The Top 5: Effect of Weakening U.S. Fuel Economy Standards Could Last Decades

02.28.19 | Blog | By:

Hello friends! Here’s my monthly take on the five most interesting developments in future fuels and vehicles trends. Items I selected include:

  • A new MIT paper points out that the effects of overturning the Obama-era fuel economy standards could last for years — even beyond 2040.
  • Tailpipe and GHG emissions are increasing in California, but I think the real culprit is really solving affordable housing.
  • The world is hooked on palm oil and the addiction is growing but not for biofuels―for food.
  • Latin America might not be a huge market initially for electric light-duty vehicles (LDVs), but could be a huge market for electric buses.
  • Renewable hydrogen may be cheaper and more within reach initially thought.

1. Keith, et al., MIT Sloan School of Management: Vehicle Fleet Turnover and the Future of Fuel Economy ―  This paper notes that while EPA has recognized that overturning the Obama-era fuel economy standards would lead to less-efficient vehicles being sold the Agency does not acknowledge the lasting environmental impacts(air pollution and GHGs) that this is going to cause in the coming years. The paper shows that such a move would increase fuel consumption and GHG emissions from the U.S. light-duty vehicle (LDV) fleet for decades to come.

Because new vehicles are highly durable, usually remaining on the road for many years, these less fuel-efficient vehicles sold as a result of this policy change will remain in operation out to 2040 and beyond. What caught my eye: The finding that it takes 19.6 years for the new technology to account for 90% of the on-road fleet, even though the average vehicle lifetime is only 16.6 years, because some vehicles remain in use much longer than average, light trucks in particular. The consequences of the fuel economy freeze is reflected in the figure below.

Source: David R Keith, et al 2019 Environ. Res. Lett. 14 021001

The authors argue that policymakers should set stringent fuel-economy standards over the long-run, and pay increasing attention to the retirement and disposal of the oldest and most inefficient vehicles in the fleet, in order to build a LDV fleet for the U.S. that is efficient, low-emission, and adaptable as the world enters period of unprecedented technological change in the automotive industry.

2. Reuters: A Climate Problem Even California Can’t Fix: Tailpipe Pollution ―California’s tailpipe emissions have risen 5% since 2013, highlighted in this article and based on data from the California Air Resources Board (CARB). Meantime, population growth, urban sprawl, vehicle miles traveled (VMT) have increased and congestion worsens. CARB Chairman Mary Nichols noted in the story, “The strategies that we’ve used up until now just haven’t been effective.” That’s an amazing admission considering how much CARB has done to combat air pollution and climate change over the years. As the article notes, it has implications for other sprawling cities in the U.S. and around the world that are in a similar situation.

The Legislative Analyst’s Office (LAO) within the California Legislature has estimated that 39% of GHG emissions are attributable to transportation and have been climbing since 2013. Tailpipe have risen 5% since 2013. Beyond that, the article points to a bigger issue that I’ve been contemplating for some time: if we want to move the needle on air pollution and climate we not only have to reduce urban sprawl, but we have to make housing more affordable in cities and make them attractive and more livable to bring people back in. And that’s a very tall order. Californians spend 60% of their income on housing, according to another LAO report. The article notes that CARB is working with municipal governments to discuss controlling emissions through city planning, including offering more lower-cost housing in urban centers to bring people closer to work and the elimination of building codes requiring parking spots to encourage more drop-off carpooling.

3.The Guardian: How the World Got Hooked on Palm Oil ― What I like about this article is the discussion on the transition of palm oil into the world’s food and personal care supplies and how almost inextricably interwoven the feedstock is in these sectors. As I have said over the years, that’s where the real issue is. In fact, this is what I said in a presentation at a 2009 IPIECA event on indirect land use change (ILUC): “Excluding palm-based biodiesel in the developed world will not quell ILUC concerns –the biodiesel will go to other markets in Asia-Pacific or the palm will go into the food market where it already goes anyway.” And I continue to wonder how we can press for strict sustainability standards, with the EU Commission now designating palm oil as a “high risk” feedstock under the revised Renewable Energy Directive (REDII) but not tackle the larger issue: food, home and personal care products?

Consider the following statistics cited in the article:

  • Of more than 200 common ingredients in food, home and personal care products containing palm oil, only about 10% of which include the telltale word “palm”,
  • Europe and the US account for less than 14% of global palm oil demand (which includes biofuels feedstock usage),
  • India, China, and Indonesia account for nearly 40% of all palm oil consumed worldwide alone and that number is climbing, and
  • 70% of personal care items include one or more palm oil derivatives. Further, as India’s GDP expanded, so did palm oil use — particularly in the growing fast food market which has grown 83% between 2011-2016.

“The reality is that the western part of world is [a small share] of palm oil consumption, and the rest of the world doesn’t give a sh**.  So there’s not much incentive to change.” Neil Blomquist, managing director of Colorado-based Natural Habitats, which produces palm oil in Ecuador and Sierra Leone to the highest level of sustainability certification told The Guardian.

4. China Dialogue: Chinese Electric Buses Make Headway in Latin America ― As I have told Future Fuel Outlook members, I don’t see electrification happening quickly (if at all) in the light-duty fleet. However, electrification in centralized fleets, like buses, are a different story. This article notes that four large cities with a combined 14 million inhabitants will debut fleets of Chinese electric buses over the first half of 2019, as the graphic below shows. BYD is the major electric bus supplier.

Source: China Dialogue, February 2019

In addition to the cities show on the map, San José (Costa Rica) will debut three buses and Montevideo (Uruguay) has requested a loan from the Green Climate Fund (GCF), one of the financial mechanisms created by the Paris Agreement to facilitate initiatives that reduce GHG emissions, to replace 120 buses (10% of its fleet) with electric buses.

5. Nature Energy: Economics of Converting Renewable Power to Hydrogen ― The prevailing view based on previous studies in this area has showed that renewable hydrogen is prohibitively expensive, but this study challenges that. It finds that hydrogen produced using wind power in Germany and Texas is already cost-competitive for small- and medium-scale users of the gas, and will be even more so by 2030. Moreover, they say renewable hydrogen will become competitive with current large-scale industrial supplies from fossil fuels in the next decade or so. This is due to the falling cost of wind energy and the electrolyser technologies used to convert it to hydrogen.  Future Fuel Outlook members: watch for an upcoming post looking at electric buses globally.

Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.