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Policies for the U.S. Light Duty Vehicle Sector:
Technical and Policy Considerations
Sanya Carley
Associate Professor
School of Public and Environmental Affairs
Indiana University
Collaborators: Denvil Duncan, John D. Graham, Saba Siddiki, Nikos Zirogiannis
This work is funded by a grant from the Alliance of Automobile Manufacturers
Light duty vehicle standards
2017-2025
National Highway Traffic
Safety Administration: 54.5
miles per gallon (MPG)
Environmental Protection
Agency: 163 g/mi CO2
Agencies’ mid-term regulatory
reviews regarding 2022-2025
implementation period
Source of image: http://www.nytimes.com/2012/08/29/business/energy-environment/obama-unveils-tighter-fuel-efficiencystandards.html
Fuel Economy Targets for 2017-2025
CARS
Source: NRC (2015)
LIGHT TRUCKS
CAFE MPG Target Curves for Passenger Cars
Nearly 50% Increase – 2016 to 2025
5
Source: Wally Wade (2016)
Fuel Economy Standards Across the World
Fuel Economy Standards for Light-Duty
Vehicles, Selected Countries
A 2016 PERSPECTIVE
Zero Emissions Vehicle (ZEV) States
These 10 states account for
approximately 30% of national
vehicle sales market
Source of image: http://www.c2es.org/us-states-regions/policy-maps/zev-program
Electric Vehicle Sales
2015 Electric Vehicle Sales
2025 Electric Vehicle Sales
(To meet a 15.4% requirement
in 30% of U.S. Auto Market)
114,000
785,400
Multipliers and GHG Credit
Each battery electric vehicle (BEV) and fuel cell vehicle (FCV)
counts as 2 vehicles between 2017-2021
Multipliers and GHG Credit
0 CO2 e
0 CO2 e
BEVs and FCVs counted as emitting zero grams CO2 equivalent per
mile between 2017-2021
Multipliers and GHG Credit
0 g/mi
+
0 g/mi
0 CO2 e
368 g/mi
368 g/mi
0 CO2 e
368 g/mi
368 g/mi
Average: 245 g/mi
Multipliers and GHG Credit
0 g/mi
+
0 g/mi
0 CO2 e
736 g/mi
0 CO2 e
736 g/mi
Average: 368 g/mi
Benefits and Challenges to
Manufacturers
Some auto manufacturers can accumulate and sell
credits in both the ZEV and the CAFE program
In electric vehicle is, on average, >$10,000 more to
produce (NRC, 2015)
ZEV sales: currently allowed a travel provision
2018-2021: regional compliance pools
2022 onward: must be sold within ZEV states
Could ZEV Have Implications for the Geographic
Distribution of U.S. Manufacturing?
Source of image: Center for Automotive Research
2015 Global Lithium-Ion Battery Sales,
by MWh
Wanxiang
Air Litium (Lyoyang)
Beijing Pride Power
Epower
Samsung
Mitsubishi/GS Yuasa
AESC
LG Chem
BYD
Panasonic
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Source of data: http://cleantechnica.com/2016/03/26/top-ev-battery-producers-2015-vs-2014-top-10-list/
5000
Percentage of US Electric Vehicle U.S. Sales, 2010 - Sept 2016
Ford Focus Electric, 1.3%
Tesla Model X, 2.5%
Fiat 500e, 3.3%
Chevy Volt, 20.3%
BMW i3, 4.4%
Ford C-Max Energi, 6.0%
Ford Fusion Energi, 7.6%
Nissan LEAF, 19.1%
Toyota Prius PHV,
8.2%
Tesla Model S, 16.3%
Source of data: insideEVs.com/monthly-sales-scorecard
Percentage of U.S. EV Sales, 2010 - Sept 2016
Ford Focus
Electric, 1.3%
Tesla Model X,
2.5% Fiat 500e, 3.3%
BMW i3, 4.4%
Chevy Volt,
20.3%
Ford C-Max
Energi, 6.0%
Ford Fusion
Energi, 7.6%
Nissan LEAF,
19.1%
Top EV Manufacturers and Production Location
Toyota Prius
PHV, 8.2%
Tesla Model S,
16.3%
Source of data: insideEVs.com/scorecard
Model
Total US
Sales
% US
Market
Assembly
Location
Battery
Manufacturer
Chevy Volt
104,750
20.3%
Michigan
(Detroit)
LG Chem
(Korea)
Nissan Leaf
98,810
19.1%
Tennessee
(Smyrna)
AESC
(Korea)
Tesla
96,860
18.8%
California
(Freemont)
Panasonic
(Japan)
Ford electric
Vehicles
76,601
17%
Mexico
LG Chem,
Panasonic,
Samsung
(Korea)
Cost and benefits of CAFE standards
(2011-2025)
600
488
500
Billion 2010 dollars
400
300
200
88
100
49
14
0
-100
Technology
Costs
Other Costs Lifetime Fuel
Savings
-34
-121
-200
Source: NHTSA RIA (2012), Table 13, p. 49
Other
Benefits
CO2
Local air
quality
benefits
Unexpected Changes in Global Oil
Market, 2012-2015
• Slowdown in global demand for oil
(especially China)
• “Shale revolution” of oil and gas production
in North America
• Saudi Arabia decides against any production
cutbacks
23
Trends in World Oil Price
Source of image: Energy Information Administration,
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=D
24
Fuel Prices
Source: EIA. (2012). Annual energy outlook 2012 with projections to 2035.;
EIA. (2015). Annual energy outlook 2015 with projections to 2040.
