPs across Europe (it is expected to be
implemented through a Community-level Directive) and should therefore not have any
significant effects on the market structure.
6
NO
See above. The proposed measure should not lead to higher costs (set-up or ongoing) for
new or potential firms that existing firms do not have to meet.
However, new firms may be disadvantaged as compared to existing firms if there are
exemptions included within the possible future Directive. Existing firms may be
disadvantaged as compared to new firms if standard emission limits can not readily be met
by retrofitting abatement equipment.
7
NO
See above.
8
NO
The market is not characterised by rapid technological change.
9
NO
The proposed measure should not affect the ability of firms to choose the price, quality,
range or location of their products. It will result in reduced emissions of NO 2 and SO2 which
may lead to higher prices although this will depend upon the firm’s ability or willingness to
pass the cost onto the customer.
Abatement technology and fuel suppliers
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
The proposed measure should not impose any costs as such on abatement technology and
fuel suppliers as it should lead to an increased demand for NO2 abatement technology and
low sulphur fuel.
5
YES/NO
For fuel suppliers there may be some competition impacts depending on whether the
existing technology allows reducing the sulphur content down to the required standard for all
operators or not. Some refineries may already have the capacity to desulphurise crude to
provide the necessary reduction.
For abatement technology suppliers there may be some competition impacts if the NO 2
reduction levels imposed favour certain technologies over others.
6
NO
The proposed measure should not lead to higher costs (set-up or ongoing) for new or
potential firms that existing firms do not have to meet.
7
NO
See above.
8
NO
The market is not characterised by rapid technological change.
9
NO
The proposed measure should not affect the ability of firms to choose the price, quality,
range or location of their products.
Whilst it has not been possible to obtain detailed information on suppliers of specific abatement
technologies within the timescales for this project, the results of the competition filter would
suggest that a detailed assessment is not required regardless of the available data on market
share.
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Impacts on competition
Would the proposed measure alter current market structure?
The proposed measure should not have any major impacts on the current SCP market structure
as it is anticipated that this legislation would be developed at an EU level and all SCPs across
Europe would therefore have to comply.
There could potentially be some impacts on the structure of the abatement technology and fuel
supplier market as those firms that produce the required technology or have existing capacity to
produce low sulphur fuel would be better placed to exploit the market than those that do not.
Would the proposed measure increase barriers to entry or exit?
Although the proposed measure would lead to higher technology and operating costs these
would apply to all SCPs (existing and new) so barriers to entry or exit should not be affected.
Would the proposed measure reduce the strength of competition?
The proposed measure should not have any impact on competition between SCPs (20-50MWth)
as the associated costs should apply fairly equally. However, those SCPs with a capacity just
below the threshold (for example, 19MWth) would have a competitive advantage over those
within the capacity band as they would not have to meet any of the associated costs.
The strength of competition between abatement technology and fuel suppliers may be reduced
as those firms that produce the required technology or have existing capacity to produce low
sulphur fuel would have a competitive advantage over those that do not.
Would the proposed measure reduce differentiation and customer choice?
The proposed measure should not have any impacts on differentiation and customer choice.
Would the proposed measure restrict innovation?
The proposed measure should not have any impacts on innovation.
Measure 14: Shipping measure through IMO
Summary of Requirements
The proposed measure involves the global fleet of ships (>100 tonnes) using fuel with a sulphur
content of 1% rather than 1.5% in the SOx Emission Control Areas (ECAs) and for all new ships
to reduce NOx emissions by 25%. The proposed measure would be implemented from 2010.
The proposed measure would affect a number of different markets including petroleum
refineries, bunker suppliers, shipping operators and manufacturers and suppliers of ships and
abatement technologies.
Market definition and current market structure
Who is affected?
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producing fuel for
shipping
Bunker suppliers
All shipping
operators
Ship & abatement
technology
manufacturers &
suppliers
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Who do they
compete against?
National, EU and
global
National and EU
National, EU and
global
National, EU and
global
Are competitors
affected by the
regulation or not?
Yes. As the demand
for low sulphur fuel
will increase
refineries supplying
this market will have
to change their
output to meet this
demand. Additional
capital investments
may have to be
made for
desulphurisation
plants.
Yes if they want to
provide this product.
Yes as all new ships
above the specified
size threshold will
have to comply with
the new NOx
standards and all
ships will have to use
fuel with a lower
sulphur content if
they operate via the
SOx emission zones.
Yes, NOx standard
will be global so all
new ships produced
after the legislative
deadline will have to
be compliant.
