The Top 5 Issues in LCFVs: China’s EV Push Is Hurting Fuel Economy

11.23.16 | Blog | By:

Happy Wednesday friends! Here’s my weekly take on the five most interesting developments in LCFV trends over the last week.

  • As it turns out, China’s EV push is having the unintended consequence of decreasing fuel economy in the conventional passenger car fleet. Since EVs are counted toward the country’s Corporate Average Fuel Consumption (CAFC) at a high rate, some manufacturers have effectively stopped improving fuel economy in conventional cars. A further problem is that there is not much in the way of incentives and enforcement currently to reverse the trend.
  • A leaked copy of the European Commission’s soon to be released (next week) revision of the Renewable Energy Directive shows the Commission is considering halving the maximum amount of crop-based biofuels used in transport after 2020.Meantime, promoting advanced biofuels will become a priority.
  • Today EPA released its final 2017 volumes under the Renewable Fuels Standard program. “Conventional” renewable fuel will increase to 15 billion gallons, meeting the original congressional target set under the Energy Independence and Security Act (2007). Biomass-based diesel will grow by 100 million gallons, while advanced biofuels and cellulosic biofuels amounts grow by 19% and 35%, respectively.
  • Europe’s air quality is getting worse, particularly for PM2.5, ozone and nitrogen dioxide. Fossil fuels are primarily responsible.
  • The Guardian reported this week that Beijing will ban highly polluting old cars from being driven whenever air-quality alerts are issued in the city or neighboring regions, according to its environmental protection bureau.

1. China Dialogue: China’s EV push Hurting Fuel Economy Standards

China’s Corporate Average Fuel Consumption (CAFC) system is strongly encouraging the EV market but may be having a negative impact on fuel economy for conventional passenger cars. The problem is that each EV under the CAFC system is considered to have zero emissions and be equal to five fuel-burning cars. Manufacturers in response began to focus on producing EVs and once they reached a certain level, “the firms effectively gave up on improving the fuel efficiency of their vehicles with internal combustion engines. In some cases, fuel consumption levels even increased.”

A recent study from the Innovation Centre for Energy and Transportation (iCET) showed that if the preferential inclusion of EVs in the CAFC system is ignored, average fuel consumption per 100 kilometers for passenger vehicles nationwide was slightly over 7 liters, which does not even meet older fuel economy requirements, the Stage 3 standard of 6.9 liters per 100 kilometers. When electric vehicles are included in the CAFC calculations, fuel economy appears much better, at 6.6 liters.

The current CAFC standard, Stage 4, require fuel consumption per 100 kilometers to fall rapidly from 6.9 liters to 5 liters between 2016 and 2020, an improvement in fuel economy of 6.2% a year over the period.  One of the issues concerns enforcement, also an issue in the Dieselgate scandal in Europe.  There are not effective incentives for or sanctions on automakers that do not meet the standards. Those “do not meet the standards are not held accountable, and those that do particularly well go unrewarded.”

Failure to improve fuel economy standards matters: China has added 19 million vehicles to its roads this year – a 15% increase from the same period a year earlier – and is expected to have over 200 million vehicles on its roads by the end of 2020, up from 154 million in 2014. Despite the government’s support, the reality at present is that 98% of new cars sold in 2015 were powered by internal combustion engines. And air quality in parts of China is a serious hazard (see item #5 below).

2. Reuters: EU Considering Halving Crop-Based Biofuels by 2030 – Draft

Late last week, Alice Stollmeyer, a climate and energy expert and blogger in the EU, obtained a leaked copy of the European Commission’s impending revisions to the Renewable Energy Directive, set to be formally released next week. As was “trial ballooned” in the Low Emission Mobility strategy released this past summer, the Commission intends to reduce the amount of first-generation biofuels in the European market over time and increase the amount of advanced biofuels.

