Transcript Amanda Sauer

Global Competitiveness in
Fuel Economy and
Greenhouse Gas Emission
Standards for Vehicles
February 10th, 2005
Amanda Sauer
World Resources Institute
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Overview of Presentation
1. Climate change and automobiles
2. Comparison of fuel economy and GHG emissions
regulations around the world
3. Impacts of these regulations on competitiveness and
value creation in the auto industry
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Climate Change and Automobiles
• Auto industry in policymakers’ crosshairs because of CO2
emissions released from burning of fuel:
– Transport accounts for 30% of OECD CO2 emissions
– Cars and light trucks account for 20% of U.S. emissions.
• Industry is part of the problem…
– Light trucks, “SUV phenomenon”
– Disregard for fuel economy
• …but also part of the solution:
– New hybrid and diesel technologies, and ultimately fuel cells
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Climate Change and Automobiles
• Pressure to reduce vehicle
CO2 emissions
– Direct vehicle use emissions
make up 75% of CO2
releases
Source of CO2 Emissions across
Vehicle Life-cycle
Materials
Fuel
production
Assembly
– Related fuel production
emissions make up a further
14%
• EU, Japan, California,
Canada all focused on
vehicle use emissions
Vehicle Use
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Fuel Economy and GHG Emissions Regulations
in the World’s Major Auto Markets
•
European Union: “ACEA agreement” seeks 25% reduction in vehicle
CO2 emissions levels by 2008 (from 1995 levels). Agreement may be
extended an additional 10% by 2012.
•
Japan: requires 23% reduction in vehicle CO2 emissions by 2010 (from
1995 levels).
•
Australia: voluntary commitment to improve fuel economy by 18% by
2010.
•
Canada: has proposed a 25% improvement in fuel economy by 2010.
•
China: Introduced new fuel economy standards in 2004; weight-based
standards to be introduced in 2 phases (2005 and 2008).
•
California: CARB approved GHG emissions reductions for
automobiles, currently under legislative review.
•
New York: Clean Cars Bill proposing to follow California standards is
currently in committee. Several other NE states have indicated they will
follow CA’s lead.
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An and Sauer, 2004 for the Pew Center on Global Climate Change
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Overview of Vehicle Fuel Efficiency and
GHG Standards Around the World
Country/region
Type
Measure
United States
Fuel
mpg
California
GHG
g/mile
Canada
Fuel
L/100-km
European Union
CO2
g/km
Australia
Fuel
L/100-km
Japan
China
Taiwan, South Korea
Fuel
Fuel
Fuel
km/L
L/100-km
km/L
Structure
Cars and light
trucks
Car/LDT1 and
LDT2
Cars and light
trucks
Overall light duty fleet
Overall lightduty fleet
Weight-based
Weight-based
Engine size
An and Sauer, 2004 for the Pew Center on Global Climate Change
Test method
Implementation
U.S. CAFE
Mandatory
U.S. CAFE
Mandatory
U.S. CAFE
Mandatory
EU NEDC
Voluntary
EU NEDC
Voluntary
Japan 10-15
EU NEDC
U.S. CAFE
Mandatory
Mandatory
Mandatory
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Issues of Comparing Vehicle Standards
around the World
• Differences in test driving cycles
• Fuel economy vs. fuel consumption vs. CO2 emissions
• Regulatory vs. voluntary
• Differences in vehicle categories and weight-classes
• Corporate fleet averages vs. minimum requirements
An and Sauer, 2004 for the Pew Center on Global Climate Change
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Conversion factors to CAFE-equivalent MPG
and EU-equivalent CO2 emission rate of g/km
Countries
Cycle
Type
Measures
(Y)
US
Taiwan, Korea
Canada
California
EU (gasoline)
EU (diesel)
Japan
China, Australia
US CAFE
US CAFE
US CAFE
US CAFE
NEDC
NEDC
Japan
NEDC
Fuel
Fuel
Fuel
CO2
CO2
CO2
Fuel
Fuel
MPG
Km/L
L/100-km
g/mile
g/km
g/km
km/L
L/100-km
Converted to
CAFEequivalent MPG
Y*
1.00
Y*
2.35
1/(Y) *
235.8
1/(Y) *
8,900
1/(Y) *
6,180
1/(Y) *
7,259
Y*
3.18
1/(Y) *
266.5
An and Sauer, 2004 for the Pew Center on Global Climate Change
Converted to
EU-equivalent
CO2 (g/km)
1/(Y) * 6,180
1/(Y) * 2,627
Y*
26.2
Y*
0.69
Y*
1.00
Y*
0.85
1/(Y) * 1,946
Y*
23.2
Converted to
CA-equivalent
CO2 (g/mi)
1/(Y) * 8,900
1/(Y) * 3,783
Y*
37.7
Y*
1.00
Y*
1.44
Y*
1.23
1/(Y) * 2,803
Y*
33.4
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Methodology to Compare Fuel Economy
Standards Worldwide
1. Research country/region-specific fuel economy/GHG
standards and future targets
2. Convert fuel economy/GHG standards into fleet
averages (assume that fleet composition remains constant
for weight/size or vehicle type targets and that all voluntary
targets will be met)
3. Choose reference standards (in this example, US CAFE)
4. Apply conversion factors (from table on preceding slide)
5. Countries/regions now converted to reference
standards and are comparable
An and Sauer, 2004 for the Pew Center on Global Climate Change
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Comparison of Fuel Economy and GHG
Emission Standards
55
EU
MPG - Converted to CAFE Test Cycle
50
Japan
45
40
California
China
35
Australia
Canada
30
25
20
2002
US
2004
2006
2008
An and Sauer, 2004 for the Pew Center on Global Climate Change
2010
2012
2014
2016
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Impacts on the Automobile Industry:
Risks and Opportunities
Financial Driver
Risk
Opportunity
Cost structure
Carbon constraints could raise
costs, from R&D to design to
production.
