On the baseline evolution of automobile fuel economy in Europe

ARTICLE IN PRESS

Energy Policy 34 (2006) 1773–1785 www.elsevier.com/locate/enpol

On the baseline evolution of automobile fuel economy in Europe Theodoros Zachariadis Economics Research Centre, University of Cyprus, P.O. Box 20537, 1678 Nicosia, Cyprus Available online 19 February 2005

Abstract ‘Business as usual’ scenarios in long-term energy forecasts are crucial for scenario-based policy analyses. This article focuses on fuel economy of passenger cars and light trucks, a long-disputed issue with serious implications for worldwide energy use and CO2 emissions. The current status in Europe is explained and future developments are analysed with the aid of historical data of the last three decades from the United States and Europe. As a result of this analysis, fuel economy values are proposed for use as assumptions in baseline energy/transport scenarios in the 15 ‘old’ European Union Member States. Proposed values are given for new gasoline and diesel cars and for the years 2010, 2020 and 2030. The increasing discrepancy between vehicle fuel consumption measured under test conditions and that in the real world is also considered. One main conclusion is that the European Commission’s voluntary agreement with the automobile industry should not be assumed to fully achieve its target under baseline conditions, nor should it be regarded as a major stimulus for autonomous vehicle efficiency improvements after 2010. A second conclusion is that three very recent studies enjoying authority across the EU tend to be overly optimistic as regards the technical progress for conventional and alternative vehicle propulsion technologies under ‘business as usual’ conditions. r 2005 Elsevier Ltd. All rights reserved. Keywords: Road transport; Efficiency; CO2 emissions

1. Introduction Energy consumption seems to be the most challenging transportation-related problem that policy makers and the automotive and petroleum industry are faced with. As more than 75% of transportation energy demand goes to road vehicles in the United States and Europe (EIA (US Department of Energy and Energy Information Administration), 2004; Eurostat, 2004), fuel consumption of cars and trucks plays the most important role in this issue. Thanks to very significant technological breakthroughs in the last two decades, motor vehicle emissions of air pollutants such as carbon monoxide, sulphur dioxide, lead, nitrogen oxides and hydrocarbons have been abated to a very large extent in OECD countries, even despite the remarkable growth in total vehicle kilometres travelled. Technologies have Tel.: +357 22 892429; fax: +357 22 892426.

E-mail address: [email protected]. 0301-4215/$ - see front matter r 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2005.01.002

also been developed for the control of particulates emitted from diesel vehicles, which will gradually penetrate the markets and seem to be capable of curbing these noxious emissions too (Walsh, 2003). Reducing fuel consumption and the resulting carbon dioxide (CO2) emissions, however, is a problem of a different nature: it requires interventions in the total demand for transportation, improvements in the fuel economy of new vehicles entering the market, and eventually a shift to alternative propulsion systems that use non-petroleum energy sources such as natural gas or hydrogen. The analysis of the long-term potential of different policies to affect transportation energy demand is normally carried out with the aid of engineeringeconomic models. These rely on sets of technical and economic data for each policy option and produce forecasts according to assumptions embedded in various ‘what-if’ scenarios. As a rule, a baseline scenario (alternatively called ‘base case’, ‘reference case’, ‘business as usual’ or ‘conventional wisdom’ scenario) acts as

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the reference against which other scenarios are analysed. This baseline reflects current trends in technical progress, public behaviour, energy markets and regulatory policies, assuming that these trends will basically continue in the future. It may also include changes that are in the pipeline, such as policies under discussion which are likely to be adopted, or alternative technologies that have already shown to be promising. In general, however, significant changes in the key forecast parameters are not included in the baseline and are usually addressed in specific scenarios. Creating a baseline that is internally coherent and consistent with historical trends is an essential task for further policy analyses, despite the inevitable uncertainty associated with ‘extrapolating’ current trends for the next 20 or 30 years. An ‘optimistic’ baseline may overestimate the potential of an existing technology or policy measure and hence can undermine the necessity of additional measures towards achieving a certain target. Conversely, a ‘pessimistic’ baseline stemming e.g. from an underestimate of technology dynamics, may mislead policy makers to the conclusion that providing additional economic support to a technology can yield scant results and is therefore not cost-effective. This article attempts to provide a set of appropriate assumptions for the baseline evolution of automobile fuel economy in Europe. It also reviews briefly three recent European energy/transport forecast studies that have dealt with this issue in different ways. In some cases, these forecasts diverge substantially and can lead to different conclusions as regards policy priorities. The article looks at the historical development of fuel economy standards as well as the evolution of basic vehicle characteristics during the same period. Based on these observations, and with the aid of data and experience gathered in the United States, the recent forecasts are evaluated and conclusions are drawn that can be used as a meaningful input for transportation policy studies.

2. The American experience In the United States, Corporate Average Fuel Economy (CAFE) standards have been implemented since the late 1970s, requiring that the sales-weighted average fuel economy of newly registered cars do not exceed a limit value, which was set at 18 miles per gallon (mpg)1 in 1978 and reached 27.5 mpg in 1990. A similar standard was adopted for light duty trucks (including Sport Utility Vehicles, pickup trucks and minivans), 1 The equivalent terms fuel economy (expressed in mpg) and fuel consumption (expressed in litres per 100 km) are linked with the following relationship: fuel consumption (l/100 km) ¼ 235.2/fuel economy (mpg).