All petroleum
refineries could
potentially be
affected unless they
have a supply of
crude product with a
low enough sulphur
content although the
measure would not
place any mandatory
requirements.
What characterises
the market in terms
of type of
competition: price,
quality of product
or reliability of
supply?
Fuel price
Suppliers may have
to invest in new
storage capacity for
an additional
product. However, as
the measure would
not place any
mandatory
requirements on
suppliers then they
would not
necessarily have to
make any changes
New engines will be
slightly more
expensive to achieve
new NOx standards
i.e. assume
advanced internal
engine modifications
will be used to meet
requirements.
A fuel premium will
have to be paid for
lower sulphur
content.
Fuel price
Price for transport
between certain
ports
Price and quality of
ships, engines and
abatement
technology
Competition filter
Petroleum Refineries
Question
No.
Yes/No
Comments
1
YES
There are nine major UK oil refineries with a distillation capacity of around 88 million tonnes
per annum, operated by Esso, BP (2), Petroplus, Shell, Total FinaElf (2), Conoco and
Texaco. As there are only 7 major UK operators some must have more than 10% of the
market.
2
YES
Very likely that one of the 7 operators has more than 20%. Estimated that at least BP has
more than 20% as they run 2 refineries.
3
YES
Very likely due to the low number of operators.
4
YES/NO
Depends on whether the existing technology allows reducing the sulphur content down to
the required standard for all operators or not. Some refineries may already have the capacity
to desulphurise a ‘sour’ crude to provide the necessary reduction. However, some refineries
might have worked with sweet crude around 1.5% and now would require an additional
process - i.e. investment - to provide 1%.
5
NO
Unlikely, as the same operators that would provide 1.5% would also try to satisfy the
demand for 1% unless some operators struggle to produce the lower fuel without major
investments and competitors do not need those investments in existing plants.
6
NO
No significant additional barrier due to lower sulphur content requirements but very high
capital requirements to set up a refinery and cost disadvantage due to long running existing
depreciated assets of incumbents.
Currently (2005) the refining business is the most profitable segment of the global energy
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Question
No.
Yes/No
Comments
business, but investment is slow due to building times of up to 5 years and the cyclical
industry15. New entrants would normally enter the market in a downturn and buy up existing
refinery capacity that is in financial distress.
7
NO
Any new operator of a refinery would face huge economies of scale, distribution channels,
etc. barriers however these are not created by the lower sulphur requirements but inherent
in this industry.
8
NO
This is an established industry and there is no need for a fundamental new method of
production or product.
9
NO
This is not a restriction on the refineries although it would be in their interests to produce fuel
with a sulphur content of 1% or less as ships will be required to use it.
Bunker suppliers
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
Bunker suppliers only provide the storage capacity for the different fuel types and as such
there are no effects expected at all due to lower sulphur contents.
5
NO
See above.
6
NO
Instead of filling the bunkers with 1.5% fuel they would bunker 1% which does not increase
the capital demand. If you have the assets already this does not need any upgrading.
7
NO
See above.
8
NO
Storage tanks do not need any changes. Technological change in the sector is not rapid.
9
NO
If the bunker operator would cover the demand for 1.5% they would also cover the demand
for 1% instead of the 1.5%, assuming this (1%) is the requirement for the Emission Control
Areas. Since the requirements would be applied internationally, it is not anticipated that the
measure would restrict choice on the part of firms’ products.
Ship operators
Question
No.
1
Yes/No
Comments
Unknown
There are 448 ships >500GT under the UK flag.
Information not available within timescales of this study
15
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
Any firm that covers the market for routes within the SOx- ECAs will have to pay for the
more expensive fuel or an equivalent scrubber solution. Ships running outside the SOxECAs do not need to buy the more expensive fuel but also do not compete for the same
customers.
5
NO
No change expected as the additional price premium for 1.0% instead of 1.5% is small
compared to the volatility of the fuel price. There are no real alternative methods of
transport to shipping as it will still be by far the cheapest alternative.
Financial Times: Comment & Analysis, Thursday September 29 2005, p.17
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Question
No.
Yes/No
Comments
6
NO
Although the set-up costs for firms purchasing new ships may be slightly higher (due to
tighter NOx requirements) than for existing firms who have purchased their ships prior to the
regulation coming into force the overall costs for a new ship above the specified size
threshold are not expected to be significantly altered by the latest engine modifications.
7
NO
It can be expected that that latest ship hull and engine designs will be more fuel efficient
than older versions despite tougher emission requirements on NOx. A premium on fuel
prices affects all in the same way that compete on the same routes where 1% sulphur is
required.
