The objective of this research is to examine policy options of likely interest to automakers and policy makers for linking the auto market to a carbon market. The research plan entails:
(1) Developing a methodology for examining the interaction of changes in auto fleet efficiency with a cap-and-trade program and the implications of metrics reflecting such a linkage; and
(2) Applying the methodology to analyze policy options for exploiting an auto-carbon market linkage to accelerate a transition to high-efficiency vehicles for cutting GHG emissions.
This project would be an early phase of a broader research agenda that explores effective and efficient policies for limiting transportation sector GHG emissions. Starting with the auto market, as proposed here, is valuable for reasons of broad public interest, timeliness and tractability. This project will create opportunities for future funding and new collaborations, increasing the school's impact by generating contributions and exposure on an issue of high national importance. It will position CSS and SNRE to pursue major funding related to transportation sustainability from federal agencies such as DOE and EPA, foundations and NSF.
This proposal will leverage recent research on vehicle energy issues, as done by MIT and the NSF MUSES project. It will point the way to extending such research to explore new policy options that the project will identify. The work is timely because policymakers in California and Federally are now looking ahead to next rounds of vehicle standards likely to be pursued after multisector climate policies are in place. To date, vehicle policies have been developed outside of a broad climate policy framework. Thus, they reflect neither the potential economic efficiency gains offered under cap-and-trade nor the levels of vehicle efficiency improvement likely to be needed for meeting climate protective targets. The work would proceed in three phases:
1. Literature Review and Assembling Modeling Tools
The literature review will cover several interdisciplinary areas including engineering analyses of vehicle efficiency potential, analyses of existing and proposed transportation-climate policies, and economic analyses of these issues. This first phase will also assess modeling tools (such as DOE's VISION and GREET models) and their related published results and then assemble the tools that will be most useful for this project.
2. Scenario Analysis and Mapping to Carbon Market Framework
The second step involves synthesizing results from the literature, supplemented by additional information as needed, to construct scenarios that characterize horizons of vehicle efficiency improvement along with the attendant costs and GHG emissions impacts. Lifecycle GHG results will be decomposed into impacts covered by a carbon cap and impacts not covered by a cap. This will enable emissions impacts to be mapped to a carbon market. The vehicle analysis will be a high-level adaptation of existing literature for the purpose of scenario definition rather than new engineering simulations, which are not needed for the questions to be addressed.
3. Analyze Auto-Carbon Market Interactions and Compare Costs
The final step will characterize the impacts of the fleet efficiency scenarios on the carbon market and develop a methodology for analyzing mechanisms that link vehicle efficiency gains to a carbon market. The methodology will be applied for defining and analyzing metrics useful for coupling the two markets in light of the decomposition of impacts developed in Step 2. Results will include comparisons of the costs of avoided GHG emissions allowances to the costs of vehicle efficiency improvement. The discussion will highlight the most promising mechanisms for using market forces to accelerate a transition to high-efficiency vehicles as a cost-effective approach for reducing transportation GHG emissions.