Automobile use, fuel economy and CO2 emissions in industrialized countries: Encouraging trends through 2008?

Transport Policy 18 (2011) 358–372

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Automobile use, fuel economy and CO2 emissions in industrialized countries: Encouraging trends through 2008? Lee Schipper Global Metropolitan Studies, University of California, Berkeley, CA 94720-1782, USA

a r t i c l e i n f o

Keywords: Fuel economy Vehicle use Fuel economy standards

a b s t r a c t Car use and fuel economy are factors that determine oil demand and carbon dioxide (CO2) emissions. Recent data on automobile utilization and fuel economy reveal surprising trends that point to changes in oil demand and CO2 emissions. New vehicle and on-road fleet fuel economy have risen in Europe and Japan since the mid 1990s, and in the US since 2003. Combined with a plateau in per capita vehicle use in all countries analyzed, these trends indicate that per capita fuel use and resultant tail-pipe CO2 emissions have stagnated or even declined. Fuel economy technology, while important, is not the only factor that explains changes in tested and on-road fuel economy, vehicle efficiency and transport emissions across countries. Vehicle size and performance choices by car producers and buyers, and driving distances have also played significant roles in total fuel consumption, and explain most of the differences among countries. Technology applied to new vehicles managed to drive down the fuel use per unit of horsepower or weight by 50%, yet most of the potential fuel savings were negated by overall increased power and weight, particularly in the US. Similarly, the promise of savings from dieselization of the fleet has revealed itself as a minor element of the overall improvement in new vehicle or on-road fuel economy. And the fact that diesels are driven so much more than gasoline cars, a difference that has increased since 1990, argues that those savings are minimal. This latter point is a reminder that car use, not just efficiency or fuel choice, is an important determinant of total fuel use and CO2 emissions. We speculate that if the upward spiral of car weight and power slows or even reverses (as has been observed in Europe and Japan) and the now mandatory standards in many countries have the intended effect that fuel use will remain flat or only grow weakly for some time. If real fuel prices of 2008, which rivaled their peaks of the early 1980s, fell back somewhat but still remain well above their early 2000 values. If the prices remain high, this, combined with the strengthened fuel economy standards, may finally lead to new patterns of car ownership, use and fuel economy. However, if fuel prices continue their own stagnation or even decline after the peaks of 2008 and car use starts upward, fuel use will increase again, albeit more slowly. & 2010 Elsevier Ltd. All rights reserved.

1. Automobile fuel use and emissions: a gap in knowledge Energy use and travel for personal transport in wealthy countries is dominated by automobiles. While fuel economy improvements and some slowing of the rise in ownership and use of automobiles has slowed the growth in fuel use, these vehicles still account for roughly 9% of total energy use (and 20% of oil use) in OECD countries, with higher shares in the United States (IEA, 2004). Their share in total energy use in developing countries is smaller, but rising rapidly (WBCSD, 2004; IEA, 2009). Since most all fuel is from oil products or natural gas, automobiles also account for a significant amount of global release of CO2, the main greenhouse gas associated with climate change. Hence the automobile and its

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energy use is a central focus of energy and environmental authorities in almost every country. Automobiles’ total fuel use is a function of both automobile utilization and automobile fuel economy (defined as fuel use per kilometer traveled of automobiles and household light trucks and sport utility vehicles (SUVs)). This paper focuses on these two components of fuel use to gain an understanding of what has caused the restraint in fuel use that we have seen in recent years. Decomposing the problem in this way, and including additional information about new vehicle characteristics such as weight, power and fuel type, fills a gap in the institutional reporting and academic literature on transport energy use. By focusing on ‘‘onroad’’ fuel economy and vehicle use we understand the evolution of the two components of fuel use and emissions for cars, one that has captured increasing attention of policy makers. A companion paper examines trends in travel over all modes in a similar set of countries (Millard-Ball and Schipper, 2010).

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There is little effort at the international level to monitor and analyze both vehicle use and on-road fuel economy achieved by the entire stock of light-duty passenger vehicles. One of the main limitations is that little has been done systematically to estimate on-road fuel economy for entire fleets across individual countries. The International Energy Agency IEA, (2004) monitored on-road fuel intensity of cars through 1998 with some data extending to 2000, but there has been little published information since that time other than from individual countries. Zachariadis, Samaras and colleagues in Europe have made a focused effort to evaluate real fuel economy (i.e., on-road fuel economy), comparing it with simulations as well as addressing the gap between the test fuel economy and actual fuel economy (Samaras et al., 2001; Zachariadis, 2006; Clerides and Zachariadis, 2008; Fontaras and Samaras, 2007. Using on-road fuel economy is particularly important with the development of the tighter fuel economy standards in the US, Europe and Japan. This work also updates a series of papers that outlined the challenges of analyzing the components of automobile fuel use, one of which is data quality. For example, in the US, actual fuel use is not surveyed and vehicle usage is only inferred from infrequent travel surveys. (Schipper et al., 1993a, b) Data quality issues also affect analyses of fuel economy. Schipper and Tax (1994) reviewed the fundamental problem of understanding the gap between tested new vehicle fuel use and that obtained in real traffic. Schipper (1995) presented a time series, cross sectional analysis of automobile use and fuel consumption in a dozen member countries of the IEA, work which was published in the Oak Ridge National Laboratory (ORNL) Transportation Energy Data Book or TEDB in the 1990s (Davis et al., 1980–2010). Johansson and Schipper (1997) carried out the first international cross-section, time-series econometric analysis of gasoline, diesel and even LPG consumed by automobiles as opposed to aggregate road fuel consumption regardless of the correspondence with automobiles. Schipper and Marie-Lilliu (1999) expanded these earlier analyses to all modes of both passenger travel and freight through 1995 (Schipper et al., 1996; Kamakate and Schipper, 2009). These figures were updated by the IEA (2000, 2004). Finally, Schipper et al. (2002) analyzed diesel cars in five countries in Europe with significant use of diesels and in two cases, LPG cars as well, analysis updated in this work and in Schipper and Fulton (2009). The present article updates the diesel analysis as well. This update is important for several reasons. First, concern for oil consumption has been enhanced, if not supplanted, by concerns about the CO2 emissions associated with automobiles’ fuel use. Addressing this issue, the European Union entered into a Voluntary Agreement with EU country vehicle manufacturers in the mid 1990s, by which the latter would strive to lower the CO2 emissions per kilometer of new cars by 20% between 1998 and 2008. Manufacturers failed to reach that goal of 140 g/km, although preliminary 2009 data suggest new cars achieved a reduction to 145.6 g/km (ADEME, 2010). A similar program called ‘‘Top Runners’’ was kicked off in Japan in 1998 (IEA, 2000). The United States finalized its own new fuel economy standards with reference to CO2 emissions (EPA, 2010a, b). Thus major industrialized countries are now focused on the performance of new light-duty vehicles. Second, since 2002 world oil prices have climbed, sending road fuel prices in the US up by almost 100% by 2008 and by roughly 40% in Europe and Japan. Indeed, both climate change concerns and higher oil prices in the US have led to much political debate. Thus, we expect to see changes in all three regions due to both price changes and policy changes. For example, as of this writing, US, EU and Japanese authorities have reacted to both climate concerns and rising oil prices by either tightening existing standards (US) or requiring what was previously voluntary (Fontaras and Samaras, 2010; METI, 2010). Unfortunately, within the policy process internationally and within several countries, the test values have

