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Study Concludes That Reducing US Transportation Oil Consumption and GHG Will Require a Package of Policies

20 June 2008

Belfer
The scenario that resulted in the lowest increase in transport-sector GHG emissions used an economy-wide carbon price beginning at $10/ton CO2, 2% annual improvement in CAFE, and a gasoline and diesel tax increasing at 10% per year in real terms (tax is not recycled back to consumers). Click to enlarge.

Individual policies, such as the increases in fuel economy standards adopted last year, will not result in significant reductions in US transportation sector greenhouse gas emissions or dependency on oil, according to a new analysis from the Harvard Kennedy School’s Belfer Center for Science and International Affairs.

Using a variant of the National Energy Modeling System (NEMS)—NEMS-ETIP—researchers in the Center’s Energy Technology Innovation Policy (ETIP) group modeled a number of policy scenarios using both the US Energy Information Administration’s “reference” case and “high-oil price” reference case. They developed quantitative estimates of the impact of increases in fuel-economy standards similar to those contained in the EISA in combination with the likely impacts of two different economy-wide climate policies and several different kinds of taxes on transportation fuels.

(The authors note that current 2008 crude oil prices are much higher than either EIA’s reference or “high” oil-price cases. If the NEMS-ETIP assumptions about the oil prices prove to be too sanguine, the higher underlying oil prices would likely result in all of the other policy scenarios modeled more effective, they concluded.)

It is a complex task to meet the policy goals of reducing GHG emissions and oil consumption from transportation sector. Our analysis shows that individual policies largely fail to produce the intended results on their own. Indeed, the new CAFE standards contained in EISA 2007 are not likely on their own to prevent significant growth in US oil consumption and transport-sector greenhouse gas-emissions by 2030, although, critically, they will prevent even larger growth from occurring. The new renewable fuel standards could result in greatly expanded use of ethanol, but whether this outcome materializes will depend on highly uncertain factors, such as ethanol production costs, investments on distribution and refueling infrastructure, and the deployment of flex-fuel vehicles. Even individual policies that seem radical in the US context, most notably taxation of transportation fuels, do not on their own produce the intended results.

Thus, a fundamental insight from this study is that if one wishes to reduce US06 net petroleum imports or to reduce CO2 from the transportation sector, packages of policies will be needed. If meaningful progress towards meeting the goals is to be achieved, such packages are likely to require combinations of bold policies.

Other insights gleaned from the study include:

  • The efficacy of energy and climate policies depends on the underlying world oil prices from now to 2030. The researchers found that if oil prices are relatively high, it is possible to achieve a reduction in net oil imports with a package that includes an initially modest 50 cent/gallon tax on gasoline and diesel that escalates 10 percent per year in real terms reaching $5.02/gallon in 2030. In that case, CO2 emissions from the transportation sector were stabilized close to 2010 levels.

    If, however, underlying world oil prices drop again during the next two decades, none of the policy scenarios modeled achieve the desired goals.

  • Demand for E85 becomes significant only when its price is lower than that of gasoline on an energy basis. Fairly stringent policies may be required to generate this effect.

  • The extent to which volumetric fuel mandates result in reductions in greenhouse gas emissions from the transportation sector will depend on how they are actually implemented. Both a low-carbon fuel standard or carbon tax on transportation fuels, if assessed on a lifecycle basis, could help reduce CO2 emissions, especially in combination with other measures.

  • Policies must be devised to make driving consumers care more about which cars they purchase and how much they drive.

  • Complementing CAFE increases with some form of fuel taxation is important to mitigate the GHG emissions coming from VMT growth.

   

This analysis is one product of a three-year Innovation in Transportation project housed at ETIP. Supported by the Environmental Protection Agency, the Hewlett Foundation, and the Energy Foundation, the Innovation in Transportation project seeks to craft innovative and effective policy strategies for overcoming barriers to the development and deployment of cleaner and more efficient fuels and vehicle technologies.

Resources

June 20, 2008 in Emissions, Fuel Efficiency, Policy | Permalink | Comments (46) | TrackBack (0)

Comments

When they lowered the speed limit to 55 MPH most everyone drove 65 MPH. Now that it's 65 MPH most everyone drives 75 MPH.
I currently drive 55 MPH. I get an occasional finger but most people think of me as an old fart with no place in particular to go.