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Fuel Economy (mpg)

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25

20

15

10 1975

1985

1995

2005

Model Year Cars CAFE Car standard

Light Trucks CAFE Truck standard

Fig. 1. Evolution of CAFE standards and sales-weighted average fuel economy of newly registered cars and light trucks in the United States, 1975–2004. Actual fuel economy figures shown here include the US EPA’s correction factors for on-road driving (0.90 for city driving and 0.78 for highway driving).

which was set at 17.5 mpg in 1982, reached 20.7 mpg in 1996 and only changed recently to 21.0 mpg in 2005, 21.6 mpg in 2006 and 21.7 mpg for 2007 and beyond.2 Fig. 1 shows the evolution of these standards. As a result, the average on-road fuel economy of new cars and light trucks increased from about 14 mpg in the mid-1970s to 21 mpg in the mid-1990s and has slightly deteriorated since then. The improvement was less remarkable than initially expected due to the increase in the share of light trucks in the fleet, which has reached 48% of new light duty vehicle sales in 2003, compared to 20% in 1975 (Hellmann and Heavenrich, 2004). Vehicle mass and power output are major vehicle attributes affecting fuel economy. Fig. 2 illustrates this by displaying the evolution of average vehicle mass, power output and fleet-average fuel economy since 1980. During the same period, technical progress in automotive propulsion technologies and vehicle design has been very substantial. Improved engines with up to 4 valves per cylinder, better combustion properties and less friction losses, enhanced automatic and manual transmission systems, tyres with lower rolling resistance and lighter automotive bodies with lower aerodynamic resistance are now commonplace in automobiles, and improvements continue. Taking this into account and observing Fig. 2, one can infer that since the mid-1990s, automobiles continuously become heavier, larger and 2 Post-2004 standards were issued by the National Highway Traffic Safety Administration (NHTSA) on 31 March 2003 (see http:// www.nhtsa.dot.gov/cars/rules/cafe/overview.htm).

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180 160 140 120 100 80 60 1975

1985

1995 Model Year

2005

Fuel Economy (13.1 mpg) Engine Power (102 kW) Vehicle Mass (1842 kg) Fig. 2. Relative evolution (1975 ¼ 100) of sales-weighted average vehicle mass, power output and composite fuel economy of new light duty vehicles in the United States, 1975–2004. Figures in brackets in the legend indicate actual values in year 1975.

more powerful; this should be attributed to rising income, increasing safety standards and technical progress towards energy-efficient engines. This clearly means that, in the absence of stricter fuel efficiency standards, technical progress has been almost exclusively used to increase vehicle performance and accommodate more amenities instead of further improving fuel economy. This well-documented conclusion does not imply that CAFE has not achieved its major goal. It has been argued, on the contrary, that it proved to be a costeffective programme and has saved hundreds of billions of gallons of fuel in the US since 1980 (Greene, 1998). It is obvious, however, that as technical progress has not halted, fuel economy improvements would have been greater if standards had not stagnated after 1995— particularly those of light trucks. In fact, there is evidence that up to 50% improved fuel economy levels can be achieved up to 2010–2015 and in a cost-effective manner if CAFE standards are raised or a similar programme is adopted (De Cicco et al., 2001; NRC (US National Research Council), 2002; Plotkin, 2002). The expectation that technical progress per se and market competition will reduce automobile fuel consumption does not seem to be justified: without more stringent requirements and at today’s fuel prices, consumers will opt at bigger and more powerful vehicles. As Segerson and Miceli (1998) have shown through economic modelling, the industry will not attempt to produce more energy efficient automobiles—even through vo-

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luntary agreements—unless there is a great likelihood for stricter regulatory measures. On the basis of similar considerations, several longterm studies evaluating the potential for improvements in automobile fuel economy and penetration of alternative fuel vehicles (AFV) in the US assume that the ‘business as usual’ development will be characterised by: (a) a very small increase in new vehicle fuel economy, mainly due to the recently adopted slightly stricter CAFE standards for light duty trucks; and (b) a negligible penetration of AFV such as hybrid and fuel cell vehicles up to 2020 (EIA (US Department of Energy and Energy Information Administration), 2004; Greene and Plotkin, 2001; IEA (International Energy Agency), 2002; Landwehr and Marie-Lilliu, 2002; MacLean and Lave, 2003). Technology assessment studies, evaluating the lifecycle costs and energy consumption of alternative technologies, partly differ in their reference case ‘forecasts’. As MacLean and Lave (2003) point out, differences are attributable to different assumptions or to the different degree of coverage of various technologies. As regards the future fuel economy of ‘conventional’ gasoline automobiles, an MIT study (Weiss et al., 2000) provides one of the most optimistic baseline outlooks: in line with their impressive evolution over the last three decades, internal combustion engines are assumed to continue to progress at the same pace. As a result, the reference case fuel consumption of a light duty vehicle with the same attributes (in terms of safety, comfort and power output) as a 1996 vehicle, is projected to be 35% lower in 2020 at a merely 5% higher cost in real terms. Because of technical progress, this baseline 2020 car, compared to its 1996 counterpart, would be 15% lighter (weighing 1245 vs. 1440 kg today) and would have a 30% smaller engine capacity (1.8 vs. 2.5 l today) and 15% lower power output (92.7 kW maximum power vs. 109.7 kW today). The authors admit that this ‘rather arbitrary’ assumption is subject to large uncertainty because of unpredictable consumer behaviour. As the data of Fig. 2 indicate, this assumption has already proved to be too optimistic already three years later. Nevertheless, this issue was out of the scope of the MIT study, which only needed an ‘evolved baseline’ to compare with the potential of other technologies. Therefore, to avoid misinterpretations, readers should be made aware of the clear distinction (outlined e.g. by Greene and DeCicco, 2000) between forecast studies and technology/cost analyses.

