One advantage of the agencies’ analytical approach is that it guarantees the standards can be met using available technologies, assuming vehicle demand does not change. Still, nothing restricts automakers to respond to the standards the way the agencies’ model predicts. Automakers have multiple compliance options available to them, and presumably choose the combination of strategies that minimize their compliance costs. Policy analyses that don’t account for the full suite of compliance options may significantly overestimate compliance costs and produce misleading estimates of emission reductions.

In addition to implementing various technology features, other possible responses to the policy include: (1) trading off vehicle performance attributes (such as acceleration performance) to improve fuel economy, (2) taking advantage of various credit provisions, (3) adjusting prices to shift sales to vehicles that exceed their fuel economy target, (4) increasing vehicle footprint (thereby decreasing the stringency of their fuel economy and GHG targets), and violating the standards and paying fines to NHTSA and civil penalties to EPA.

In this paper, we investigate the role that engineering design tradeoffs between acceleration performance and fuel economy can play in automakers’ response to the reformed standards. To do this, we nest a flexible approximation (also called a surrogate model) of engineering design tradeoffs generated from physics-based vehicle performance simulations within an economic equilibrium model of the automotive market. We then simulate the engineering design and pricing decisions of profit-maximizing firms responding to the 2014 standards with and without the ability to trade off acceleration performance.

—Whitefoot et al.

The CMU team focused on medium-term options—fuel-efficiency technologies and design tradeoffs that can be implemented in the first few (i.e., 1-6) years after the regulations are announced.

Unlike NHTSA’s analysis, the CMU model allows demand to respond to policy-induced changes in vehicle prices and attributes. In contrast with fuel-efficiency technologies that increase vehicle production costs, the primary costs to automakers of compromising acceleration performance are lost profits due to reduced demand and/or lower markups necessary to achieve a particular level of demand.

Acceleration tradeoffs can lower the compliance costs associated with fuel economy regulations in three related ways, the researchers said.

1. An automaker may find it relatively more profitable to compromise the acceleration performance of its vehicles (to improve fuel economy) rather than incorporating additional costly fuel-saving technologies or changing prices to shift demand to more fuel-efficient vehicles.

2. Automakers may prefer to use acceleration tradeoffs in combination with technology features in some or all of their vehicles so that fuel economy improves as well as acceleration performance.

3. If the regulation induces worse acceleration performance in some vehicles, competition for consumers who value acceleration will be reduced. This may cause some automakers to improve the acceleration performance of certain vehicles (in order to attract these consumers) at the expense of fuel economy, while simultaneously improving the fuel economy of other vehicles enough to comply with the standards.

To capture the tradeoffs between acceleration performance and fuel economy, the CMU team implemented thousands of vehicle performance simulations over a range of feasible vehicle design configurations using AVL Cruise. They estimated a flexible approximation of the relationships among vehicle performance attributes and production costs. They then nested these estimated relationships within an oligopolistic equilibrium model of the automotive market.

… our analysis suggests that acceleration trade-offs play a role in automaker compliance strategies with potentially large implications for both compliance costs and emissions.

—Whitefoot et al.

Resources

• Kate S. Whitefoot, Meredith L. Fowlie, and Steven J. Skerlos (2017) “Compliance by Design: Influence of Acceleration Trade-offs on CO₂ Emissions and Costs of Fuel Economy and Greenhouse Gas Regulations” Environmental Science & Technology doi: 10.1021/acs.est.7b03743