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Weight matters – on fuel efficiency and vehicle weight

Obama has promised to put climate change front and center in Washington politics. As one of the first direct measures, Obama has directed the EPA to reconsider permitting California to impose tougher fuel standards. What does this measure mean for fighting climate change?

Obviously, measures in the transportation sector are very relevant to avoid potentially catastrophic climate change. In the US, transportation, and specifically motor vehicle use, is the largest and fastest growing source of GHG emissions among all energy sectors. Transportation alone accounts for one-third of all US emissions [1].

Current federal fuel standards (CAFE) are around 25 mpg. The Californian standards would require a fleet-wide average standard of around 35 mpg by 2016. An increase of 40% in this short time sounds quite ambitious. So is it even feasible? A look across the Atlantic is useful: by 2002, Europe already had an average consumption of 37 mpg. Just comparing these numbers, it is obvious that no technological barrier hinders California from reaching its goal. But where does this difference come from? Popular wisdom suggests that the Big Three–GM, Ford and Chrysler–were unable to develop advanced technologies. But this is not really the heart of the issue. In fact, the Detroit manufacturers contributed significant technological advancements over the last 20 years. What then is going on here?

It helps to understand what exactly “fuel efficiency” means. It turns out that fuel efficiency in the US, measured in miles per gallon, did not improve in the last two decades. Yet in that same period, manufacturers pushed heavier, more powerful cars onto the market. In fact, the consumption of gasoline per vehicle weight improved dramatically. In terms of consumption per vehicle weight, the US fleet is as good as any other region in the world [2]. Instead, the bad overall mileage is related to the high number of heavy tank-like vehicles on the streets. By 2008, more than half of all vehicle purchased in the US were SUVs or light trucks (the trend is currently changing though). So in effect, additional weight consumed all the technological improvement.

That makes one curious about why car purchases went up for heavier cars. SUVs became more popular worldwide, but especially so in the US. Is it simply that Americans like big cars more than the rest of the planet? It is probably true that gas-guzzlers are chosen as status symbols. But the story is richer. Many car owners, in fact, cite safety concerns: they can’t ride a small car when others are riding big cars. It is an arms race. Where did it find its origin?

Let us go back to the fuel standards. As a leader, the US introduced fuel standards in the 1970s as a reaction to the oil crisis. The Big Three feared the incoming Japanese competition, which produced much more fuel-efficient and smaller cars. Doing what they do best, the Big Three lobbied Congress for loopholes for light trucks, exempting them from stringent regulation and taxes. At the same time, a 25% tax on imported pickup trucks was put into place. That didn’t seem like a big deal then as those big cars made up a small market share. However, the Detroit manufacturers invested heavily in this loophole rather creating a new market for big and, due to their size, fuel-inefficient vehicles, than competing with the Japanese. [3] Detroit manufacturers chose an intermediate successful but ultimately dead-end strategy.

From this perspective, it looks much more like supply first created the demand for big vehicles. Dysfunctional fuel standards are partially to blame, allowing for different categories.

Fig_weight.png
Comparison of fuel economy standards [4].

What lessons can the Obama administration learn from this when re-regulating fuel efficiency?

The Californian standard is promising but still adheres to the current double standard: a lower standard for SUVs and light trucks and a higher one for everybody else.. The updated federal CAFE standards from 2007 are also a step in the right direction, especially when the changes in the standards are front-loaded, i.e. the highest steps in fuel efficiency requirements must be taken first. The new CAFE standards are differentiated in size, i.e. larger cars have lower fuel efficiency requirements. This means that there is an incentive to reduce the vehicle weight for any given car size. However there is no incentives to reduce weight by going to smaller cars and promote them.

The Obama administration has indicated it wants to implement progressive but harmonized standards. (Harmonization makes sense, as it helps car manufacturers without harming greenhouse gas emissions). The harmonized standards could set weight independent standards. Another option is to supplement CAFE standards with market-based incentives for consumers to buy the overall more fuel-efficient cars, e.g. by a fee-bate scheme, where buyers of fuel-efficient cars get a rebate whereas buyers of fuel-inefficient cars pay a fee. This is a revenue neutral scheme.

There is much promise in fuel-efficiency standards. If Obama follows the proposed California regulation or a similar approach and implement them on federal level, overall US GHG emissions will be around 5-6% lower by 2016, assuming all else being constant. That is very successful achievement for a single measure!

References

[1] Energy Information Administration (EIA), Emissions of Greenhouse Gases in the United States 2004, Washington DC, 2005

[2] Lee Schipper, Automobile Fuel, Economy and CO2 Emissions in Industrialized Countries: Troubling Trends through 2005/6, EMBARQ, the World Resources Institute Center for Sustainable Transport, 2007

[3] Daniel Sperling, 2 billion cars, 2009.

[4] Feng An and Amanda Sauer, Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards around the World, Pew Center on Global Climate Change, 2004

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