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been those figures most commonly discussed, and often confused with on-road fuel economy of the entire fleet. Within these policy processes we should be capable of evaluating the fuel economy and vehicle usage of the overall fleets on the road. After all, it is the on-road performance of the entire fleet that leads to fuel use and emissions, not the test values of new vehicles alone. As we shall argue, understanding on-road fuel economy (and consequent CO2 emissions) is critical for both interpreting how changing fuel prices and other conditions have changed vehicle use and vehicle purchases, and for estimating the impacts of future policies and technologies. Whatever the tested or hoped for fuel economy and emissions were, the atmosphere sees the emissions that are the product of actual, i.e., ‘‘on road’’ and not test (or theoretical) fuel use/km times kilometers driven. Moreover, policy analysis must judge the real, not theoretical (i.e., test-based) impacts of fuel economy standards or other policies on both fuel economy or fuel intensity and fuel use. Reducing the latter from a base case is the objective of fuel-saving policies. And since fuel use is the product of total distance driven (by all cars) times fuel intensity of all cars, monitoring distance driven is equally important. If there is a small ‘‘rebound effect’’ (Hymel et al., 2010) – slightly higher distances driven given lower fuel economy, all else equal – changes in distance driven are important to monitor. This paper is organized as follows. After a brief discussion of data and methods, we consider trends in fuel economy, and discuss ‘‘on road’’ fuel economy, trends in fuel economy for new vehicles, the influence of new car power and weight on fuel economy, the diesel car phenomenon in Europe, as well as the influence of fuel prices on fuel economy. We then review the evidence of a surprising plateau in car use that has combined with improved fuel economy to hold fuel consumption per capita constant in the past few years. We ask whether these trends might lead to falling fuel use and CO2 emissions over the longer term. We suggest that this decline may be possible because of both new mandatory fuel economy standards combined with higher fuel prices, i.e., maintaining the level seen in 2009.

2. Data and methods: focusing on the on-road fuel economy of entire fleets The approach in this work follows the ‘‘ASIF’’ framework, in which fuel use depends on the product of total vehicle travel by vehicle fuel times the fuel intensity of that vehicle travel for each fuel. Adding CO2 emissions requires determining the CO2 content of each fuel used (Schipper et al., 2000). Apelbaum (2009) provides perhaps the most comprehensive review of how information on vehicle stocks, usage, and fuel intensity from both surveys and other sources are assembled to give a good picture, which he extends over many years for Australia. Schipper et al. (1993b) reviewed the many hazards in using the available data for vehicle numbers, annual usage and fuel economy by fuel (see also Zachariadis and Samaras (2001) for a similar approach used in EU). National authorities have three approaches to estimating fuel economy and vehicle usage. The most accurate method surveys thousands of drivers to record annual fuel use and vehicles utilization (Australia, Canada, France, Netherlands, and the US in the early 1980s). Germany (DIW, 2010) and Japan (EDMC, 2010; MLIT, 2010) rely on detailed models of the vehicle stock, fuel consumption per km, and km traveled, bolstered by some observations, to account for all fuel sold. Zachariadis and Samaras (2001) had noted that these kinds of simulations can be informative but need to be calibrated with surveys. Some countries survey parts of this ‘‘ASIF’’. Sweden surveys annual vehicle use (SIKA, 2010). As a variant, it is possible to derive annual vehicle use from national travel surveys if these represent all seasons and days of the week. It is also possible to estimate fuel

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use from household budget surveys if respondents also supply average prices of fuel they paid. These approaches are bottom-up. While they may overlook some vehicles/users, they account for the bulk of car activity and fuel use. It might be argued that on-road/on-board measurements with portable emissions measuring devices (Liu et al., 2010) are the only ‘‘reliable’’ way of measuring fuel consumption, but such measurements over a large enough sample to capture different kinds of cars and vintages and driving conditions are very expensive. The problem with all of them is that without either a very large sample or very frequent estimations and some calibration, the uncertainties from any method can be larger than the year on year changes in on-road fuel economy. Without surveys, analysis collides with a circularity, i.e., estimating distance per car as total fuel divided by fuel economy while estimating fuel economy as total fuel divided by distance per car and numbers of cars (Schipper et al., 1993b). This is increasingly problematic with the rise of diesel vehicles (and those on other fuels) since the correspondence cars—gasoline is not one-to-one and many other kinds of vehicles use diesel fuel. Why is accuracy important? First, stakeholders need to know the parameters determining automobile use if they want to agree on policies to change fuel use. Second, the same stakeholders will hold authorities accountable for what did occur if a policy is instituted. One contentious element of this debate is the so-called rebound effect, related to the short-term price elasticity of fuel use. Through the rebound effect, lower fuel intensity, particularly if imposed by standards, is associated with a small degree of increased driving (Small and van Dender, 2007; Hymel et al., 2010). Without good measures of fuel use, vehicle use, and fuel economy, it is virtually impossible to untangle impacts of higher fuel prices on fuel economy and car use over time to compare what is observed with what would have been expected with no improvement in fuel economy. The problem in part is that even a blunt, top down instrument, raising fuel prices, is contested today—what is the elasticity of vehicle use and fuel use in the short and long term? How much do higher fuel prices affect which car a multi-car household drives? And how much do higher prices influence new car fuel economy, as measured not by tests but by on-road surveys? Finally, how do higher prices, fuel economy standards, and other forces affect car uses in different geographical locations or from different income strati? Only regular surveys could answer these questions. Good policymaking requires good information before and after. The approach taken (and that used by the national authorities cited herein) has to follow certain rules. First, the vehicles must be

defined. For example light trucks used as household vehicles (more than 25% of the ‘‘car’’ stock in Australia, Canada, the US) must be included. Second, the vehicle populations, vehicle use, and fuel use should be consistent. Most national authorities in Europe for example adjust out cars of other nations driving their roads and using their fuel. More extreme examples of fuel tourism, i.e., buying fuel across a border where it is cheaper must be accounted. For Europe, the most notorious example is Luxembourg, whose low fuel prices attract drivers from Belgium, Netherlands, Germany, and France to give that country very high apparent gasoline use as measured by sales (IEA, 2009). A recent study of Ireland makes this ´ Gallacho´ir et al., 2009). In short, problem for that country clear (O there are many effects that, while small in most cases, can distort slowly changing trends. The on-road fuel intensity of the ‘‘fleet’’ of vehicles, i.e., all the vehicles on the road, is one of the results of analyzing distances, fuels, and if surveyed fuel intensity of each fuel. We also discuss the sales weighted test fuel intensity of new vehicles of a given model year as reported by national authorities and (in CO2 emissions) by the vehicle manufacturers through EU. Where important we inflate these test figures to approximate ‘‘on road values’’ of each year’s vintage in order to compare the gap between these new vehicles and all the rest on the road.

2.1. A note on data and measures In this work, fuel economy refers to the ratio of distance driven to fuel consumed (e.g., kilometers per unit fuel consumed), while fuel intensity is the inverse (e.g., fuel consumed per kilometer). ‘‘On Road’’ fuel economy or ‘‘fleet’’ fuel economy refers to fuel intensity of the complete fleet of cars for a given fuel, measured either from surveys of large numbers of drivers or calculated from estimated total fuel use divided by total vehicle kilometers run by vehicles using that fuel. Unless otherwise labeled with ‘‘on road’’, new vehicle fuel intensities are those reported in EU, US, Japanese or national documents as the sales weighted figure based on standard tests. Also, it is important to account for all fuels at their calorific values or CO2 content. While CNG is insignificant, liquid petroleum gas (LPG, mostly propane) has been important in some countries (Netherlands, Japan, Italy, and to a lesser extent in France). Diesel use has been rising because diesel cars account for over 50% of sales in the EU-15 (Schipper and Fulton (2009); European Commission, 2010). On a volumetric basis, diesel contains 12% more energy than

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Fig. 1. On-road fuel intensity for US, Australia, Japan, and European countries gasoline equivalent l/100 km. Data sources see Appendix in Millard-Ball and Schipper, 2010 and acknowledgements.

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gasoline, and 17–18% more CO2. In this work, we sum the energy in all fuel consumed at its lower heating value and then divide by the heat content of gasoline to arrive at a ‘‘gasoline equivalent’’ fuel intensity or fuel economy. When reporting CO2 emissions we count each fuel’s CO2 content using standard Intergovernmental Panel on Climate Change (IPCC) practices straightforward, although for simplification in the graphics presented (Figs. 1 and 3) we overlook the differences in CO2 released per unit of energy consumed. Where not specifically labeled by fuel, intensity in liters/100 km (or MPG) converts diesel to gasoline at its higher energy equivalent. Thus one liter of diesel is counted as 1.12 liters of gasoline. In the present work figures for vehicle use and on-road fuel economy are updated from previous work to the most recent year available. While the national data sources are similar those used previously (see Appendix), those from France, UK, and Japan have more details and expanded coverage than previously. Spain, and for analysis of diesel, Belgium has been added to the review (see Appendix).