3. The European experience There have been no EU-wide fuel economy regulations until the end of the 1990s, but only some national incentive schemes. Improvements in vehicle energy

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Fuel Consumption (litres per 100 km)

efficiency, if any, have occurred as side-effects of regulations for air pollutant emissions and as a result of autonomous technical progress and high fuel prices in the 1980s. After 1995, however, serious considerations were made for an agreement between the European Commission (EC) and the automobile industry. The discussions materialised into an agreement between the EC and the European Automobile Manufacturers Association (ACEA) in 1998 (EC (European Commission), 2000), which was followed by similar agreements with the Japanese and Korean manufacturers one year later. The industry committed itself to achieving the target that by 2008/2009 the average (sales-weighted) new passenger car will emit 140 g of CO2/km, compared to the 1995 average of 187 g/km, while the EC wishes that this figure will be brought down to 120 g/km by 2012. As a result of this voluntary agreement, fuel economy as measured in the official driving cycle has improved considerably since 1995. According to progress reports published by the EC and ACEA each year, CO2 emissions of new cars per kilometre dropped by 12% between 1995 and 2002, i.e. a 1.7% annual improvement. Although both gasoline and diesel cars have become more fuel efficient, the increasing share of diesel car sales have further enhanced the average picture; this is illustrated in Fig. 3. To achieve the 2008 target,

20

16

12

8

4 1975

1985

1995

2005

180 170 160 150 140 130 120 110 100 90 80 1975

1985

1995

2005

Model Year Vehicle Mass (980 kg)

Engine Power (55 kW)

Engine Size (1.5 l)

Fig. 4. Evolution of sales-weighted average vehicle mass, power output and engine size of new cars in the European Union, 1975–2002. See caption of Fig. 3 for explanation of data sources.

however, there is still a long way to go: a 2.5% annual reduction of average fuel consumption is necessary for model years 2003–2008. In view of the progress made so far, this target seems to be ‘extremely ambitious, both technically and economically’, as the latest report states (EC-ACEA, 2003). It is interesting to observe how this fuel economy improvement has been achieved up to now. One main driver has been the adoption of improved technologies that have reduced vehicle mass (related to power output) and enhanced thermodynamic engine efficiency as well as rolling and aerodynamic resistance. The second driver was dieselisation: compared to 23% of new cars sold in 1995, the share of diesel car sales climbed to 44% in 2003 (CCFA, 2004). During the same period, vehicles have become heavier, faster and more powerful, as Fig. 4 indicates. Increases in engine size and vehicle mass should partly be attributed to dieselisation (as diesel vehicles have a lower power/mass ratio), but even so it is evident that greater reductions in fuel consumption would have been achieved if consumers had not opted for bigger, faster and theoretically safer cars.

Model Year EU Gasoline Cars EU Diesel Cars

EU Composite US Composite

Fig. 3. Evolution of fuel consumption of new cars in the European Union and the United States, 1975–2002. For years 1995–2002, EU data from EC-ACEA (2003) were used. For earlier years, EU data from IEA (International Energy Agency) (2001) and Martec (2002) were evaluated and adjusted in order to be consistent with post-1995 figures. Note that, prior to 1995, the EU consisted of different numbers of member states, so that the 1975–1995 figures are approximations of the post-1995 EU average.

4. The gap between fuel economy on test procedures and in the real world Fuel consumption and air pollutant emissions, as measured in the driving cycles of the regulated test procedures, have historically been lower than those measured either directly on the road or during driving cycles that were derived from real-world driving recordings. This discrepancy has been well documented

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in the United States and Europe and is mainly due to more aggressive real-world driving and the use of extra amenities—mainly air conditioning units—that are not in operation during regulated tests (Hellmann and Heavenrich, 2004; Samaras et al., 2001; Schipper and Tax, 1994). It is therefore essential that forecast studies account for this fact and convert, with the aid of appropriate data, future fuel economy regulations to realistic on-road fuel economy figures. According to IEA estimates for nine EU countries (Landwehr and Marie-Lilliu, 2002), the difference between test and on-road fuel economy has increased in the last two decades: on-road fuel consumption was about 0.6 l/100 km (or 7%) higher than test fuel consumption in 1980, and the gap has grown to 0.9 l/ 100 km or 13% in 1997. Schipper and Tax (1994) report discrepancies of over 20% in France, Germany and the United Kingdom in the late 1980s. Van den Brink and van Wee (2001) cite Dutch and German studies that estimated this gap to be 10% and 17%, respectively, in the late 1990s. Bearing in mind the particularities of the European car market, it is very likely that the gap will increase further in the future for the following reasons:
















Thanks to improved engine control systems, vehicles can be tuned with great accuracy to the specific requirements of the test cycle. Hence it is likely that off-cycle engine operation will be sub-optimal in order to accommodate the increasingly challenging vehicle performance needs, although this may not affect test fuel economy at all. As cars become faster and more powerful, the test cycle will become increasingly ‘easier’ for them. Cars will be driven faster and at higher speeds, so their actual driving behaviour will deviate further from standardised driving simulated in the test cycle. The well-known discrepancy between the test cycle and actual driving conditions may be increasing as congestion seems to get worse in most European urban areas. This has also been reported in the US (Hellmann and Heavenrich, 2004). Air conditioning units are currently penetrating the European car market at high rates. While in the 1990s the gap between on-road and test fuel consumption was higher in the US and Japan than in Europe because of earlier air conditioning penetration, it is now Europe’s turn. Besides air conditioning units, the increasing use of additional electric devices in future automobiles is expected to reinforce this effect. Gasoline direct injection technology is expected to contribute significantly to the industry’s attainment of the EC-ACEA VA targets. However, as Van den Brink and van Wee (2001) explain, these engines have shown a much bigger gap between real-world and test fuel efficiency than their indirect injection counterparts.

