Assessment of the Economic Impact of Greening Vehicular Transport in Barbados Winston Moore (PhD) and Stacia Howard Antilles Economics November 2015

Motivation  Caribbean countries are highly dependent on fossil fuel imports. – foreign exchange reserves – inflation volatility – economic growth Fuel imports between (% of merchandise imports)

Motivation  Transportation is a key part of economic activity in the Barbados: – commute to work and school – private motorised vehicle transport Total Number of Registered Vehicles

Motivation  Dependence on vehicle transport implies that the island spends a large amount on fossil fuel imports: – $1 in every $5 of imports was spent on fuel – US$323 million Fuel Imports in Barbados ( )

Motivation  A large proportion of fossil fuel imports is utilised by transportation.  This study investigates how the island can green the transport industry as well as support the goals of increased energy efficiency and the greater utilisation of renewable energy in the island.

Energy Efficiency and Renewable Energy in Transport  Renewable energy – individual demand for fossil fuel vs. utility demand for fossil fuel – symbiotic relationship between renewable energy resources and the replacement of oil in the transport industry – 100% Renewable Denmark (2050) and vehicle-to- grid integration of electric vehicles

Energy Efficiency and Renewable Energy in Transport  Cost Factors – higher upfront cost – subsidies – fuel prices – operating costs

Energy Efficiency and Renewable Energy in Transport Electricity Grid  Overnight charging of electric vehicles (coordinated charging)  Distributed energy storage for renewable energy  100% electric vehicle fleet represents a storage capacity of 2742MW, 10 times the installed electricity generating capacity for the island Social and Environmental Benefits  1-1 ratio for CO 2 emissions  Lifecycle costs of battery  National branding

Energy Efficiency and Renewable Energy in Transport  Energy efficiency – fuel savings can also be achieved through changes in driving habits – integrated transport and land use planning – efficient city planning

Methodology Demand for Electric Vehicles Electric Vehicle Characteristics Price factors Non-Price Factors Traditional Transportation Determinants

Methodology Microeconomic assessment Macroeconomic model Policy scenarios

Stakeholder Interviews  Largely positive statements from most stakeholders  Benefits – cost savings – increased demand for business (rental car) – links with renewable energy (PV installations at home)  Limitations – upfront costs – size of delivery vehicles – high nominal duties

Consumer Survey Importance of Vehicle Characteristics

Consumer Survey Likelihood of Purchasing a Battery Electric and/or Hybrid Vehicle

Consumer Survey  Main concerns about electric vehicles and hybrids 1.purchase price 2.charging infrastructure 3.battery range 4.maintenance costs 5.parts

Microeconometric Analysis Vehicle AVehicle B Fuel TypeGasolineElectric Acceleration (0 to 60mph)9.4 seconds9.7 seconds Maintenance cost a year (US $)$400$350 Fuel costs per year (US $)$1300$450 Pollution level (grams per mile)2750 Purchase Price (US $)$17,000$29,000 Attributes of hypothetical cars used in survey (baseline)

Microeconometric Analysis Purchase price of gas vehicle( US $) Purchase price of electric vehicle( US $) Baseline17,00029,000 Incentive 117,00023,200 Incentive 217,00017,200 Incentive 317,00014,200 Purchase prices of hypothetical cars under various scenarios

Microeconometric Analysis Electric vehicleGas vehicle Baseline Incentive Incentive Incentive Change in electric car penetration rates under the various scenarios

Microeconometric Analysis Purchase price ( US $)Penetration Rates Gas VehicleElectric Vehicle Gas VehicleElectric Vehicle Baseline17,00029, Incentive 117,00023, Incentive 217,00017, Incentive 317,00014, Purchase prices and penetration rates of hypothetical cars under various scenarios

Microeconometric Analysis Demand for electric vehicles

Macroeconomic Model Results Potential impact of further Government incentives on penetration rates and tax revenues over the period (US $ Mil)

Macroeconomic Model Results Direct Benefits of Government Incentives over the period

Macroeconomic Model Results Impact of incentives on real GDP over the period

Policy Recommendations 1.Consider the further reduction in duties on electric vehicles and hybrids so that the landed price (inclusive of duties) of electric vehicles is on par with that of traditional fossil fuel vehicles 2.Consider the introduction of a public education campaign to enhance knowledge and interest about electric vehicles 3.Consider the introduction of a public education campaign to explain the link between climate change and vehicle emissions 4.Consider the introduction of a tax on the CO 2 emissions of passenger vehicles to replace the current system of road taxes 5.Work with the national utility to develop a policy for the integration of electric vehicles into the national grid

Conclusions  Electric vehicles seem to offer a number of advantages: renewable energy, ownership costs, and emissions.  Key factor impact on consumer purchase decision appears to be price, environmental awareness and general interest in electric vehicles.  Through the use of a revised approach to road taxes, it is possible to reduce the cost of electric vehicles without significantly impacting on Government tax revenues.

Thank you! Any questions?