Posted by: shigley | June 20, 2008 at 02:38 PM

@ Henrik:

I agree that the infrastructure will be a primary concern. But the automaker's approach seems to be that as they get their cars onto the roads the market will provide the incentive for charge stations. Probably, like coffee shops added internet services to attract customers - we'll see the same with electric quick/slow charging.

I would like to see a sunbelt municipal government invest in waste-to-electric "hybrid" charge stations. That is, a methane capture system in municipal landfill spins turbine, supplemented by a PV array. The energy is stored in some big (LiOn) ESS unit and dispensed for fee nearby. This solar+waste mini-power plant would demonstrate the potential for larger scale systems, provide new revenue to cities and push the renewable factor further into the public eye.

San Diego, Santa Monica, Santa Fe, Scottsdale - hello?

Posted by: gr | June 20, 2008 at 02:50 PM

You need long range policies to create and maintain infrastructure that is necessary in times like these. With oil prices now, a person can immediately change his/her habits but society still has the long term drag effects caused by infrastructure developements made when energy was cheap. These last a long time. These don't change and are just as bad.

A package of policies will be needed just to replace cars with EV's to create the electrical infrastructure. Anyone who doesn't believe some sort of planning is necessary is dreaming.

Posted by: aym | June 20, 2008 at 05:46 PM

joseph is correct. while 55mph speed limit is good for the northeast, once you get out west the terrain is not conducive to such slow speeds. everything is just farther apart, and it makes sense that you should be able to go faster. ever been to texas..?
just a quick example. i used to go camping in death valley when i lived in california.
one way trip ~375 mi
at 55mph = 6.8 hrs
at 85mph (a conservative speed if you've ever been out to inyokern area) = 4.4 hrs
just making a point here before everyone starts crying about how i "shouldn't be allowed" to drive that far and see one of the last well-preserved areas of our beautiful country..
and by the way, i did it in a truck. no prius is going to make it offroad to the places we'd go.

Posted by: marc | June 20, 2008 at 06:14 PM

"to far worse effect than CO2."

And there was no "holocaust."

Posted by: | June 20, 2008 at 07:09 PM

There are several ideas here that are just excuses to avoid change ...

Idea ( 1 ) "We don't need a "recharge-infrastructure" just use hybrids.
While hybrids are a great short term help, they are not a solution to the lack of oil, nor are they a long term way to clean up our environment. A nation driving 100% Prius cars is still 100% addicted to oil. This just puts the need for a real solution off for a few years, but does not solve anything. We still run out of gas. We still have global warming. We still have smog.

Idea ( 2 ) Just put recharge points at highway Gas stations.
Seriously! The first recharge methods will take time, and the constraint is on the power source, not the car batteries. We know this time period can be 2 hours with today's technology, and may be lowered with later upgraded methods.
Few people want to go onto the highway and sit for two hours while a car recharges, but most of us would be happy to have a nice restaurant meal, do a little shopping, or watch a movie while our car recharged.


Seriously, we DO need a universal standard for BEV recharging, and to see it installed in every city at the largest shopping plazas. We also need to insist that BEV cars be made available to buy.

Posted by: John Taylor | June 20, 2008 at 08:28 PM

Stas writes: Every single gas auto retired, is the equivalent of of ten PHEVs. The adoption of a 50% market penetration of PHEVs and BEVs, would be the equivalent of slashing the US auto fleet from 250 million vehicles to a gasoline auto fleet of but 25-50 million cars.

Stas, isn't this a bit of magical thinking? You still have 125 million ICE vehicles PLUS 125 million PHEVs somehow using in total the gasoline of 25-50 million cars?

Posted by: George | June 20, 2008 at 11:34 PM

@J. Taylor

Very good points. Maybe I am being too optimistic about how fast the first EVs will be able to charge. Nevertheless, there are a couple of articles here at CCG that indicate that 10 minutes fast charge of an EV is quit doable.

The best reference is probably the City EV from Subaru due for sale in 2009. They say it will be able to charge its battery to 80% capacity in 8 minutes. The two-seat Subaru R1e is capable of driving at speeds up to 65 mph with a range of up to 50 miles. I quote “The price and specifics of the vehicle are not yet disclosed, but FHI said it plans to have its electric cars down to around ¥2 million (US$17,500) apiece by 2012 or 2013. Mori said that by the mid-2010s, mass production will significantly decrease the cost of batteries, enabling electric cars to come down to below ¥1.5 million (US$13,100).”

http://www.greencarcongress.com/2007/12/electric-subaru.html
http://www.greencarcongress.com/2008/03/subaru-will-eva.html

With only 50 miles range this car will be “worth twice as much” to the consumers if a national fast charge grid was available along all highway gas stations.