3. Results for on-road fuel intensity of the entire fleet This section focuses on on-road fleet fuel intensity, the quantity directly proportional to energy use and CO2 emissions. Fig. 1 shows on-road fuel intensity of entire light-duty passenger fleets for a wide variety of developed countries from the early 1970s through 2007 or 2008. Fuel intensity declined rapidly in the US in the 1970s and 1980s, while European countries experienced slower and less dramatic declines. Japan actually experienced an upturn in fuel intensity in the late 1980s and 1990s as worsening traffic and larger cars more than offset technological improvements in fuel economy (Hayashi et al., 2001). During the 1980s Japan, Germany and France engaged manufacturers in voluntary agreements to improve fuel economy, but these agreements did not have the same political force as those of the late 1990s when they included all 15 countries of the European Union or the ‘‘Top Runners’’ program in Japan. Beginning in the 1990s, European nations exhibited a slow but continuing decline in fuel intensity, while Japan’s finally turned around in the early 2000s. US on-road fleet fuel intensity showed a decline beginning in 2003 as the new vehicle fuel intensity started downward.1 Vehicle ownership and use has continued to grow in all these countries, but vehicle stocks are growing more slowly than before (IEA, 2004; Schipper and Marie-Lilliu, 1999; Dargay et al., 2007; Millard-Ball and Schipper, 2010). Slower growth in new car ownership means the influence of new car fuel intensity on the entire on-road fleet will be slow to take effect because the stock turnover has slowed down. How much new car intensity has changed is considered next.

4. Fuel economy of each year’s new vehicles New car fuel economy, as measured by tests and weighted by sales, is an important indicator of how on-road fuel economy will behave as the fleet is renewed. The greater the difference (on road) between the fuel economy of new cars sold and those in the stock, and the more rapidly the stock turns over, the more rapidly the onroad fuel economy of the fleet will change. 1 US data are marred by a blip in the official total oil consumption tally of light trucks (82% of which is counted here as ‘‘cars’’), consumption that rises suddenly in 2004 and 2005 by approximately 10% then falls back in 2006, obscuring what could be a downward trend in fuel intensity from earlier (BTS 2010). Since the fuel use for SUV is counted here, the ‘‘blip’’ affects the curve for the US in Fig. 1. Fuel intensity of the entire fleet of automobiles without SUV alone fell continuously from 2002.

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A cautionary note: there is no simple way to compare new vehicle fuel intensities from tests among countries, both because test procedures, i.e., the driving cycles differ among countries and because the gap between test and on road differs as well by country (Schipper and Tax, 1994). An et al. (2007) adjusted sales-weighted new-car fuel economy test values to a simulation of a uniform drive cycle. This makes comparison of test results more straightforward. Unfortunately this process results in simulated on-road fuel intensities that cannot be used to indicate ‘‘real’’ fuel use or CO2 emissions for any of the countries represented. A key question is what impact new vehicles will have on the on-road fuel economy of the entire fleet. This requires a comparison of approximate on-road values of new vehicles’ fuel economy with that of older ones, as well as the overall rate of stock turnover, and utilization of each vintage of vehicles. These parameters determine the rate at which real stock-wide fuel economy will change in each country and therefore the rate at which total fuel use and emissions will change as new vehicles enter the stock. While the approximate standardization of new vehicle test procedures across countries. With these caveats in mind, Fig. 2 shows US, Japan, and the sales-weighted EU average new vehicle fuel intensity. For the US, the EPA light truck average is counted with cars, using 82% of the light truck sales as indicative of how many should be averaged with cars sold to give a combined value.2 Japanese values are chained from the 15-mode (and earlier 10 mode) tests reported by EDMC (2010). European values are given as weighted averages provided by EU (ADEME, 2010) and before then the European Automakers Association (ACEA) as tabulated by the European Council of Ministers of Transport (S. Perkins, ECMT/OECD, priv., comm. 2008). Examining the changes, new-vehicle test fuel economy trends suggest three periods of activity. The 1970s and early 1980s saw a dramatic decline in new vehicle fuel intensity in the US and more modest, but still substantial, declines in Japan and EU. In the mid 1980s–mid 1990s, EU new vehicle fuel intensities were stagnant while those in Japan and the US rose as SUVs in the US and larger cars in Japan became increasingly more important. Finally, after 1995, values in Japan and EU headed down again, presumably as voluntary agreements came under discussion, while the US average fluctuated. While the EU values through 20,095, approximately 146.5 g/km of CO2 in absolute terms based on tests, fell short of a path to the ultimate goal (140 g/km based on tests) the improvements are still in stark contrast to developments in the US, where little change in new car test fuel economy took place through 2002. This is ironic because the relative changes in fuel prices from higher crude prices have been much larger in the US, both because so little of the US price is taxation and because the crude oil price increases (noted in dollars) have been mitigated somewhat in Japan and significantly in Europe by the falling value of the dollar. Recent years have seen an important change in new-vehicle fuel-economy standards. The European Union strengthened their ‘‘Voluntary Agreement’’ to become a mandatory target with the goal of 130 g/km CO2 emissions from tests of new cars, which corresponds to roughly to 5.5 l/100 km or 42 MPG gasoline equivalent in tests (European Commission, 2010; Fontaras and Samaras, 2009). The Obama administration announced a strengthened standard of approximately 35.5 MPG test (6.62 l/100 km or 156 g/km), echoing values proposed for California as early as 2002 (CARB, 2008). The actual values depend on the footprints of mix of cars sold, so the value given is only approximate. Japan made their ‘‘Top Runners’’ mandatory, with a standard that depends level of test fuel economy under the standard is uncertain,

2 This is the number of light trucks used as household vehicle according to the last survey (Vehicle Inventory and Utilization Survey 2002, as reported in TEDB 2010).

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depending on what cars are sold, but in either country, as well as EU, new vehicles are likely to be considerably less fuel intensive than those on the road today. As will be noted below, per capita car use in all the countries studied stagnated after 2005 as fuel prices rose, so any rebound effect of greater driving caused by these improvements in fuel economy was lost in the effects of higher fuel prices. The adjustments made to convert Fig. 2 data into values compatible with Fig. 1 depend on the ‘‘gaps’’ (Schipper and Tax, 1994) between test and real world driving. These are likely changing with increased speeds, congestion, and accessory use (particularly air conditioning in the US, Japan, and now even Europe). Continual revision of tests and chaining of results is necessary to obtain long-term time series that are realistic measures of how well vehicles will do in real traffic. Few believe the gap can be eliminated, however. Only a wide, regular survey of vehicles by vintage permits comparison of fuel economy from a given year with what was indicated for that cohort from new vehicles sales. This gap has important ramifications for discussions of policies aimed at boosting fuel economy. The widespread misunderstanding of the gap means politicians may expect larger changes in fuel economy because ‘‘new’’ as proposed may be much larger than ‘‘on road’’. US Env. Prot Agency Administrator Lisa Jackson, for example, states ‘‘And it is (the new standard) a victory for drivers, who by 2016 will get 35 miles to the gallon’’ on the EPA web site.3 A correct statement would be that those who buy 2016 model cars will average closer to 29 MPG on the road. Since it takes almost 20 years for all the cars in the fleet to be replaced, that means that it will be sometime after 2030 when all cars on the road, and therefore ‘‘drivers’’, will have been affected by the new standards. How tight are these standards compared to what fleets are presently achieving on-road? To answer this question requires an estimate of how to ‘‘translate’’ sales weighed values of the vehicle fuel economy into ‘‘on road’’ values that can be compared with that of the existing fleet. Smokers et al. (2006) and Zachariadis and Samaras (2001) use a 19.5% increase to translate test to ‘‘actual’’ values of fuel intensity. A figure of 33% appears correct for translating the ‘‘15 mode’’ test in Japan to what is observed on road (EDMC, 2010). The EPA put their adjustment at close to 24.5% (EPA, 2010a) for raising fuel intensity test values, equal to a reduction of the test MPG value of 20%. In fact, the new US value of 35.5 MPG, sales-weighted test

