How Alternative Vehicle Sales Trigger Higher-Emitting Fleets AFV Alan Jenn Postdoctoral Research Fellow Engineering and Public Policy Carnegie Mellon University (now at UC-Davis) Inês Azevedo Associate Professor Engineering and Public Policy Carnegie Mellon University Jeremy J. Michalek Professor Engineering and Public Policy Mechanical Engineering Carnegie Mellon University

A brief history of CAFE 1975: response to oil crisis 1990: cars stagnant for two decades, then tightened during Obama administration 2012: following CA and 2007 ruling, joint NHTSA CAFE & EPA GHG standards 2012: attribute-based 2025: 54.5 mpg (on 2-cycle test)

A binding constraint No manufacturer except Tesla would have satisfied the 2016 standards with their 2009 fleet

Implications of a binding standard Congressional Budget Office (2012) “With CAFE standards in place … putting more electric (or other high-fuel-economy) vehicles on the road will produce little or no net reductions in total gasoline consumption and greenhouse gas emissions.” Goulder et al. (2012): “Leakage” But new standards also have incentives for AFV sales

AFV incentives in CAFE/GHG policy Weighting factors and multipliers incentivize sale of AFVs by relaxing the CAFE/GHG target when AFVs are sold

Illustration of effect Case of Chevy Volt with a single balancing vehicle model of equal sales volume

Net effect per AFV sold GHGs increase of 0 to 60 metric tons 0 to 6,700 gallons extra gasoline consumed Depending on vehicle model and year

Cumulative effect Using AEO AFV sales projections for cars: 30-70 million metric tons CO2 3-8 billion gallons of gasoline consumed Compared to no AFV incentives or no AFV sales On-road effect may be 30-40% higher

Policy options No change Eliminate CAFE AFV incentives Eliminate other AFV sales incentives Redesign policy Alternative policy

Policy options No change Eliminate CAFE AFV incentives Eliminate other AFV sales incentives Redesign policy Alternative policy Tolerate near-term increases in gasoline consumption and GHG emissions in pursuit of long term gains of a fleet transition Whether or not benefits outweigh costs depends on degree to which policy accelerates post-2025 fleet transition

Policy options No change Eliminate CAFE AFV incentives Eliminate other AFV sales incentives Redesign policy Alternative policy Eliminates increase in fleet emissions per AFV sold but not leakage effect More difficult for automakers -- negotiations in setting CAFE policy may have resulted in less stringent standards if incentives had been excluded

Policy options No change Eliminate CAFE AFV incentives Eliminate other AFV sales incentives Redesign policy Alternative policy Eliminating ZEV mandate, PEV subsidies, etc. would reduce fleet emissions through 2025 However, could stall efforts to transition fleet

Policy options No change Eliminate CAFE AFV incentives Eliminate other AFV sales incentives Redesign policy Alternative policy Fleet emissions increase proportionally to number of AFVs sold, and state ZEV policy mandates sale of more AFVs Improved coordination of federal and state policy design could potentially help reduce such interactions Nontrivial

Policy options No change Eliminate CAFE AFV incentives Eliminate other AFV sales incentives Redesign policy Alternative policy Pricing externalities among most efficient options Can avoid or mitigate leakage Target end goals rather than specific technologies Foundation on which to build other policies

Contact: Jeremy Michalek jmichalek@cmu. edu Jenn, A. , I. L Contact: Jeremy Michalek jmichalek@cmu.edu Jenn, A., I.L. Azevedo and J.J. Michalek (2016) "Alternative fuel vehicle adoption increases fleet gasoline consumption and greenhouse gas emissions under United States corporate average fuel economy policy and greenhouse gas emissions standards," Environmental Science & Technology, v50 n5 p.2165-2174.