Vehicle fuel consumption depends on the combination of powertrain and fuel used, as well as how the vehicle is driven. We emphasize that this policy portfolio is not a substitute for an economy-wide carbon management policy (such as a carbon tax or cap-and-trade system). Indeed, an economy-wide constraint would ensure that reductions in fuel consumption and GHG emissions are not displaced to sectors not covered under transportation-specific policies.

We recognize that policies aimed at creating alternatives to vehicle travel also have an important role to play in reducing petroleum dependence and GHG emissions. However, such solutions are beyond the scope of this study and we do not specifically address them in this report.

—Heywood et al., 2009

The emissions from cars and light trucks account for 16% of the total greenhouse gas (GHG) emissions in the United States, and these vehicles use 47% of all the petroleum consumed in this country. Without strong action, those numbers are expected to keep rising, but reducing the nation’s impact on global climate change and dependence on oil imports has proved problematic.

For policymakers in Washington, taking a systems view is difficult because of the politics involved. Interest groups are constantly diverging into separate camps and lobbying for separate policies.

To help demonstrate how a systems approach could work, Heywood turned to 10 of his graduate students in the Sloan Automotive Laboratory who study different aspects of the transportation problem—from technology and fuels options to consumer behavior to the impacts of specific policies. Heywood issued this group a challenge: come up with a sensible, effective and realistic policy portfolio.

Guided by Heywood and feedback from several outside experts, graduate students Valerie Karplus and Donald MacKenzie of MIT’s Engineering Systems Division integrated the group’s ideas into a report called “An Action Plan for Cars.” The study was supported in part by the MIT Energy Initiative.

To reduce the fuel consumption of new vehicles, the report recommends a set of three complementary policies:

1. Clearly defined increases in Corporate Average Fuel Economy (CAFE) standards should continue to be enacted beyond the 2016 target (34.1 mpg) (earlier post) to ensure a minimum level of progress on fuel consumption, while allowing manufacturers adequate lead time (on the order of 10 years) to fully account for CAFE increases in their product planning cycles.

2. A feebate incentive system should be implemented to encourage consumers to place greater emphasis on fuel consumption in their purchase decisions, by providing rebates on the purchase of lower-consuming vehicles and assessing fees on higher- consuming vehicles.

   The report recommends that the fee or rebate amount vary by $120 for each 1 gal/1,000 mile change in fuel consumption, which would lead to more than 95% of current vehicles incurring between a $2,000 rebate and a $2,000 fee.

3. Taxes on motor vehicle fuels should be increased by $0.10 per gallon ($0.0264 per liter) each year for at least the next 10 years, in order to reflect more accurately the full cost of fuel use and driving. This increase would stimulate the purchase of more fuel-efficient vehicles and encourage consumers to consider other transportation choices. The report recommends that the revenue generated be returned to consumers through reductions in income or payroll taxes and through financing improvements in transportation infrastructure.

In addition to the policies aimed at new vehicles, the report recommends a sustained effort to provide more information to vehicle purchasers and drivers on two main fronts:

• Consumer labeling provisions related to fuel consumption should be broadened and updated to reflect the realities of today’ car-shopping process. This should include standardizing the presentation of key information on car-buying websites.

• Driver education programs should be established to provide the public with reliable information on how their driving habits affect in-use fuel consumption, and on the concrete actions they can take to reduce their consumption.

A more comprehensive national policy on fuels, including support for non-petroleum fuels, needs to be developed and implemented in a more systematic fashion, the report says. It recommends:

1. Transportation fuels (both petroleum-based and alternatives) should be included in any comprehensive national carbon management policy. Fuels should be evaluated on the basis of their full life-cycle GHG emissions, which will require additional efforts to improve carbon accounting practices.

2. A national strategy for alternative fuels should be developed. This strategy should identify long term objectives and supporting policies for reducing fleet GHG emissions and fuel consumption. The objective of this national strategy would be to develop a clear set of goals and use them to identify the most promising vehicle powertrain, fuel, and infrastructure options to focus research, development, and demonstration funding, while also identifying appropriate enabling investments in infrastructure in partnership with the private sector.

3. Any national fuels strategy should include policies that address the need for developing production capacity, distribution infrastructure, and compatible vehicles for the more promising alternative fuels rather than focusing narrowly on one (or even two) of these challenges. Existing policies for promoting alternative fuels, such as subsidies, mandates, and import tariffs for biofuels, should be revisited to ensure that they align with the new national strategy. Policies should be aimed at integrating efforts across municipal, state, and national levels and clearly defining the roles of the public and private sectors.

If we’re serious about reducing petroleum consumption and GHG emissions, we need to look at the whole system—at everyone who makes, buys, and uses vehicles and their associated fuels. All the pieces are interrelated, and we need them to work together. For example, tighter regulations can push industry toward higher fuel economy, but then we need to create incentives for consumers to buy those cars, which may be smaller, lighter and more expensive than they’re used to.

—John Heywood, professor of mechanical engineering, emeritus

Resources

• Heywood et al. (2009) An Action Plan for Cars: The Policies Needed to Reduce US Petroleum Consumption and Greenhouse Gas Emissions (MIT Energy Initiative Report)