CONTROVERSY is bound to erupt among fleet operators that the new 1.4-litre diesel engine to debut in the Peugeot 307 and next year in the Ford Fiesta will be Euro III emission compliant and not Euro IV. Government changes in company car tax rules from April next year mean that diesel cars powered by engines which are not Euro IV compliant face a 3% penalty under the new carbon dioxide-based company car tax system being launched from next year.

Presently no diesel cars on sale in the UK are Euro IV compliant - although similar models on sale on the continent do meet Euro IV regulations. In launching the new HDi 1.4 for the 307 and subsequently the Citroen C3 and the Duratorq TDCi 1.4 for the Fiesta the manufacturers say the engines can be adapted to meet Euro IV standards - which will be mandatory for all new petrol and diesel-powered vehicles sold in Europe from January 2005.

But initially, at least, the new engine will be only Euro III compliant in the 307 and Fiesta although it is not yet known whether it will be adapted to Euro IV standards when used by Citroen in the C3. A Ford spokesman said: 'Complying with Euro IV, which demands lower nitrous oxide emissions, means a trade-off in terms of higher fuel consumption and consequently higher CO2 emissions.

'With changes in Vehicle Excise Duty and the British company car taxation structure to be built around CO2 levels from next year, it is more appropriate and economically advantageous for the fleet market for cars to achieve a low CO2 figure rather than Euro IV - despite the 3% penalty.' The new family of engines could be fitted with a particulate filter system - similar to that now appearing on new Peugeot diesels - and while that can help to improve fuel consumption and reduce CO2 emissions it does not reduce NOX, the main element that appears to give manufacturers problems in meeting Euro IV standards.

However, with a small diesel unit - around 1.4 litres or less - in a small, light vehicle, it should be easier to achieve Euro IV standards than it is with a larger diesel engine in a heavier car. Ford and PSA Group vehicles with the new 1.4 litre diesel engine will have relatively low CO2 emissions, ranging from 90-110 g/km, depending on the model, compared with an average of 171 g/km for new vehicles sold in Europe last year.

The two companies say that the new engine family will make a 'significant contribution' towards achieving the objective that European vehicle manufacturers have set for reducing CO2 emissions to an average 140 g/km by 2008. The manufacturers are also confident of low cost of ownership figures when the 1.4 litre powered cars finally enter showrooms. They say the compactness of the engine enables under-bonnet packaging which allows improved crash performance due to more space around the engine to allow for optimum deformation of the front of the car in an impact.