Global Policy Review: Transportation and Climate Change
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1 Global Policy Review: Transportation and Climate Change Drew Kodjak,, Executive Director International Council on Clean Transportation 26 th Annual Conference U.S. and International Association for Energy Economists Ann Arbor, MI September 25,
2 Outline Introduction to ICCT Emissions Trends Past, future, and with modeled carbon constraints. Review Major Policies Passenger Cars, Commercial Trucks, and Fuels US, California, Canada, EU, Japan, China. Final Thoughts 2
3 About the ICCT The International Council on Clean Transportation (ICCT) is dedicated to improving the environmental performance of vehicles, fuels and transportation systems throughout the world. The ICCT is composed of government officials and international experts who are actively involved in developing environmental regulations for motor vehicles and transportation fuels. Council participants are drawn from those nations, states, and regions that are home to some of the largest auto and fuel markets around the world, including the European Union, Germany, Great Britain, Japan, China, Thailand, India, Brazil, Mexico, Canada, California, and the United States. Council participants act as individuals, rather than representatives of their countries or agencies. 3
4 ICCT Participants Brazil Suani Coelho Sao Paulo State Department for the Environment Assistant Secretary Ruy de Goes Leite Barros Ministerio de Meio Ambiente Program Director Canada Peter Reilly-Roe Natural Resources Canada Assistant Director China He Dongquan China Sustainable Energy Program Program Officer Feng Fei Development Research Center for the State Council Director General Fu Lixin Tsinghua University Department of Environmental Science and Engineering Europe Axel Friedrich Federal Environmental Agency Head of Division Guenter Hormandinger European Commission Vehicle emissions and transport Martin Williams Department for Environment Food and Rural Affairs Head of Air and Environmental Quality Division India Anumita Roychowdhury Center for Science and Environment Associate Director International Michael Walsh Transportation Consultant Japan Yasuri Daisho Waseda University Professor Korea Youngil Jeong Center for Environmentally Friendly Vehicle Director Mexico AdriánFernández Bremauntz National Institute of Ecology President Mario Molina Centro Mario Molina President Leonora Rojas National Institute of Ecology Directora General Thailand Supat Wangwongwatana Ministry of Natural Resources and Environment Deputy Director General USA Hal Harvey The William and Flora Hewlett Foundation Environment Program Director Margo Oge U.S. Environmental Protection Agency Office of Transportation and Air Quality Director Robert Sawyer California Air Resources Board Chairman 4
5 Shares & Trends of World CO 2 Emissions World CO2 emissions from fossil fuel combustion grew by 20% from 1990 to Second largest source was transport sector with 24% of total world emissions. Growth since 1971 was 150% mainly from road transport. Source: IEA CO2 Emissions from Fuel Combustion Paris, France. 5
6 Recent and Projected World Transportation Fuel Demand Million Barrels/Day Oil Equivalent Other Bunker Jet Fuel Diesel Gasoline Source: EIA/DOE (2001) 6
7 World Transport Vehicle CO2 Emissions By Mode Megatons Thousands Water-borne 2-3 wheelers LDVs Freight trucks Air Buses Freight + Passenger rail WBCSD
8 What happens to transport sector GHG emissions under a modest U.S. economy-wide GHG cap and trade system? Answer: Very little, because a modest carbon price (e.g., $7 ton/ CO2) translates into a 5.3 cent per gallon increase at the pump. Transportation Source: EIA analysis of NCEP policies. 8
9 Global Projections to 2100 Modeled inventory changes under a stabilization-inducing global carbon price shows doubling of transportation sector Base emissions. Case Electricity Sector Transportation Sector Source: PNNL / Battelle Jae Edmonds, PNNL / Battelle, MiniCam Modeling,
10 United States: National Approach Corporate Average Fuel Economy (CAFE) Standards Mandated by Congress in response to Arab oil embargo Standards first took affect in 1978 Cars mpg increased from 13.2 in 1975 to 27.5 by 1985 Light trucks standards increased less steeply, from about 13 mpg to 20.5 mpg by 1987 Gas Guzzler Tax Included Two recent rulemakings by NHSTA to raise light truck standards (not passenger vehicles) 2002 Rule raised LDV standards 1.5 mpg over 3 years 2005 Rule: reformed and increased CAFE system 10
