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Analysis of Transport Emissions Reduction Policies

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Analysis of Transport Emissions Reduction Policies Understanding the costs, benefits, mitigation potentials and ethical aspects of New Zealand’s transport emissions reduction policies By Md Arif Hasan A thesis submitted to Victoria University of Wellington in fulfilment of the requirements for the degree of Doctor of Philosophy Victoria University of Wellington August 2020 Abstract Greenhouse gas emissions from New Zealand’s road transport sector have been increasing rapidly since 1990. Between 1990 and 2017, New Zealand’s gross greenhouse gas emissions increased by 23.1% while emissions from the road transport sector increased by 82%; rising to 15.9 MtCO2e in 2017 from about 8.8 MtCO2e in 1990. To reduce transport emissions, the government has undertaken various initiatives including electric vehicle support, introduction of an emissions trading scheme (ETS), promotion of biofuel and other alternative fuels, and announcement of a feebate scheme. However, even though some of these policies require time to take effect, it is evident from the increase in emissions that there has so far been little progress in terms of transport emissions reduction. This raises questions over the acceptability and effectiveness of the policies taken by the government. Given the pressing need to reduce transport emissions globally and in New Zealand in particular, the present study initially investigates the major drivers of transport emissions from among a set of likely drivers, using a causality test. Because electric vehicles are widely seen as an obvious ‘solution’ within the sector, this study next examines the costs and mitigation potential of electric vehicles in the New Zealand context in order to understand the uncertainties, risks, barriers, costs, and policy gaps associated with their widespread adoption. Next, this study examines the scope for an increased carbon price signal to curb emissions growth. Finally, this study takes the view that technological and price instruments have to be seen within a wider range of possible transport policy measures, some of which may be complementary. The study therefore elicited the perspectives of a number of transport experts, and NGO and green energy activists. It ranked six mitigation policy pathways and 26 policy options on the basis of experts’, and NGO and green energy activists’ preferences. Findings of this study include that poor vehicle fuel economy is the major driver of transport emissions in New Zealand. Policies such as a high minimum vehicle fuel economy standard and/or feebate scheme could effectively help New Zealand reduce its transport emissions significantly. Electric vehicles (EVs) are also found to be potentially very effective in reducing emissions as around 80-85% of New Zealand’s electricity comes from renewable generation. Moreover, in terms of the ownership costs of using EVs, used EVs are now the most cost competitive among various vehicle types such as new EVs, used internal combustion engine vehicles (ICEVs) and new ICEVs. An increase in the carbon price to around NZD 235 per tonne of carbon dioxide (tCO2) is also likely to help the transport sector reduce its emissions Page 2 of 177 by 11% from the 1990 level and achieve the Paris target. However, according to experts’, and NGO and green energy activists’ preferences, EV support and an increased carbon price are not the most preferred emissions reduction options. Some experts, and NGO and green energy activists viewed EV subsidization, EV free parking and EV access to high occupancy lanes as unethical because EVs are mostly used by high-income people whereas low-income people often use bus or low-cost used cars. Likewise, some experts, and NGO and green energy activists did not prefer an increased carbon price because the impact of such a policy would be uneven, and low-income people would be hurt severely compared to high-income people. Results demonstrate that active and public transport support and travel demand management are the most preferred options. Since New Zealand roads are not wide enough to support a high level of individual car use both in the short and the long run, most experts, and NGO and green energy activists preferred active and public transport under current and future circumstances. Policies related to bio-fuel support were least preferred because most experts, and NGO and green energy activists think an increased production and use of biofuels is likely to replace existing forestry and farm activity and decrease food production and forestry. It is hoped that the findings of this study will help to better illuminate the difficult policy options facing policy makers and work to assist them in identifying the most acceptable policies and projects for investment. Page 3 of 177 Table of Contents List of Figures ........................................................................................................................... 9 List of Tables .......................................................................................................................... 11 List of Abbreviations ............................................................................................................. 12 Chapter 1: Introduction ........................................................................................................ 15 1.1 Background to the Study ................................................................................................ 15 1.2 Research scope ............................................................................................................... 20 1.3 Research question .......................................................................................................... 20 1.4 Research aim .................................................................................................................. 20 Chapter 2: Literature Review ............................................................................................... 21 Chapter 3: Methodology........................................................................................................ 27 3.1 Drivers of road transport emissions ............................................................................... 27 3.2 Costs and mitigation potential of EVs ........................................................................... 28 3.3 Costs and mitigation potential of an increased carbon price ......................................... 30 3.4 Acceptability of transport emissions reduction policies ................................................ 31 Chapter 4: New Zealand transport emissions drivers ........................................................ 34 Summary findings ................................................................................................................ 34 4.1 Introduction .................................................................................................................... 34 4.2 Literature review ............................................................................................................ 36 4.3 Methodology .................................................................................................................. 38 4.3.1 Data and data source ............................................................................................... 39 4.3.2 Model specification ................................................................................................. 40 4.3.3 Unit root and co-integration test ............................................................................. 42 4.3.4 Granger causality test .............................................................................................. 43 4.4 Major factors driving transport sector emissions ........................................................... 43 4.4.1 Population and urbanisation .................................................................................... 44 4.4.2 Sprawl development................................................................................................ 44 4.4.3 Fleet composition .................................................................................................... 45 4.4.4 Vehicle fuel efficiency ............................................................................................ 45 4.4.5 Share of used vehicles in the fleet........................................................................... 47 4.4.6 Fuel prices ............................................................................................................... 47 4.4.7 Modal split .............................................................................................................. 49 4.5 Model results .................................................................................................................. 50 Page 4 of 177 4.5.1 Results of unit root test ........................................................................................... 50 4.5.2 Results of co-integration tests ................................................................................. 52 4.5.3 Results of long-run equilibrium relationship .......................................................... 52 4.5.4 Granger tests of causality based on vector error correction model (VECM) ......... 53 4.6 Implications for reducing transport emissions ............................................................... 55 4.6.1 Vehicle fuel efficiency ............................................................................................ 57 4.6.2 Public and active transport .....................................................................................
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