Thursday, July 7, 2011

Global Warming, Fuel Economy, and Uncertainty

According to the data in Steven F. Hayward’s 2011 Almanac of Environmental Trends which is the latest adaption of the former Index of Leading Environmental Indicators, global temperatures were flat or slightly declining between 2002-2008 before ticking up slightly in 2009. When data from 2010, an El Nino year, becomes available it is expected to challenge 1998 (also an El Nino year) for the warmest year on record. Without the El Nino years in the data; the long term upward trend of temperatures is more visible in the data, but more than two decades of data is necessary to see, let along understand global trends.

Global CO2 concentrations in the atmosphere as measured from the Mauna Loa Observatory in Hawaii where the level of ambient greenhouse gases are measured show an increase of 1.78 parts per million in 2009. The United States CO2 emission growth has been flattening out after the steep growth in the 1990’s and fell slightly during the recession. The CO2 emissions intensity in the United States has declined 28.8% since 1991. Emissions intensity is the measure of the amount of CO2 emitted per dollar of economic output. The key factors in CO2 intensity is the method and efficiency of electricity generation and automobile and truck mileage and emissions.

The climate of the earth is constantly changing on a geological time scale, but the geological record hints that sudden shifts can happen. The controversy over both the science and policy relating to climate change is far from over. Policy mandates to have the United States adopt constraints on fossil fuel energy consumption have changed forms. We now speak of energy independence and fuel efficiency to achieve these goals. According to the US EPA, transportation represents 27% of greenhouse gas emissions. Passenger cars, light trucks and motorcycles represent 62% of the transportation greenhouse gas emissions.

The U.S. Environmental Protection Agency (EPA) and the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) are currently finalizing the new millage and emission standards for automobiles and light trucks for model year 2012 through 2016. The EPA GHG standards require these vehicles to meet an estimated combined average emissions level of 250 grams of carbon dioxide (CO2) per mile in model year 2016, equivalent to 35.5 miles per gallon (mpg) if the automotive industry were to meet this CO2 level all through fuel economy improvements.
However, the potential need to utilize coal fired electric plants to meet this requirement may negate the GHG benefits.

Now the administration is looking to continue this trend until 2025 requiring continued improvement of about a 5% per year in average fuel economy from 2016 when they are required to have at least a 35.5 mpg fleet average for vehicles sold in the U.S. Under the new proposals automakers that sell vehicles in the U.S. will have to boost car and light truck fuel economy to an average 56.2 miles per gallon by 2025 using regulation rather than a direct tax on gasoline to reduce the use of fuel.

Increasing fuel economy by the amount proposed could cost at least $2,100 per vehicle, according to a document prepared last year by the EPA and National Highway Traffic Safety Administration. Representatives of the auto industry claim that the additional costs will be closer to $6,000 per car. The differences are how that cost is estimated and the assumptions made and whether additional safety technology are included in the costs. It is assumed by all sides that this goal can be achieved which is quite frankly amazing. The questions is how much of the automobile fleet will depend on plug-in electric vehicles, the cost of charging equipment, how long we will own our cars in the future, what cost of gasoline will be in the future, how much will the average American drive, and what is the appropriate discount rate. All these factors are incorporated into the projections of the costs to achieve this millage goal. For a good discussion of the calculation see the Consumer Federation of America discussion.

I’m impressed that neither side thinks the task is impossible. That is fairly impressive, the question is how much will it cost and what impact will that cost have on our economy. There seems to be no appreciation by either the EPA or other regulators of the law of dimishing returns and the tendency of ever smaller improvements in gas mileage to cost more and more. Many of the materials needed for fleets of ultra-high mileage vehicles are not produced in enough volume. I think it is fair to say that cars will cost more and we will be poorer, but our gasoline used per mile will decrease and maybe our total gasoline use will decrease while our CO2 intensity is also reduced.

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