Climate policies for road transport revisited (I): Evaluation of the current framework

The global rise of greenhouse gas (GHG) emissions and its potentially devastating consequences require a comprehensive regulatory framework for reducing emissions, including those from the transport sector. Alternative fuels and technologies have been promoted as a means for reducing the carbon intensity of the transport sector. However, the overall transport policy framework in major world economies is geared towards the use of conventional fossil fuels. This paper evaluates the effectiveness and efficiency of current climate policies for road transport that (1) target fuel producers and/or car manufacturers, and (2) influence use of alternative fuels and technologies. With diversifying fuel supply chains, carbon intensity of fuels and energy efficiency of vehicles cannot be regulated by a single instrument. We demonstrate that vehicles are best regulated across all fuels in terms of energy per distance. We conclude that price-based policies and a cap on total emissions are essential for alleviating rebound effects and perverse incentives of fuel efficiency standards and low carbon fuel standards. In tandem with existing policy tools, cap and price signal policies incentivize all emissions reduction options. Design and effects of cap and trade in the transport sector are investigated in the companion article (Flachsland et al., in this issue).     

The rebound effect in the aviation sector

The rebound effect, i.e., the (partial) offset of the energy efficiency improvement potential due to a reduction in marginal usage costs and the associated increase in consumer demand, has been extensively studied for residential energy demand and automobile travel. This study presents a quantitative estimate of the rebound effect for an air traffic network including the 22 busiest airports, which serve 14 of the highest O–D cities within the domestic U.S. aviation sector. To satisfy this objective, passenger flows, aircraft operations, flight delays and the resulting energy use are simulated. Our model results indicate that the average rebound effect in this network is about 19%, for the range of aircraft fuel burn reductions considered. This is the net impact of an increase in air transportation supply to satisfy the rising passenger demand, airline operational effects that further increase supply, and the mitigating effects of an increase in flight delays. Although the magnitude of the rebound effect is small, it can be significant for a sector that has comparatively few options for reducing greenhouse gas emissions.     

Analysis of policies to reduce oil consumption and greenhouse-gas emissions from the US transportation sector

Even as the US debates an economy-wide CO₂ cap-and-trade policy the transportation sector remains a significant oil security and climate change concern. Transportation alone consumes the majority of the US’s imported oil and produces a third of total US Greenhouse-Gas (GHG) emissions. This study examines different sector-specific policy scenarios for reducing GHG emissions and oil consumption in the US transportation sector under economy-wide CO₂ prices. The 2009 version of the Energy Information Administration’s (EIA) National Energy Modeling System (NEMS), a general equilibrium model of US energy markets, enables quantitative estimates of the impact of economy-wide CO₂ prices and various transportation-specific policy options. We analyze fuel taxes, continued increases in fuel economy standards, and purchase tax credits for new vehicle purchases, as well as the impacts of combining these policies. All policy scenarios modeled fail to meet the Obama administration’s goal of reducing GHG emissions 14% below 2005 levels by 2020. Purchase tax credits are expensive and ineffective at reducing emissions, while the largest reductions in GHG emissions result from increasing the cost of driving, thereby damping growth in vehicle miles traveled.     

Reducing CO<Subscript>2</Subscript> emissions of cars in the EU: analyzing the underlying mechanisms of standards,registration taxes and fuel taxes

Road transport, especially passenger car transport, is one of the largest contributors to greenhouse gas emissions. The major elements of the strategy of the European Union (EU) in order to reduce car emissions—such as CO₂ emission regulations from new passenger cars, vehicle-related fiscal measures and fuel economy labelling—have not resulted in significant reductions of greenhouse gas emissions over the last two decades. We focus in this paper on the theoretical understanding of how different policy instruments affect the decisions of (rational) consumers with an emphasis on registration taxes. Our major conclusions are as follows: (i) Theoretical analyses of the effects of taxes and standards in car transport are already very informative for policy design, even before quantitative assessments with observed data are available; (ii) CO₂ emission standards will not deliver the theoretically possible CO₂ reduction due to the rebound effect, and they are questionable for regulating the average car as applied in the context of EU to car manufacturers; (iii) the rebound effect of standards depends on the service price elasticity, which plays also a crucial role how fuel taxes affect demand; the magnitude of the service price elasticity determines which of these instruments is more effective with respect to energy conservation; (iv) combining fuel taxes and standards may allow for a win-win situation for the environment and car drivers but not for the current kind of EU regulation; and (v) a registration tax is equivalent to a standard binding consumers’ decisions (this does not apply to the current EU regulation), in particular, both lead to demand rebounds.     

