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MIT Study: Widespread Acceptance of Alternative Fuel Vehicles Will Require Decades of Subsidies and Targeted Programs
2 June 2007
A study by MIT researchers concludes that marketing programs and subsidies will need to be in place for decades in order for the adoption and long-term market penetration of alternative fuel vehicles to become significant and self-sustaining.
Jeroen Struben and John Sterman of MIT’s Sloan School are developing a behavioral, dynamic model to explore the possible transition from internal combustion engine (ICE) vehicles to alternative fuel vehicles (AFV) such as hybrids, plug-in hybrids, natural gas vehicles, flex-fuel vehicles and hydrogen fuel cell vehicles.
Results show that there is a tipping point in the diffusion of AFVs: successful adoption of alternative vehicles requires policies, such as subsidies for alternative vehicles and fueling infrastructure, that persist long enough to push the AFV installed base over a critical threshold. Efforts falling short of the tipping point will not lead to sustained adoption. We show that the time required to achieve self-sustaining adoption is long—on the order of several decades—primarily due to the long life of vehicles.
Current alternative fuel vehicle technologies face a number of significant challenges that the gasoline internal combustion engine did not when it emerged in the market more than a century ago in competition with steam and electric vehicles.
The current enormous size of the automobile industry and support infrastructure creates a wide range of powerful positive feedback processes, including vehicle improvements and cost reductions driven by scale economies; R&D; and improving vehicle performance, sometimes through the spillover of innovations developed for alternative fuel vehicles to the dominant ICE platform.
More subtly, the current low functionality and high cost of alternatives, and low gasoline taxes, are endogenous consequences of the dominance of the internal combustion engine and the petroleum industry, transport networks, settlement patterns, technologies, and institutions with which it has co-evolved. The success of internal combustion suppresses the emergence of alternatives, maintaining the dominance of ICE.
These feedbacks mean, as we argue here, that achieving self-sustaining adoption would be difficult even if AFV performance equaled that of ICE today. The challenge facing policymakers seeking to promote a transition to sustainable alternative vehicles is how to overcome the barriers created by these feedbacks.
The researchers suggest that the potential for self-sustaining adoption of AFVs may be greater in developing markets such as China and India where the installed base of ICE vehicles is smaller and growth is faster. Growth in the total vehicle market speeds adoption of AFVs.
The mature markets of US, Europe and Japan, however, face greater challenges, especially given the long life of vehicles. Policies aimed at removing older ICE vehicles from the market therefore could have high leverage, the authors suggest. A sustained increase in the price of oil might stimulate sufficient adoption of AFVs to push past the tipping point, they note.
The long time required for the AFV market to develop in the simulations, however, suggests that a successful transition to AFVs will likely require policies that raise the real price of gasoline to levels that reflect its fully internalized cost, thus providing the persistent incentive favoring AFVs needed to reach the tipping point.
This research was supported by the Project on Innovation in Markets and Organizations at the MIT Sloan School of Management, the National Renewable Energy Laboratory and Shell Hydrogen.
Resources:
“Transition Challenges for Alternative Fuel Vehicle and Transportation Systems” (May 2007); Struben, Jeroen J.R. and Sterman, John; MIT Sloan Research Paper No. 4587-06
June 2, 2007 in Electric (Battery), Fuels, Hybrids, Hydrogen, Policy | Permalink | Comments (39) | TrackBack (0)
Comments
Posted by: sjc | June 03, 2007 at 12:38 PM
BlackSun: thanks for looking more deeply into the MIT paper.
In my scan I simply concluded they were looking at ICE/ACF as it it were 1900 when a few Baker Electrics were limping along at six MPH and Rollo, the Driver/Mechanic, took the banker to work in the Pierce-Arrow.
A study of some static world, of markets w/o political fact, and consumers w/o imagination.
Posted by: K | June 03, 2007 at 12:51 PM
I agree with the poster on the Ipod issue. Produce something better, cheaper and change will come exponentailly faster. Right now Prius is prob economical based on higher resale than the press gives it credit for.
Let that sink in a year or two. Then watch Toyota's committement to hybrids kick in on the next gen Prius. I predict over 20% improvement to todays and lowered by 50% hybrid premium. The next gen Prius and better Camry hybrid will force the hand of the rest if the volt and hybrid escape haven't already improved.
Posted by: Richard | June 03, 2007 at 03:40 PM
I don't see any mention of of social and environmental costs.Go figure!! That must mean the National Defense Council Foundation is underestimating the external costs!
This group would support vastly expanded oil exploration in US territoryGo figure!! That must mean they're not tree-hugging Liberals.
You're evaded the obvious point: with an external cost of at least $8.35 the US public is paying more for gasoline then Europeans.
Who is benefiting from this?
Posted by: DS | June 03, 2007 at 07:00 PM
Thanks BlackSun, I had ask if they considered peak oil, you answer in great detail: "NO!" which is not only a fatal flaw but makes their conclusion completely meaningless.
