Top 5: Global Fuel Economy Improvement Slowing

03.26.19 | 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:

  • Fuel Economy: Improvement is slowing globally and especially in advanced economies. One reason why? SUVs.
  • Batteries: Amnesty International is calling for car companies to make “ethical batteries” within five years.
  • Fuel Prices: GIZ released is global survey of fuel prices, while the U.S. Chamber of Commerce is advocating for increasing the gasoline tax in the U.S. to fix the country’s crumbling infrastructure.
  • Hydrogen Fuel Cell Vehicles: China wants 100,000 of them on the road in 5-6 years.
  • Energy Demand & CO2 Emissions Increasing: IEA says energy demand worldwide grew by 2.3% last year, its fastest pace this decade. So did CO2 emissions.

1. FIA Foundation: Global CO2 Vehicle Emission Reduction Measures Falter― Vehicle fuel economy improvements have slowed globally, but was especially pronounced in advanced economies. FIA Foundation’s Global Fuel Economy Initiative (GFEI) found in a new report that 27 countries saw an increase or stagnation in average vehicle CO2 emissions in the two years up to 2017. Overall, global fuel economy has improved by an average of 1.7% per year over the past 12 years, although the rate of improvement has slowed to 1.4% in the past two years.  This is far from GFEI’s goal to double fuel economy by 2030, which translates to annual average fuel economy improvements in the global fleet of 3.7%. 

What’s happening, in a nutshell, is that fuel economy is improving in emerging economies that are now setting and implementing standards, while in advanced economies, fuel economy is slowing or stagnating. One of the big issues? Sport utility vehicles (SUVs) ― and not just in the U.S. but globally. GFEI notes the market share of SUVs and pick-ups has grown by 11 percentage points since 2014 and, in 2017, represented nearly 40% of the global LDV market. North America and Australia have had a particularly high market share of SUVs/pick-ups, closing in on 60% in 2017. Most of the growth has taken place in the small SUV/pick-up segment, which includes many cross-over versions of popular passenger cars. As the figure below shows, there are a number of countries with significant numbers of SUVs, including the U.S., Australia, Philippines and Thailand.

2. Amnesty International: Amnesty Challenges Industry Leaders to Clean Up Their Batteries― Amnesty International took it to the mat at last week’s Nordic EV Summit in Oslo, challenging the EV industry (and presumably the policymakers sitting there) to make completely ethical batteries within five years. “Finding effective solutions to the climate crisis is an absolute imperative, and electric cars have an important role to play in this. But without radical changes, the batteries which power green vehicles will continue to be tainted by human rights abuses,” said Kumi Naidoo, Amnesty International’s Secretary General. Amnesty says that despite projections that the demand for cobalt will reach 200,0000 tons per year by 2020, no country legally requires companies to publicly report on their cobalt supply chains. With more than half of the world’s cobalt originating in southern DRC, the chance that the batteries powering electric vehicles are tainted with child labor and other abuses is “unacceptably high.”

I agree. Here’s what I had to say about it in an op-ed for Automotive News last year: “It troubles me that governments haven’t stepped forward on this. In fact, there has been outright silence on this issue from NGOs, policymakers and others advocating EVs. And there is some hyperdefensiveness on the issue from some media outlets that advocate for EVs with almost tunnel vision. As much as NGOs, policymakers and the media are pushing for EVs to promote environmental sustainability, they should not be ignoring the social sustainability component. They should partner with the auto industry to see this through.” It looks like Amnesty is going to see to that.

3. GIZ: International Fuel Prices 2018/19 ― For 20 years, the German firm GIZ has published an annual report on diesel and gasoline prices globally, this year for 179 countries. In this year’s report, published this month, GIZ found that:

  • Highest prices for gasoline in Hong Kong ($2.09/liter (l)) and for diesel in Norway ($1.93/l)
  • Lowest prices in Venezuela, where gasoline and diesel were virtually for free
  • Retail price in the United States: $0.88 for both gasoline and diesel
  • In the European Union: Lowest prices in Bulgaria with $1.26 for gasoline; Luxembourg, $1.31 for diesel
  • Fuel prices in 53 countries were below market prices, though GIZ notes the UN Sustainable Development Goal 12 explicitly calls for a phase-out of inefficient fossil fuel subsidies.
  • While diesel is still cheaper than gasoline ($1.07 compared to $1.14 on global average), the diesel price is growing at a higher rate. This is mainly due to increasing quality requirements, namely ULSD.
  • Compared to the 2016/17 report: Fuel prices (converted to USD) increased by 17 % (gasoline) and 25 % (diesel) on a global scale.