Climate consequences of low-carbon fuels: The United States Renewable Fuel Standard

A common strategy for reducing greenhouse gas (GHG) emissions from energy use is to increase the supply of low-carbon alternatives. However, increasing supply tends to lower energy prices, which encourages additional fuel consumption. This “fuel market rebound effect” can undermine climate change mitigation strategies, even to the point where efforts to reduce GHG emissions by increasing the supply of low-carbon fuels may actually result in increased GHG emissions. Here, we explore how policies that encourage the production of low-carbon fuels may result in increased GHG emissions because the resulting increase in energy use overwhelms the benefits of reduced carbon intensity. We describe how climate change mitigation strategies should follow a simple rule: a low-carbon fuel with a carbon intensity of X% that of a fossil fuel must displace at least X% of that fossil fuel to reduce overall GHG emissions. We apply this rule to the United States Renewable Fuel Standard (RFS2). We show that absent consideration of the fuel market rebound effect, RFS2 appears to reduce GHG emissions, but once the fuel market rebound effect is factored in, RFS2 actually increases GHG emissions when all fuel GHG intensity targets are met.     

Stacking low carbon policies on the renewable fuels standard: Economic and greenhouse gas implications

This paper examines the economic and GHG implications of stacking a low carbon fuel standard (LCFS) with and without a carbon price policy on the Renewable Fuel Standard (RFS). We compare the performance of various policy combinations for food and fuel prices, fuel mix and fuel consumption. We also analyze the economic costs and benefits of alternative policy combinations and their distributional effects for consumers and producers in the transportation and agricultural sector in the US. Using a dynamic, multi-market, partial equilibrium model of the transportation and agricultural sectors, we find that combining the RFS with an LCFS policy leads to a reduction in first generation biofuels and an increase in second generation biofuels compared to the RFS alone. This policy combination also achieves greater reduction in GHG emissions even after considering offsetting market mediated effects. Imposition of a carbon price with the RFS and LCFS policy primarily induces fuel conservation and achieves larger GHG emissions reduction compared to the other policy scenarios. All these policy combinations lead to higher net economic benefits for the transportation and agricultural sectors relative to the no policy baseline because they improve the terms of trade for US.     

The effect of energy end-use efficiency improvement on China’s energy use and CO2 emissions: a CGE model-based analysis

With its rapid economic growth, China is now confronted with soaring pressure from both its energy supply and the environment. To deal with this conflict, energy end-use efficiency improvement is now promoted by the government as an emphasis for future energy saving. This study explores the general equilibrium effect of energy end-use efficiency improvement on China’s economy, energy use, and CO₂ emissions. This paper develops a static, multisector computable general equilibrium model (CGE) for China, with specific detail in energy use and with the embodiment of energy efficiency. In order to explore the ability of subsidizing non-fossil-generated electricity on moderating potential rebound effects, in this model, the electricity sector was deconstructed into five specific generation activities using bottom–up data from the Chinese electricity industry. The model is calibrated into a 16-sector Chinese Social Accounting Matrix for the year 2002. In the analysis, seven scenarios were established: business as usual, solely efficiency improvement, and five policy scenarios (taxing carbon, subsidized hydropower, subsidized nuclear power, combination of taxing carbon and subsidized hydropower, combination of taxing carbon and subsidized nuclear power). Results show that a sectoral-uniform improvement of energy end-use efficiency will increase rather than decrease the total energy consumption and CO₂ emissions. The sensitivity analysis of sectoral efficiency improvement shows that efficiency improvements happened in different sectors may have obvious different extents of rebound. The three sectors, whose efficient improvements do not drive-up total national energy use and CO₂ emissions, include Iron and Steel, Building Materials, and Construction. Thus, the improvement of energy end-use efficiency should be sectoral specific. When differentiating the sectoral energy-saving goal, not only the saving potential of each sector but also its potential to ease the total rebound should be taken into account. Moreover, since the potential efficiency improvement for a sector over a certain period will be limited, technology measures should work along with a specific policy to neutralize the rebound effect. Results of policy analysis show that one relatively enhanced way is to combine carbon taxing with subsidized hydropower.     

