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Chapter 3, Section 3.4 discusses the status of low-GHG-emission technology for passenger cars. This section will discuss the effects of mitigation policies on the use of this technology and more generally on the use of passenger cars.
Government policies aimed at reducing passenger car fuel use, such as the US
corporate average fuel economy (CAFE) standards, and the high tax placed on
gasoline in many countries, have been in place for many years. These policies
have been driven by two considerations: the cost of importing crude oil, and/or
the desire to improve local environmental quality. The auto industry has responded
to these policies with the introduction of successive generations of technology
to improve passenger car efficiency. However, total passenger car fuel use has
increased steadily as improvements in vehicle efficiency have been overwhelmed
by increases in car sizes and car traffic. The number of passenger cars in use
worldwide has risen from 193 to 477 million between 1970 and 1995, and total
kilometres travelled have risen from 2.6 to 7.0 trillion vehicle-kilometres
between 1970 and 1995 (OECD, 1997b). While growth in passenger car numbers has
slowed in OECD countries, it is expected to continue to rise at a rapid rate
in the rest of the world. Passenger car numbers in China are expected to increase
20-fold from 1995 to 2015 (Dargay and Gately, 1997).
Because gasoline is already taxed at a very high level in many countries, and
the cost of fuel is a small portion of the total cost of driving, even fairly
substantial increases in the cost of the fuel (as a GHG mitigation policy) may
have little impact on vehicle use. The net present cost to the consumer of a
tax equivalent to US$300/tC is approximately 5% of the capital cost of a typical
new vehicle, assuming an initial cost of US$20,000, 12,000 km/year, and a 10-year
life (IEA, 1997b). Furthermore, the users of company and/or government-provided
cars may not be responsive to the increase in fuel cost at all, a typical case
of principal-agent problem (see Chapter 3 and Chapter
6).
Initiatives to improve fuel economy continue, often with the express intention
of reducing GHG emissions. European car manufacturers have voluntarily agreed
to reduce the fuel consumption of new cars by 20% by 2010. In 1993, US car manufacturers
entered into a partnership for a new generation vehicle (PNGV) with the US government
aimed at developing a passenger car with triple the current fuel economy (to
about 80 miles per gallon), by 2004, with no increase in cost or loss of performance
compared with current vehicles. The incremental costs of these vehicles have
been estimated to be as low as $2,500/car (DeCicco and Mark, 1997) to as high
as more than $6,000/car (Duleep, 1997; OTA, 1995). Since these vehicles will
be designed to meet the emissions standards anticipated to be in effect when
they are produced, no ancillary local air pollution benefit is expected.
However, much of the increase in fuel efficiency may be taken up in increased
demand for fuel if the lower operating costs are translated into increased ownership
and use of vehicles. In addition, Dowlatabadi et al. (1996) find that increasing
fuel economy to 60 miles per gallon had little beneficial effect on urban ozone
concentration, and could decrease the safety of passenger cars unless offsetting
steps were taken. Wang et al. (1998) estimate the capital investment required
in the USA through to 2030 for fuel production and distribution to be (1) US$100bn
(1995$) or less if the fuel for PNGV cars is reformulated gasoline or diesel,
ethanol, methanol, liquefied petroleum gas (LPG), or liquefied natural gas (LNG);
(2) approximately US$150bn for di-methyl ether; and (3) in the order of US$500bn
for hydrogen. No estimate was made of the cost of applying this technology outside
the USA.
The Australian Bureau of Transport and Communications Economics (BTCE, 1996)
examine the social costs of 16 measures to reduce GHG emissions from the transport
sector. In the longer term, five of these measures: (1) metropolitan road user
charges, (2) reduced urban public transport fares, (3) city-wide parking charges,
(4) labelling of new cars to inform buyers of their fuel efficiency, and (5)
shifting inter-capital freight from road to rail were found to be “no regrets”
options, i.e., they had zero or negative costs to society as a whole. Together
these measures could reduce emissions from the Australian transport sector by
about 5% to 10% of total projected emissions. A carbon tax on motor fuels and
accelerated introduction of fuel-saving technology for commercial vehicles are
no regrets measures if applied at a low level, but incurred positive social
costs if applied more broadly. Planting trees to offset transport emissions,
scrapping older cars, and accelerating the introduction of energy efficiency
technology for passenger cars and aircraft are found to be low-to-medium cost
measures. Scrapping older commercial vehicles, compulsory tuning of passenger
car engines twice a year, resurfacing highways, and increasing the use of ethanol
as a motor fuel are found to be high cost measures.
Many parts of the developing world are faced with severe environmental problems
caused in part by a rapid growth in the use of personal vehicles (scooters,
motor cycles, mopeds, and cars). Many of these vehicles are old and poorly maintained,
use two-stroke engines, and operate on inadequate road systems. The result is
traffic congestion, greater fuel consumption, and noise and air pollution that
degrade the urban environment. Bose (1998) finds that improving public transportation
to meet as much as 80% of travel demand, and promoting cleaner fuels and improved
engine technologies (i.e., phasing out two-stroke engines, increasing the share
of cars equipped with three-way catalytic converters, using unleaded gasoline,
electric vehicles, and vehicles fuelled with compressed natural gas) in six
Indian cities can significantly reduce both emissions and fuel consumption.
Total fuel savings for the six cities is 0.83mtoe (see footnote
3) in 2010 to 2011, and automotive emissions are reduced 30%–80% compared
with a baseline case.
Freight transportation has been growing rapidly as a result of the growth of
international merchandise trade, which has surpassed the growth in the world
economy over the last two decades (IEA, 1997b). EIA (1998) consider the impacts
of carbon fees to reduce US carbon emissions to 3% below 1990 levels, the amount
estimated by the US administration as necessary to meet its Kyoto Protocol commitments
when reductions in the emissions of other gases were taken into account. These
fees raise the cost of diesel fuel by US$0.68/gallon, but result in only a 4.9%
reduction in US freight truck travel, most of which is a result of lower economic
activity. US rail transport is projected to decline by 32%, largely as the result
of a 71% reduction in the demand for coal. The cost of marine fuel is projected
to rise by US$0.84/gallon, nearly twice the reference price, but domestic shipping
is projected to decline by only 10% (EIA, 1998).
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