8
NO
The sector is not characterised by rapid technological change.
9
NO
The regulation would not affect firms from choosing their own price, quality, range or
location of their products. Operators will still compete for the same routes and the
requirements will apply equally to all firms.
Ship & abatement technology manufacturers & suppliers
Question
No.
Yes/No
Comments
1
Unknown
Information not available within timescales of this study
2
Unknown
Information not available within timescales of this study
3
Unknown
Information not available within timescales of this study
4
NO
All ship/engine manufacturers will have to ensure that their new ships comply.
5
NO
There is no change expected in the market structure for ship/engine manufacturers as the
impacts of the requirements are not significant and would apply to all manufacturers.
The ship emission abatement technology sector is currently not developed and will be most
likely covered by main engine manufacturers and a few specialised firms e.g. those that
have gained experience with similar land-based emission sources and abatement
technology.
6
NO
The impacts of the requirements on the overall costs of a new ship are likely to be
insignificant. These requirements therefore will not create any additional barriers for new
entrants. Instead the proposed measures would create a new market for ship emissions
abatement technology.
7
NO
Ongoing cost will not be affected differently for incumbents or new entrants due to these
requirements.
8
NO
The requirements will support innovation rather then suppress as the abatement technology
needs to be developed. Required NOx reduction can most likely to be achieved by internal
engine modifications alone. However more effective abatement equipment most likely to be
developed by incumbent engine manufacturers but manufacturers of land-based abatement
technology might be interested in entering this market segment too. However, overall, the
market is not characterised by rapid technological change.
9
NO
Ships will still be produced and the required new abatement technologies need to be
developed and create a new demand for these type of products. It would restrict the range
of products in that non-compliant equipment could no longer be produced; however, this is
not expected to have a significant adverse effect upon competition.
Whilst it has not been possible to obtain detailed information on bunker suppliers, ship
operators and ship and abatement technology manufacturers & suppliers within the timescales
for this project, the results of the competition filter would suggest that a detailed assessment is
not required regardless of the available data on market share.
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Impacts on competition
Would the proposed measure alter current market structure?
Although those refineries with existing capacity to produce the required 1% sulphur fuel
without further investment would have a slight advantage over those who do not, the impacts on
market structure are likely to be minimal as refineries will be able to continue to produce fuels
with a higher sulphur content and bunker fuels represent only one of many products from a
refinery. The proposed measure is unlikely to alter the structure of any of the other identified
markets.
Would the proposed measure increase barriers to entry or exit?
The set-up costs for firms purchasing new ships may be slightly higher than for firms operating
existing ships although the additional costs are unlikely to be significant. The proposed measure
would not affect barriers to entry or exit for the other identified markets.
Would the proposed measure reduce the strength of competition?
Although some refineries may have an advantage over others if they can produce 1% sulphur
fuel without additional investment, the proposed measure is unlikely to reduce the strength of
competition in this, or any of the other, affected markets.
Would the proposed measure reduce differentiation and customer choice?
The proposed measure should not reduce differentiation or customer choice.
Would the proposed measure restrict innovation?
The proposed measure should not restrict innovation.
Measure 22: All road user charging scheme
Summary of Requirements
The proposed measure involves a charging scheme affecting all road users from 2015. The exact
details of the scheme are yet to be decided although the Department for Transport have
produced a feasibility study addressing the issue.
The proposed measure would impact upon all owners and operators of vehicles.
Market definition and current market structure
Who is affected?
Owners & operators of vehicles
Who do they compete against?
Mainly national (some EU)
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Are competitors affected by the regulation or not?
Yes (road transport). The proposed measure will impact
upon all UK road users.
No (other forms of transport). The proposed charging
scheme would not apply to air, rail or waterway transport
although these sectors are subject to their own charges
and regulations which road vehicles do not have to comply
with (for example, the NRMM16 Directive 2004/26/EC).
It is also unclear if foreign vehicles using UK roads would
also be charged. In practice this could be very difficult to
implement. If foreign operators are not charged then they
would have a competitive advantage over UK based firms.
What characterises the market in terms of type of
competition: price, quality of product or reliability of
supply?
Price, quality of product and reliability of supply.
Competition filter
Owners & operators of vehicles
Question
No.
Yes/No
Comments
1
NO
Large number of relatively small owners and operators of vehicles (haulage firms, delivery
companies, hire companies etc.).
2
NO
See above.
3
NO
See above.
4
YES/NO
Would affect some firms more than others depending upon the distance they are required to
travel (due to the nature of their business – e.g. delivery firms – and/or location). However,
the costs within each of these sub-markets such as delivery firms, for example, should be
relatively similar. Similarly, the costs for local or regional geographical markets will be
similar.
