Cambridge, Massachusetts – A new study from current and former researchers at Harvard Kennedy School’s Belfer Center for Science & International Affairs finds that reducing greenhouse gas emissions from transportation will be a much bigger challenge than conventional wisdom assumes – requiring substantially higher fuel prices combined with more stringent regulation.
The study finds that reducing carbon dioxide (CO2) emissions from the transportation sector 14 percent below 2005 levels by 2020 may require gas prices greater than $7/gallon by 2020. It also finds that, while relying on subsidies for electric or hybrid vehicles is politically seductive, it is extremely expensive and an ineffective way to significantly reduce greenhouse gas emissions in the near term.
The paper is written by current and former affiliates of the Energy Technology Innovation Policy research group at Harvard Kennedy School’s Belfer Center: W. Ross Morrow, Assistant Professor, Iowa State University; Kelly Sims Gallagher, Associate Professor of Energy & Environmental Policy at Tufts University and a Senior Associate at the Belfer Center; Gustavo Collantes, Senior Energy Policy Advisor to the State of Washington; and Henry Lee, Director of the Belfer Center’s Environment & Natural Resources Program.
This study explores several policy scenarios for reducing oil imports and greenhouse-gas emissions from transportation. It finds that aggressive climate change policy need not bring the economy to a halt. Even under high-fuels-tax, high-carbon price scenarios, losses in annual GDP, relative to business-as-usual, are less than 1 percent, and the economy is still projected to grow at 2–3.7 percent per year assuming a portion of the revenues collected are recycled to taxpayers.
The authors find that present efforts to keep fuel prices low while simultaneously trying to significantly reduce oil imports and greenhouse-gas emissions are inconsistent. Taxing transportation fuels stimulates the greatest reductions in oil consumption and CO2 emissions and is a necessary complement to strong vehicle efficiency standards. Fuel efficiency standards affect only new vehicles and are subject to the rebound effect, in which some of the efficiency gain is offset by increased use due to lower operating costs. Higher fuel costs are the only policy option modeled that curtails the growth in vehicle-miles traveled.
“The most effective policy for reducing carbon dioxide emissions is to spur the development and sale of more efficient vehicles with strict efficiency standards while increasing the cost of driving with strong fuel taxes,” Lee said. “Without addressing both, CO2 emissions from the U.S. transportation sector will continue to grow.”
The paper also finds that an economy-wide carbon price of $30–60/t CO2 alone would do little to curb emissions from cars, trucks, and the rest of the transportation sector. Instead, most of the emission reductions would occur in the electric utilities – specifically, those that rely heavily on coal. (Note that prices in the range of $30–$60/t CO2 are higher than the levels now considered by Congress.)
While increasing Corporate Average Fuel Economy (CAFE) standards would reduce CO2 emissions, the benefits of this approach take time to accrue and decrease as people increase the number of miles they drive. This phenomenon becomes most pronounced in the 2020–2030 time period as population and incomes rise.
The authors note that even individual policies that seem radical in the present U.S. political context do not meet targets set by the Obama administration or proposed in the American Clean Energy & Security Act without significant use of offsets. This is a challenge, since there is no agreement on the structure of a workable offset policy.
The strengthened Energy Independence and Security Act CAFE standards, or continued increases in new vehicle fuel economy past 2020, are also unlikely by themselves to prevent significant growth in U.S. transportation-sector greenhouse-gas emissions and oil imports by 2030. These policies will, however, prevent even larger growth from occurring. The reason is that the U.S. economy will continue to grow over this period increasing personal incomes and consumption, including increased vehicle purchases and increased driving.
A version of this study also is being published by the journal, Energy Policy.
Read the full paper here: http://belfercenter.ksg.harvard.edu/publication/19971/
Sasha Talcott is the Director of Communications & Outreach at Belfer Center for Science & International Affairs, Harvard University.
Press Release dated March 4, 2010