MIT study finds carbon prices more cost-effective than fuel economy regs at reducing CO2 emissions

Via GCC:

MIT study finds carbon prices more cost-effective than fuel economy regs at reducing CO2 emissions; fuel economy regs more efficient at reducing fuel use

Click to expand...

http://www.greencarcongress.com/2015/10/20151012-mit.html

Researchers at the MIT Joint Program on the Science and Policy of Global Change have compared the worldwide economic, environmental, and energy impacts of currently planned fuel economy standards (extended to the year 2050) with those of region-specific carbon prices designed to yield identical CO2 emissions reductions.

Their study, which appears in the Journal of Transport Economics and Policy, finds that such stringent fuel economy standards would cost the economy 10% of global gross domestic product (GDP) in 2050, compared with a 6% cost under carbon pricing. This finding reinforces economists’ contention that improving the efficiency of motor vehicles through fuel economy standards will yield significantly less CO2 emissions reduction per dollar than an economy-wide instrument that encourages such cutbacks where they are cheapest—principally in the electric power and industrial sectors.

However, the fuel economy standards modeled in the study did prove beneficial in terms of fuel consumption: They reduced fuel used in passenger vehicles by 47% relative to a no-policy scenario in 2050, versus only 6% under carbon pricing.

"Many developed countries are choosing very expensive ways to reduce CO2 emissions, but if that’s a top priority, they should go with a price on carbon. If they’re more focused on energy independence, fuel economy standards can deliver, but a tax on gasoline would be more cost-effective. What makes our study unique is that we used a global model that captures market linkages around the world, rather than within a single nation, region or sector. . . ."

Click to expand...

In general, it makes sense that appropriately pricing fossil carbon relative to other energy sources, as opposed to subsidies for alternatives, is likely the most efficient way to reduce overall CO2 emissions.

That said, I still consider subsidies on EVs to be a good investment, even if the immediate payback in terms of reduced emissions is modest relative to the cost. In the transportation sector, switching from gasoline to electricity will require millions of consumers to adjust their "fueling" habits, and many thousands of municipalities, workplaces, and condo/apartment buildings will need to accommodate EV owners who do not reside in single-family dwellings. With the right infrastructure in place, coupled with long range EVs, this is certainly do-able. (Hydrogen fuel cell vehicle proponents argue that this "fueling" challenge can be bypassed, but hydrogen has been discussed on this forum ad nauseam, and I'm not at all convinced.)

So, while the market for EVs is small today, its existence gets the ball rolling, and increases the likelihood of EVs replacing fossil-based liquid fuels en masse in the future. The simple fact of electricity (derived from renewables) being much cheaper than fossil fuels (priced appropriately) for transportation will do nothing for us without viable EVs to drive, consumers ready to purchase them, and the necessary infrastructure in place. While it's possible that a massive shift to autonomous, electric "cars for hire" will greatly accelerate the adoption of EVs, we cannot count on this, as full autonomy in all driving conditions may take longer than many expect to come to fruition, time is of the essence with respect to addressing climate change, and many will continue to prefer owning their own vehicles.

Thus, given the need for millions of consumers to make changes, it is indeed worthwhile to continue EV subsidies for a while longer, even with appropriate carbon pricing. Even if driving an EV is not necessarily the most cost-efficient way of reducing personal CO2 emissions in the near future, I am convinced that it is worth the money and effort because of the precedent we are setting and the demand we are creating. In time, this will pay large dividends for our children who, I hope, will inherit a world that is not addicted to fossil fuels.

How about fuel economy regulations AND carbon pricing? That would make BEV powered by renewable energy very attractive.