Transportation's Role in Reducing U.S. Greenhouse Gas Emissions ...

Transportation's Role in Reducing U.S. Greenhouse Gas Emissions: Volume 1
4-24
2011 to 2030 as consumer fuel cost savings outweigh increased costs of vehicle
technology. 147 If consumers undervalue energy efficiency, a carbon price signal
alone will not elicit all cost effective emission reductions. Efficiency standards
can compensate for market failures in consumers undervaluing energy savings.
However, outside of the consumer sector, the evidence for market failure in
commercial transportation operations such as trucking, aviation, maritime, or
railroads is less compelling.
Models of cap and trade systems that include raising efficiency standards
estimate lower allowance prices and consumer energy bills. These models also
show that the availability of low-carbon technologies is critical to minimizing
costs of GHG reductions.
148
The Government Accountability Office (GAO) surveyed a panel of 18 noted
economists with expertise in climate change policies and found that 14 out of 18
believed that in addition to a cap and trade or carbon tax mechanism to establish
a price for carbon, complementary policies such as investment in research or
energy efficiency standards should be pursued.
As such, public investment in research and
development can spur new energy technologies that reduce costs. This is
particularly important to the extent that even with a price signal, private
companies are hesitant to risk investing in uncertain, long term technologies or
basic research.
147 National Highway Traffic Safety Administration (2009). Average Fuel Economy
Standards, Passenger Cars and Light Trucks, Model Year 2011, Final Rule. April 2009.
149
However, the GAO report
also emphasized the view of several panelists that energy efficiency standards
can be economically inefficient and that vehicle fuel efficiency standards would
be unnecessary in the presence of a robust mitigation policy to place a price on
carbon. By not pursuing complementary policies for the transportation sector in
addition to a cap and trade system, the sector may miss opportunities for
investing earlier in low carbon technologies and mobility options, leading to
higher costs in the future when allowance prices are high and these options are
not available. As one expert put it, “Harnessing market forces is a very useful
but probably insufficient strategy for mitigating transportation’s GHG emissions.
Even a carbon cap and trade system, as beneficial as it would be, would be
hindered by the tendency of households to undervalue fuel economy. It would
be unlikely to bring about an appropriate level of investment in long-term
148 Pew Center on Global Climate Change (2008). “Innovative Policy Solutions to Global
Climate Change: Insights from Modeling Analyses of the Lieberman-Warner Climate
Security Act (S.2191)”
149 U.S. Government Accountability Office, 2008 (cited).