Study finds CO2 emissions trading more effective path to automotive CO2 reduction in Europe than tailpipe standards
11 November 2016
A new study by researchers at MIT and colleagues in Europe has found that rather than adopting a standard for automotive fuel economy ratings, as the United States has done with its CAFE (corporate average fuel economy) standards for many years, the EU could achieve the same results for CO2 emission reduction at far lower cost to the economy by simply extending their existing emissions-trading system to encompass transportation rather than just electricity generation and energy intensive industry.
The European Union (EU) recently adopted CO2 emissions mandates for new passenger cars, requiring steady reductions to 95 gCO2/km in 2021. Switching from the automotive standards to the trading scheme could save as much as €63 billion, says the study’s lead author Sergey Paltsev, deputy director at MIT’s Joint Program on the Science and Policy of Global Change and senior research scientist at the MIT Energy Initiative. The results are published in the journal Transportation.
The goal of this paper is to assess the resulting CO2 emissions, energy, and economic impacts of the EU CO2 mandates, and compare them to an alternative scenario where vehicle emissions are part of an emission trading system designed to meet Europe’s announced economy-wide targets. In our study we focus on cars, while the EU also imposed the emission targets for vans (which account for around 10% of the EU market for light-duty vehicles) and considered a strategy to reduce CO2 emissions from trucks, buses, and coaches.
We argue that assessment of the performance of the EU targets and alternatives should account for interactions of the transport sector with other energy sectors and with other parts of the economy.
—Paltsev et al.
The researchers used a multi-sector computable general equilibrium (CGE) model, which includes a private transportation sector with an empirically-based parameterization of the relationship between income growth and demand for vehicle miles traveled. The model also includes representation of fleet turnover, and opportunities for fuel use and emissions abatement, including representation of electric vehicles.
They analyzed the impact of the mandates on oil demand, CO2 emissions, and economic welfare, and compare the results to an emission trading scenario that achieves identical emissions reductions.
They found that vehicle emission standards reduce CO2 emissions from transportation by about 50 MtCO2 and lower the oil expenditures by about €6 billion, but at a net added cost of €12 billion in 2020. Tightening CO2 standards further after 2021 would cost the EU economy an additional €24–63 billion in 2025, compared with an emission trading system that achieves the same economy-wide CO2 reduction.
There are many ways to do policies, and sometimes political reality doesn’t allow you to do things the best way.
—Sergey Paltsev
The existing emissions trading system in Europe has not worked well, Paltsev says, partly because its price on carbon is quite low, and partly because it does not encompass enough different emissions-producing sectors of the economy.
The new analysis, Paltsev says, clearly shows that instead of imposing mileage efficiency standards, there is a much better way to achieve the relevant targets for cutting emissions from the transportation sector. He points out that because of high fuel taxes and the resulting high cost of gasoline in Europe, the existing fleet of passenger cars there is already more efficient than the US fleet, so implementing stringent fuel efficiency standards would be more costly for Europe.
Emissions trading or a carbon tax is going to achieve their emissions goals at the lowest possible cost to society.
—Sergey Paltsev
The emissions trading system is already established in the EU, Paltsev notes, even though in its present form the system is flawed because of over-allocation of emission permits and interaction with renewable energy requirements. In addition, it only addresses the most energy-intensive sectors, primarily power generation. However, the trading system could easily be expanded to encompass private vehicles as well, according to Paltsev.
This study, for the first time, quantifies the vast economic costs of that policy using a general equilibrium framework. Although the figures should be considered with caution (as also suggested by the authors), the extra costs of separate emission standards between 2015 and 2020 compare to roughly half the EU Framework Program for Research and Innovation Horizon 2020 [spending] of around 80 billion Euros over nearly the same period.
—Andreas Schafer, Professor of Energy and Transport at University College London, who was not involved in the analysis
The research was supported by the US Department of Energy, Office of Science, the US Environmental Protection Agency, and other sponsors from government, industry, and foundations, through the Joint Program on the Science and Policy of Global Change.
Resources
Paltsev, S., Henry Chen, YH., Karplus, V. et al. “ Reducing CO2 from cars in the European Union” Transportation doi: 10.1007/s11116-016-9741-3
A zero emission mandate requiring every automaker to make an increasing percentage of zero emission vehicles and pay 15.000 USD or more in fines per car sold that is not in compliance with this zero emission mandate is by far the most effective way to transition the auto industry into a sustainable industry that make products that do not destroy the planet and kill millions of people each year prematurely because of air pollution and co2 emissions. Car companies in over compliance like Tesla could sell off their over compliance credits to the highest bidder.
Posted by: Account Deleted | 11 November 2016 at 03:04 AM
A vehicle mfgr could easily make vehicles which emit 0.00 gCO2/km by making ICEVs which burn anhydrous NH3.
The responsibility for CO2 emissions (and related taxes) would then fall on the NH3 supplier.
