Many Public Surveys or Polls often find strong Consumer support for regulating and reducing U.S. carbon emissions. The most successful regulatory actions in recent years have been replacing fossil fuels with alternative lower carbon energy sources, and increasing energy consumption efficiencies. Since 2007 the most effective actions and policies towards reducing U.S. carbon emissions have been a combination of ‘fuels switching’ from higher carbon fossil fuels to natural gas and expanded renewables, and increased energy efficiency upgrades; primarily improved ‘Corporate Average Fleet Economy’ (CAFE) Standards or increased vehicle fuel efficiencies. Despite the apparent polling-support for reducing carbon emissions and mandating higher efficiency on-road vehicles, recent trends in Consumer purchase behaviors appear to be inconsistent with supporting U.S. ‘green energy/efficiency’ policies. In recent years U.S. Consumers have purchased greater numbers of lower efficiency SUV’s and Light Trucks, than higher efficiency-smaller Cars. Why does this inconsistency between the Public Polls for strongly supporting ‘green policies’ and actual Consumer buying behaviors continue to develop and what should be done to help correct this undesirable pattern?
Recent Economic Recession and Recovery Impacts – Prior to the 2007-09 Economic Recession U.S. Consumers purchased an average of about 16 million new ‘Light Duty Vehicles’ (LDV’s) annually. These average LDV purchases included a combination of about 50% Cars and 50% Light Trucks. Due to the Recession and high unemployment, total LDV purchases dropped to about 10 million per yearduring 2009. Since 2009, the economy has slowly recovered, unemployment has dropped significantly, and purchases of new LDV’s have returned to over 16 million per year in 2014. Another market LDV statistic that has changed is that the purchase percentages of new Light Trucks/Cars increased from 52%/48% up to 55%/45% since January 2014. Why does this matter? The fuel efficiency of new Light Trucks average about 23% lower (26.3mpg vs. 34.1mpg) than new Cars. Yes, many of those Consumers that apparently polled in support of reducing U.S. carbon emissions have begun increasing their purchase of lower fuel efficiency LDV’s that will generate about 23% greater carbon emissions per mile.
Why do Consumers Buy Less-Green/Less-Efficient Vehicles? – There are a number of likely reasons why Consumers poll green, but do not always buy green. One feasible explanation is that when disposable income is restrained, as during and immediately following the 2007-09 Recession, Consumers were highly motivated to keep their transportation costs down by buying and operating higher efficiency vehicles. However, the combination of the growing recovery from the Recession, increased employment, and possibly the recent reduction in fuel costs, may have become significant motivations towards purchasing larger, more convenient-comfortable, but less efficient, SUV’s and Light Trucks.
The motivation for this less-than-green Consumer behavior could also be due to assuming or believing the increased carbon emissions and impacts of new SUV’s and Light Trucks are insignificant compared to the increased ‘standards-of-living’ benefits. Or, Consumers could believe and trust that current Government policies to reduce carbon emissions are as effective as the Polls and many Politicians advocate. In this case, Consumer behaviors could be strongly influenced by the belief that Federal CAFE Standards will effectively achieve the claimed benefits of substantially reducing new LDV fleet average carbon emissions. In other words, Consumers fully trust that the Government’s Administration of the CAFE Standards will guarantee the efficiency improvement/carbon reduction targets set by the EPA & NHTSA each year. This being the case, no personal sacrifice should be needed beyond complying with existing Government Rules & Regulations.
Effectiveness of EPA/NHTSA CAFE Standards in Reducing LDV Carbon Emissions – The original CAFE Standards were developed in 1975 following the Arab OPEC Oil Embargo and energy crisis. The original CAFE Standards were designed to reduce U.S. petroleum consumption by mandating increased LDV fleet fuel efficiencies. The CAFE Standards eventually evolved to address both continuous increase of on-road vehicle petroleum fuel efficiencies and reduced vehicle tailpipe carbon emissions.
LDV Manufacturers’ annual compliance with increasing CAFE Standards can be achieved directly by producing higher efficiency new LDV’s or indirectly by generating or obtaining credits for building new LDV’s that operate on ‘alternative fuels’ to petroleum. The actual performance of ‘alternative fuels’ regulatory options towards achieving CAFE Standards has unfortunately been somewhat disappointing over the years.
Have Alternative Fuel LDV’s Sales Fully Off-Set Increased Light Truck Sales and Carbon Emissions? – LDV Manufacturer’s can generate and obtain credits towards their fleet average CAFE Standards compliance for a given year by building and selling Alternative Fuel Vehicles (AFV’s). For example in 2011 about 1.0 million AFV’s were built and sold within the U.S.; of the total 13 million LDV’s sold that year. The 1.0 million AFV’s consisted of 80% ethanol (E-85) ‘Flex Fuel Vehicles’(FFV’s), 8% LPG fueled, 6% natural gas fueled, and 6% ‘Electric Vehicles’ (EV’s). Unfortunately, most of the AFV’s do not even come close to off-setting the added carbon emissions of increased Light Truck sales. The largest gap or CAFE Standards’ compliance ‘loophole’ is due to the fact that only a very small percentage of FFV’s actually operate on E-85 ethanol. Today there are about 15 million registered E-85 ethanol FFV’s in service that were built and sold over the past decade. Manufacturers’ received substantial credits over the years towards their annual fleet average CAFE Standards compliance from these newly built FFV’s. Unfortunately only about 300 thousand FFV’s (2% of the total ethanol FFV fleet) actually operate primarily on E-85 today.