Several battery manufactures have said their batteries can be charged in 10 minutes including but not limited to A123, Altair, NEC, and Toshiba. I think this it is possible for all high power LiFePO4 and LiMn2O4 batteries and titanium based batteries.

***
Fast charge for heavy duty trucks is probably going to be more difficult to implement because of the size of the battery and the amount of heat that need to be removed during the fast charge. A heavy duty truck will need a battery from 140 to 350 kWh to get a 60 to 175 miles range. I have one reference on a heavy duty 60.000 lbs truck used in Port of LA to move containers internally. This truck charge its 140kWh battery in 2 hours (down from 8 hours with lead acid batteries) and it can also swap its batteries (two big ones) in 3-5 minutes.
Video
http://www.youtube.com/watch?v=0f1AlrG8gVU
Brochure:
http://www.balqon.com/admin/images/pdf/nautilus%20E30_0402.pdf

Unless fast charging for heavy duty trucks can be minimized to max 20 minutes I think battery swapping will be needed as well along all highway gas stations to also accommodate the transition of these vehicles to EV power. If it is more that 20 minutes too much money will be spend to pay the driver to wait for the battery to charge.

Posted by: Henrik | June 21, 2008 at 12:41 AM

On the 55mph point, surely a better alternative would be for a mandatory requirement for all cars to have an 'overdrive' or higher sixth gear.

My partner's 2.5 litre Audi A6 TDi returned 55 UK mpg from a mainly motorway journey at 70mph. At 60, the national speed limit on non-divided highways, mileage is about the same. At 55mph or below, driving in 6th is difficult without labouring the engine, especially on hills, so you actually get more of a fuel penalty than a bonus at this speed. It's all in the gearing.

Electrics are good for short commutes in cities. Hybrids are best suited to stop-start journeys, also in cities, where braking etc regenerate batteries for acceleration. But aren't these the types of journeys that government's are trying to reduce?

I don't see the advantage in EVs or Hybrids, especially for the type of driving I do which is more occasional but longer distance drives for camping trips and visiting family. A Diesel is far better value, even though prices are currently reaching £1.30 per litre/£6 per gallon ($10 per US gallon).

Lets not also forget where most of this lovely clean electricity comes from - coal and gas fired pwower stations, and forget the extra number of power stations that would be needed to supply EVs, especially in the short term. And what happens when batteries need to be replaced - where do the old ones go?

My money is on biofuels derived from algae based biomass. If this can be produced economically and at a scale that can displace petroleum demand would this not be simpler? Pity that some green activists are trying to kill and bury biofuels because of food vs fuel debate. Sure this is valid for crop based biomass and palm oil, but not for promising sources such as algae.

If algae does take off, it could also be a opportunity for developing countries to create an algae based fuel industry, especially for the most desertified areas within reach of the sea. Maybe this is a good way also perhaps to use the process not only to produce fuel but also clean water in the process if this is possible for areas where clean water supply is scarce.


Posted by: Chillegibbo | June 21, 2008 at 07:17 AM

@Chillegibbo

The EV batteries are non-toxic lithium batteries. They will be nearly 100% recycled because they contain valuable metals.

Also 40% of all new electricity in the EU come from clean wind power. (Net capacity additions and net reductions 2007: Wind power 8,504 MW; Gas 8,226 MW; Coal (-750 MW); Nuclear (-1,203 MW) Source: Platts PowerVision and EWEA).

Still not 100% from clean modern energy but give it 3 or 4 more years with 30% growth and 100% of all new electricity in the EU will come from wind and some solar. In the US it depends on who is elected I am afraid. Obama and the US will be 100% clean and modern energy by the end of his term and McCain it will be “clean coal” that is not clean at all because it use water resources and still emit 20% of their CO2 because the CO2 capture is in reality only 80% CO2 capture. McCain’s nuclear ambition is ridiculous because it is too expensive compared to wind and it is still not clean because it uses water resources and produce dangerous waste and help other countries to acquire doomsday technology because there will be more relevant engineers to hire in the global labor market.

