CMU study concludes alt fuel vehicle incentives for OEMs result in increased fleet gasoline consumption and emissions
A study by researchers at Carnegie Mellon University has concluded that regulatory incentives for OEMs for alternative fuel vehicles (AFVs) intended to encourage a technology transition in the transportation fleet result in increased fleet-wide gasoline consumption and emissions. Their paper is published in the ACS journal Environmental Science & Technology.
In the US, the main regulatory drivers for increased light-duty vehicle fuel efficiency are the National Highway Traffic Safety Administration’s (NHTSA) CAFE standards and the US Environmental Protection Agency’s (EPA) GHG standard. The two standards are harmonized for comparable stringency, but there are differences. (Earlier post.)
Each, however, offers compliance flexibility mechanisms including:
Credits that can be earned if a manufacturer’s fleet has lower emissions or higher efficiency than the respective policy requires in a given year and can be traded or used when a manufacturer’s fleet would otherwise not comply with the policy;
Credits for air conditioning improvements;
Off-cycle credits for measurable GHG and fuel savings from technologies whose benefits are not measured by the standard laboratory two-cycle test; and
Incentives for selling AFVs. EPA/NHTSA policy includes incentives that encourage automakers to produce AFVs by allowing automakers that sell AFVs to meet less-stringent fleet standards.
In their study, Alan Jenn, Ineŝ Azevedo and Jeremy Michalek focus solely on the last.
NHTSA incentives for AFVs differ from EPA incentives for AFVs due in part to differences in the regulatory authority of the two agencies. The two policies were designed to have comparable stringency, but because they are not identical, it is possible that one standard may be slightly more restrictive than the other for a given manufacturer’s fleet in a given year. While it is potentially true that the CAFE standard could be slightly more stringent than the GHG standard for a given manufacturer, the penalty for violating the GHG standard is severe (potential revocation of the license to sell vehicles in the United States), whereas the penalty for violating the CAFE standard is relatively mild ($5.50 per 0.1 mpg violation per vehicle—a quantity that manufacturers have been willing to pay in the past even when standards were far more lax).
…For this reason, we focus on treating the GHG standard as the binding constraint in our analysis.—Jenn et al.
The rules offer different incentives for flex fuel vehicles (FFVs); compressed natural gas vehicles (CNG); battery electric vehicles (BEVs); plug-in hybrid electric vehicles (PHEVs); and fuel cell vehicles (FCVs).
There are two types of AFV incentives in the GHG standard, the authors explain: weighting factors and multipliers.
A weighting factor reduces the effective emissions rate for AFVs used in compliance calculations, allowing AFVs to count as though they have lower emissions than they actually do and relaxing the stringency of the automaker’s fleet standard.
A multiplier allows each AFV sold to count as more than one vehicle sold in compliance calculations, further relaxing stringency of the automaker’s standard (whenever the AFV is lower emitting than the manufacturer’s average vehicle).
For a given manufacturer, if one of its vehicles has emissions lower than the annual GHG emissions standards with which the manufacturer needs to comply, a second “balancing vehicle” can be sold with higher emissions such that the average emission rate of the two vehicles is equal to the standard.
For the study, the CMU team assumed no policy changes through 2025; that the total number of vehicles sold by each manufacturer is not affected by the AFV incentives; and that the GHG standards are binding.
To estimate the net effect of AFV incentives on fleet tailpipe and power plant emissions associated with vehicle operation, the researchers used projections of AFV sales through 2025 from the reference case scenarios of the EIA’s Annual Energy Outlook (AEO) reports in 2012 through 2015. The CMU team compared four different AEO projections because the sales of AFVs, particularly FFVs, are substantially higher in the 2012 projections (at nearly 1 million sales annually) but have since been adjusted downward in the 2013 projections before increasing in the 2014 and 2015 projections.
The researchers selected representative vehicles in categories reported by the AEO: PHEV10 (Prius PHV); PHEV40 (Chevy Volt); BEV100 (Nissan LEAF), and FFVs. For the representative FFVs, they drew from historical sales-weighted emissions rates of FFVs over the past 10 years.
We find under fairly general conditions that reducing AFV weighting factors results in increased fleet emissions and gasoline consumption. Increasing AFV multiplier factors also results in increased emissions and gasoline consumption when the manufacturer’s incentive-weighted AFV emissions are lower than its fleet average. Further, and counterintuitively, increased sales of AFVs in place of conventional vehicles results in increased United States fleet emissions and gasoline consumption because of the incentives.—Jenn et al.
Among their findings:
The net effect of the AFV incentives in the GHG standard from vehicles sold from 2012 to 2025 (assuming a 12 year life) is an increase of 30 to 70 million metric tons of CO2 (50% to 75% due to FFVs) relative to the same policy without AFV incentives (or, equivalently, relative to the same policy if there are no AFV sales).
Gasoline consumption implications depend on AFV sales induced by the incentive, but assuming no induced sales implies 3.4 to 7.9 billion additional gallons (11 to 30 billion liters) of gasoline consumed.
On-road effects may be 30−40% higher in the real world, since the base case analysis was based on the optimistic 2-cycle laboratory tests used in CAFE/GHG compliance calculations. Therefore, the CMU team estimated the on-road effect as about 40 to 100 million metric tons of CO2.
Our estimates represent about 1−2% of total estimated GHG savings from CAFE/GHG policy, and the net effect on fleet-wide GHG emissions is approximately equivalent to relaxing the overall GHG standards by 0.8% to 1.5%. The policy also has implications for other air pollutants not examined here, which could have large social costs.—Jenn et al.
Alan Jenn, Inês M. L. Azevedo, and Jeremy J. Michalek (2016) “Alternative Fuel Vehicle Adoption Increases Fleet Gasoline Consumption and Greenhouse Gas Emissions under United States Corporate Average Fuel Economy Policy and Greenhouse Gas Emissions Standards” Environmental Science & Technology doi: 10.1021/acs.est.5b02842