The impact will depend partially on the ability and willingness of businesses to pass costs on
to customers.
It is also unclear whether foreign vehicles using UK roads would also be charged. In practice
this could be problematic to implement. If foreign operators are not charged then they would
have a competitive advantage over UK based firms.
5
YES
The additional costs associated with the proposed measure could lead to the closure of
smaller firms who cannot afford to stay in business with increases in the cost of road use.
The impact will depend partially on the ability and willingness of businesses to pass costs on
to customers.
In addition to this, if prices were to rise some customers may choose alternative services to
transport by road. For example, customers may choose to travel by rail or air as it may
become more cost effective.
16
6
NO
The proposed measure would not lead to higher costs (set-up or ongoing) for new or
potential firms that existing firms do not have to meet.
7
NO
See above.
8
NO
The markets using road vehicles is diverse and includes some markets that will be
characterised by rapid technological change. However, technological development tends to
be gradual in the markets directly associated with road transport.
Non-Road Mobile Machinery
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Question
No.
9
Yes/No
Comments
YES
A proposed road user charging scheme could potentially affect the ability of firms to choose
the price or location of their products/services, due to increased costs of transportation
(products and people).
Impacts on competition
Would the proposed measure alter current market structure?
The proposed measure could potentially alter the market structure depending upon how the
scheme is implemented. For example, it is unclear whether or not, and how, foreign vehicles
would be charged for using UK roads. If foreign operators were not to be charged then they
could possibly charge lower prices compared to UK based firms and gain a greater market
share.
The proposed measure could also lead to the closure of some smaller firms whom are unable to
stay in business due to the increased costs of road use resulting in a more concentrated market
structure overall dominated by larger firms. These additional costs could also lead to customers
switching to other forms of transport if they are more cost effective.
Would the proposed measure increase barriers to entry or exit?
The proposed measure would not increase barriers to entry or exit.
Would the proposed measure reduce the strength of competition?
The proposed measure could potentially reduce the number of competitors within the market if
smaller firms are forced out of the market.
Would the proposed measure reduce differentiation and customer choice?
The proposed measure should not reduce differentiation or customer choice.
Would the proposed measure restrict innovation?
The proposed measure should not restrict innovation.
Measure 23: Combined measure 3B plus 21 (updated LEV17
scenario – replacement of petrol & diesel cars)
Summary of Requirements
The proposed measure is a combined measure involving a programme of incentives for the early
uptake of Euro V and VI standards (Measure 3B) and the replacement of petrol and diesel cars
with Low Emission Vehicles (LEVs) (Measure 21). See Measure 3B for details of impacts on
competition. This section only deals with the additional impacts of Measure 21.
17
Low Emission Vehicles (LEVs) refer to a wide range of technologies, these include hybrid-electric
passenger cars as well as standard vehicles fitted with exhaust gas abatement systems (e.g. DPFs).
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The way in which the proposed measure will be implemented has not yet been decided although
it is likely to be through some form of incentivisation scheme similar to those that have been in
place for several years now (for example, the PowerShift Programme). The markets likely to be
affected are the vehicle and engine manufacturers and suppliers and owners and operators of
vehicles.
Market definition and current market structure
Who is affected?
Vehicle and engine manufacturers
and suppliers (including Low
Emission Vehicles)
Owners and operators of vehicles
Who do they compete against?
National, EU & global
Mainly national (some EU)
Are competitors affected by the
regulation or not?
Yes/No. Some manufacturers already
produce LEVs that are available on
the UK market (e.g. Honda Civic IMA
and Toyota Prius which are both
hybrid electric passenger cars).
Yes/No. The impact of this proposed
measure will be dependent upon how
it is implemented (for example,
incentives to encourage their
purchase. The Powershift programme
has previously offered grants to cover
part of the additional cost of an LEV
over a standard vehicle7).
The impact of this proposed measure
will be dependent upon how it is
implemented. For example, the
Powershift programme has previously
offered grants to cover part of the
additional cost of an LEV over a
standard vehicle18. If incentives were
to be offered those firms currently
producing LEVs would benefit
indirectly as it would encourage more
owners and operators to purchase
their vehicles.
What characterises the market in
terms of type of competition: price,
quality of product or reliability of
supply?
Price and quality of product.
Those firms with the investment
available to take advantage of any
incentives to purchase LEVs would
also receive further benefits such as
improved fuel efficiency, free or
reduced entry into congestion charge
zones and reduced road tax.
Price, quality of product and reliability
of supply.