I agree with you that an EV should be able to serve its owner as well as an ICE can (no compromising on anything) so this is why we need fast charge stations everywhere.

Posted by: | June 21, 2008 at 08:08 AM

me above

Posted by: Henrik | June 21, 2008 at 08:08 AM

The problem with EV's is that they are useless in any part of the world where the temperature dips below freezing. Not only does your battery capacity drop because of the low temperature, you also need to use a significant part of it to keep the winshield clear and the driver warm enough to avoid crashing into schoolchildren.

Here in Ontario, electricity is mostly dirty and generated in antiquated plants, with frequent brownouts in the summer.

Why would I spend huge money to get a summer-only car that is mostly powered by coal? The baseline may be hydro/nuclear, but those facilities don't even meet our needs today.

It will take more than 15 years before we can get cleaner electricity sources online, and that's an optimistic estimate given that we haven't even reached the planing stages (we are still in the "if we switch off a few lightbulbs we'll be o.k." stage, a.k.a. denial).

Posted by: Bernard | June 21, 2008 at 10:01 AM

"Obama and the US will be 100% clean and modern energy by the end of his term "

Henrik, what makes you think that 250 million cars, the coal/oil/nuclear utilities, shipping, rail, air transport, military ($500B petroleum-based budget) will suddenly become 100% clean in only 8 years (assuming two terms.) This is the kind of idolatry that arises from cults and fanatics. I have read your posts and believe you to be neither.

Posted by: sulleny | June 21, 2008 at 11:05 AM

@Sulleny
You get me wrong. It is a flow consideration (new electricity added to the grid). It is not a stock consideration (composition of existing sources of electricity). The relevant consideration is the flow because the conversion of transportation from ICE to EV will require new added electric generation. Existing generation is already used for other purposes. Many people don’t distinguish between flow and stock which is why they wrongly claim that EVs will not be CO2 neutral. The EU and USA is only a few years away from achieving 100% CO2 neutrality with regard to added electricity and this is coming predominantly from wind power. Of cause it will take decades to replace the existing and CO2 polluting power plants (the stock). Maybe I wasn’t clear enough in which case I apologize.

Posted by: Henrik | June 21, 2008 at 12:17 PM

I should also stress that energy policy is not really a matter of DEMs or GOPs. The republican governors of California and Texas are doing the right thing in their jurisdictions in my opinion. When I favor Obama’s energy policy from McCain’s it is not at all an endorsement of one party or the other. It is limited to the energy policy in the white house which is also related to security policy. I simply don’t trust that McCain will lead America (or the free world for that sake) away from its addiction to fossil fuel. His statement about staying in Iraq for 100 years and now this ‘clean coal’ and nuclear has convinced me that he is stuck in old ways of thinking in this regard. It is not visionary at all. To have visions for a better future is some of the most important part of being a good president for America and as a world leader. I would be more comfortable to see both candidates offer such visions.

Posted by: Henrik | June 21, 2008 at 01:12 PM

Henrik, I agree. Personally I would like to see *more* government and private sector partnerships that expand the flow generation. I like the idea of small municipal-based solar, wind and W2E (Waste to Energy) projects. An easy one in the southwest would be landfill methane micro-turbines supplemented by solar. The accumulated energy is stored and dispensed for a small fee to public EVs at cheap (or no cost). This demonstrates the W2E concept, EVs, solar and gives the early adopters a free (or small $$) "fill up."

As for the politics, forces beyond the main cast often produce compromises unanticipated at election time. I expect the same from both parties next time around.

Posted by: gr | June 21, 2008 at 03:38 PM

HAS ANYONE HEARD OF THE COMPRESSED AIR CAR IN EUROPE. IT COMING OUT IN 2009-201O....AND THEY GET GREAT MILAGE PER CHARGE.

Posted by: GEORGE | June 28, 2008 at 12:01 PM

I agree with Axil: garbage in , garbage out. How does anyone get paid to write this trash?

