Ripple Effects of Dieselgate Continue to Negatively Impact Diesel’s Outlook

Once touted as the cleaner alternative to gasoline due to lower CO2 emissions, the use of diesel as a transportation fuel is under intense scrutiny following Volkswagen’s scandal in 2015. Since then, academics and media outlets have publicized the adverse effects of NOx emissions on air quality and public health. In a somewhat knee-jerk reaction, many governments around the world called for an outright ban of diesel vehicles.

Lux Research compiled a non-exhaustive list of cities around the world that announced intentions to ban diesel vehicles. While some cities called for a blanket ban, others are introducing restrictions to limit the number of diesel vehicles, a step we believe will eventually move towards a ban.

We rated each city on the likelihood that their announcements and actions will eventually result in a blanket ban on all diesel vehicles. Likelihood is described as follows:

  • Confirmed – All diesel vehicles are now banned, regardless of their emission profile. No cities or countries have imposed a blanket ban.
  • Likely – Have or will have aggressive policies that severely restrict the use of diesel vehicles. The restrictions can be in the form of a pollution tax (London), a ban on pre-Euro VI diesel vehicles (Stuttgart), or as a temporary blanket ban (Oslo).
  • Possible – Display increasing momentum in introducing bans or restrictions on diesel vehicles. Momentum can be represented through repeated announcements on the issue and/or adopting minor restrictions to deter the sale of new diesel vehicles. In December 2016, Paris and Madrid announced intentions of banning diesel vehicles by 2025, and both have since made further announcements to reinforce their intention. Seoul and Singapore have or will have restrictions on diesel vehicles, but have not formally signaled their intention for a blanket ban.
  • Unlikely – Announced intentions of banning or restricting diesel vehicles, but no indications to follow through on original announcement. Mexico City and Athens announced together with Paris and Madrid intentions of banning diesel vehicles by 2025, but we find it unlikely that such a ban will be enforced, even in the long-term.

By no means will a blanket ban on diesel vehicles happen overnight. However, the idea of a diesel ban is rapidly gaining traction, and with diesel car manufacturers struggling to abide with existing regulations, it appears that diesel’s days are numbered. The question is, therefore, when – not if – a ban will happen. Various stakeholders in the industry are already taking notice. Volvo’s CEO Hakan Samuelsson is anticipating a diesel-free future and recently said that the company intends to phase out development of diesel engines in favor of electric powertrains by 2023. At the other end of the spectrum, renewable diesel producer Neste published an opinion piece urging restraint in implementing diesel restrictions; the prospect of a diesel ban is particularly troublesome for Neste, as deployment of its renewable diesel will be severely impacted. Lux Research will continue to track the trends on this movement and regularly update the map and likelihood based on the latest developments.

By: Runeel Daliah