Though Sales of Diesel-powered Cars Are Permitted

A plan to permit sales of diesel-powered passenger sedans from 2005 was made by the Environmental Committee for Diesel-Engine Cars, a panel of private and state environmental experts. But the controversy regarding the plan within the government and industries would not subside at all.

As a result, there are concerns that the draft could not pass through economy-related ministers’ meeting slated for Feb 19.

Ñ Points of contention in the draft = Hyundai Motor and Kia Motors asked for the implementation of Euro-3 (the current emissions standard) in 2004 and Euro-4, which is twice tougher than Euro-3, in 2006 and the permit for sales of diesel-powered passenger cars in 2004. But they ended up satisfied with sales of diesel-engine cars starting 2005. They tried in vain to preoccupy the market with their edge in development of Euro-3 diesel-powered cars. They are currently exporting Euro-3 diesel cars to Europe.

In addition, the automakers should develop an engine for Euro-4 if they are to sell euro-4 cars as much as they do Euro-3. If they improve the currently used engine for Euro-3 and equip the cars with Diesel Particulate Filter (DPF), the price of diesel cars would go up in price, thereby causing a slump in sale.

Meanwhile, GM Daewoo Motor, Renault Samsung Motors, and Ssangyong Motor, which insisted on the introduction of Euro-4 after 2005, are breathing a sigh of relief.

The refinery industry seems not opposed to the draft, because they could get an incentive of tax cut if they reduce the sulfur content in diesel fuels to 50 ppm, before the standard is lowered to 30 ppm. However, conflicts could arise between those with enough financial resources for investment in sulfur removing equipment, which costs more than 500 billion won and those without.

Also, the relative adjustments of gasoline and LPG prices and sharing a fund for the improvement of the environment give rise to complications among government agencies.

The Ministry of Commerce, Industry and Energy is worrying that revising the ratio of gasoline, diesel, and LPG prices from government proposal of 100:75:60 to 100:85:50 could make the industry, which is using diesel fuels a lot, decline.

The Ministry also points out that to make a sudden change in relative energy prices is problematic in terms of consistency.

On the other hand, the Ministry of Finance and economy is showing disapproval for the Ministry of Environment’s revision to the law on sharing costs for improvement of the environment, citing complexity in taxation.

Ñ Future outlook = The Ministry of Environment should decide on change of emissions standards until June this year considering notice period required for revision of laws.

If new emissions standards are to be prepared before the inauguration of a new government, the Feb. 19 ministers’ meeting will be the last chance. If the draft fails to pass at the meeting, agreement among government ministries, environment groups and the industry will be much difficult to reach after the new government come to power. It could lead to the give-up of the plan to change the standards. However, the outlook is difficult to predict given lobbying of the car manufacturing industry, conflict within the refinery industry, and troubles among government ministries about energy price adjustment and change in taxation.

An official with the Environmental Committee for Diesel-Engine Cars said, "In any case, there are winners and losers, and troubles are inevitable in any draft. The currently made plan should be passed because it contains voices from all corners."

Sung-Hee Jung Ho-Won Choi shchung@donga.com bestiger@donga.com