IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/332263.html
   My bibliography  Save this paper

The global energy, CO2 emissions, and economic impact of vehicle fuel economy standards

Author

Listed:
  • Karplus, V.
  • Kishimoto, P.
  • Paltsev, S.

Abstract

Fuel economy standards have been recently tightened in the United States and Europe, and have been adopted in Japan, Korea, China, Australia, and Canada. This analysis uses a global computable general equilibrium model to analyze the combined effect of existing national or regional fuel economy standards on global demand for petroleum-based fuels, CO2 emissions, and welfare. We also examine the impact of more aggressive targets for fuel economy through 2050 for all regions, and compare it to a market-based (cap-and-trade) instrument that achieves identical reductions. We find that while fuel economy standards reduce demand for petroleum-based refined fuels and lead to a net decrease in global CO2 emissions, the standards are not cost effective in part because they indirectly subsidize the use of these fuels in unconstrained sectors and regions. Refined oil demand even increases in India, Indonesia (Rest of East Asia), and Africa due to lower refined oil prices, as fuel economy standards reduce demand in other parts of the world. Fuel economy standards are also a relatively expensive way of reducing global CO2 emissions—year-on-year consumption loss reaches 10% in 2050 with fuel economy standards, as opposed to 6% by 2050 with a global cap-and-trade system that achieves comparable total CO2 reductions. This study underscores how the effects of national and regional fuel economy standards can propagate through global fuels markets to offset petroleum or CO2 reductions at the global level, as well as lead to surprising outcomes in unconstrained countries or regions.