11 CAFE Worked: Oil, Cost, and GHG Savings in 2000 Oil Consumption 2.8 MBD oil savings (13% reduction) 25% reduction in demand for gasoline Consumer and Economic Savings $66 billion in direct consumer savings Reduced imported oil price by $1 to $1.80/bbl, yielding $3-6 billion savings in 2000, and $40-80 billion cumulative. Climate Change Benefits 100 million metric tons of carbon/yr 7 percent reduction in overall US emissions Source: NRC
12 What Didn t t Work With CAFE Lower standards for light trucks CAFE credits for flex-fuel vehicles Failure to regularly update standards to reflect new technologies. Fleet average approach favored manufacturers with smaller vehicle sales mix. 12
13 Reformed CAFE New approach established fuel economy standards that vary based on vehicle size (i.e., footprint). Shifts distribution of costs away from manufacturers focused on largest classes and towards those focused on smallest. Standard is now sensitive to benefit assumptions; $0.50 / gallon translates into 2-4 mpg 13
14 Big winners under revised approach are likely to be GM and Ford. 14
15 California s s Approach: Mandatory GHG Emission Standards Statute passed in July 2002, regulations adopted September 24, Maximum feasible CO 2 -equivalent emission standards 30% reduction by 2016 (phase in begins 2009) Bundle of gases, CO 2, HFC, N 2 0, CH 4 About ten other states have adopted the California regulations as permitted under the Clean Air Act. Equivalent to about 30% of U.S. vehicle market. Quebec also considering adoption. 15
16 Vehicle Climate Change Emission Sources Black Carbon? Ozone CO 2 Methane Nitrous Oxide HFC Engine Transmission A/C compressor CO2
17 CO2 Is Not The Whole Story Watts Per Square Meter Climate Forcings Recent evidence indicates Reducing 1 kg of BC is equal To reducing 2.5 tons of CO Carbon Dioxide Chlorofluorocarbons Methane Nitrous Oxide Ozone Aerosol Effects Are Not Known Accurately Refelective Aerosols Black Carbon Cloud Droplet Changes Forcing Agent Source: Hansen, Scientific American, March
18 European Approach: Voluntary Agreement on CO2 Emissions Voluntary agreement between European Commission and Automobile Associations (EU, Japanese, Korean). Target of 140 g/km in 2008 and 120 g/km in Dieselization of passenger vehicle market largely responsible for about 14% reduction in GHG emissions from 1995 baseline. Progress has slowed, and latest data indicates 140 targets will not be met Actual Agreement Target 18
19 Some European Policy Questions Voluntary or Mandatory? Integrated approach with other measures? Incorporate transport sector into broader emissions trading system? How should cost effectiveness be determined? Size-based or weight-based? Japanese front runner approach? Include all GHG emissions or stay with only CO2? 19
20 Canada s s Dominant GHG Emissions Source is the Transport Sector. 20
21 Canada s s Approach: Voluntary Agreement on GHG Emissions. MOU signed in 2005 with Canada and International Automobile Associations. Commitment to achieve 5.3 Mt reduction in GHG emissions from passenger vehicles by end of Includes all GHG emissions listed in Kyoto Protocol. Compliance calculated by comparing modeled GHG emissions from passenger vehicles in 2010 against adjusted forecast from
22 Passenger car agreement to contribute only 10% of transport sector Kyoto commitment. 22
23 Denmark s s Approach: Vehicle Tax Tied to Fuel Economy 24 Different Car Classes Based On Kilometers Per Liter of Fuel Diesel Taxed More Than Gasoline Annual Increase with Inflation Plus 1.5% Per Year Petrol Diesel Above Below
24 Japanese Top-Runner Approach Weight-class fuel economy standards, a 23% fuel economy improvement by 2010 from a 1995 baseline, yielding an average fuel economy of 35.5 mpg. Example: For vehicles with curb weight of 1515 to 1750 kg, the baseline average fuel economy is the bold black line, and the 2010 requirement is the red line above. 24