Specifically, the Commission is considering halving the maximum amount of crop-based biofuels used in transport after 2020 over concerns they increase rather than reduce carbon emissions, according to a draft seen by Reuters. According to the Commission’s current proposal, the maximum contribution from liquid biofuels to the EU renewable energy target should fall to 3.8% in 2030 from 7% in 2021. A mandate for advanced biofuels will be introduced, but in a quick review of the leaked (and redacted) document, it is not clear what that will be.

The Commission, in the leaked proposal, noted:

“A progressive reduction of food based biofuels and their replacement by more advanced biofuels will realize the potential for decarbonizing the transport sector. However, in determining the progression of the reduction of conventional biofuels, it is important not to retrospectively undermine the business models incentivised by the existing directive. Therefore the proposed trajectory progressively reducing the share of conventional biofuels aims at avoiding stranded assets and unintended job losses, whilst taking into account the important past investments realised so far, and is also in line with a realistic rollout of advanced biofuels in the market.”

I will provide more detail and analysis when the formal proposal is released.

3. EPA: Final Renewable Fuel Standards for 2017, and the Biomass-Based Diesel Volume for 2018

Today Paul Argyropoulos at EPA shared the Agency’s finalized the volume requirements and associated percentage standards that apply under the RFS program in calendar year 2017 for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel. EPA also finalized the volume requirement for biomass-based diesel for 2018. The table below summarizes the volume requirements per category.

Renewable Fuel Volume Requirements for 2014-2018

2014 2015 2016 2017 2018
Cellulosic biofuel (million gallons) 33 123 230 311 n/a
Biomass-based diesel (billion gallons) 1.63 1.73 1.9 2.0 2.1
Advanced biofuel (billion gallons) 2.67 2.88 3.61 4.28 n/a
Renewable fuel (billion gallons) 16.28 16.93 18.11 19.28 n/a

Source: EPA, November 2016

The final volumes represent continued growth over historic levels. The final standards meet or exceed the volume targets specified by Congress for total renewable fuel, biomass-based diesel, and advanced biofuel, as shown in the figure below.

rfs-charts

Features of the regulation include the following:

  • Non-advanced or “conventional” renewable fuel increases in 2017 meet the 15 billion gallon congressional target for conventional fuels.
  • The standard for biomass-based biodiesel – which must achieve at least 50% lifecycle GHG reductions compared to petroleum-based diesel – grows by 100 million gallons. The required volume of biomass-based diesel for 2017 is twice as high as the minimum congressional target.
  • Cellulosic biofuel, which must achieve at least 60% lifecycle GHG emissions reductions, grows by 35% over the 2016 standard.
  • The advanced biofuel standard, comprised of biomass-based diesel, cellulosic biofuel, and other biofuel that achieves at least 50% lifecycle GHG emissions reductions, increases by 19% over the 2016 standard.
  • Total renewable fuel volumes grow by 1.2 billion gallons from 2016 to 2017, a 6% increase.

4. Deutsche Welle (DW): Air Pollution Is ‘Top Health Hazard In Europe’

The European Environment Agency (EEA) released its annual report on air quality in Europe today blaming coal and biomass burning industries, power plants and households for hundreds of thousands of premature deaths across Europe, despite improvements to air quality in recent decades. Read more about it here.

5. The Guardian: Beijing Bans Highly Polluting Cars During Smog Alerts

The Guardian reported this week that Beijing will ban highly polluting old cars from being driven whenever air-quality alerts are issued in the city or neighboring regions, according to its environmental protection bureau. Starting February 15, 2017, vehicles that don’t meet the government’s current standard on emissions (those more than 10 years old) will be banned in Beijing’s main urban area whenever orange or red alerts are issued in Beijing or neighboring Hebei province and Tianjin city. Vehicles breaking the restrictions will be fined 100 Yuan (US$14.47) every four hours they are on the road, the bureau added. Cars at the National 1 or National 2 emissions standards, which the rules are aimed at, only account for 8% of the cars in the city, but they account for more than 30% of smog causing nitrogen oxide emissions, the bureau said.