Suggested Citation

  • Karplus, V. & Kishimoto, P. & Paltsev, S., 2012. "The global energy, CO2 emissions, and economic impact of vehicle fuel economy standards," Conference papers 332263, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
  • Handle: RePEc:ags:pugtwp:332263
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/332263/files/5757.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher R. Knittel, 2012. "Reducing Petroleum Consumption from Transportation," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 93-118, Winter.
    2. Karplus, Valerie J. & Paltsev, Sergey & Reilly, John M., 2010. "Prospects for plug-in hybrid electric vehicles in the United States and Japan: A general equilibrium analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(8), pages 620-641, October.
    3. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
    4. Wang, H. & Zhou, P. & Zhou, D.Q., 2012. "An empirical study of direct rebound effect for passenger transport in urban China," Energy Economics, Elsevier, vol. 34(2), pages 452-460.
    5. Klier, Thomas & Linn, Joshua, 2011. "Fuel Prices and New Vehicle Fuel Economy in Europe," RFF Working Paper Series dp-11-37, Resources for the Future.
    6. Shiau, Ching-Shin Norman & Michalek, Jeremy J. & Hendrickson, Chris T., 2009. "A structural analysis of vehicle design responses to Corporate Average Fuel Economy policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 43(9-10), pages 814-828, November.
    7. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    8. Oliver, Hongyan H. & Gallagher, Kelly Sims & Tian, Donglian & Zhang, Jinhua, 2009. "China's fuel economy standards for passenger vehicles: Rationale, policy process, and impacts," Energy Policy, Elsevier, vol. 37(11), pages 4720-4729, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karplus, Valerie J. & Paltsev, Sergey & Babiker, Mustafa & Reilly, John M., 2013. "Should a vehicle fuel economy standard be combined with an economy-wide greenhouse gas emissions constraint? Implications for energy and climate policy in the United States," Energy Economics, Elsevier, vol. 36(C), pages 322-333.
    2. Karplus, Valerie J. & Paltsev, Sergey & Babiker, Mustafa & Reilly, John M., 2013. "Applying engineering and fleet detail to represent passenger vehicle transport in a computable general equilibrium model," Economic Modelling, Elsevier, vol. 30(C), pages 295-305.
    3. Paltsev, Sergey & Chen, Y.-H. Henry & Karplus, Valerie & Kishimoto, Paul & Reilly, John & Loeschel, Andreas & von Graevenitz, Kathrine & Koesler, Simon, 2015. "Reducing CO2 from cars in the European Union: Emission standards or emission trading?," CAWM Discussion Papers 84, University of Münster, Münster Center for Economic Policy (MEP).
    4. Jensen, Jesper & Tarr, David G., 2011. "Deep Trade Policy Options for Armenia: The Importance of Services, Trade Facilitation and Standards Liberalization," Conference papers 332083, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. Li, Yi & Wang, Zhaohua & Wang, Ke & Zhang, Bin, 2021. "Fuel economy of Chinese light-duty car manufacturers: An efficiency analysis perspective," Energy, Elsevier, vol. 220(C).
    6. Robson, Edward N. & Wijayaratna, Kasun P. & Dixit, Vinayak V., 2018. "A review of computable general equilibrium models for transport and their applications in appraisal," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 31-53.
    7. Mahlia, T.M.I. & Tohno, S. & Tezuka, T., 2012. "History and current status of the motor vehicle energy labeling and its implementation possibilities in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 1828-1844.
    8. Lucas W. Davis & James M. Sallee, 2020. "Should Electric Vehicle Drivers Pay a Mileage Tax?," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 1(1), pages 65-94.
    9. Paltsev, Sergey & Chen, Y.-H. Henry & Karplus, Valerie & Kishimoto, Paul & Reilly, John, 2015. "CO2 Emissions, Energy, and Economic Impacts of CO2 Mandates for New Cars in Europe," Conference papers 332645, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Hirte, Georg & Tscharaktschiew, Stefan, 2013. "The optimal subsidy on electric vehicles in German metropolitan areas: A spatial general equilibrium analysis," Energy Economics, Elsevier, vol. 40(C), pages 515-528.
    11. Yu, Biying & Zhang, Junyi & Fujiwara, Akimasa, 2013. "Evaluating the direct and indirect rebound effects in household energy consumption behavior: A case study of Beijing," Energy Policy, Elsevier, vol. 57(C), pages 441-453.
    12. Chen, Zhenni & Du, Huibin & Li, Jianglong & Southworth, Frank & Ma, Shoufeng, 2019. "Achieving low-carbon urban passenger transport in China: Insights from the heterogeneous rebound effect," Energy Economics, Elsevier, vol. 81(C), pages 1029-1041.
    13. Karplus, Valerie J. & Paltsev, Sergey & Reilly, John M., 2010. "Prospects for plug-in hybrid electric vehicles in the United States and Japan: A general equilibrium analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(8), pages 620-641, October.
    14. Sergey Paltsev & Y.-H. Henry Chen & Valerie Karplus & Paul Kishimoto & John Reilly & Andreas Löschel & Kathrine Graevenitz & Simon Koesler, 2018. "Reducing CO2 from cars in the European Union," Transportation, Springer, vol. 45(2), pages 573-595, March.
    15. Runa Nesbakken, 1998. "Residential Energy Consumption for Space Heating in Norwegian Households A Discrete-Continuous Choice Approach," Discussion Papers 231, Statistics Norway, Research Department.
    16. Martin, Ralf & Muûls, Mirabelle & de Preux, Laure B. & Wagner, Ulrich J., 2012. "Anatomy of a paradox: Management practices, organizational structure and energy efficiency," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 208-223.
    17. Simon J.Evenett & Mia Mikic & Ravi Ratnayake (ed.), 2011. "Trade-led growth: A sound strategy for Asia," ARTNeT Books and Research Reports, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), number brr10.
    18. Ianchovichina, Elena, 2004. "Trade policy analysis in the presence of duty drawbacks," Journal of Policy Modeling, Elsevier, vol. 26(3), pages 353-371, April.
    19. Hache, Emmanuel & Leboullenger, Déborah & Mignon, Valérie, 2017. "Beyond average energy consumption in the French residential housing market: A household classification approach," Energy Policy, Elsevier, vol. 107(C), pages 82-95.
    20. Pierre Boulanger & Hasan Dudu & Emanuele Ferrari & George Philippidis, 2016. "Russian Roulette at the Trade Table: A Specific Factors CGE Analysis of an Agri-food Import Ban," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(2), pages 272-291, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:332263. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.