The authors note that the EIA forcast of oil proces has already been proved wrong:
"In addition to their reference case forecast of oil prices, EIA also makes projections for high and low oil prices, each of which makes different assumption regarding the behavior of the Organization of Petroleum Exporting Countries (OPEC). The reference case assumes that OPEC continues to be the primary source of oil, increasing their production through 2030 at a rate similar to that of the last 15 years. EIA’s high oil price scenario accounts for a hypothetical scenario where aggressive OPEC behavior influence
oil markets. The high oil price scenario in AEO 2007 projects a world oil price of $59 per barrel in 2007, continuously increasing through 2030 to $93 per barrel in real terms. The average price of gasoline in this scenario starts at $2.66 in 2007 and ramps up to $3.10 in 2030. Of course, 2008 crude oil prices are much higher than either EIA’s reference or “high” oil-price cases. The NEMS-ETIP assumptions about the oil prices may be too sanguine, in which case the higher underlying oil prices would likely result in all of the
other policy scenarios modeled more effective. Oil prices are unaffected by the
introduction of policies in the NEMS-ETIP model."

Despite this, they choose the following key assumption for their model:
"Imported oil prices are predicted to fall from $59/barrel in 2007 to $41/barrel in 2014, to then rise to $51/barrel by 2030 in the reference case."

Their assumptions for PHEVs are also garbage:
• PHEV’s use electricity for only 10 percent of their VMT, and that this percentage remains invariable over time;
• PHEV’s are introduced only in three passenger vehicle categories, namely compact, midsize, and large cars—no plug-in hybrid light-duty trucks are introduced;
• The fuel economy of PHEV’s remains about constant throughout the estimation period, at circa 65 miles per gallon; and,
• PHEV’s have a maximum of 50 percent market penetration potential, based on the fraction of homes that have garages for battery recharging.

None of these assumptions are sensible.

As to the policies modelled, where is the innovation?
The grandly named "Energy Technology Innovation Policy (ETIP) group" only models a handful of policies none of which is innovative:
"economy-wide carbon prices, fuel-economy performance standards, and several kinds of transportation-fuels taxes."

Even their assumptions for these old chestnuts are garbage, for example they assume "economy-wide carbon pricing" of $10 or $30 to $60 per ton CO2.
Estimates of CCS costs are mostly in the $80 to $100 range, so not much changes unless the CO2 tax is higher than the cost of CCS. By contrast, once the CO2 tax is higher than than CCS cost, market forces will rapidly change electricity generation.

The most glaring omission from the policies modelled is any form of vehicle purchase tax or feebate, which would directly affect consumer choice and hence the fuel efficiency of the new vehicles purchased.

It is bizarre that this feeble drivel comes from the "John F Kennedy School of Government". If JFK had adopted this approach, we would still be modelling the flight of rockets instead of actually building and testing rockets till they could land a man on the moon.

What we actually need is a program similar to the JFK space moon landing program to put in place all the fiscal policies, emissions regulations and minimum standards necessary to reduce GHG emissions enough to stabilise GHG forcing.

Ten years after Kyoto, these bogus "studies" only spread misinformation and encourage endless talk and delay.
The approach taken by the Governor of California will be much more effective - set goals for reducing GHG emissions by target dates and mandate a government taskforce to introduce a very large range of measures which taken together will achieve the targets.
I hope the incoming president and congress will start to set federal fiscal measures and minimum standards and let the market compete to deliver.

Posted by: Polly | July 02, 2008 at 08:54 PM

I'm personally worried about the US economy. It is driving force of World economy too. If we are living Oil Peak or it has been passed already, then we are going to have difficult times. In U.S. the main transportation made with oil fueled vehicles. Many US cars are using double gasoline compared to European counter parts. In Europe we have electric trains and more alternative transportation than in US. In Finland gasoline price is now 1.60 EUR / liter ( 9,50 USD per / Gallon) and rising.

We need more time with oil, that's why we need to increase taxes for oil more than this report says. This gained time we need for building alternative energy sources to make electricity, which may power less cars than we already have.

Posted by: Finn | July 03, 2008 at 12:42 PM

I heard that the 55 mph speed limit was set so low because they never thought it would last set that low. Well it did last and it saved a lot of lives and fuel. We may need to consider this again.

It is well past time that we all stop talking about this and actually DO something. The waiting and talking is a reminder to me of the the 70s, where everyone talked about the problems, but did nothing about them until it was too late.

Posted by: sjc | July 06, 2008 at 07:49 AM

can i ask if you have already made a research about the oil cost in relation to transportation fee's towards estimation of fare increase

Posted by: ria | July 07, 2008 at 10:00 PM

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