Posted by: Engineer-Poet | 11 November 2016 at 08:27 PM
Reuters article; Cambridge Econometrics Consultants analysis claimed 1% by 2030 improvement if Europe adapts the carbon trading scheme (ETS) for transport. Carbon tax would need huge cost rise, 300E/ton and would work to burden heavy industry with most of it (economy crush).
Also, the article claimed power sector was the largest polluter with transport being #2. So, does it appear a little silly that a car that powers up on the largest polluter is suddenly zero emissions? Could we achieve zero vehicle emissions with trailer in which to locate the ICE with generator to power are vehicle? If so, how about diesel air compressor at the gas pump to quickly recharge our cars for the next 20 miles. A stationary constant rpm diesel can achieve better efficiency than grid power.
This is just a scheme to award unfair credits to EV and at the same penalize the grid for carbon power. The EV is the device causing the disturbance. In reality the grid power should be minimized not increased because of the pollution. Green power than could naturally increase its' share and improvement. To this extent, nothing better for low cost and convenient emission reduction than utilizing more ethanol in fuel and maximize carbon reduction in the production of ethanol. You can do more and do more quicker with an actual cost reduction with no expensive cost of infrastructure. Why are so many missing this or ignoring the benefit?
Posted by: Trees | 12 November 2016 at 03:35 AM
There is so much fossil fuel involved in the growing of grain crops for ethanol, its distillation and distribution that whether or not it is better than petroleum is a matter of juggling numbers for "byproduct credits".
Nuclear and hydro are the GHG winners, because they do not throw externalities onto other generators.
Posted by: Engineer-Poet | 12 November 2016 at 04:50 PM
What E-P said.
Posted by: Nick Lyons | 12 November 2016 at 07:30 PM
Petroleum use within ethanol production is not that large. Agriculture use is per the fertilizer and depending on harvest weather for corn, drying. Most of the petrol use is at the process plant, that is learning and improving to utilize CHP equipment and anaerobic digester equipment. The plant technology for the leading process plants is very impressive and the trend line is steep for improvements. I read a USDA report that estimate return on energy for ethanol within a fully CHP plant would push 427:1. I think the basic low tech ethanol is currently in the 3's. Pacific Ethanol just put in a CHP turbo-generator powered by their digester gas. New technology equipment has the ability to upgrade bio-gas to high btu turbine fuel. They produce more power than needed as well as the exhaust heat powers all their heat needs. The new plant technology also recuperates waste heat, utilize semipermeable membrane technology for final dehydration, and a whole list of energy improvements. Since the processing is 24x7 the "system" can achieve incredible heat efficiency.
The talk of co-product value is correct. Some within the industry are thinking ethanol may become the co-product as more value may be in the latter. Meaning with DDG the science of animal nutrition has really taken off. The feed value of this product was greatly under rated. The industry appears to be transitioning to formulate feed to specific needs of livestock. For example a beef cow eating hay or fee range chicken. It may end up with the requirement of all corn going the fermented route to increase value to animal health. Also, the value for plastic feed stock and food grade products continues to spike. Wet milling is extremely powerful in number of co products produced. Green Plains bought an established vinegar brand and I would guess they plan on producing that product. The bolt on cellulosic ethanol process continues to improve and be very cost justifiable. The process ability continues to improve as well. R&D is making tremendous strides within biological world. I do think we may be within a dual revolution. History talks of our prior Industrial Revolution and may claim this era the Technology Revolution with following Biological Revolution. I think were in for a massive change and economic growth.
I do like hydro and nuclear power. Even wind is good if utilized and located properly. Solar is a far stretch to envision much value in its' current cost benefit strength. But green power be utilized easily within farming and plant processing of ethanol. Probably easier than most industries. It does look like ethanol could enter into the negative carbon rating. The indirect land use penalty is bogus and most now think just the opposite effect. Meaning a net benefit to environment, especially to developing economies. This penalty pushes ethanol from 40%-60% carbon decrease to 30%. It's just a wild guess and theoretical optics.
Posted by: Trees | 13 November 2016 at 01:53 AM
Oh, by the way, did you read the blurb a week back on a new process technique that cleverly added gasoline to the ethanol "beer" to intentionally phase change the brew. This chemical action as you know separates the ethanol from water to a great extent. They can physically separate the brew and greatly decrease distillation time or need. Also, most process plants now completely recycle waste water per the needed water quality. Early process plants had quality problems related to municipal water supply, especially the chlorine. Most plants have extremely low or zero waste steam. My guess they will get involved with processing manure from neighboring farmers to help them meets stringent EPA regs. It would be easy to truck animal waste to plant and return with wet grains for feed. Maybe hose down the truck? :)
Posted by: Trees | 13 November 2016 at 02:11 AM
@Trees, yes, I saw the ethanol beer / gasoline thing, very interesting.
If you could get very good biofuels, you could continue to use ICE systems with much lower CO2 emissions.
Posted by: mahonj | 13 November 2016 at 05:22 AM