The LEV market is fairly poorly developed in the UK with very few models commercially
available at the present time. Grants have been offered for several years now towards the
additional cost of purchasing a LEV over a conventional petrol/diesel vehicle.
Competition filter
Vehicle & engine manufacturers & suppliers
Question
No.
1
Yes/No
Comments
YES
In 2004 the Ford Group sold approximately 19% of all cars sold in the UK, the GM Group
13%, the Volkswagen AG Group 13% and the PSA Group 11%.
The LEV car market in the UK is very small and not very well developed. At present only a
small number of firms currently produce and sell hybrid electric cars e.g. Honda (Civic IMA),
Lexus and Toyota (Prius).
2
18
NO
See above.
The TransportEnergy programme (which includes the Powershift programme) is currently suspended
whilst the UK holds discussions with the EC concerning this, and other, incentive programmes.
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3
NO
See above.
4
NO
The proposed measure to replace petrol and diesel cars with LEVs is likely to be voluntary
with incentives to encourage their purchase. No manufacturers or suppliers are obliged to
develop LEVs although it will be in their interests to do so as it is the intention of this
measure to grow demand for these vehicles. In addition, manufacturers and suppliers can
generally pass the additional cost of producing LEVs onto the customer.
5
NO
See above.
6
NO
The proposed measure is likely to be voluntary with incentives to encourage the purchase of
LEVs. No manufacturers or suppliers are obliged to develop LEVs although it will be in their
interests to do so as it is the intention of this measure to grow demand for these vehicles. In
addition, manufacturers and suppliers should be able to pass the additional cost of
producing LEVs onto the customer. Therefore, it should not lead to higher costs (set-up or
ongoing) for new or potential firms that existing firms do not have to meet.
7
NO
See above.
8
NO
Overall, the motor vehicle market is not characterised by rapid technological change.
Technological development tends to be gradual and is generally in response to legislation
(for example, previous Euro standards).
LEV’s have been gradually developed over the past 10-15 years and they have attracted a
great amount of interest and investment. However there is still a very limited range of LEVs
available on the commercial market.
9
NO
The proposed measure is likely to be voluntary and would therefore have no impact on the
ability of firms to choose the price, quality, range or location of their products.
Owners & operators of vehicles
Question
No.
Yes/No
Comments
1
YES
Large number of relatively small owners and operators of vehicles (delivery companies, hire
companies etc.).
2
NO
See above.
3
NO
See above.
4
NO
The proposed measure to replace petrol and diesel cars with LEVs is likely to be voluntary
with incentives to encourage their purchase. Therefore no firms would incur any costs
unless they choose to replace their vehicles themselves.
5
NO
See above. Those firms that can afford to purchase LEVs will also gain further benefits over
other firms such as improved fuel efficiency, free or reduced entry into congestion charge
zones and reduced road tax. However, those firms unable to afford (with or without
incentives) to purchase LEVs will still be able to operate as normal.
6
NO
The proposed measure is likely to be voluntary with incentives to encourage the purchase of
LEVs. Therefore, it should not lead to higher costs (set-up or ongoing) for new or potential
firms that existing firms do not have to meet.
7
NO
See above.
8
NO
Overall, the motor vehicle market is not characterised by rapid technological change.
Technological development tends to be gradual and is generally in response to legislation
(for example, previous Euro standards).
LEV’s have been gradually developed over the past 10-15 years and they have attracted a
great amount of interest and investment. However there is still a very limited range of LEVs
available on the commercial market.
9
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NO
The proposed measure is likely to be voluntary and would therefore have no impact on the
ability of firms to choose the price, quality, range or location of their products.
October 2005
Draft - See Disclaimer
A30
Impacts on competition
Would the proposed measure alter current market structure?
The proposed measure is unlikely to alter the current market structure although it will favour
those firms currently manufacturing and supplying LEVs on the UK market. The impacts of
this, however, are likely to be minimal as several other manufacturers are also developing their
own LEV models.
Would the proposed measure increase barriers to entry or exit?
The proposed measure is likely to be voluntary supported by an incentive scheme and would
therefore have no impacts on barriers to entry or exit.
Would the proposed measure reduce the strength of competition?
The proposed measure should increase the strength of competition in the LEV market as more
firms are likely to produce LEVs for the UK market.
Would the proposed measure reduce differentiation and customer choice?
The proposed measure is likely to increase customer choice as more firms are likely to produce
LEVs for the UK market.
Would the proposed measure restrict innovation?
The proposed measure should encourage innovation and the development of new LEVs as
demand for these vehicles should increase.
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