Posted by: Ben | June 03, 2007 at 07:01 PM
DS:
A good question which cannot be answered in a blog comment, even accepting for the purposes of discussion that the NDCF is correct. Fact is that you'll be hard-pressed to get any politician to say to their constituency "Congress is going to raise your gas prices by eight dollars per gallon."
If any tax will come it'll likely be in the form of a generalized carbon tax that will be raised slowly.
Posted by: Cervus | June 03, 2007 at 07:18 PM
A good question which cannot be answered in a blog comment
Who is benefiting from this?
Actually it's very simple: Detroit & the Oil companies.
Posted by: DS | June 03, 2007 at 08:13 PM
"Fact is that you'll be hard-pressed to get any politician to say to their constituency "Congress is going to raise your gas prices by eight dollars per gallon."
What if it were accompanied with an equal reduction in income and sales taxes, so as to be revenue neutral? This would focus the attention on energy consumption and encourage conservation and adoption of AFVs. People who used energy wisely wouldn't be adversely affected at all.
Posted by: BlackSun | June 03, 2007 at 08:18 PM
DS:
Can you honestly say that you don't benefit? Not even a little? It doesn't have to be direct.
BlackSun:
Such a scheme might actually be workable as a form of inclusive consumption tax. Still, it'd be a very hard sell to the average voter. You'd have your work cut out for you.
Posted by: Cervus | June 03, 2007 at 08:44 PM
People here in CA have adopted hybrids rather rapidly. Am
I to assume from this report that people will adopt new
plug-in hybrids more slowly when they raise the mpg from
48 to 100?
It seems like an unrealistic study, to me. The demand is there. Get the cars and fuel to us. If Brazil and Argentina can do it, we can, if we get special interests out of the way.
Posted by: swen | June 03, 2007 at 10:46 PM
Ok all-Back to square one-if we devoted our (USA) pioneer spirit to this,as like a war project, we can solve this gasoline addiction in a short time. The demand is there but so are interrupters.
Posted by: Devarity | June 04, 2007 at 07:38 AM
I didn't read the report. Do they classify diesel and hybrids as "alternative fuel vehicles?"
After all, the bulk of the changes we can accomplish in the next 20 years - PHEV, Mild Hybrid, Series Hybrid, shrinking and lightening vehicles, and diesel usage - all can occur, giving us 100% of our current transportation supply at 50-60% of our current consumption, without using ethanol or biodiesel.
Posted by: Dollared | June 04, 2007 at 09:04 AM
What the engineering community overlooks in this and other studies is the wild flux in consumer "taste." That is, like popular music, fashion, consumer electronics, social mores, once a product becomes "in" a whole new set of criterion drives the consumer. We are seeing this with the Prius and some other hybrids. I would argue that the tipping point in marketing occurs before we even claim a peak oil event. $5-8 dollar gas, foreign oil independence, security, environment, and western desire to save a buck whenever possible (e.g. WalMart)drive consumer habits in ways we suspect this study ignores.
in its
Even if the simulations are accurate in their prediction of needed marketing and subsidized (tax breaks/credits) incentives, so what? Of course those tools are needed to transition out of a giant industry to alternatives. The study does a service to the GCC cause by predicting longer term thus keeping up pressure to promote alternatives.
We have confidence that a Volt-type vehicle at a $20k price tag will set the stage for a storm of consumer choice. The Japanese, Chinese and Euros will pressure the pricing downward and the ICE will go to the buggy whip museum faster than cassettes gave way to CDs. That prediction requires intuition not simulation.
Posted by: gr | June 04, 2007 at 03:25 PM
The MIT study is somewhat correct, we need another solution and the ones offered don't really address the consumer, only the producers and only the big fat ones that do gas can win because they hold the money power.
Build an engine that runs any fuel, a Next Generation Flex Fuel, then watch the fuel market. Folks will make the right choice given the opportunity in a market economy. Right now there is no market economy, just a Hobsons choice for gas. Brazil proves that folks will chose a vehicle that runs on something other than gas, and in just 3 years, 90% of all vehicles sold run on ethanol. In the US, if folks could buy a vehicle that could run all fuels, that would change the fuels market dramatically, like Brazil, just 3 years. The solution must address the joe average, who must get to work and feed the kids. The solution must use all alternative fuels and ones coming on line. Joe would buy a vehicle that runs on any fuel if it didn't cost much more than a regular vehicle. And Joe would also buy any fuel to help out, as soon as it became available. It would become available as soon as Joe has the vehicle. Its painfully obvious that somebody has to build the vehicle first. Check out a previous post and ask DoE why they don't want to build such a vehicle.
http://www.greencarcongress.com/2005/10/concept_a_unive.html#more
Posted by: wxfman | June 05, 2007 at 09:45 PM
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People can save fuel by not having a "lead foot", taking the stuff out of the trunk and keeping their tires inflated, engine tuned, air cleaner clean and combining trips. Throw in a little telecommuting and car pooling and we can reduce fuel consumption. These are things we can do right away, but people would rather complain that this is a restriction of their freedoms. Apparently this is a perceived freedom to be wasteful if they can afford to do so.