What I found interesting was this statement at the end of the report: “Rising fuel prices and changes in pricing schemes have proven to be a cause for major social unrest. Over the last two years, there have been a multitude of protest worldwide triggered by increasing fuel prices… Although the removal of subsidies creates a powder keg of social unrest, there is a global consensus on the importance of reforming fuel pricing schemes, especially with regards to the reduction of fossil fuel subsidies.” GIZ notes that subsidized fuels hinder the transformation towards sustainable transportation and hide the true environmental costs of fossil-fueled mobility while also proving socially regressive, benefiting middle- and high-income households. While some countries have taken actions to eliminate gasoline and diesel subsidies, globally rising oil prices have reversed this trend.

Meantime, the U.S. Chamber of Commerce is advocating for an increase in the U.S. gasoline tax from 18 to 25 cents to fix the country’s crumbling infrastructure. The idea has bipartisan support in Congress, but the question is can they get it done, when they aren’t getting much of anything done? The tax has not been increased since 1993. Inflation has eroded 40% of its value and more fuel efficient vehicles has translated into less revenue in the Federal Highway Trust Fund.

4. Asia Times: Beijing Wants 100,000 Hydrogen Cars by 2025 ― China expects to have 100,000 hydrogen fuel-cell vehicles on its roads within five to six years as it challenges such countries as Japan and South Korea for dominance of the emerging carbon-free automotive markets, this story reports. With its policies in place, including its New Energy Vehicle Policy, to promote electric vehicles, the focus is turning to other fuels, including hydrogen. The plan is to scale up manufacturing and offer incentives.

Older vehicles may be converted to hydrogen as technologies become available, the story notes. In one notable breakthrough, Chinese researchers have adapted methanol, an alcohol made easily from coal, to hydrogen gas so it can power cars. The methanol releases hydrogen and carbon dioxide when it comes into contact with water, and the Chinese Academy of Sciences’ Institute of Coal Chemistry has developed a way to get a faster reaction under normal temperatures by using a device that can fit into a compact car.  Check out my recent podcast interview of Greg Dolan, who talks about the Chinese fuel market, including methanol’s and hydrogen’s role.  He notes:

“What we’re looking at the Chinese government doing is moving towards a double-credit program. So they’ll basically provide disincentives for people that buy gasoline and diesel vehicles and incentives for people that buy cleaner vehicles, whether it’s battery electric, natural gas, hydrogen, and methanol.”

-Greg Dolan, Methanol Institute

5. IEA: Global Energy Demand Rose by 2.3% In 2018, Its Fastest Pace in the Last Decade ― Energy demand worldwide grew by 2.3% last year, its fastest pace this decade, an exceptional performance driven by a robust global economy and stronger heating and cooling needs in some regions, according to IEA. Natural gas emerged as the fuel of choice, posting the biggest gains and accounting for 45% of the rise in energy consumption. As a result, global energy-related CO2 emissions rose by 1.7% to 33 Gigatonnes (Gt) in 2018. Coal use in power generation alone surpassed 10 Gt, accounting for a third of the total increase, and most of that came from a young fleet of coal power plants in developing Asia. Together, China, the U.S. and India accounted for nearly 70% of the rise in energy demand around the world. Renewables grew by 4% and met around one-quarter of the growth in total primary energy demand.

IEA says CO2 emissions stagnated between 2014 and 2016, even as the global economy continued to expand. This decoupling was primarily the result of strong energy efficiency improvements and low-carbon technology deployment, leading to a decline in coal demand. But the dynamics changed in 2017 and 2018. Higher economic growth was not met by higher energy productivity, and lower-carbon options did not scale fast enough to meet the rise in demand.  The figure below shows global energy-related CO2 emissions and avoided emissions for the years 2017-2018. In short, and perhaps to state the obvious, global decarbonization  is a huge challenge, even with major scale up in renewables , energy efficiency and other initiatives being undertaken around the world.

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.

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