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In line with the above remarks, IEA (International Energy Agency) (2001) and Landwehr and Marie-Lilliu (2002) assume in their baseline scenarios that the fuel economy gap will increase moderately in Europe at least until 2020. The authors admit that these may still be conservative estimates, while real-world vehicle behaviour may turn out to be even worse. On the other hand, the most recent reference case projections made by the IEA and the World Business Council for Sustainable Development for their ‘Mobility 2030’ report (WBCSD (World Business Council for Sustainable Development), 2004; Fulton and Eads, 2004) assume that the gap will remain constant over time and equal to 18% in Europe. At any rate, it will be possible to assess these effects with greater confidence when ample experimental data become available, covering especially cars of very recent model years. A large study that is under way, the European research project ARTEMIS, involves emission and fuel consumption measurements across many driving cycles and many European countries, so its results will shed more light into this issue.3

5. Proposed guidelines for baseline fuel economy assumptions In the light of the definition of baseline scenarios, historical developments and observable future trends as outlined in the previous sections, the following paragraphs attempt to provide suggestions for the future evolution of European car fuel economy under ‘business as usual’ conditions. These should be viewed as general order-of-magnitude guidelines. It must be strongly emphasised that these estimates are not predictions of the most probable future developments, but only educated guesses of fuel economy evolution that are consistent with what a baseline scenario is meant to be, i.e. a continuation of current regulatory and behavioural trends with moderate technology dynamics. Table 1 summarises all assumptions explained below. Note that the analysis focuses on the 15 ‘old’ EU Member States, i.e. not those of Central and Eastern Europe that joined the EU in May 2004, for which different assumptions should apply in view of the particularities of their car markets. Like all baseline scenarios currently available, it is implicitly assumed here that, despite recent price increases, oil prices will remain at US$(2000) 30–35 in the longer term. Besides assumptions on new car fuel consumption, Table 1 provides estimates on the evolution of fleetaverage fuel consumption, which changes gradually as the vehicle stock turns over, old cars are scrapped and new more fuel efficient cars enter the market. In fact, these figures cannot originate from pure fuel economy 3

For more details see http://www.trl.co.uk/artemis/index.htm

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Table 1 Proposed ‘business as usual’ evolution of automobile fuel economy in the 15 ‘old’ EU Member States, to be used as a guideline for energy/ environmental modelling of the transport sector Change (%) (l/100 km) New cars (test cycle) Gasoline Diesel Composite Diesel sales (%) New cars (on-road) Gasoline Diesel Composite Test/on-road fuel consumption gap (%) Total car fleet (test cycle) Gasoline Diesel Composite Total car fleet (on-road) Gasoline Diesel Composite Test/on-road fuel consumption gap (%)

2000

2010

2020

2030

2010/2000

2020/2010

2030/2020

7.4 5.9 6.9 33

6.2 5.3 5.7 52

5.6 4.9 5.2 55

5.3 4.7 5.0 55

16.2 10.2 17.0

9.7 7.5 9.0

5.0 5.0 5.0

8.5 6.8 7.8 15

7.4 6.3 6.9 19

6.8 6.0 6.4 22

6.5 5.7 6.1 22

13.3 7.0 12.2

7.4 5.2 6.1

5.0 5.0 5.0

8.9 7.7 8.7

7.7 6.6 7.3

6.8 5.7 6.3

6.0 5.1 5.6

13.9 14.7 16.6

11.7 13.6 13.2

11.8 9.8 11.7

10.2 8.8 9.9 14

9.1 7.8 8.6 18

8.2 6.9 7.6 21

7.3 6.3 6.8 22

10.8 11.7 13.6

9.4 11.4 10.9

11.0 9.1 10.9

Data of year 2000 come from combination of the following data sources: EC-ACEA (2003), CCFA (2004), IEA (International Energy Agency) (2001), Landwehr and Marie-Lilliu (2002), and Van den Brink and van Wee (2001).

assumptions, but are the composite outcome from the evolution of several parameters such as vehicle replacement and fuel economy improvement rates as well as growth of total car population. As the fleet-average figures shown in Table 1 have not been derived through explicit modelling of all these factors, they should rather be viewed as indicative on the basis of standard assumptions made in these cases: average car lifetime of 8–10 years, an S-shaped car lifetime function (implying roughly that scrapping probability grows with car age and is very low for cars less than 5 years old) and moderate increases in car ownership. The analysis will be divided in three parts, one for each decade up to 2030. 2000– 2010: The effects from the EC-Industry Voluntary Agreements (VAs) are fully under development during this decade. In line with trends of the first VA period 1995–2003, it is reasonable to assume that average new vehicle mass and power output will continue to increase at a similar rate. The fraction of passenger light trucks like SUV and minivans in Europe is still quite low (less than 10% of sales in the end of the 1990s) and, in the absence of a steep increase in fuel prices or any other economic disincentive, it will continue to rise—albeit not to the levels observed in the US. Moreover, safety and comfort related amenities like airbags and air conditioning systems will be increasingly used in new models, thus increasing vehicle