Alternative policy impacts on US GHG emissions and energy security: A hybrid modeling approach

This study addresses the possible impacts of energy and climate policies, namely corporate average fleet efficiency (CAFE) standard, renewable fuel standard (RFS) and clean energy standard (CES), and an economy wide equivalent carbon tax on GHG emissions in the US to the year 2045. Bottom–up and top–down modeling approaches find widespread use in energy economic modeling and policy analysis, in which they differ mainly with respect to the emphasis placed on technology of the energy system and/or the comprehensiveness of endogenous market adjustments. For this study, we use a hybrid energy modeling approach, MARKAL–Macro, that combines the characteristics of two divergent approaches, in order to investigate and quantify the cost of climate policies for the US and an equivalent carbon tax. The approach incorporates Macro-economic feedbacks through a single sector neoclassical growth model while maintaining sectoral and technological detail of the bottom–up optimization framework with endogenous aggregated energy demand. Our analysis is done for two important objectives of the US energy policy: GHG reduction and increased energy security. Our results suggest that the emission tax achieves results quite similar to the CES policy but very different results in the transportation sector. The CAFE standard and RFS are more expensive than a carbon tax for emission reductions. However, the CAFE standard and RFS are much more efficient at achieving crude oil import reductions. The GDP losses are 2.0% and 1.2% relative to the base case for the policy case and carbon tax. That difference may be perceived as being small given the increased energy security gained from the CAFE and RFS policy measures and the uncertainty inherent in this type of analysis.     

Vehicle technology under CO2 constraint: a general equilibrium analysis

A study is presented of the rates of penetration of different transport technologies under policy constraints on CO₂ emissions. The response of this sector is analyzed within an overall national level of restriction, with a focus on automobiles, light trucks, and heavy freight trucks. Using the US as an example, a linked set of three models is used to carry out the analysis: a multi-sector computable general equilibrium model of the economy, a MARKAL-type model of vehicle and fuel supply technology, and a model simulating the split of personal and freight transport among modes. Results highlight the importance of incremental improvements in conventional internal combustion engine technology, and, in the absence of policies to overcome observed consumer discount rates, the very long time horizons before radical alternatives like the internal combustion engine hybrid drive train vehicle are likely to take substantial market share.     

Assessment of demand for natural gas from the electricity sector in India

Electricity sector is among the key users of natural gas. The sustained electricity deficit and environment policies have added to an already rising demand for gas. This paper tries to understand gas demand in future from electricity sector. This paper models the future demand for gas in India from the electricity sector under alternative scenarios for the period 2005–2025, using bottom-up ANSWER MARKAL model. The scenarios are differentiated by alternate economic growth projections and policies related to coal reforms, infrastructure choices and local environment. The results across scenarios show that gas competes with coal as a base-load option if price difference is below US $ 4 per MBtu. At higher price difference gas penetrates only the peak power market. Gas demand is lower in the high economic growth scenario, since electricity sector is more flexible in substitution of primary energy. Gas demand reduces also in cases when coal supply curve shifts rightwards such as under coal reforms and coal-by-wire scenarios. Local environmental (SO₂ emissions) control promotes end of pipe solutions flue gas de-sulfurisation (FGD) initially, though in the longer term mitigation happens by fuel substitution (coal by gas) and introduction of clean coal technologies integrated gasification combined cycle (IGCC).     

Should a vehicle fuel economy standard be combined with an economy-wide greenhouse gas emissions constraint? Implications for energy and climate policy in the United States

The United States has adopted fuel economy standards that require increases in the on-road efficiency of new passenger vehicles, with the goal of reducing petroleum use and (more recently) greenhouse gas (GHG) emissions. Understanding the cost and effectiveness of fuel economy standards, alone and in combination with economy-wide policies that constrain GHG emissions, is essential to inform coordinated design of future climate and energy policy. We use a computable general equilibrium model, the MIT Emissions Prediction and Policy Analysis (EPPA) model, to investigate the effect of combining a fuel economy standard with an economy-wide GHG emissions constraint in the United States. First, a fuel economy standard is shown to be at least six to fourteen times less cost effective than a price instrument (fuel tax) when targeting an identical reduction in cumulative gasoline use. Second, when combined with a cap-and-trade (CAT) policy, a binding fuel economy standard increases the cost of meeting the GHG emissions constraint by forcing expensive reductions in passenger vehicle gasoline use, displacing more cost-effective abatement opportunities. Third, the impact of adding a fuel economy standard to the CAT policy depends on the availability and cost of abatement opportunities in transport—if advanced biofuels provide a cost-competitive, low carbon alternative to gasoline, the fuel economy standard does not bind and the use of low carbon fuels in passenger vehicles makes a significantly larger contribution to GHG emissions abatement relative to the case when biofuels are not available. This analysis underscores the potentially large costs of a fuel economy standard relative to alternative policies aimed at reducing petroleum use and GHG emissions. It further emphasizes the need to consider sensitivity to vehicle technology and alternative fuel availability and costs as well as economy-wide responses when forecasting the energy, environmental, and economic outcomes of policy combinations.     

