unintended consequences: why u.s. afv adoption increases fleet gasoline consumption & ghg...
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Unintended Consequences: Why U.S. AFV Adoption Increases Fleet Gasoline Consumption & GHG
Emissions under Federal CAFE/GHG Policy
Jeremy J. Michalek Professor
Engineering and Public Policy Mechanical Engineering
Carnegie Mellon University
Inês AzevedoAssociate Professor
Engineering and Public Policy Carnegie Mellon University
Alan JennPostdoctoral Research FellowEngineering and Public Policy Carnegie Mellon University
(now at UC-Davis)
AFV
2USAEE | 27 Oct 2015 Jeremy J. Michalek
MotivationTransportation: 28% of U.S. GHG emissions 2nd largest source after electricity sector
Light duty vehicles: 62% of these emissions
118 billion gallons of gasoline in 2012
Main U.S. policy effort: Corporate Average Fuel Economy (CAFE) standards
(NHTSA)
Greenhouse Gas (GHG) Emission Standards (EPA)
3USAEE | 27 Oct 2015 Jeremy J. Michalek
A brief history of CAFE1975: response to oil crisis
1990: cars stagnant for two decades, then tightened under Obama administration
2012: following CA and 2007 ruling, joint NHTSA CAFE & EPA GHG standards
2012: attribute-based
2025: 54.5 mpg (on 2-cycle test)
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A binding constraintNo manufacturer except Tesla would have satisfied the 2016 standards with their 2009 fleet
5USAEE | 27 Oct 2015 Jeremy J. Michalek
Implications of a binding standardCongressional Budget Office (2012) “With CAFE standards in place … putting more electric
(or other high-fuel-economy) vehicles on the road will produce little or no net reductions in total gasoline consumption and greenhouse gas emissions.”
Binding standards must be satisfied by the overall fleet, regardless of whether or not alternative-fuel vehicles are sold
Goulder et al. (2012): “Leakage”
6USAEE | 27 Oct 2015 Jeremy J. Michalek
A binding CAFE/GHG standardBasic policy With AFV incentives
Total autos sold
Sales volume of
model j
GHG target for
model jGHG rate for model j
Sales-weighted
GHG target
Sales-weighted
GHG emission rate
=
Sales-weighted
GHG target
Modified sales-weighted GHG emission rate
=
GHG rate
when operating
on gasoline
Portion of VMT
operating on alt fuel
GHG rate when
operating on alt fuel
AFV incentive weight
AFV incentive multiplier
Conventional vehicles
Alt fuel vehicles
7USAEE | 27 Oct 2015 Jeremy J. Michalek
AFV incentives in CAFE/GHG policyWeighting factors and multipliers incentivize sale of AFVs by relaxing the CAFE/GHG target when AFVs are sold
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Balancing vehiclesWithout AFV incentives
With AFV incentivesWith AFV incentives in place, manufacturer can relax emission rates and/or change sales volume of some conventional vehicles and still comply
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Net effectNet Δ GHG emissions
GHG emissions increase with smaller weights w
larger multipliers m (if AFV GHGs < avg. GHGs)
lower AFV gasoline consumption rG
larger AFV sales volume n (if AFV GHGs < avg. GHGs)
*Case shown assumes no change in sales-weighted vehicle footprint induced by CAFE/GHG AFV incentives. For general case, see working paper.
Manufacturer’s CAFE target
VMTAFV sales
volume
10USAEE | 27 Oct 2015 Jeremy J. Michalek
Net effectNet Δ gasoline consumed
Proportional to GHGs if no AFV sales induced by policy
nj = nj’
*Case shown assumes no change in sales-weighted vehicle footprint induced by CAFE/GHG AFV incentives. For general case, see working paper.
(GHG/gal)-1
11USAEE | 27 Oct 2015 Jeremy J. Michalek
IllustrationCase of Chevy Volt with a single balancing vehicle model of equal sales volume
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Net effect per AFV soldGHGs increase of up to 60 metric tons
Up to 6,700 gallons extra gasoline consumed
Depending on vehicle model and year
13USAEE | 27 Oct 2015 Jeremy J. Michalek
Cumulative effectUsing AEO AFV sales projections: 30-70 million
metric tons CO2
3-8 billion gallons of gasoline consumed
Compared to no AFV incentives or no AFV sales
On-road effect may be 30-40% higher
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Policy relevanceCAFE/GHG midterm review and future policy on AFV incentives
Rationale for ZEV policy
Similar policies in other regions (e.g.: EU, China)
AFV
15USAEE | 27 Oct 2015 Jeremy J. Michalek
Policy options1. Do nothing
2. Eliminate CAFE AFV incentives
3. Eliminate other AFV sales incentives
4. Redesign policy
5. Replace policy
16USAEE | 27 Oct 2015 Jeremy J. Michalek
Policy options1. Do nothing
2. Eliminate CAFE AFV incentives
3. Eliminate other AFV sales incentives
4. Redesign policy
5. Replace policy
Tolerate near-term increases in gasoline consumption and GHG emissions in pursuit of long term gains of a fleet transition
Long term gains of fleet transition likely far outweigh near term factors we estimate
If CAFE AFV policy enables a transition that would not have happened otherwise, good
If policy only accelerates a pending transition, not clear if benefits outweigh costs
17USAEE | 27 Oct 2015 Jeremy J. Michalek
Policy options1. Do nothing
2. Eliminate CAFE AFV incentives
3. Eliminate other AFV sales incentives
4. Redesign policy
5. Replace policy
Would eliminate increase in fleet emissions per AFV sold but not emissions leakage effect
Resulting standards may be more difficult for automakers, given low gas prices and consumer preferences for performance over fuel economy
Negotiations in setting CAFE policy may have resulted in less stringent standards if incentives had been excluded
18USAEE | 27 Oct 2015 Jeremy J. Michalek
Policy options1. Do nothing
2. Eliminate CAFE AFV incentives
3. Eliminate other AFV sales incentives
4. Redesign policy
5. Replace policy
Examples: ZEV mandate, subsidies, etc.
Would reduce fleet emissions through 2025
However, could stall efforts to put fleet on a transition that would take decades even if the ideal technology and infrastructure were available today at competitive costs
19USAEE | 27 Oct 2015 Jeremy J. Michalek
Policy options1. Do nothing
2. Eliminate CAFE AFV incentives
3. Eliminate other AFV sales incentives
4. Redesign policy
5. Replace policy
Fleet emissions increase proportionally to number of AFVs sold, and state ZEV policy mandates sale of more AFVs Improved coordination of federal and
state policy design could help reduce negative interactions
Coordination is nontrivial The new CAFE standards themselves
were created as a federal compromise with California, which wanted to create more stringent standards
20USAEE | 27 Oct 2015 Jeremy J. Michalek
Policy options1. Do nothing
2. Eliminate CAFE AFV incentives
3. Eliminate other AFV sales incentives
4. Redesign policy
5. Replace policy
Pricing externalities at a value equal to the estimated marginal damages to society among most efficient options
US public support is dismal, even if tax revenues returned to households
Alt policies more politically realistic Regulating CO2 as a pollutant
Subsidizing fuel-efficient vehicles
Requiring high fuel efficiency
Continue efforts to persuade public & lawmakers of benefits of externality pricing: target end goal rather than specific technologies
21USAEE | 27 Oct 2015 Jeremy J. Michalek
AcknowledgementsContact
Jeremy J. Michalek (CMU)
Coauthors
Alan Jenn (CMU, UC-Davis)
Inês Azevedo (CMU)
Support
NSF-CMU Center for Climate and Energy Decision Making
Toyota Motor Corporation
AFV