mass and power requirements. It should be expected that diesel cars will continue to penetrate the market in the short term, but up to a certain limit that may be determined from consumer preferences, oil refinery capabilities and diesel import constraints (see e.g. Jensen, 2003). Hence a baseline scenario may reasonably assume that the share of diesel cars in new registrations, which was 32.8% in 2000 and reached 44% in 2003 (CCFA, 2004) will still rise but will not exceed 50–55% in any country, as also assumed in other studies (COWI, 2002; Pischinger, 2002). Moreover, for the reasons mentioned in the previous section, the gap between fuel economy in the legislated test cycle and under real-world conditions is expected to expand further. It should be born in mind that this gap may in reality become even larger than assumed here, in order to combine the increasing consumer preferences for improved vehicle performance with the test requirements stemming from the VA. Hence it seems reasonable to assume that, on the basis of data that have become publicly available up to December 2004, the fuel economy improvement rate up to 2010 will be similar to that of the initial VA period (1995–2002), reaching 1.8% per year. In accordance with this assumption, 2008/2009 targets of the VAs will be missed by a small amount and, by 2010, new gasoline and diesel cars will consume on average 6.2 and 5.3 l/ 100 km, respectively. With a 52% diesel sales share, this

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will correspond to sales-average CO2 emissions of about 143 g/km,4 which is a 2.3% miss of the 140 g/km target that should be attained 1–2 years earlier. Taking into account the test/actual fuel economy gap, however, onroad fuel consumption and CO2 emissions of new cars may improve by about 12% during that period. The above reductions in new car consumption would cause fleet-average fuel consumption in 2010, as measured with the official test procedure, to fall by 16.6% compared to 2000. As the test/actual fuel economy gap is widening, fleet-average on-road fuel consumption should be assumed to fall by less than 14% during this decade. 2010– 2020: It can be assumed that technical progress will continue albeit at a slower pace than in the previous decade. It has to be reminded that the 2012 CO2 target of 120 g/km is not part of the automobile industry’s commitment but rather an objective set out by the EC.5 As Jensen (2003) points out, this target is achievable only under optimistic assumptions (and not merely by gasoline and diesel direct injection engines, which are clearly a priority area for the industry—see Pischinger, 2002) and a diesel sales share of 84% in 2012, which is far higher than today’s 45%. The automotive industry, which has recently published its opinion on this issue in response to the VA’s requirement to review the 2012 target in 2003, asserts that this ‘over-ambitious’ target cannot be achieved without very high societal costs and unless dramatic changes in technology availability and consumer behaviour are observed (ACEA, 2003; JAMA, 2003). It would therefore not be consistent with the definition of a baseline scenario to assume that this target is attained soon after 2012; still, the existence of a target will continue to bring about improvements. Besides one can reasonably presume that, as many safety and comfort requirements will largely be satisfied by European cars in the near future, vehicle mass and engine power output will not continue to rise at the same rate after 2010–2015. Consequently, is seems appropriate to assume for the year 2020 an average test fuel consumption of new gasoline and diesel cars of 5.6 and 4.9 l/100 km, respectively. At a 55% diesel sales share,

4 To convert from l/100 km to g CO2/km, fuel densities of 750 and 835 g/l were used for gasoline and diesel respectively, and a carbon mass balance was utilised, assuming that all carbon contained in the fuel is ultimately transformed into CO2. 5 In fact, the VA foresees that ‘‘some members of ACEA will introduce in the EU market, not later than 2000, models emitting 120 g CO2/km or less’’. This commitment has been achieved, and in 2000 ACEA members brought to market more than 20 models emitting 120 g CO2/km or less. The share of newly registered cars from ACEA members even rose to 5% in 2002, or over 580 000 cars (EC-ACEA, 2003). Despite this achievement, however, the target for a salesweighted average emission of 120 g CO2/km is much more ambitious, even in the longer term.

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this would correspond to an average CO2 emission level of 131 g/km, which would be a 9% improvement from 2010 levels, compared to a 15% reduction between 2000 and 2010. In the absence of a firm post-2008 commitment, this 9% should be regarded as a significant decline and certainly not as a pessimistic view to the future. Fleet-average fuel economy will thus be affected by the market penetration of high fuel economy cars induced by both the ‘binding’ part of the VAs and the post-2008 technical progress and can fall by 13% in 2020 compared to 2010. In view of the discrepancy between test and real-world fuel consumption, however, fleet-average on-road fuel consumption should be assumed to fall by approximately 11%. 2020– 2030: As oil prices are assumed to remain below US$(2000) 30 per barrel, alternative technologies are not considered and further regulatory measures are not accounted for, new car fuel economy should be assumed to improve only marginally. In the light of all issues mentioned in the previous sections, there is no reason to believe that autonomous technical progress will cause car fuel consumption to fall much below the already low levels achieved by 2020 (see also Landwehr and MarieLilliu, 2002). Therefore, compared to 2020, a 5% reduction in sales-weighted new car fuel consumption is assumed for 2030, leading to an average CO2 emission of 124 g/km. As a result, fleet-average fuel consumption will decrease slightly, mainly in relation with vehicle turnover rates; so will real-world fuel consumption, as the test/actual fuel economy gap should not be assumed to grow further. For comparative purposes, Table 2 displays fleetaverage fuel economy in the US according to the official US Department of Energy baseline projections (EIA (US Department of Energy and Energy Information Administration), 2004). These show much lower improvements than those widely assumed for Europe: 8.4% lower fuel consumption for cars between 2002 and 2025 (no tightening of CAFE standards is assumed throughout this period). As for light duty trucks, where CAFE standards will be raised up to model year 2007, fleet-average fuel consumption in 2025 is 7.7% lower than in 2010. The above figures imply that, according to this forecast, absent further regulations or voluntary agreements, new light duty vehicle fuel consumption can only be expected to improve autonomously by a mere 0.3–0.5% per year. Table 3 summarises the reference case assumptions reported by Fulton and Eads (2004) that were used for the IEA-WBCSD ‘Mobility 2030’ study. Fuel economy improvements in OECD America are in line with those of the EIA, whereas improvements for OECD Europe are much slower than those usually assumed in European studies, and quite slower than those used in this paper. According to the authors, on the basis of past trends for IEA countries and in the absence of policies

