Transportation Policy in America - Part 2
By Kevin Hughes
1. Significantly revamp Corporate Average Fuel Economy (CAFE) standards to drive fuel consumption efficiency
Automotive manufacturers should be required to improve the fuel consumption of their fleets by a fixed percentage every second model year. Improvements are likely to be 10%+ per step (the example below is at 11% per step), for both Gasoline and Diesel cars and trucks. The short term efficiency steps are not only achievable but are already operational by the global auto companies in other parts of the world. Given the potential blended gains from areas such as Hybrid, Variable Displacement, Regenerative Braking and switching to Diesel, short term fixes already available will allow the auto manufacturers can concentrate on research and development of longer term technologies and designs including Pluggable Hybrid, Hydraulic Energy Storage, Ultra Capacitors, Battery Efficiency and possibly Hydrogen. It is already clear from 2007 sales figures in the US that $3.00 gas is a consumer barrier, where drivers start to seriously consider their driving habits, and look for cars and trucks that will match their requirements efficiently. This policy does not require the end of “gas guzzlers”, there will be some need for high gas consumption vehicles in the future, it does however radically reduce the proportion of such vehicles in the US fleet.
2. Legislate to require MPG in advertising
In much the same way as the tobacco industry is required to declare health warnings using a significant percentage of available advertising real estate, the auto industry should publish MPG figures in similar fashion. This will encourage fuel economy competition amongst the auto manufacturers and educate citizens as to the real fuel cost of the powerful Hemi engine, the Mustang styled after the GT, or the Truck that can tow a house.
3. Legislate to require fuel consumption gauges in the dashboard
In practice it is often not possible to monitor fuel consumption even in modern cars, or to understand when significant fuel is being used. In the same way that legislation mandates an accurate speedometer, a fuel consumption gauge should be placed in every dashboard, with appropriate warning signs for high fuel usage. This gauge would be extremely cheap to install, there are already aftermarket products available that use manufacturers’ in car data, they could be added in a model year change by the manufacturers, and would significantly improve citizen education, a recent Toyota announcement suggested that this addition in its own right might produce a 4% improvement in fuel consumption.
4. Legislate taxation based on fuel consumption on purchase and annually
All new cars and trucks should have an energy efficiency tax and license tax based on their fuel consumption, the effect of this taxation model is to level the playing field, from a consumer perspective regarding fuel saving technologies (e.g. Hybrids are more expensive to build, this would be off-set by this taxation)
A taxation model could be defined as follows:
Over 50 mpg - $0 Over 40 mpg - $250 Over 30 mpg - $500 Over 20 mpg - $1000 Under 20 mpg - $2000
Over 50 mpg - $0 Over 40 mpg - $50 Over 30 mpg - $100 Over 20 mpg - $150 Under 20 mpg - $250
The increased fuel economy requirements that the auto manufacturers need to meet will be increasingly difficult to achieve and require significant investment. Taxation based on fuel consumption will generate revenue to fund the required investment into research of transportation efficiency. The system would principally be funded in the same way as defense research is funded today, with the Department of Defense and other Federal Agencies allocating funds for specific projects. Product spin out would replicate the NASA model of the 1960’s and 70’s, licensing developed technologies and eventually releasing the patents for general use.
It is worth noting that cars that would not incur any tax are already available, the key feature here is to move the US car and truck fleet to a more economically efficient position. Total taxation using the financial figures outlined above would generate $10bn in its first year rising to $60-80bn after 10 years, then falling sharply again. This profile matches the need for research and development of efficient technologies to meet the policies outlined here.
5. Support the Bio-diesel industry
An important effect of the taxation measures will be to drive higher volumes of Diesel cars principally because they already have significantly better fuel consumption for equivalent performance. This has 3 distinct advantages, firstly, Diesel is a more efficient fuel (conservatively assumed to have a 30% higher energy density than gasoline and perhaps 50% higher than ethanol), secondly, Diesel already has the distribution infrastructure in place, and thirdly Diesel can most easily be replaced by a renewable source, Bio-diesel. Europe already has a significantly larger Diesel vehicle presence and this should be encouraged in the US. This policy requires Diesel to replace 40% of the US car and light truck fleet over 14 years, this is a challenging target, but possible in that time period. The principal drivers for consumers to switch to Diesel will be the taxation benefit (lower purchase and license taxation as a result of better fuel economy than an equivalent gas powered car), plus the benefit of lower fuel and operating costs. To facilitate this adoption standards need to be defined and agreed regarding fuel qualities and properties so that auto manufacturers have a developing but well understood base to work from in the development of new engine technologies.
Despite the incremental requirements for fuel efficiency, there will be a significantly increased need for Diesel, this policy dictates that any incremental diesel consumption should be matched by increases in Bio-diesel production so that Fossil-diesel consumption can fall in line with its availability (we would be using fewer barrels of oil therefore less Fossil-diesel would be produced). In practice this means bringing on-stream massive Bio-diesel capability, perhaps as much as 4.1mbpd by 2020. Unlike the Fossil-diesel industry, the Bio-diesel industry is currently very fragmented, this industry will tend to consolidate over time, but in its fragmented state, development of the refining capacity and supply chain will be slowed. In order to achieve the ramp rate required, the permit and approval process for proposed development needs to be significantly shortened, and other Federal incentives put in place.
6. Align US and European emissions standards
The US currently has a number of emissions regulations being implemented on a state by state basis. This effectively generates a number of discrete distribution markets for auto suppliers; in short, they need to supply different cars to different geographies. This completely undermines their investment model, where the efficiencies of mass production are lost (imagine if TV’s across the US used different standards, how much more expensive would a Nevada specific television be, and how much more expensive the distribution costs for programming). By aligning with the European emissions regulations, and jointly stiffening them over time, the US encourages investment in improvements in efficiency and improves the return on investment for manufacturers. This is particularly true of Diesel, and therefore Bio-diesel, as a fuel.
Does having different global standards for emissions help any country?
7. Support the Bio-diesel industry, B0 to B60+ adoption
Through legislation, require the development of Bio-diesel and Fossil-diesel blends, with incrementally higher Bio-diesel content, moving from B0 (no Bio-diesel content), to B60 (60% Bio-diesel content) in 10%, 3 year increments. Given the inherent efficiency of Diesel and the required improvements in fuel consumption, Gas consumption would reduce from 9.1 mbpd to just below 6mbpd over a 15 year period, while Bio-diesel consumption would rise from almost zero today to 2.7mbpd of new usage, plus 1.4mbpd requirement to replace the Fossil-diesel reduced supply associated with the reduction in petroleum over the same period. Fossil-diesel consumption would therefore reduce to 2.6mbpd.
To achieve the required growth in Bio-diesel capacity would require a switch of agricultural land to Bio-diesel as a crop, and to incremental improvements in yield per acre. Current production techniques produce only 2-6 barrels of bio-diesel per acre (bpa), this policy proposes that a significant proportion of the energy tax dollars would go into research and development to improve Bio-diesel yield per acre. Research is already finding that algae can yield bio-diesel much more efficiently than existing crops, this paper assumes a yield improvement from 4bpa to over 50bpa. Should this improvement be achieved, the proportion of arable land being used for Bio-diesel production would be in the order of 10% or some 45-50million acres.
To Be Continued....
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