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standard for 2016 (6.6 l/100 km or 156 g/km in tests) that would average in both SUVs and cars together, works out to about 29.5 MPG (8.3 l/100 km or 194 g/km) when the adjustment noted above is applied. The real values of emissions or fuel intensity will likely be higher because the US allows credit for sales of flex-fuel vehicles against test fuel economy. With these adjustments then the new standard ultimately means 27% less fuel/km new vs. fleet for the US. Similarly, the EU target of 130 g/km, increased by 19.5% becomes approximately 155 g/km, vs. an approximate fleet average in 2008 of 187 g/km, thus calling for a drop of approximately 16%. For Japan, the approximate on road equivalent of vehicles sold in 2009 of 6.3/100 km becomes nearly 8.4 l/100 km on the road or 199 g/km of CO2, roughly 27% less. The results are shown in Fig. 3. Following the conventions set out previously, Fig. 3 shows emissions of carbon per km on one axis and approximately gasoline equivalent fuel economy (in l/100 km, converted using the CO2 content of gasoline) on the other. The first bar gives the on-road fleet average for 2008.4 The second bar gives the previous new vehicle standard (US) or voluntary agreement goal (EU and Japan). The third bar shows the levels realized by new vehicles sold in 2008, while the last bar gives the most recently enacted standard for all three regions. All the figures affecting or describing new vehicles are adjusted to ‘‘on road’’ as noted above. Fig. 3 shows that while Japan appears to have the tightest new vehicle standard, the US 2016 goal appears to force the largest change from the current on-road situation. Note that for the EU, new vehicles sold in 2008 failed to meet the voluntary agreement level (corresponding to 140 g/km of CO2), while for the US and Japan new vehicle sales were less fuel intensive than the standards at the time. For Japan, this occurred because of the high sales of mini-cars under 660 cm3 displacement (EDMC, 2010), while for the US both the tightening of standards on SUV announced in 2002 and a spontaneous, progressive increase in new automobile test fuel economy well ahead of the CAFE´ standards both contributed to the increase in fuel economy beyond the standard. Are these standards the last word in fuel economy? World oil prices are higher than when the US, EU, and Japanese standards were worked out. This might provoke purchases of smaller cars, as well as earlier introduction of more fuel efficient technology for a given car, as well as higher shares of hybrid vehicles. These shifts

4 For EU we use Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, and the United Kingdom as shown in Table 1 below. Based on the number of cars or car sales in EU, these represent roughly 83% of all cars and car use in the EU-15.

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Ratio of Fuel Consumption (l/100km) to Vehicle weight (kg)

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could dramatically cut the time until the stock reaches the levels of the estimated on-road value of the standard to approximately 15 years, which is the time for almost all the car stock to be replaced. Indeed, accumulating evidence suggests technology improvements are laying in wait (Cheah et al., 2009; King, 2008). But Cheah et al. (2009) warn that the upward march of weight and power absorbed most of the benefits of new technology in the US until recently. The next section discusses new car weight and power kept advancing in the US and Europe. The difference in these characteristics between the US and Japan or Europe remains the single most distinguishing component of the difference in new vehicle (and implicitly, onroad) fuel economy. If they stop rising, or decline, fuel economy could improve more rapidly than foreseen.

5. The race for weight and power Throughout this report we have avoided using the term ‘‘efficiency’’ for the indicators we have presented. The reason is clear—real fuel efficiency, if expressed as energy required to move a

given mass a given distance, or the energy required to provide a given level of power to an engine, or to extract a given amount of power from a given volume has risen markedly in the US and Europe. Based on US and EU data (EPA, 2010a; European Commission, 2010), Figs. 4 and 5 show how fuel per kilometer per unit of curb weight or engine power (in kilowatts) has fallen remarkably since the early 1980s. The lower fuel-use to weight ratio signals greater efficiency, not declining performance, because power/weight is up in all countries. The lower fuel use to power ratio says the engine itself is more efficient, providing potentially more power for a given average fuel consumption. Interestingly, the ratios of fuel use (or emissions) to mass or weight for diesel vehicles in EU fell faster than those for gasoline between 1995 and 2009. But new-vehicle test fuel intensity has not fallen anywhere nearly as much as these two indicators. In short efficiency has fed power and weight. And because power has risen faster than weight, acceleration has increased. Since the increases in power or weight of diesels were more rapid than those of gasoline, fuel economy of diesels improved less rapidly than that of gasoline, but did maintain its (small) lead through 2008.

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Ratio of Intensity (l / km) to car power (kw)

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Fig. 5. Fuel consumption to power ratio for new cars (diesel and gasoline averaged). Source: As in Fig. 4.

2400 US Light Trucks US cars

2200

Sweden Japan

2000

Germany

Curb Weight, kg

Italy

1800 1600 1400 1200 1000 800 1975

1980

1985

Fig. 6. New car curb weight (diesel and gasoline averaged). Source: As in Fig. 4.

200 US Cars

180 160

US Light Trucks Sweden UK

Power, kW

140 120

Italy Germany

100 80 60 40 20 0 1975

1980

Fig. 7. New car engine power (diesel and gasoline averaged). Source: As in Fig. 4.

1985

L. Schipper / Transport Policy 18 (2011) 358–372

Fig. 6 shows new vehicle weight, Fig. 7 power in the US and selected European countries over time (EPA, 2010a; European Commission, 2010). Except for the stagnation in weight in Japan after 1998, weight and power have risen everywhere, enough so to offset the impact of improved efficiency in the US, but not so rapidly as to obliterate improvements in Europe from the mid 1990s. Is this increase in weight a manifestation of greater safety? Zachariadis (2008) finds this effect to be small. Average weight and power of diesels rose faster than that of gasoline cars, which explains why diesel fuel economy actually improved less than that of gasoline. This may simply be a manifestation of the fact that diesel car buyers acquire more expensive and larger cars than gasoline buyers. The differences among countries are instructive. The European countries bracket the averages for years where all countries’ data are available. American cars and light trucks are heavier and more powerful than those elsewhere. In Europe, Swedes buy the heaviest largest cars (Italians the smallest), which is surely a function of disposable incomes, taxation and company car policies for Sweden (Schipper et al., 1993c). It is these differences in weight and power that lie behind most of the differences in new-vehicle fuel economy implied by Figs. 1 or 2. Fulton (2000) does find that when a similar car produced for sale in Germany, the US, and Denmark is compared, the model sold in Germany has more fuel economy technology than that sold in the US. That sold in Denmark has less technology than the one made for Germany, because new cars in Denmark are subject to a very high ad valorem purchase tax (nearly 200%), which raises the cost of fuel saving technologies. In Japan, however, an indicator of a possible change is the near stagnation of new car weight. According to the Japan Automobile Manufacturers Association (Sano, 2008; JAMA, 2010); MLIT, 2010), power and weight of new cars also stopped rising in Japan, leading to a notable improvement in new vehicle fuel economy. To some extent this may reflect an economic slowdown, but its timing coincides with the ‘‘Top Runners’’ agreement on new car fuel economy too. Indeed the percentage of mini-cars (engines under 660 cm3) in overall new car purchases, up from the teens in the 1980s, the 20s in the 1990s, and the 30s after 2000 (EDMC, 2010). This break in trends is probably motivated as much by the lack of space for parking and narrow streets as the desire to save fuel. In Europe, new diesel cars in 2008 and 2009 in EU were less powerful than in 2007, perhaps a reaction to the rise in fuel prices or the economic stagnation. Is this change permanent? The analysis suggests that without a slowing or even reversing of the seemingly endless upward spiral of vehicle weight and power, ‘‘technology’’ per se will not be deployed solely to reduce fuel intensity, but also and possibly preferentially to provide more vehicle performance. Indeed, during the years since oil prices started to rise in 2002, average new car or light truck engine displacement, weight, and power kept rising in the US. The fuel to weight or power ratio continued to fall, but this was only enough to balance increases in HP or weight until 2003 (EPA, 2010a). In short, it is not clear how much (or how rapidly) technology can reduce fuel use as long as much or all of the technology goes to boost power or weight (Cheah et al., 2009). With that in mind, the most recent trends in Japan and EU may signal the change that Cheah et al. (2009) await.