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Table 2 New and fleet-average fuel economy projections for light duty vehicles (cars and light trucks) in the US according to US Department of Energy baseline projections Change (%)

New light duty vehicles (mpg) New cars New light trucks Composite New light duty vehicles (l/100 km) New cars New light trucks Composite Total light duty fleet (mpg) Total light duty fleet (1/100 km)

2002

2010

2020

2025

2010/2002

2025/2010

2025/2002

28.2 20.5 23.8

28.8 22.8 25.3

30.4 24.1 26.5

30.8 24.7 26.9

2.1 11.2 6.3

6.9 8.3 6.3

9.2 20.5 13.0

8.3 11.5 9.9 19.7 11.9

8.2 10.3 9.3 19.6 12.0

7.7 9.8 8.9 20.5 11.5

7.6 9.5 8.7 20.9 11.3

2.1 10.1 5.9 0.5 0.5

6.5 7.7 5.9 6.6 6.2

8.4 17.0 11.5 6.1 5.7

Source: EIA (US Department of Energy and Energy Information Administration), 2004.

Table 3 Reference case projections of fuel economy for light duty vehicles (cars and light trucks) in OECD America and OECD Europe according to the WBCSD’s Sustainable Mobility Project Annual change (%)

New light duty vehicles (mpg) OECD America OECD Europe New light duty vehicles (l/100 km) OECD America OECD Europe New diesel sales (%) OECD America OECD Europe New gasoline hybrid sales (%) OECD America OECD Europe Test/on-road fuel consumption gap (%)

2000

2010

2020

2030

2000–2010

2010–2030

2020–2030

24.6 35.6

25.1 40.1

26.1 41.8

27.2 43.5

0.2 1.2

0.4 0.4

0.4 0.4

9.6 6.6

9.4 5.9

9.0 5.6

8.7 5.4

0.2 1.2

0.4 0.5

0.3 0.4

2.0 40.0

2.4 50.0

2.9 50.0

3.5 50.0

0.1 0.0 18

0.5 0.4 18

0.9 0.8 18

1.1 1.0 18

Source: Fulton and Eads (2004).

to promote improvement, average fuel consumption (in l/100 km) decreases by about 0.4% per year. It has to be stressed, however, that past trends should not be regarded as an absolute guide for future developments: global energy and environmental concerns are increasingly important for public opinion and in the political agenda, and fuel economy standards or agreements are currently applied in Europe, Japan, Korea and even China. Hence a simple extrapolation of past fuel economy trends is probably not sufficient for future baseline scenarios because concerns about energy and global warming are now at the centre of discussions worldwide, and this cannot leave the automobile industry unaffected even in the absence of regulations. Therefore, one can reasonably assert that in a ‘business as usual’ future fuel consumption trends up to 2020 or 2030 will not revert to the rates observed in the past.

6. Review of European studies Three very recent EU-wide studies will be considered here. They were selected because they have several things in common: they were published in 2003–2004, so they could take into account recent data and policy discussions; they are all modelling studies funded by the EC and clearly intended for policy analysis (and not e.g. for technology assessment only); they have been conducted by leading experts in energy/transport issues; and they all include baseline scenarios that are defined in a similar way and in line with the definition given in Section 1 of this article. The studies are the following:




The most recent long-term energy outlook funded and published by the EC (European Commission) (2003). Such an outlook is prepared every two to four years

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and is a major reference work on which energy policy discussions in the EU are based. It extends its analysis up to 2030 and will be called ‘EC Outlook’ in the rest of this article. An EC-funded study (IPTS, 2003) carried out by European experts within a network called ‘European Science and Technology Observatory’ and supervised by the EC’s Institute for Prospective Technological Studies (IPTS), a research institute that is part of the EC’s Joint Research Centre. It provides a forecast up to 2020 and will be hereafter referred to as ‘IPTS Outlook’. The baseline forecast up to 2020 prepared in the framework of the Clean Air for Europe (CAFE) Programme (De Ceuster et al., 2004), which is a major EC initiative for analysing policy options in order to adopt an integrated long-term strategy on air pollution across Europe (‘CAFE Baseline’ in the rest of this article).6 The results presented here come from the study’s final baseline of December 2004. The reader should not confuse this study with the American CAFE programme described earlier in this article.

Table 4 summarises the major assumptions in each one of these studies, as well as the fuel consumption figures and AFV penetration rates projected as a result of the corresponding model runs. The similarity in economic growth and petroleum price assumptions among the studies is obvious. In the following paragraphs baseline assumptions and results of the three studies are described and evaluated in more detail. 6.1. EC Outlook According to this baseline forecast, average fuel consumption of the entire passenger car stock is projected to decline annually by 0.9%, 1.4% and 1.5% in the periods 2000–2010, 2010–2020 and 2020–2030, respectively. In light of the recommendations provided in Table 1, these improvement rates seem to be too high, particularly for the post-2010 period. Although the study does not mention it explicitly, De Ceuster et al. (2004) note that the EC Outlook assumes a constant diesel car share after 2002/2003. If so, and in view of the evolution of fleet-average fuel economy in the 1990s shown in Fig. 3, the efficiency improvement rate seems to be quite optimistic even for the period 2000–2010. Energy consumption in the EC Outlook is expressed per passenger kilometre travelled, which must be divided by car occupancy to yield consumption per vehicle kilometre. As occupancy rates of cars have gradually fallen from 1.8–2.0 to 1.5–1.7 passengers per vehicle in EU countries since 1970 (Eurostat, 2001), demographic 6 For more details on the European CAFE Programme, see http:// europa.eu.int/comm/environment/air/cafe/.