25 Japan s Approach to Trucks: World s First Fuel Economy Standards for Heavy-Duty Trucks Set in FY2005. Source: Japan MLIT Target year Base year (2002) Fuel Economy Target standard value (average) Trucks Buses km/l (15.8L/100km) (415 g-co2/km) 5.62 km/l (17.8L/100km) (466 g-co2/km) 7.09 km/l (14.1L/100km) (370 g-co2/km) (12.2% improvement) 6.30 km/l (15.9L/100km) (416 g-co2/km) (12.1% improvement) 25
26 China s s Situation China to become the second largest vehicle market this year, with total new sales project to be 6.5 millions. New car sales are project to be surpass 3.0 millions this year. Annual growth in new car sales averaged about 20% since 92, trucks 7%, buses 13% millions Annual Vehicle Sales in China, Buses Trucks Cars
27 China s petroleum production, consumption, and imports projected by IEA China currently ranked 2nd in oil consumption in the world after US. From 1993 China has turned into an oil net-import country, and in 2004 the net-import oil amount has reached 40% of the total oil use. About half of imports from Mideast. IEA projects imports share to reach 60% by 2010, 70% by 2020 Source: World Energy Outlook
28 China s Approach: Mandatory weight-class standards Approx CAFE-equiv MPG Red Line -- Phase II (2008/9) Green Line -- Phase I (2005/6) For both Phases, the upper dot line is for Manual transmissions and the lower solid line is for Automatic transmissions Vehicle Test Weight (lbs) M1 and M1G type vehicles (EU classification), including passenger cars, SUVs and MPVs less than 9 seats Two separate sets of standard for: passenger cars with manual transmission passenger cars with automatic transmission, SUVs and MPVs with 3+ rows (all transmission types) Weight-based, 16 classes (based on EU emission wt. categories ) Based on European Test Cycle (NEDC) Liters/100 km Maximum fuel consumption level for individual vehicle models within each wt. class, instead of average value associated with each wt. class
29 China s Tax Approach: Sales tax tied to engine size Vehicle Category by Engine Displacement Tax Rate Automobiles 1.0 to 1.5 liters 3% 1.5 to 2.0 liters 5% 2.0 to 2.5 liters 9% 2.5 to 3.0 liters 12% 3.0 to 4.0 liters 15% 4.0+ liters 20% Commercial Buses 5% Motorcycles <250cc 3% >250cc 10% Stalled proposal: Levy penalty tax on vehicle models that fail fuel consumption standards. Reformed corporate exercise tax: reduce tax rate on small engines ( L) from 5% to 3%, increase tax rate on larger engine (> 4L, from 8% to 20%) eliminate SUV special rate of 5%
30 g CO2/km - Converted to NEDC Test Cycle Comparison of fleet average fuel economy and GHG emission standards US Canada Australia California China EU missing target? 140 Japan Source: Comparison of Passenger Vehicle Fuel Economy and GHG Emission Standards around the World, by Feng An and Amanda Sauer, Report for the Pew Center on Global Climate Change EU
31 Transportation Fuels Renewable fuel requirements spreading throughout the world. U.S. renewable fuel standard requires 7.5 billion gallons by 2008 (check). Canada s national target is 5% renewable fuels by European indicative standard is 5.75 percent on an energy content basis. Brazil sugarcane ethanol accounts for 40% of passenger vehicle fuel consumption (not diesel). 31
32 All Transportation Fuels Not Created Equal Brazil Ethanol LCA Canada GHGenius Model Europe WTW Model U.S. GREET Model 32 Diesel Gasoline (Oil Sands) LPG from Petroleum CNG from Natural Gas thanol (Corn / EU Sugarbeet) Ethanol (Adv. Corn Biogas) EU Wheat Ethanol (BR Sugarcane) Biodiesel (Rapeseed) Biodiesel (Soybean) Biodiesel (Yellow Grease) Biodiesel (Palm Oil) Electricity g/ GJ Gasoline
33 Renewable Fuels Portfolio Standard This policy concept would require fuel suppliers / importers to quantify and eventually reduce GHG emissions generated by fuels. Does not exist anywhere at present Under public discussion in Europe and California. 33
34 Final Thoughts Passenger Vehicles Many ways to promote GHG reductions from passenger fleet. The key is to create incentives for continuous, long-term reductions in GHG emissions. European debate over next 12 months will be critical, as will the outcome of California lawsuit. Transportation Fuels Key challenge to biofuels is certification of lifecycle emissions from soil to tank. Little previous experience with process rather than productbased standards. Commercial trucks Japan leads the world with first standards. Economic incentives are stronger than for passenger vehicles. 34
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