6. Impact of diesels—disappointing? Shifting from gasoline to diesel should save fuel and reduce CO2 emissions as well, goes the mantra in Brussels. In technical terms diesels are much more efficient than their gasoline counterparts of similar output (Schipper et al., 2002; Schipper and Fulton, 2009). In matched pairs, the diesel version of an automobile is somewhat heavier than the gasoline version, and has greater power to give

365

roughly the same performance. Yet, because of the intrinsically higher efficiency of a diesel engine, the diesel still uses considerably less fuel/km than gasoline. Recall that when taking account of the greater energy density of diesel and the greater CO2 released per unit of energy in diesel fuel, diesel fuel economy values have to be increased by 11–12% in energy terms or 17–18% in CO2 terms before they can be compared with gasoline. This step cuts the apparent emissions advantage of diesels significantly, but still leaves diesels in a matched pair as emitting less than their corresponding gasoline cars. It turns out, however, that consumers neither buy from matched pairs nor use diesel cars in the same way as gasoline-fueled cars, as Schipper et al. (2002) and Schipper and Fulton (2009) showed. The salesweighted power and weight of new diesels far exceeds the differences typical of matched pairs. Consequently the diesel bought each year have only a small advantage in lower CO2 emissions than the gasoline cars bought, an advantage that has narrowed over time. The analysis of 1995 data in the 2002 and 2009 studies were reviewed here and the same findings hold through 2007/8 (Schipper et al., 2011). Austria (not shown), Belgium, Spain, and Sweden were been added to the original countries studied in Schipper et al. (2002), namely France, Germany, Italy, Netherlands, and the UK. Table 1 shows diesel and gasoline sales-weighted test new-car fuel economy and CO2 emissions in 2007/8 for eight European countries. For comparison, the table gives the volumetric ratios of diesel to gasoline fuel intensity (l/100 km) as well as the ratios of CO2 emissions in g/km. Expressed as CO2/km, the difference for new vehicles from tests was only 10% in 1994, vs. 6% in 2008 and even less in 2009 (not shown), according to the official EU Data (European Commission, 2010). For the eight EU countries, the ratio of CO2 emissions of new diesel to new gasoline emissions went from 97% to 99% and the on-road difference also shrunk. If all 15 EU countries (representing 25% more cars sold) are counted using the EU Data set, the ratio of emissions for diesel to gasoline new vehicles went from 94.6% to 98.2% over the same period of time. The overall decline in test new vehicle emissions intensity from 1995 through 2009 was 18.1% for new gasoline cars and 16.6% for diesels. Shown in Table 2 the ‘‘on road’’ or fleet-wide values for those countries for diesel cars as well as the average distances diesel cars are driven, as presented by national authorities. The surprising result is that while on-road fuel intensity of diesel (l/100 km) was 20% lower than that of the gasoline cars on the road in 1995, this difference in 2007/8 shrunk to 16%. Thus the overall differences in CO2 emissions/km, or even those of energy use/km, are surprisingly small. Indeed, in a few countries (Italy for example), sales weighted emissions of new diesels exceeded those of new gasoline cars, according to both EU and national data. There are some important trends underlying these findings. The diesel advantage of lower emissions/km over gasoline, as calculated over the sales of all new vehicles has been shrunk as vans and SUVs have migrated to diesel from gasoline. This is illustrated by the small new vehicle differences in France, Germany and Italy, above. Diesel mass increased faster than that of gasoline cars, indicating again a migration of the largest cars (or buyers of the largest cars) to the diesel market. Diesel power increased even more rapidly, reaching 158% of that of gasoline in 2007 before falling back slightly in 2008 and 2009 (European Commission, 2010). The power/mass ratio, related to acceleration, increased for diesel (over gasoline) by 30% from 1995 to 2007 before falling slightly in 2008 and again in 2009 (European Commission, 2010). Preliminary work using a Laspeyres test of the entire EU sample of cars and their characteristics sold in each country from 1995 to 2008 shows that well more than 95% of the overall decline in new EU vehicle fuel intensity is explained by the decline in both new

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Table 1 Parameters of New Diesels in Eight EU Countries and the EU Average. Sources: European Commission (2010) Appendix and Schipper and Fulton (2009). New diesels

New diesel, 1000s Share of sales (%) New diesel, l/100 km L/100 km rel. to gas (%) CO2/km rel. to gas (%) New gasoline, l/100 km

France

Germany

Spain

Italy

Netherlands

Belgium

UK

Sweden

EU-8n

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

892 47 6.60 88 99 7.50

1571 77 5.30 88 98 6.00

448 14 6.50 86 96 7.60

1331 44 6.59 100 102 6.62

275 33 6.21 81 91 7.69

729 70 5.45 83 93 6.57

178 10 6.92 91 103 7.57

1094 54 5.56 92 104 6.03

62 12 6.64 83 93 8.03

123 25 5.93 90 101 6.66

166 48 6.49 81 91 8.01

423 79 5.51 86 96 6.43

394 20 6.93 85 95 8.16

906 43 5.90 88 99 6.71

5 3 7.50 81 90 9.30

87 35 6.30 86 94 7.30

2419 23 6.61 86 97 7.76

6264 55 5.77 91 99 6.50

Note: In this table CO2 derived from IPCC values for direct combustion of each respective fuel. L. Schipper / Transport Policy 18 (2011) 358–372

Table 2 Parameters of Diesel and Gasoline Car Performance ‘‘On Road’’ in Eight EU Countries. Sources: Given in Schipper and Fulton (2009) and Millard-Ball and Schipper, 2010. On road diesel stock

Diesels stock, ’000 Share of stock (%) km/car/year, 000 km/year, rel. to gas (%) Diesel stock l/100 km l/100 km rel. to gas (%) CO2/km rel. to gas (%) Gasoline l/100 km

France

Germany

Spain

Italy

Netherlands

Belgium

UK

Sweden

EU-8n

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

1995

2008

6622 26 20.6 178 6.67 79 88 8.49

16335 53 15.9 170 6.40 84 95 7.60

5545 14 18.0 144 7.47 82 92 9.14

10290 25 21.1 177 6.85 87 97 7.89

1559 14 15.7 130 6.90 83 93 8.32

8176 49 16.4 179 6.69 83 94 8.02

3100 11 21.5 204 6.68 84 95 7.93

11900 37 14.3 162 5.55 84 94 6.63

614 11 25.3 212 6.90 83 93 8.33

1286 17 24.9 226 6.74 83 93 8.15

1393 33 22.7 184 7.48 84 94 8.92

2903 57 20.2 220 6.47 79 88 8.21

1722 8 26.7 180 7.45 81 91 9.20

6966 26 21.1 151 7.43 82 92 9.11

146 3 22 160 7.05 81 91 8.71

884 17 25 190 6.80 81 91% 8.43

20702 15 20.5 172 7.03 81 91 8.65

58740 35 17.3 175 6.56 84 94 7.83

Note: In this table CO2 derived from IPCC values for direct combustion of each respective fuel.