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projections incorporated in the EC Outlook show a further decrease in average household size up to 2025 and car ownership will continue to rise in the future, it is reasonable to expect that car occupancy will decline further. This will tend to increase fuel consumption per passenger kilometre, so that the projected efficiency improvements will be even more difficult to achieve; particularly after 2010, the EC Outlook’s forecast seems to be too optimistic. With the exception of biofuels to be blended with conventional gasoline and diesel in line with recent EU legislation, the study projects minimal penetration of alternative fuels as well as hybrid and fuel cell propulsion systems. This seems to be consistent with the study’s baseline scenario definition, which is fully in line with that mentioned in Section 1 of this article.

6.2. IPTS Outlook Fuel economy is assumed to improve at rates similar to those proposed in Table 1. In other words, this study estimates that the EC-ACEA VA will stimulate technical progress in gasoline and diesel fuel consumption such that, if no significant amounts of AFVs came into the market, the VA would be missed by a small amount. However, the main characteristic of this study is the penetration of AFVs: The IPTS Outlook assumes in the baseline scenario that hybrid and fuel cell technologies will mature in the medium term to such an extent that hybrids will account for 10% of new car sales in 2010 and 27% in 2020, and fuel cells will represent 11% of sales in 2020. As a result, total CO2 emissions of passenger cars are projected to peak in 2005 and then to fall remarkably, so that by 2010 they return to the 2000 levels and in 2020 they are 13% lower than in 2000. These developments occur despite a projected 33% increase in total car use (i.e. vehicle kilometres driven) between 2000 and 2020. The authors of the study recognise the many uncertainties associated with these forecasts and admit that their baseline may represent a ‘rather optimistic’ projection of technical progress. As mentioned earlier in this article, there is in fact no other European or American study known to the author that includes such a dramatic diffusion of alternative technologies in its baseline scenario. Since the IPTS Outlook has been constructed on the basis of a survey of current research activities and car manufacturer predictions, there may be an inherent bias in these estimates: as Tichy (2004) has shown, the best experts in a research field often provide the most optimistic predictions, which are eventually refuted by real-world developments. It should be stressed again that this comment does not imply that the baseline forecasts of the IPTS Outlook are necessarily less likely to happen, but that they do not

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Table 4 Major baseline assumptions of the forecast studies evaluated in this article EC Energy Outlook Economic growth (average annual % change of real GDP/capita) 2000–2010 2.2 2010–2020 2.2 2020–2030 2.2 International crude oil prices (US$’2000/barrel) 2000 2010 2020 2030 Automobile efficiency (average annual % change)

2000–2010 2010–2020 2020–2030

Share of alternative fuel car sales (%) 2000 2010 2020

CAFE Baseline

2.1 2.1

2.2 2.2

28.0 20.1 23.8 27.9

28.0 23.0 29.0

28.0 20.1 23.8

Fleet-average (tonnes of oil eq.per passenger-km)

New cars l/100 km gasoline cars; l/100 km diesel cars

Fleet-average l/100 km gasoline cars; l/100 km diesel cars

0.9 1.4 1.5

1.4;2.1 0.6;1.3

1.7;1.7 1.5;1.5

In new registrations

In total fleet

27.0 33.0 23.0

17.0 24.8 24.4

10% hybrids, 2% electric 27% hybrids, 5% electric, 11% fuel cells

4% hybrids 14% hybrids

Share of non-hybrid diesel cars (%) 2000 2010 2020 2030

IPTS Outlook

No apparent change

Minimal throughout the forecast period

2030

seem to be fully consistent with what a baseline is meant to be. 6.3. CAFE Baseline The baseline scenario of this study has been constructed in order to be broadly along the lines of the EC Outlook baseline. It assumes that the 2008/2009 targets of the EC-Industry VAs will be fully met, both by gasoline and diesel cars, on top of a further 2–3% reduction effected by the introduction of low-sulphur fuels. After 2009, no further fuel efficiency improvement is assumed. The share of diesel car sales is projected to remain at 40% (the 2002 figure) up to 2010, hence diesel cars will not exceed 26% of the total car population in any year. From 2003 onwards hybrid cars, most of which equipped with gasoline-powered internal combustion engines, are assumed to penetrate the European market remarkably, so that by 2020 14% of the total passenger car fleet is projected to have a hybrid powertrain. Already in 2003 hybrid car population in the 20 European countries modelled in the CAFE Baseline is ‘projected’ to have reached 855 000, and this number is forecast to rise to 2 600 000 vehicles in 2005.