Renewable energy for sustainable electrical energy system in India

Present trends of electrical energy supply and demand are not sustainable because of the huge gap between demand and supply in foreseeable future in India. The path towards sustainability is exploitation of energy conservation and aggressive use of renewable energy systems. Potential of renewable energy technologies that can be effectively harnessed would depend on future technology developments and breakthrough in cost reduction. This requires adequate policy guidelines and interventions in the Indian power sector. Detailed MARKAL simulations, for power sector in India, show that full exploitation of energy conservation potential and an aggressive implementation of renewable energy technologies lead to sustainable development. Coal and other fossil fuel (gas and oil) allocations stagnated after the year 2015 and remain constant up to 2040. After the year 2040, the requirement for coal and gas goes down and carbon emissions decrease steeply. By the year 2045, 25% electrical energy can be supplied by renewable energy and the CO₂ emissions can be reduced by 72% as compared to the base case scenario.     

世界汽柴油标准及供需发展趋势浅析

清洁燃料的发展,尤其是北美、西欧以及日韩等部分亚太地区国家的清洁燃料发展已经非常成熟,无论从标准的制定及实施、技术的开发及应用、国家政策的激励等等方面,都积累了相当的经验,为发展中国家清洁燃料的发展奠定了基础。尽管目前全球汽柴油质量存在差异,但世界汽柴油需求仍处于稳步增长态势,尤其是全球清洁汽柴油需求的比例在逐年提高。主要从全球汽柴油标准、质量以及供需现状等进行调研,分析未来20年世界各地区汽柴油的变化趋势以及需求走向,指出全球汽油、柴油标准虽然因各国汽柴油生产装置结构不同、加工原油种类不同以及受气候等诸多因素影响,各国汽柴油标准中的各种限值有所不同,但是硫含量逐渐降低并趋于无硫化将是大势所趋;指出欧美等国受燃油经济性标准不断提高等多种因素影响,在2030年前的汽油需求将呈现下降,柴油需求将略有增长,而亚太、中东等发展中国家则将处于稳步增长趋势。     

Estimation of global rebound effect caused by energy efficiency improvement

Rebound effect refers to the phenomenon that the actual reduction in energy use and emissions is less than the expected reduction caused by an energy efficiency improvement due to induced behavior adjustment of relevant economic agents. This article studies the global rebound effects on energy use and related emissions caused by an energy efficiency improvement. We adopt a global computable general equilibrium (CGE) model to design a scenario of energy efficiency improvement, which is compared to a business-as-usual (BAU) scenario to identify the global rebound effect. Our results show very large rebound effect on energy use (70%) and related emissions (90%) in 2040 at the global level with regional and sectoral differences. Important determinants, among others, are induced labor movement among economic activities and labor supply, and substitution elasticity between energy and other goods. Labor mobility has a marked impact on both rebound effects and on fuel mix. The global rebound effect is still considerable even with a low substitution elasticity between energy and other goods. The effect of capital accumulation over time contributes marginally to the global rebound effect as it is utilized to promote economic growth by using energy input more efficiently.     

Spatial and temporal optimization of hydrogen fuel supply chain for light duty passenger vehicles in British Columbia

British Columbia is well positioned to capitalize on its natural resources and its carbon policies towards the development of a hydrogen fueling network. A multi-period optimization model was developed to design a hydrogen fuel supply chain based on a mixed integer linear programming formulation. The model was applied to the light duty passenger vehicle sector in British Columbia under three hydrogen demand scenarios. As part of the objective function, the model incorporated the current provincial emissions mitigation policies, i.e., a carbon tax and a low-carbon fuel standard (LCFS). Based on cost, our model indicates that steam methane reforming (SMR) is the least costly hydrogen production technology even with carbon policies in place. However, SMR would result in higher emissions (compared to other pathways). Coupling the carbon tax with the LCFS can be a suitable policy option when hydrogen price and GHG emissions are weighted equally.     