L. Schipper / Transport Policy 18 (2011) 358–372

gasoline and diesel intensities, while the shift to diesel explains only 5% (Schipper et al., 2011). Thus the matched pair analysis is correct yet misleading: buyers do not buy matched pairs, they buy larger and more powerful cars. Is this a rebound effect enabled by the technical advantages of diesel? What else explains the boom in diesel sales? Part of the explanation could be the shrinking price differences between diesel and gasoline cars, even before taxation is considered. This could permit potential diesel buyers to afford larger diesel cars (compared to what they would have purchased as gasoline cars), thus eating into the potential savings of buying a matched pair. In the UK, a scheme refunding the vehicle excise duty could have stimulated buying of larger than-otherwise diesel cars (Bonilla, 2009; Mazzi and Dowlatabadi, 2006). A third part could be that the diesel advantage (in terms of fuel economy) relative to its extra costs makes better economic sense over larger than smaller vehicles because the percentage savings in fuel is larger. More investigation is called for.5 Overall we must conclude there is only a small extra reduction in CO2 emissions per km due to a higher share of diesel cars, compared with the reductions from fuel economy improvements of either new gasoline or new diesel cars. An econometric study that posed the counterfactual of no diesel cars might reveal what would have happened to the gasoline stock if diesels had not presented an alternative. An additional factor makes the on-road, stock-wide comparisons (Table 2) even more enigmatic. Since their popularity has risen dramatically in recent years, diesel cars on the road are much newer than gasoline cars. Since the new cars of either cohort have become less fuel intensive over time, the younger age of the onroad diesel fleet should boost their advantage over the gasolinefueled fleet. Yet this does not appear to be the case using the fleet averages; in fact the reverse occurred in all but two countries. While these changes are small and subject to statistical uncertainties, it is surprising that in ten years of overall change the diesel advantage does not show through more in the stock as a whole. A different observation is also shown in Table 2. Diesel cars in Europe are driven 40–100% more than gasoline cars. A large part of this effect is the fact that diesel cars are on average newer. Newer cars are always driven more than older ones, as any country’s car use surveys show. This could account for part of the increase over time in the diesel/gasoline distance gap, too. Being larger than gasoline cars, diesels may be used more as first family cars or for touring (Cerri and Hivert, 2003). Another factor is the use of diesel cars for business other than taxis, which are driven almost twice as much as private cars according to Dutch data (CBS, 2010). The small number of taxis and other professional vehicles that are diesels, with yearly driving in excess of 60,000 km/year is another effect. These cars were chosen for durability and to some extent for fuel economy. But the high shares of new vehicles sold as diesels, 47% in the countries considered here and 55% in the EU-15 in 2008, means that most new buyers are private users. This is odd—more private users yet a widening diesel/gasoline car usage gap. There is also a self-selection process—since diesels given equivalent performance cost more than gasoline cars, drivers who pick them must figure how many more miles they drive before a diesel becomes less costly overall to own and drive. But ‘‘new dieselists’’ use their diesel cars more than their former gasoline cars, confirmed by direct surveys of French drivers who switched to diesel carried out in the mid 1990s (Hivert, 1994; Cerri

5 To some extend the rapid expansion of the diesel fleet with small net savings has implications for hybrid vehicles or those running on biofuels where the choice is stimulated by subsidies or other programs (Kaageson, 2009; Ryan et al., 2009) rather than predominantly by prices. What if the subsidies enable buyers to acquire larger than otherwise vehicles and take back some of the potential fuel savings because they, too, do not buy from matched pairs?

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and Hivert, 2003). The large increases or differences in average driving distance are hard to account for by any of these effects alone or in combination. Instead, the low price of diesel (as much as 30% lower in some European countries, i.e., greater than the differences in fuel economy) must contribute as well to greater driving. As Schipper et al. (2002) noted, even a rebound effect of 0.2 can boost driving of lower fuel-cost diesel enough to offset any advantage of fuel economy in overall CO2 emissions. However, Small and van Dender’s conclusion (2007) that the rebound effect in the US is shrinking makes it unclear how important this direct rebound is in Europe. In other words, the broad findings of (Schipper et al., 2002) remain applicable with 13 more years’ of additional data and addition of o more countries—increased dieselization per se has only contributed to a small decline in energy use/km or CO2 emissions/km. If only a small part of the higher yearly use of diesels is attributed to the combined effects of the lower cost per km of using diesel fuel – mostly the lower price and to some extent the lower specific use – then it is still hard to say that dieselization leads to significant energy saving or lower CO2 emissions. Whatever the cause of greater diesel use, the net savings in fuel and CO2 emissions are small. Given concerns over the emissions of particulate matter and NOx from diesels (Mazzi and Dowlatabadi, 2006; Mayeres and Proost, 2001), as well as the growing concern over the greenhouse-gas impacts of black carbon, the small particles of unburnt carbon emitted by diesels (Jacobson, 2010; Schipper et al., 2011) it remains questionable whether the popularity of diesel cars is as beneficial as hoped for on environmental grounds, although the spread of fine-particle filters will probably alleviate this problem. And now with diesel prices are converging on those of gasoline in other countries, manufacturers and buyers may start to squeeze diesel technology to save fuel and CO2.

7. Driving forces The foregoing suggests that while improvements in on-road automobile fuel economy are critical for reducing oil demand and GHG emissions, serious oil saving or reduction in GHG emissions – say, bringing automobiles back to their 1990 levels of emissions or fuel use – cannot occur without both reductions in vehicle use and an end to the upward spiral of weight and power as well as improved fuel economy. The data on new vehicle properties and the diesel comparison show that between auto producers and buyers/users, choices are made that give results far from one simple engineering model of fuel savings predict. Both technology and producer/buyer/user behavior must change. What could drive this change? Fuel prices are clearly an important instrument affecting fuel use, as a recent review by Basso and Oum (2007) showed. Schipper and Marie-Lilliu (1999) showed an inverse cross sectional relationship between fuel prices (weighted by actual use of automobile fuels) and average per capita distances cars were driven. The inverse relationship between fuel prices and fuel economy must be linked at least in part to vehicle size/power, and technology choices. Similarly there is a clear inverse relationship between fuel prices and on-road fuel economy as borne by our econometric calculations (Johansson and Schipper, 1997). Similarly, a recent study of EU experience (Ryan et al., 2009) found that the various incentives programs for fuel-efficient cars in EU were far less effective than fuel prices in affecting fuel use. Johansson and Schipper (1997) simulated effects of new vehicle taxes and found that a tax on fuel led to four times more fuel saving than the same tax applied to the car (over the life of the car). Furthermore, Morrow et al. (2010) found that in simulating future fuel use and CO2 emissions the various incentives for ‘green cars’ were far less

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effective than fuel taxes in controlling fuel use. One can certainly debate the level of price and income elasticities are for a given country, but it is hard to rule out the importance of fuel prices or taxes and formulate policies without taxes. In that light, Johansson and Schipper (1997) found a substantial long-term price elasticity for fuel economy ( 0.5 to 0.7, i.e., a 10% rise in fuel prices leads to a 5–7% decline in fleet fuel intensity over time). These same authors found a small elasticity of vehicle use ( 0.2 to –0.3) and an even smaller elasticity of vehicle ownership ( 0.050) in this cross sectional time series study. Over the short term, Hughes et al. (2008) and Small and van Dender (2007) find a small short term elasticity of use for the US, 0.1 or less, which also means the ‘‘rebound effect’’ is small. But a different kind of rebound is implied by the trends in Figs. 4 and 5, namely that during the

period of rising incomes and flat or falling fuel prices, technology was used not to save fuel but to improve performance A key question is whether the level of fuel prices in 2008, double those of 2002 for the US and about 30–40% higher for Europe, have stimulated a long term trend towards purchase of smaller, less powerful cars, and redesign new of cars (downsizing) for smaller engines and less weight (Sprei and Karlsson, 2007; Sprei, 2010). Work in progress (Schipper et al., 2010) will test how the additional 15 years of data since Johansson and Schipper (1997) affect overall results. Fig. 8 shows real prices over time, converted from real local 2000 currency to $US 2000 at purchasing power parity. Diesel and gasoline weighted by consumption of each fuel by the cars in this study. Fig. 9 conflates prices (Fig. 8) with fuel economy (Fig. 1) to

2

Canada Australia France Germany Italy Japan Netherlands Spain Sweden Uk US

1.8 1.6

$ us 2000 (ppp)/ liter

1.4 1.2 1 0.8 0.6 0.4 0.2 0 1970

1975

1980

1985

1990

1995

2000

2005

2010

2005

2010

Fig. 8. Real prices for gasoline, taken from the International Energy Agency. Source: (IEA 2010). Deflated to real 2000 local currency and converted to US Dollars at purchasing power parity.

