Automotive Industry

New regulatory pressures with respect to fuel economy and tailpipe emissions, along with rising consumer expectations for better fuel efficiency, have placed a competitive premium on auto manufacturers, who have developed strategies to address these challenges. Due to the carbon profile of a typical automotive vehicle (Figure 3.4), the primary force felt by the industry is to lower the carbon intensity of passenger cars (gCO2/ km) while increasing fuel economy during the use of their vehicles.

Measures to encourage fuel efficiencies within the auto industry, seen in the form of regulations, standards, taxes, and fiscal incentives, are being felt in the EU, Canada, China, Japan, Australia, and some regional markets in the United States (see Table 3.5). In the European Union, the auto industry association ACEA1 signed a voluntary agreement with the government in 1998 to have manufacturers reduce CO2 emissions on new passenger cars by 25 percent by 2008, with a possible further 10 percent reduction by 2012. At the same time, all member states have imposed a tax on fossil fuels, creating an incentive for car buyers to choose lower consuming vehicles (Mettler, Wellington, and Hartmen 2005). Both the Korean (KAMA)2 and Japanese (JAMA)3 Manufacturers Associations have similar agreements with ACEA, which have been altered with respect to target ranges and time horizon, to

Materials 4% Assembly 2%

Materials 4% Assembly 2%

Use 75%

FIGURE 3.4 Emissions from life cycle of a typical vehicle

Source: Adapted from Weiss, M., J. Heywood, E. Drake, A. Shafer, and F. Au Yeung. 2000. On the Road in 2020: A Lifecycle Analysis of New Automobile Technologies, MIT Energy Laboratory Report #MIT L 00-003, Cambridge, MA, October.

Use 75%

FIGURE 3.4 Emissions from life cycle of a typical vehicle

Source: Adapted from Weiss, M., J. Heywood, E. Drake, A. Shafer, and F. Au Yeung. 2000. On the Road in 2020: A Lifecycle Analysis of New Automobile Technologies, MIT Energy Laboratory Report #MIT L 00-003, Cambridge, MA, October.

meet different national capabilities.4 Together, the vehicles sold under the three separate agreements make up nearly 100 percent of total EU vehicle sales.

In 2005, China introduced fuel economy standards for passenger vehicles that are considered to be more stringent than those in the United States. There are, however, important differences between these two countries regarding the maturity of their vehicle market and the likely success of their respective programs to dampen levels of vehicle gas consumption. The United States has a mature vehicle market that grew at only 3 percent a year from 1992 until 2002. China, by contrast, is an emerging market that experienced a vehicle sales growth rate of 50 percent in 2003, and is expected to grow at over 7 percent annually between 2005 and 2020. Included in the Chinese standards are encouragements to use more advanced vehicle technologies, and discouragements against heavier vehicles. Thus, China's standards have the ability to bring about rapid changes and greater overall efficiency in their vehicle fleets than those in the United States (Sauer and Wellington 2004).

In North America, the United States uses CAFE5 standards that require each car manufacturer to meet specified fleet average fuel economy levels and CO2 emissions rates for cars and light trucks. In 2005, the state of

TABLE 3.5 Measures to Promote Fuel-efficient Vehicles around the World

Fuel Efficiency Approach

Country/Region

Measure

Fuel Economy

U.S., Japan, Canada,

Numerical standards in

Standards

Australia, China,

mpg, km/L or L/100 km

Taiwan, South Korea

GHG emissions

EU, California

g/km or gm/mile

standards

High fuel taxes

EU, Japan

Tax 50%>crude oil base

price

Fiscal incentives

EU, Japan

Tax relief based on engine

size, efficiency, CO2

emissions

R&D Programs

US, EU, Japan

Incentives for technology

and alternate fuels

Economic penalties

US

Gas-guzzling tax

Technology

California

Sales requirements for

mandates and

ZEVsa

targets

Traffic control

Several U.S. states

Hybrids allowed in HOVb

measures

(hybrid HOV lanes)

lanes; ban on SUVsc

Paris (SUV ban)

aZEVs = California's zero emission vehicles. bHOVs = high occupancy vehicles. cSUVs = sport utility vehicles.

Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World. Pew Center on Global Climate Change, www.pewclimate.org.

aZEVs = California's zero emission vehicles. bHOVs = high occupancy vehicles. cSUVs = sport utility vehicles.

Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World. Pew Center on Global Climate Change, www.pewclimate.org.

California proposed its own set of GHG emissions standards for passenger cars, and in some cases, sports utility vehicles (SUVs) and large trucks. New motor vehicles sold in that state would be required to cut GHGs by about 30 percent by 2017 (Minerva 2005). California's plan to reduce emissions from automobiles appears to be spreading across the United States as a number of other states6 followed suit. However, automakers in California have sued that state, alleging that the regulations on fuel efficiency fall under federal purview. They also claim that stringent regulations would impose unreasonable cost increases to car buyers and impede sales, because of the expensive technologies necessary to meet the mandate.

Further in the United States, the Pew Center on Global Climate Change (2006) has recommended that transportation be included in U.S. GHG reduction policies, since transportation is responsible for one-third of all that country's CO2 emissions. In order to make the U.S. emission reduction program more comprehensive, the Center proposes the conversion of the existing vehicular mileage standards into CO2 standards that would measure the average CO2 emissions per mile for cars and light trucks. It suggests that manufacturers who ''overachieve'' would receive allowances that could be traded or banked. However, the report acknowledges that a system for tracking and reporting GHG emissions has to be established before such a plan would be viable.

Canada's automobile industry has agreed to voluntarily follow the U.S. CAFE standards. However, the Canadian government has taken the standards one step further in announcing its goal of reducing CO2 emissions from all new passenger cars and light trucks by 25 percent by 2010 through decreased fuel consumption (Bustillo 2005).

It is difficult to make a direct comparison among different regions' and countries' vehicular standards, since they differ not only in form and structure, but also in terms of stringency, levels of measurement and implementation requirements (voluntary or mandatory) (see Table 3.6). Japanese and Chinese fuel economy standards are based on a weight classification system where vehicles must comply with the standards for their weight class. By contrast, the fuel economy standards in the United States depend on vehicle type, while in Taiwan and South Korea they are related to an engine classification system (An and Sauer 2004).

By normalizing the different fleet average fuel economy levels of these countries and regions by CAFE cycles, An and Sauer (2004) have, however,

TABLE 3.6 Varying Global Vehicular Fuel Economy and GHG Standards

Country/Region

Type

Measure

Structure

Implementation

United States

Fuel

Mpg

Car and light trucks

Mandatory

EU

CO2

g/km

Overall light-duty fleet

Voluntary

Japan

Fuel

km/L

Weight-based

Mandatory

China

Fuel

L/100-km

Weight-based

Mandatory

California

GHG

g/mile

Cars and two categories Mandatory

of light trucks

Canada

Fuel

L/100-km

Car and light trucks

Voluntary

Australia

Fuel

L/100-km

Overall light-duty fleet

Mandatory

Taiwan

Fuel

km/L

Engine size

Mandatory

South Korea

Fuel

km/L

Engine size

Mandatory

Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World. Pew Center on Global Climate Change, www.pewclimate.org.

Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World. Pew Center on Global Climate Change, www.pewclimate.org.

2002 2004 2006 2008 2010 2012 2014 2016

FIGURE 3.5 Comparison of fuel economy and GHG emission standards normalized by CAFE-converted mpg

Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World, www.pewclimate.org.

2002 2004 2006 2008 2010 2012 2014 2016

FIGURE 3.5 Comparison of fuel economy and GHG emission standards normalized by CAFE-converted mpg

Source: An, F., and A. Sauer. 2004. Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World, www.pewclimate.org.

been able to demonstrate that the European Union and Japan have the most stringent standards, while the United States and Canada have the lowest standards, in terms of fleet-average fuel economy ratings. The new Chinese standards are more stringent than those in North America and Australia, but less so than the EU and Japan. It also shows that when the California GHG standards take effect, they would narrow the gap between the United States and the EU (Figure 3.5).

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