Payback Period Analysis for a consumer investing a
$2,000 premium in a fuel efficient vehicle
Payback Period Analysis for a consumer investing a
$5,000 premium in a fuel efficient vehicle
Payback Period Analysis for a consumer investing a
$10,000 premium in a fuel efficient vehicle (PEV)
Consumer Preferences
Consumer preferences for vehicles are changing
• Demand is greater for light trucks than for cars
• Decline in sales of hybrids, diesels, and electric vehicles
• Resale values changing
Market Share of Passenger Cars vs. Light Trucks
Source of data: Ward’s Auto. (2016, January 22). U.S. vehicle sales by vehicle type and source, 1931-2015
Price premium for the average Light-Duty Vehicle due
to the CAFE/GHG standards (2008 baseline)
$2,000
$1,800
2010 constant dollars
$1,600
$1,400
$1,200
NHTSA
$1,000
EPA
$800
$600
$400
$200
$0
MY2017
MY2018
MY2019
MY2020
MY2021
MY2022
MY2023
MY2024
MY2025
Direct Manufacturing Cost and Total Cost for CAFE compliance of
a Midsize Car based on NHTSA estimates
Source: NRC (2015)
Direct Manufacturing Cost and Total Cost for CAFE compliance
of a Midsize Car based on NRC estimates
Source: NRC (2015)
Conclusions
1. Must consider important implications
about the interactions between the ZEV
and CAFE programs
2. Many important changes have occurred
since the 2012 rules were finalized, such
as gas prices
3. Necessary to revise our expectations
about how these programs will perform
Appendix
Bibliography
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Bureau of Economic Analysis. (2016). Interactive access to industry economic accounts data: GDP by industry [Data
file]. Retrieved from:
http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5101=1&5114=a&5113=22r&5
California Air Resources Board. (2011b). Staff report: Initial statement of reasons. Advanced Clean Cars. 2012
Proposed amendments to the California Zero Emission Vehicle Program regulations. Retrieved from
http://www.arb.ca.gov/regact/2012/zev2012/zevisor.pdf
Center for Automotive Research (2011). The U.S. automotive market and industry in 2025. Retrieved from
http://www.cargroup.org/assets/files/ami.pdf
Center for Automotive Research. (2015). Contribution of the automotive industry to the economies of all fifty states and
the United States. Retrieved from http://www.autoalliance.org/files/dmfile/2015-Auto-Industry-JobsReport.pdf112=1&5111=1997&5102=15
Department of Transportation. (2012). Corporate average fuel economy standards for MY 2017-MY 2025 passenger
cars and light trucks. Final Regulatory Impact Analysis. Retrieved from
www.nhtsa.gov/staticfiles/rulemaking/pdf/cafe/FRIA_2017-2025.pdf
Energy Information Administration. (2016). Short term energy outlook. Retrieved from http://www.eia.gov/forecasts/steo/
Environmental Protection Agency/ Department of Transportation. (2012). 2017 and later model year light-duty vehicle
greenhouse gas emission standards and CAFE Standards; Final rule. Federal Register. Retrieved from
http://www.federalregister.gov
Hill, K., Menk, D. M., Cregger, J. (2015). Assessment of tax revenue generated by the automotive sector for the year
2013. Center for Automotive Research. Ann Arbor, Michigan.
National Research Council. (2015a). Cost, effectiveness, and deployment of fuel economy technologies for light duty
vehicles. Washington, DC: The National Academies Press.
Wagner, D., Nusinovich, P., & Plaza-Jennings, E. (2012). The effect of proposed MY 2017-2025 corporate average fuel
economy (CAFE) standards on the new vehicle market population. National Automobile Dealers Association. Retrieved
from http://www.nadafrontpage.com/upload/wysiwyg/The%20Effect%20of%20Proposed%20MY%2020172025%20CAFE%20Standards%20on%20New-Vehicle%20Market.pdf
Revival of the U.S. Auto Sector
*
*estimated
Source: Statista U.S. Light Truck Sales and U.S. Car Sales
36
Importance of the Automobile Sector
Industry sectors
Manufacturing
Finance, insurance, real estate, rental
and leasing
Government
Wholesale trade
Retail trade
Construction
Motor vehicle manufacturing
Percent of US Gross
Output for 2014
20%
17%
11%
5%
5%
4%
2%
Source: BEA 2016
37
Recent NRC Cost Estimates for Greener
Automotive Technology
Selected Technologies*
Incremental Cost to the Consumer**
(2007 dollars)
Cars
Light Trucks
Clean diesel engine
$3,600
$4,500
Conventional hybrid
engine
$4,500
$5,500
Plug-in hybrid EV
$7,800
$10,500
Plug-in battery EV
$16,000
$24,000
*based on 2035 estimates of technology
**relative to a baseline 2005 standard gasoline vehicle
Source: NRC, Assessment of Fuel Economy Technologies for Light-Duty Vehicles, Table H.4
38
Source: NRC (2015)
Impact of Gas Prices on Consumer Payback
Suppose you are deciding between a 30 mpg gasoline car and a
plug-in electric vehicle with a $12,000 premium:
If gasoline = $2.50/gal:
If gasoline = $4.25/gal:
Holding car for 10y, driving 12,000 mi/y, using discount rate of 5%, and assuming free electricity
You would save money by purchasing the EV under the high gas
scenario but lose money under the low gas scenario