$20

Australia France Germany Italy Japan Netherlands Spain Sweden UK US

$18

$ us 2000 (ppp)/ 100 km

$16 $14 $12 $10 $8 $6 $4 $2 $0 1970

1975

Fig. 9. Real prices for automotive diesel fuel (including taxes). Source: (IEA 2010).

1980

1985

1990

1995

2000

L. Schipper / Transport Policy 18 (2011) 358–372

369

15000 13500 12000

Veh-km/capita

10500

US Cars and HH Light Trucks Japan Australia France Germany Italy UK Spain

9000 7500 6000 4500 3000 1500 10.0

12.5

15.0

17.5

20.0

22.5

25.0

27.5

30.0

32.5

35.0

37.5

40.0

GDP/capita, Thousand Real 2000$ at PPP, 1970 -2008 Fig. 10. Vkt/capita for cars and household SUV or light trucks vs GDP per capita in 2000 US Dollars, converted at purchasing power parity.

give the real cost of driving 100 km. What is notable about Fig. 8 is in a few cases, real prices in 2008 were higher than in their peak of 1981–2. But in Fig. 9 it is seen that only in Sweden was the real fuel cost of 100 kilometers even slightly higher than its previous high, a result of deliberate tax policy that boosted prices and led to a decline in fuel intensity from the highest level in Europe. This may be the challenge for authorities – maintaining the pressure of fuel prices on manufacturers’ planning decisions on what cars to make, and consumers’ decisions on what cars to buy and how to use them. Even with a small rebound effect of 0.1, the incentive to buy even greater fuel economy and drive less will get weaker if real fuel prices stagnate or recede. Given the long-run price elasticities for fleet fuel economy from Basso and Oum (2007) or Johansson and Schipper (1997), we surmise that were the price of fuel to rise back to its 2008 level for the next fleet turnover – approximately 15 years – car use would fall slightly and fuel economy would increase significantly, certainly beyond the 33% reduction in fuel/km on road that the new US standards imply. Since EU and Japan have much higher fuel taxes that buffer global oil price changes, the effect there would be smaller there than in the US. On the other hand, if fuel economy continued to improve even beyond the targets shown in Fig. 3, fuel costs could become almost irrelevant to future gains in fuel economy, consistent with the low elasticities found by Hymel et al. (2010) or other authors. This also means the rebound effect on driving will also be small, but there will also be little incentive to drive less because of higher fuel prices.

8. A plateau in vehicle use—the other part of the equation It was noted that in the ‘‘ASIF’’ approach (Schipper et al., 2000), fuel use or emissions depends on the product of car use (in kilometers/year) and fuel economy or emissions per kilometer. Will car use grow continually with higher incomes? Fig. 10 shows a novel portrayal of vkt/capita over time. The horizontal axis is per capita GDP over time, converted to real 2000 US dollars from real 2000 local currency at purchasing power parity. The vertical axis shows vkt/capita over time for cars. Data for each country range from the early 1970s to 2007 and 2008. Each year’s vkt and GDP points are plotted. When GDP/capita falls, a knot in the curve appears as the x-axis values fall temporarily. The representation suggests growth in vkt/capita has slowed or stopped in most

countries, mostly dramatically in the US, when compared with GDP/capita. This portrayal shows that increments of per capita GDP do not bring the same increments of vkt growth, i.e., the GDP elasticity of car use is less than 1. Note, too, that the graph shows how much higher vkt were in the US than in Europe or Japan for comparable levels of GDP/capita, with Australia lying between Europe and the US.6 This means that GDP/capita does not explain more than part of the Europe/US/Japan differences in vehicle use. Indeed, the vkt data in Fig. 10, together with on-road fuel economy of Fig. 1 suggests that for 2008, most of the US/Europe or US/Japan differences in per capita fuel use (and consequent CO2 emissions) arise from differences in car use per capita, with only about 1/3 explained by the differences in fuel use/km. Because Figs. 4–7 imply that a considerable amount of the differences in fuel economy arise because of differences in vehicle weight and power, this means that technology per se is only a small component of the overall difference in per capita automobile fuel consumption between Japan, Europe, and the US. This does not mean technology will not be important for saving fuel, rather that technology is only one component, with vehicle weight and power and vehicle use the others. Policies that focus only on technologies may indeed encourage improvements in efficiency as Figs. 4 and 5 showed, but these will not translate into higher fuel economy by themselves. The US–Japan differences are particularly surprising. Cars in densely populated Japan have high fuel intensities (Fig. 1) but very low yearly utilization, leading to low per capita fuel use compared with the US. Analysts comparing the US and Japan should note that it is car use, not fuel economy, that dominates the differences. The high use of bus and rail in Japan – 40% of domestic passenger-km there vs. less than 5% in the US (Millard-Ball and Schipper, 2010; EDMC, 2010) – accounts for only a part of the lower car use in Japan. The rest of the differences arise from the fact that most Japanese live in very crowded settings, slowing average travel speeds and reducing total travel. Note, too, that per capita VMT in Europe and Japan are not converging on the US values. This could be a result of both demographic shifts (aging) as well as higher fuel prices and the success of efforts to recapture a share of car travel for either

6 Canada lies close to Australia in this portrayal (Millard-Ball and Schipper, 2010) but reliable data for vehicle-km do not cover nearly as long a period of time.

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collective transit or feet and pedals. This is also consistent with findings by Dargay et al. (2007) that levels of vehicle saturation as incomes rise vary among countries and depend on geography. Is there a rebound effect from greater fuel economy apparent in Fig. 10? Fig. 9 shows that fuel costs/km rose since the late 1990s, because prices rose more than fuel economy improved. One can always argue that the levels of vkt in Fig. 10 are higher than they would have been had fuel economy not improved, but there is no apparent upturn in car use except possibly in Sweden. Finally, note that Fig. 10 conflates car ownership per capita and car km/car/year. Car ownership levels in Western Europe are converging on 500–600 vehicles/1000 people vs. over 700 in the US. These figures included household vans and SUVs in Europe and Japan, and the 80% of light trucks/SUVs in the US reported as household vehicles. In European countries with fewer cars per capita, such as Finland or Denmark, vkt/car is higher than in other EU countries and vkt/capita is comparable (Schipper and MarieLilliu, 1999). Thus vkt/capita and not car ownership, per se, is a good indicator of auto-mobility and more directly related to fuel use or emissions than car ownership alone.