Rebound and disinvestment effects in refined oil consumption and supply resulting from an increase in energy efficiency in the Scottish commercial transport sector

In this paper, we use an energy–economy–environment computable general equilibrium (CGE) model of the Scottish economy to examine the impacts of an exogenous increase in energy augmenting technological progress in the domestic commercial Transport sector on the supply and use of energy. We focus our analysis on Scottish refined oil, as the main type of energy input used in commercial transport activity. We find that a 5% increase in energy efficiency in the commercial Transport sector leads to rebound effects in the use of oil-based energy commodities in all time periods, in the target sector and at the economy-wide level. However, our results also suggest that such an efficiency improvement may cause a contraction in capacity in the Scottish refined oil supply sector. This ‘disinvestment effect’ acts as a constraint on the size of rebound effects. However, the magnitude of rebound effects and presence of the disinvestment effect in the simulations conducted here are sensitive to the specification of key elasticities of substitution in the nested production function for the target sector, particularly the substitutability of energy for non-energy intermediate inputs to production.     

Assessment of mitigation options for the energy system in Bulgaria

The Bulgarian greenhouse gas (GHG) emission profile reveals the energy sector as the most significant emission source and also as an area where great potential for GHG emissions reduction exists. Mitigation options in energy supply were selected considering the potential of fossil fuel substitution and new energy technology implementation in the context of the existing structure of energy system and projects for mid- and long-term development. Basically three modules of ENPEP were used: BALANCE — to calculate the energy flows and energy cost from primary fuel resources and fuel import to energy end-use, IMPACT — to calculate GHG emissions, and ELECTRIC — to project the electric system long-term development. Different mitigation measures combined in four scenarios were developed. The integrated mitigation scenario incorporated a mix of mitigation measures in the energy demand and supply. Implementation of CO₂ mitigation measures both in energy demand and energy supply would reduce the 2020 emission level by 34.3 Tg (29.1%), and by 544.2 Tg (21.7%) for the entire study period 2000 – 2020, compared to the baseline scenario.     

A review on energy pattern and policy for transportation sector in Malaysia

Transportation has dominated global fuel consumption and greenhouse gas emissions have risen in an alarming rate. Gasoline and diesel consumption for road transport have a faster growing rate than other sector and the trend appeared to be rapidly moving upwards in the near future. This has caused much concern in many countries including Malaysia to improve the sustainable energy of this sector. The focus of this paper is to analyze the trends of energy pattern and emission of road transport in Malaysia. On top of that, the review of prospective policies such as fuel economy standards and fuel switching to natural gas as well as biodiesel are summarized in this study. The study found that there is an urgent need to adopt suitable energy policy to balance the energy demand and reduce emission in this sector. This study serves as a guideline for further investigation and research in order to implement and improve the transportation sector.     

Implications of a US electricity standard for final energy demand

This paper analyzes the emissions impact of an emissions intensity standard (metric tons of CO₂ per MWh of electricity) for the US power sector on US final energy demand — i.e. the manufacturing, residential, commercial, and transportation sectors. An emissions intensity standard, although geared towards the power sector, will have implications for these other sectors of the economy through its effect on economy-wide energy prices. Using a hybrid energy-economy simulation model (CIMS), we find the effect on aggregate emissions from final demand to mostly be small. However, after disaggregating final demand, we find significant changes in CO₂e emissions for several of sub-sectors. Given that emissions reductions in final energy demand are needed alongside power sector reductions for the US to achieve deep emissions cuts, our findings provide needed insight as to whether these eventual reductions will be helped or hindered by a US electricity standard.     

Review on fuel economy standard and label for vehicle in selected ASEAN countries

Sustainable supply of energy at affordable prices is vital to ensure the human development. ASEAN is committed pursuing for a clean and green region with fully established mechanisms for sustainable development to ensure the protection of regional environment, resources and the high quality of people's life. Nowadays, energy use in the transportation sector represents an important issue in ASEAN countries. Therefore, it is believed that the introduction of fuel economy standards and labels is the key to save energy in this sector. Fuel economy standards and labels are relatively cheap measure to influence consumer behaviour and to induce car manufacturers to produce more efficient vehicles. Fuel economy standards and labels for vehicle are being implemented in many countries around the world to save fuel consumption and mitigate CO₂ emission. This paper is a review on fuel economy standard and labels for vehicle in some selected ASEAN countries such as Singapore, Indonesia, Malaysia, Philippines, Thailand and Vietnam. It has been found that Singapore is the leading country in ASEAN that has implemented fuel economy standards and labels. Moreover, it has been found that the implementation of cleaner fuels standard play a crucial role in protecting public health and the environment from transportation sector emissions. The most common alternative fuels used in ASEAN are biodiesel, ethanol, methanol, propane, hydrogen and natural gas.