More efficient OEMs could
have a relative cost
advantage.
Brand
Lagging behind in development
of cleaner technologies could
harm brand.
Being viewed as a leader on
climate change could enhance
brand equity.
Innovation
Carbon constraints puts
pressure on innovation
capacity.
Leadership in low carbon
technologies could translate
into first-mover advantages.
Product
segmentation
OEMs that depend on carbonintensive segments could see
sales and profits fall.
OEMs producing lower-carbon
vehicles could see sales and
profits grow.
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Lower-carbon Technology Options
• Carbon constraints will force OEMs to add new
technologies, some of which may lead to competitive
gains
• Key technologies:
– Incremental Technologies (fuel injection, continuously
variable transmission etc.)
– Diesel Technology (compression-ignition)
– Hybrid Technology
– Fuel Cell Technology
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Carbon Reduction Potential
Key engine technologies that provide mid- to long-term reductions of vehicle carbon emissions
Conventional ICE
Advanced Gasoline ICE
Advanced Diesel
Gasoline Hybrid
Diesel Hybrid
Fuel Cell (gasoline)
Fuel Cell (hydrogen from natural gas)
Fuel Cell (hydrogen from renewables)
0
20
40
60
80
100
Relative CO2 Emissions (as percentage of conventional ICE)
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Carbon-intensity of Sales
Dependency of 2002 sales in US, EU and Japan on vehicles of high-, medium- and lowcarbon intensity
High
Medium
Low
Share of Global Sales
100%
80%
60%
40%
20%
0%
PSA
VW
Honda
BMW
Nissan
Toyota
Renault
GM
Ford
DC
High: worse than 20.7 on-road mpg; Low: better than 27.5 on-road mpg; Medium: between 20.7 and 27.5 on-road mpg
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Aggregate Value Exposure
Estimated cost per vehicle to meet “most likely” carbon constraint
scenarios in US, EU and Japan
$700
25x difference in Value Exposure across the industry
Cost per vehicle
$600
$500
$400
$300
$200
$100
$0
BMW
DC
Ford
GM
VW
Nissan
Toyota
PSA
Renault
Honda
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Management Capacity for Low-Carbon
Technologies
Measure of OEMs’ capacity to develop and commercialize main low-carbon technologies:
hybrids, diesels & fuel cells
Management Quality Index
100
90
80
70
60
50
40
Toyota
DC
RenaultNissan
Honda
Ford
GM
VW
BMW*
PSA
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Carbon Positioning of Leading OEMs
Success in a carbon-constrained market will require moving into the top-right quadrant
$0
Honda
Decreasing Carbon Risks
(estimated cost per vehicle to
meet new carbon constraints)
Renault
PSA
$100
Nissan
VW
$200
Toyota
$300
GM
$400
Ford
DaimlerChrysler
$500
$600
BMW
$700
40
50
60
70
80
Increasing Carbon Opportunities
(management capacity score on lowcarbon technologies)
90
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Implications of Carbon Constraints for Future Earnings
Estimated changes in forecast earnings from inclusion of carbon constraint factors;
ranges reflect alternative regulatory scenarios in US, EU and Japan.
15%
10%
5%
0%
-5%
-10%
-15%
Toyota
Renault
Nissan
Honda
DC
VW
PSA
BMW
GM
Ford
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Conclusions
•
The European Union (EU) and Japan have the most stringent
standards in the world.
•
The fuel economy and greenhouse gas emission performance of the
U.S. automobile fleet -- both historically and projected based on current
policies -- lag behind most other nations.
•
These GHG and fuel economy regulations create financial risks and
opportunities for automobile companies.
– In our analysis, we found the financial implications of these regulations to
range from +10% to -14% of operating income.
•
Overall, the automobile industry is becoming increasingly global in
scope with these regulations are becoming increasingly stringent (with
the exception on the U.S.). Therefore fuel economy will become a
major driver in the financial performance of automobile companies.
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Contact Information
Amanda Sauer
Associate
202 729 7689
[email protected]
Changing Drivers report available at:
http://capitalmarkets.wri.org
Comparison of Fuel Economy and GHG Emissions Standards
report available at:
http://www.pewclimate.org
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