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

Transportations Role in Reducing U.S. Greenhouse Gas Emissions: Volume 2
run partially on electricity), the effect is more complicated as it will depend upon the
relative cost per mile of the different fuels compared to gasoline.
The estimates cited by NHTSA and commonly found in the literature apply only to
personal travel using light-duty vehicles. A rebound effect could theoretically be present
for other passenger modes (including personal travel by bus, rail, and air) as well as for
goods movement, if the total cost of travel or goods movement is reduced. However,
these effects, while not extensively studied, are likely to be small. Nonfuel costs (e.g.,
labor) make up a more significant proportion of overall costs, and for goods, shipping
costs usually make up a relatively small proportion of a product’s overall costs.
Furthermore, since all costs (including vehicle capital costs as well as fuel costs) would be
passed on to the traveler or consumer—not just the per-mile costs—any increase in vehicle
costs due to advanced technologies would offset reductions in fuel costs from the traveler
or consumer’s viewpoint.
Policy Implications
On-Road Vehicles
Policies to promote on-road vehicle technology strategies will need to overcome several
hurdles. Consumers tend to “undervalue” fuel economy improvements—i.e., they value
fuel savings over only part of the lifetime of the vehicle when making vehicle purchase
decisions, limiting the amount of increased initial cost that manufacturers can pass on to
consumers. NHTSA assumes that consumers value five years worth of fuel savings (the
current average term of consumer loans to finance new vehicles) (NHTSA, 2008b). Other
studies have shown shorter periods, with Greene (2007) concluding that consumers have a
willingness to pay for only about two years of fuel savings. In contrast, about half of the
light-duty vehicles sold in 2012 are expected to remain in service for 14 years or more.
In the absence of strong consumer interest in fuel economy, technology has been put
towards increasing horsepower rather than efficiency. Uncertainty in future fuel prices
also limits interest in potential advanced technologies. The vehicle fleet turns over
relatively slowly, and retrofits are practical only for some heavy-duty vehicle
technologies. Evidence suggests that even heavy-duty vehicle operators require a
payback period of four years or less for fuel-saving improvements—meaning that many
enhancements with net lifetime cost benefits may not be retrofit or introduced with new
vehicles. Finally, some heavy-duty vehicle design strategies require coordination between
tractor and trailer manufacturers.
Fuel economy standards have been the main policy mechanism used in the United States
to improve the vehicle efficiency of light-duty vehicles. Fuel economy standards and
greenhouse gas emission standards have the advantage of overcoming consumers’ short
payback period and undervaluing of fuel economy. The first corporate average fuel
economy (CAFE) standards were passed in 1975 in the wake of the Arab oil embargo; it is
estimated that light trucks and passenger cars would have emitted an additional 11 billion
metric tons of CO2 into the atmosphere between 1975 and 2005 had the CAFE standards
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