Fortunately, the development and growth of EV’s has been directionally more effective in crediting LDV Manufacturer’s CAFE Standards compliance and more realistically reducing LDV fleet fossil fuels consumption and associated carbon emissions. In 2011 the President Obama set a goal of adding one million EV’s to the U.S. fleet by 2015. This would effectively expand the U.S. EV fleet by almost 50-fold over a 5-year period. While this noble goal is very consistent with significantly reducing future U.S. LDV fossil fuels consumption and associated carbon emissions, actual EV sales have unfortunately lagged and will probably only achieve about 420 thousand new EV’s, 2011-2015.
What are the Major Barriers to Substantially Increasing EV Sales? – The most successful (plug-in) EV’s marketed and sold in the U.S. 2011-2015 have been the Nissan Leaf, Chevy Volt and the Tesla Model S. The Nissan Leaf (EV) sells for about $30K, the Chevy Volt (PHEV) $35K and the Tesla Model S (EV) an average of $80K. All of these EV’s qualify for up to $7.5K Federal tax credits/subsidies. While the Nissan Leaf is the least expensive, it has a limited travel range between battery charges of about 80 miles. The Tesla Model S has about a 250 mile range between battery charges and the (PHEV) Chevy Volt switches to gasoline after 40 miles on its battery, for a total range of about 350 miles; battery + gasoline power.
The Nissan Leaf and Chevy Volt are both smaller compact vehicles and generally compete with other gasoline fueled compact cars that typically get 30-40 mpg. The limited range of the Nissan Leaf and its price up to double similar compact gasoline cars is clearly a major barrier for many Consumers. The Chevy Volt does not have the limited range constraint, but still costs about double equivalent gasoline fueled compact cars. The Tesla Model S has attracted the higher income Consumers by providing a luxury, sports car that meets the needs of those who value this high-end EV. The future challenge for the Tesla will be eventually producing a car in the price range more affordable by average Consumers.
To further increase the attractiveness of EV’s some Politicians, and the President in his recent 2014 budget, have advocated increasing the Federal EV tax credit from $7.5K up to $10K. This increased subsidy in combination to possibly increasing available public charging stations (i.e. re-charging convenience), and, the potentially growing value of CAFE EV-AFV credits should also increase the attractiveness and help reduce new EV market prices in the future.
Other Regulatory Loopholes that Compromise CAFE Standards Carbon Emissions Performance – All LDV Manufacturers have another option to comply with annual CAFE Standards that does nothing towards reducing LDV fleet carbon emissions: ‘paying non-compliance fines’. All domestic and imported LDV Manufacturers face penalties or fines of $5.50/0.1 mpg per vehicle for non-compliance with current year CAFE Standards. For example, if a Manufacturer sells a LDV with (test) fuel efficiency of 15 mpg vs. the CAFE Standard of 34.1 mpg, the Manufacturer would face a fine of ((34.1-15) x ($5.50/0.1) =) $1,050 per each LDV sold. Over the years many Manufacturers have paid $10’s of millions in fines in order to fully comply with annual CAFE Standards. Recent year CAFE fines datashow that Foreign Manufacturers (imports) overwhelming rely on this loophole to comply with U.S. fuel efficiency requirements for their high-end LDV’s. While paying a $1,050 added cost for a $25K gasoline fueled Light Truck could significantly discourage Consumers, in the case of imported luxury and sport cars that typically cost well over $100K each, this level of CAFE fines is not likely to significantly impact Consumers’ purchase decisions.
In Conclusion – U.S. Consumers may ‘poll’ green when asked if they believe it is important for the U.S. to reduce its future carbon emissions, but will often buy larger-less efficient SUV’s and Light Trucks that meet their personal-family’s needs. Yes, in some cases the Consumers may believe that reducing carbon emissions is a priority issue and be willing to make some level of voluntary-personal sacrifice, but in most cases Consumers are probably relying on Federal Government policies and regulations to adequately address reducing future U.S. carbon emissions. In the case of current CAFE Standards intended to significantly reduce future U.S. carbon emissions there are clearly major gaps and loopholes in this policy. These CAFE policy deficiencies need to be addressed and corrected to make this regulation much more effective in reducing future U.S. carbon emissions. Needed improvements include basing AFV CAFE Standard credits on ‘actual’ petroleum displaced, and substantially increasing the non-compliance fines up to say 10-fold (or $55.00/0.1 mpg per LDV). Without eliminating these and possibly other future CAFE Standard loopholes the probability of the most recent Obama Administration policy updates of actually achieving future improved LDV fuel efficiencies and reduced carbon emission targets, will continue to be significantly compromised.
In addition, since substantially expanding EV’s is a very critical part of the solution to reducing future LDV fleet’s petroleum consumption and carbon emissions, new-improved policies will also be needed. Improved policies should possibly include helping make EV technologies much more cost effective compared to petroleum fueled vehicles (through increased R&D support primarily), making EV’s more attractive to most Consumers (lower cost & increased re-charging station conveniences), and truly making EV’s sustainable in the Free Markets (without perpetual Government financial subsidies).
Your thoughts and ideas?
This article is published in collaboration with The Energy Collective. Publication does not imply endorsement of views by the World Economic Forum.
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Author: John Miller is an Energy Consultant, Researcher and Professional Engineer.