As a result, fleet-wide fuel consumption is projected to drop by 1.7% annually between 2000 and 2010 and by 1.5% in the 2010–2020 period. As regards diesel sales and post-2009 efficiency improvements, the CAFE Baseline seems to be quite balanced. Still, the technological optimism associated with the penetration of hybrid cars is difficult to justify; the reader can compare these results e.g. with those of the IEA/WBCSD study summarised in Table 3, bearing also in mind that the TREMOVE model projections for years 2003 and 2004 are not confirmed by statistics.7 The evolution of average fuel consumption is more optimistic than that of the EC Outlook up to 2010 as the ECIndustry VA targets are assumed to be fully met. After 2010 improvements become somewhat less dramatic because the improved efficiency due to hybrid cars will be partly offset by the assumed stagnancy of post-2009 fuel economy of conventional powertrains. In summary, all three studies include assumptions that seem to overestimate ‘business as usual’ technical progress: the EC Outlook in conventional technologies, 7 Hybrid car sales did not exceed 10 000 in Europe for the whole of 2004—see e.g. http://www.hybridcars.com

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the IPTS Outlook in alternative technologies and the CAFE Baseline both in conventional (pre-2010) and hybrid (post-2010) technologies.

7. Conclusion Energy scenarios for the future are inevitably fraught with large uncertainties since they have to model the interactions between society, economy, technology and the environment. As Smil (2000) has demonstrated, long-term energy forecasts will certainly be wrong in both qualitative and quantitative terms, as they are unable to predict major discontinuities or disruptions in social and economic conditions. Hence, in view of the remarkable recent progress in computing capacity, instead of constructing only few distinct scenarios, the future trend will be to analyse hundreds or thousands of different scenarios in order to evaluate robust strategies (Linstone, 2004; Silberglitt et al., 2003). In any scenario family, however, ‘business as usual’ scenarios will always be the reference against which alternatives are compared. It is therefore essential that assumptions included in this baseline are internally consistent and correspond to what the baseline is designed to be, i.e. the world as it is today with moderate evolution in terms of economic growth, energy reserves and prices, technology dynamics and consumer behaviour. The analysis of historical trends in the US and Europe has shown that automobile fuel economy is difficult to improve. Firstly, significant progress in engine and vehicle technologies has been observed; when relevant regulations were not present, however, these advances were used to improve vehicle performance instead of fuel consumption. Secondly, cars have become heavier in response to requirements for more safety and amenities, and consumers tend to buy bigger and more powerful cars as their income grows and these vehicles become available. Thirdly, oil prices have stayed at ‘reasonable’ levels for the most part of the last two decades and high fuel taxes have somewhat increased fuel economy awareness in Europe, in contrast to the US. And finally, technologies like hybrid powertrains and fuel cells still face difficulties to become widely available and replace conventional cars to a significant extent. A baseline scenario for the future has to take these trends seriously into account. Therefore, this paper has attempted to provide guidelines for making appropriate assumptions towards a consistent ‘business as usual’ outlook of passenger vehicle fuel economy. Table 1 summarises these proposed assumptions, which are generally in line with those of the IEA and the US Department of Energy. The European Commission’s voluntary agreement with automobile manufacturers may significantly contribute to lowering fuel consump-

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tion levels in Europe, albeit not to the extent anticipated by some analysts. In the post-2010 period, in particular, improvements should be expected to slow down, in the absence of further regulatory measures and because fuel consumption will already have fallen considerably. One has to remain sceptical, however, about the possibility to achieve even the improvements described in Table 1 under real-world conditions. Experimental data from ongoing European research projects will allow for safer conclusions. By contrast, three very recent forecast studies carried out in Europe seem to include some optimistic assumptions as regards the future fuel economy of gasoline and diesel cars or the penetration of alternative fuelled vehicles under baseline conditions. Although such developments are not necessarily less probable in the future, the main argument presented in this article is that such optimism is not consistent with the definition of baseline scenarios used in these studies. It is true that public awareness of global warming and energy efficiency issues has grown recently, and regulatory policies in Europe, Japan, Korea and even China are currently oriented towards increasing automobile efficiency. The article does not claim that the 1970–1995 trend should be followed in today’s baseline scenarios (although this is assumed in the recent IEA/WBCSD ‘Mobility 2030’ study), but a continuation of the 1995–2003 improvements up to 2030 is not a plausible baseline either. Therefore, the ‘business as usual’ assumptions of these studies may need to be adjusted in order to enable more meaningful policy analyses. A final comment is necessary. As the major policy objectives are to curb greenhouse gas emissions and secure energy supply, the ultimate criterion for policy assessment should be the evolution of total transportation energy consumption and CO2 emissions. In the past, fuel economy improvements have led to less-thanexpected reductions in total fuel consumption because of the well-documented ‘rebound effect’ (see e.g. Greene et al., 1999; Greening et al., 2000), which has been estimated to range between 20% and 40% in Europe (IPCC (Intergovernmental Panel on Climate Change), 2001). Currently, this effect can be explained by three factors: as consumers are informed (mostly from official test cycle figures) that new cars are more fuel efficient and hence cheaper to operate, they tend to purchase bigger cars than they initially planned; they drive their cars more; and those choosing to replace their gasoline car with a new diesel one may opt for an even bigger car to be driven more, as diesel fuel is considerably cheaper almost everywhere in Europe. Note, however, that the advantage of a diesel car consuming 20% less fuel than its gasoline counterpart (expressed in l/100 km of the corresponding fuel) will be less than 15% in equivalent energy units (expressed e.g. in MJ or in g of oil equivalent) and less than 9% in terms of g CO2/km.

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As data show that road transport related fuel consumption and CO2 emissions in the 15 ‘old’ EU Member States kept increasing up to 2002 at rates similar to those of earlier years (Eurostat, 2004), policy makers need to consider interventions that both ensure real-world fuel economy gains and minimise ‘rebound’ effects in order to attain real improvements in energy consumption.

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