Climate Change 2001:
Working Group III: Mitigation
Other reports in this collection Passenger Cars

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 Trucks, Rail, and Shipping

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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