9. Changing the trends? Johansson and Schipper’s (1997) and Basso and Oum’s (2007) findings suggest economic forces – fuel prices – are an important determinant of fuel use for cars. In the US, at least, recent work suggests the reaction to higher prices would be small in the short term (Small and van Dender, 2007; Hughes et al., 2008; Hymel et al., 2010). Yet the plateau of vkt/capita or even vkt relative to income in so many countries suggests a larger reaction, particularly as fuel prices have risen slowly but stayed high longer than previously. Comparing both new vehicle fuel economy and changes in the stock among the US, EU, and Japan since 2003 show that improvements in the all three regions. But changes in EU and Japan started earlier, suggesting that the Voluntary agreements (now mandatory) in both regions affected new vehicle fuel economy. In short, both fuel price increases and fuel economy standards can contribute to fuel economy improvements, and higher prices will offset the rebound effects of lower driving costs. Voluntary or mandatory programs remain contentious in the US. Even if the CAFE standards themselves and the assignment of ‘‘cause’’ of the large increase in fuel economy in the US is contentious (Clerides and Zachariadis, 2008; Greene, 1990, 1998), it is difficult not to attribute a significant part of the big changes in fuel economy in the US from the mid 1970s until the early 1990s to CAFE. At the same time, the doubling of the real price of gasoline between 2002 and 2008, in the absence of any significant tightening of MPG on car standards was accompanied by a 7% decline in new-car fuel intensity, about what was achieved through standards on new SUV. The share of gasoline in household budgets in the US, or alternatively the real cost of fuel for 1 km was still below its peak of 1981 in 2008 except for a few months in late spring and the summer, One could argue that until 2003, fuel prices in the US (o$2.00/gallon) were lower than levels consistent with fuel economy levels that were mandated by CAFE and consumers would have purchased anyway. Only after 2004 did the rise in prices push consumers to buy fuel economy higher (year on year, through 2009) than the standards required. Clearly the cross sectional evidence (Johansson and Schipper, 1997) suggests that fuel prices do explain a considerable amount of the US/Europe difference, i.e., lead to purchase of smaller, less powerful cars in Europe than in the US as well as somewhat more fuel saving technology in a car of a given size (Fulton, 2000). The issue remains: what will change car buying preferences away from greater weight and power? In 2005–2007 in the US, the

share of SUVs in the total number of light-duty vehicles sold fell slightly, but average weight, engine size, and horsepower, and acceleration of the combined fleet increased through 2009, as did measures of true efficiency such as fuel intensity per tonne-km of new car or peak horsepower. But the historical stalemate of technology and car power yielded to greater fuel economy since 2002. In the EU, by contrast, efficiency factors improved significantly more than car power or weight through 2008 (EU, 2010), leading to a real improvement in both new vehicle and fleet, onroad fuel intensity. The share of diesels in new car purchases fell in 2008 and 2009, probably in part because the economic slowdown hurt the purchasers of the largest cars (i.e., diesels) more than small cars, as evidenced by the decline in new diesel weight and power. In fact new car engine displacement fell starting in 2004, while new car weight started to fall in 2008 and new car power grew at less than 1%/year in 2007 and 2008, far less than during the decade earlier. In Japan, mini-cars take an increasing share of new purchases. The slowing of the world economy could explain part of the drop in large car sales, but it appears that buyers in all regions are finally turning to smaller, more fuel economic cars. Still, Sprei (2010) shows how these trends in Sweden absorbed as much as 2/3 of the new technology appearing in new cars between 2002 and 2007, so even in recent years most of the impact of technology went to performance, not fuel saving. Will continued increases in fuel economy reduce the costs of driving even more? While we noted research finding short-term fuel price elasticities of driving to be small, there is discussion in the transport communities of the US Bipartisan Policy Center (2009) and European Commission (1996) that some of the costs of car us should be reflected in charges per kilometer, rather than only in fuel prices. The US State of Oregon is experimenting with shifting fuel taxes to kilometer taxes (Whitty, 2007). Increasing fuel efficiency and declining revenues from fuel taxes may provoke authorities to find ways to make this tax shift. Such shifts, bolstered by congestion pricing and other measures (such as pay as you drive insurance) might actually raise the cost of driving significantly because the externalities and insurance costs per kilometer are larger for these variables than for oil security or CO2 (Parry et al., 2007). If this is the case then another powerful force – the higher marginal cost of car use – may come into play to restrain fuel use and CO2 emissions as a co-benefit.

10. Conclusions On-road fuel economy started improving in Japan and Europe by 2000, but hardly at all in the US from the early 1990s until 2003. New-vehicle test fuel economy has improved in all regions in recent years. Improvements in Europe through 2008 fell short of the target expressed in test CO2 emissions but landed about 5% above that figure in 2009. The shift to diesel cars was expected to ‘‘spark’’ significant fuel economy improvements in Europe to meet this target. But for a variety of reasons, new diesel cars show only slightly lower energy- or CO2 intensities than new gasoline cars and the figures for on road fleets show the same relationship. Technology has reduced the fuel required for a given car horsepower and weight markedly, but in the US until 2003 (and to some extent Europe) this has been offset by greater new car power and weight. Further improvements in fuel economy depend both on technology to reduce fuel use per unit of weight or power, and a slowing, halting, or even reversal (i.e., downsizing or downweighting) of new vehicle power and/or weight beyond weight reductions in a given car class, i.e., downsizing. Sales data from the period after 2006 suggest technology may now save fuel faster than weight and power can absorb it.

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Vehicle utilization, in vehicle kilometers per capita, is constant or even falling in most of the countries studied. While congestion, an ageing population and saturation of car ownership certainly contributes to this slowdown or reversal, higher fuel prices – more than double in the US between 2002 and 2008 – certainly have made their impacts felt as well. Whether the fall in fuel prices after 2008 will reverse these trends is difficult to know yet because of the global recession. When on-road fuel economy improvements over time are considered, however, the real fuel costs of using cars in 2008 were well below their historic highs of the early 1980s. EU, Japan and the US have tightened their standards for new vehicles. Getting such changes through the planning cycles of manufacturers and then into the stocks would take 20 years, given the delays and turnover times at each stage. While the literature leaves little doubt that these levels could be reached, such an achievement would be made increasingly harder by continued increases in car weight, power and features. Downsizing, i.e., consumers buying smaller, less powerful cars and manufacturers offering smaller engines in existing cars, could provide more rapid relief from higher fuel prices (Sprei and Karlsson, 2007). Finding a mechanism for this transformation to occur faster than the present rates may indeed be a key goal of all stakeholders in the near future. The new US standards, for example, call for fuel intensity or emissions already achieved by EU in 2008, yet with normal stock turnover it will be well past 2030 when these levels are achieved for the entire US stock. Given even slow population growth and some growth in vkt/capita in the US, total emissions from cars will hardly be below its present level (EIA, 2009). The same could be true for EU, particularly as motorization rises in less-motorized countries. This implies that reducing CO2 emissions from automobiles in the longer term probably means both much greater fuel economy than any region has in sight, unless a truly low carbon fuel appears. Moreover, containing or reversing growth in car use is an equally important ingredient in reducing fuel consumption and CO2 emissions in an absolute sense.

Acknowledgment The original version was written at the University of California Transportation Center, where the author was a visiting Scholar. This version of the paper was written with the support of EMBARQ, the WRI Center for Sustainable Transport, and its global strategic partners, the Shell Foundation and the Caterpillar Foundation. The author also acknowledges support of the Precourt Energy Efficiency Center, Stanford University. Maria Mendiluce of the University of Madrid and Jennifer Carol Place of Stanford University provided the data and calculations for Spain from official data sources (Place et al., submitted for publication), Steffi Proost and Inge Mayeres provided those for Belgium from official sources. Adam Millard-Ball of Stanford analyzed the Swedish and UK data, John Apelbaum provided Australian data from his published work (Apelbaum, 2009). The author also acknowledges assistance from Fanta Kamakate (The ICCT, San Francisco); Stephen Perkins (ECMT, Paris), L. Hivert (Inrets, France), N. Doi, (the Energy Data and Modeling Center, Tokyo), Karst de Geurs (Netherlands Environment Assessment Agency),Uwe Kuehner and Dominka Kalinowska (DIW, Berlin) Andrea Ketoff (Assominera, Roma), Shinji Nitta, J. Hoshi, Takashi Naono and Shigenori Hiraoka (Ministry of Land, Infrastructure and Transport, Tokyo), Theo Zachariadis (University of Cyprus), and Hadi Dowlatabati (University of British Colombia). John Apelbaum, Apelbaum Associates, Melbourne Australia, and Adam Millard-Ball and Kenneth Gillingham, both of Stanford University, provided a valuable critique of the text. Anonymous Transport Policy referees provided valuable insights as well in an earlier version of this paper.

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Carey McAndrews of University of California at Berkeley, Jessica Shipley, now of the Pew Climate Trust, provided final critical readings. Alisar Aoun and Andrew Kosinski of UC Berkeley made the final graphics. Remaining errors are those of the author.

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