Regulating fuel economy of heavy-duty vehicles (HDVs)

Winston Harrington Alan Krupnick For USAEE Meeting Washington, DC, October 11, 2011

Outline

    Background on HDVs The regulations Some economic issues Conclusions

Caveat: TO ABRIDGE IS TO LIE

   Final rule: 958 pages RIA: 391 pages This presentation: 15 slides

Background on heavy-duty vehicles

Energy use (almost all oil) in transport (2010)     Light duty vehicles: 58% Heavy-duty vehicles: 17% Air: 9% Other: 16%  Eliminating diesel CO2 emissions reduces U.S. CO2 by .17*.30 = 5% CO2 vs. miles (LDVs and HDVs): LDVs: 77% of CO2, 90% of miles HDVs: 23% of CO2, 10% of miles

HDV energy losses (Class 8 Combination trailers)

Engine losses Urban 60% Intercity 59% Potential Gains* 28% Aerodynamic Tires Braking/drive train Auxiliary 4-10% 8-12% 20-26% 7-8% 15-22% 13-16% 2-4% 1-4% 12% 11% 7%

Total Gain is 47% * NRC report (2009)

Complex industry-complex products

  Strong secondary market with modifications easy to do  hard to regulate  Purchase engine, vehicle and trailer/body separately  tough for regulation and could be inefficient Strong announcement and new-source bias effects around NOx, PM regs

Regulation

Authority

 Energy Information and Security Act (EISA) gives NHTSA a mandate to regulate fuel use in HDVs 

Massachusetts v. EPA (2008)

gave EPA the authority/responsibility to regulate CO2 as a criteria pollutant  Agencies jointly proposed regulations in Nov. 2010, promulgated in August 2011

Vehicle classifications

 Traditional classification (FHWA): 8 vehicle classes, based on weight   1-2a: Light duty vehicles 2b-8: Heavy-duty vehicles  Regulatory categorization (NHTSA/EPA):  Class 2b-3 HD pickups and vans (20% of energy use)   Class 7-8 Combination vehicles (Semis) (65%) Class 2b-8 “Vocational” vehicles (15%)  Basis: duty cycle, energy use, weight, similarities in manufacture/assembly

Regulatory description

 Class 2b-3 HD pickups and vans  Regulated like LDVs (whole-vehicle, payload based attribute regulation)  Class 7-8 combination vehicles   Separate standards for engines and cabs Subcategorization : 2 engine, 9 cab classifications  Vocational vehicles  3 engine-chassis combinations, based on weight

Development of standards

    Set baseline for engine and vehicles (e.g., class 8: HD 15-liter engine producing 455 hp); can be based on mfg fleet average Apply performance-enhancing technologies in order of cost-effectiveness Set percent reduction equating estimated average cost/ton CO2 across categories (equity?) Allow trading of emissions credits with banking within vehicle subcategories

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Regulatory effectiveness in 2018

(% reduction in fuel use or CO2 emissions) HD Pickups and vans   With gasoline engines: 12% With diesel engines: 17% Combination vehicles  Engines: 6%  Vehicles: 10-24%; higher for sleeper cabs (more aerodynamic opportunities)   Vocational vehicles Engines: 5-9% Vehicles: 6-9%

Estimated cost of regulations for combination and vocational vehicles (2008 $)   Cost per ton CO2:  Combination vehicles: $30  Vocational vehicles: $30  Hardware Cost per vehicle (2020):   Combination vehicles: $5661 Vocational vehicles: $343 Net cost per ton incl energy savings:   Combination vehicles: -$220 Vocational vehicles: -$230

Table 8. Estimated net benefits of HDV regulations

Category Average benefits, 2014-2018 model years, millions of 2008 dollars Technology costs Public good benefits Energy security Rebound externalities CO 2 emission reductions (3% discount) Net before private benefits Private benefits Refueling Fuel savings Net including private benefits Notes Accidents, conventional pollutants, congestion $1540 340 -180 820 -560 180 5680 $5300

What’s good and not

Good  Redo of categories  Credit trading Not so good  No alternate fuel credits  Technique for setting level of standards. Are marginal costs being equated across categories?

 Standards appear too weak, but perhaps understandably so

Broader Issue

 The usual problems with new source standards  Rebound effect (5-15%) (plus road damage and accidents)     New source bias Missed opportunities for existing vehicles Class shifting Lack of vehicle innovation incentives  Raise tax on diesel fuel

Takeaways

   This is only a first step. Expect further and more expensive regulation Could fix some issues We’d be better off with carbon/diesel taxes or, much less so, feebates