SHORTENING the PATH to ENERGY INDEPENDENCE: a POLICY AGENDA to COMMERCIALIZE BATTERY-ELECTRIC VEHICLES (Printed in the August 2008 Electricity Journal)
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SHORTENING THE PATH TO ENERGY INDEPENDENCE: A POLICY AGENDA TO COMMERCIALIZE BATTERY-ELECTRIC VEHICLES (Printed in the August 2008 Electricity Journal) Peter J. Fontaine, Esquire Cozen O’Connor 856.910.5043 | [email protected] I. INTRODUCTION the amount of fuel consumption per mile is directly related to the amount of CO emissions per mile. Also, Battery electric vehicles (“BEVs”)—highway vehicles 2 by completely shifting pollution from hundreds of primarily powered by electricity stored in a battery— millions of small sources to a few thousand central present the best near term solution to reduce America’s electrical generation plants, air quality in urban areas dependence on petroleum and to curb carbon dioxide would improve dramatically. The cost-effectiveness of (“CO ”) emissions, the primary pollutant contributing to 2 emission-reduction and carbon-sequestration climate change. Our nation’s almost total dependence technologies also would be much better if they are on petroleum to power our cars and trucks is dragging- installed at central power plants rather than in motor down our economy, entangling our military in foreign vehicles. Costs can be spread over forty or fifty year conflicts, and saddling our children with an ecological operating lives and billions of kilowatt hours rather than disaster. over ten or fifteen years and 150,000 to 200,000 miles. Only ten years ago, the technical consensus was that Also, as CO2 emissions from central electricity BEVs suffered from an “insurmountable handicap” generation are reduced over time with increasing because their lead acid and nickel metal-hydride penetration of renewable energy and other CO2 batteries were prohibitively expensive, had limited controls, BEVs will become even cleaner. Finally, calendar and cycle lives, required replacement during because electricity is heavily regulated by federal and vehicle lifetime, and could not be recharged in less than state energy commissions its price is far more stable 12 hours.1 Then, BEVs were regarded as little more than than petroleum which is unregulated and subject to a quixotic dream of the environmental community. speculative trading, price gouging, and other predatory Now, new lithium-ion (“LI-ion”) batteries are changing practices. the game. The batteries are more powerful, lighter and Notwithstanding their promise, without aggressive longer-lived than their lead-acid and nickel metal- government policies, it may be decades before BEVs can hydride predecessors. In fact, the technology has come meaningfully penetrate the vehicle market. The history so far that BEVs are approaching the performance of of technology adoption in the automotive industry internal combustion (“IC”) vehicles with the suggests that new technologies take 20 to 30 years to introduction of fast charge technology that enables ten- penetrate even 50% of the vehicle population.5 BEVs are minute battery recharging. still 25% to 50% more expensive than their IC A shift to BEVs would have a profound impact on our counterparts. The relatively high cost of Li-ion batteries petroleum dependency and mobile source air pollution. is the principal reason. Rapid adoption of BEVs is more BEVs have a petroleum-equivalent fuel economy of difficult also because a variety of current federal between 200 and 300 miles per gallon,2 roughly five to government policies discriminate against BEVs in relation to other alternative fuel vehicles (“AFVs”). seven times the fuel economy of a Toyota Prius, the most fuel-efficient gasoline vehicle on the road today.3 Gasoline Unfortunately, we do not have the luxury of 20 to 30 consumption would drop by up to 6.5 MMB per day years before taking serious action to substantially (52% of total petroleum imports). CO2 emissions would reduce dependence on petroleum and CO2 tailpipe be cut by 47% (based on the national average CO2 emissions. The nation’s economy and global climate output rate for electricity generation)4 and smog change impels government intervention to accelerate emissions by 90%. CO2 emissions are directly linked to the uptake of BEVs, the most viable near-term vehicle fuel consumption because CO2 is the ultimate end- propulsion technology to eliminate dependence on product of burning gasoline. The more fuel a vehicle fossil fuel. burns, the more CO2 it emits. Since the CO2 emissions are essentially constant per gallon of fuel combusted, © 2008 Cozen O’Connor. All Rights Reserved. 1 SHORTENING THE PATH TO ENERGY INDEPENDENCE: A POLICY AGENDA TO COMMERCIALIZE BATTERY-ELECTRIC VEHICLES Printed in the August 2008 Electricity Journal This paper proposes the adoption of six federal policies necessary technological changes needed to designed to level the playing field for BEVs with the aim dramatically improve CO2 reductions from automobiles of reducing incremental cost and accelerating the and trucks. With VMT increasing roughly 2% per year in commercialization and deployment of this vital the U.S. and IC automobiles propagating rapidly in the technology. Part II discusses the importance of finding a developing world a revolutionary improvement in fuel solution to transportation-related CO2 emissions in the economy and/or CO2 destruction technology is needed context of the global climate change problem. Part III quickly. While conventional pollutants can be reduced provides relevant background information on BEV in automobile exhaust with sophisticated emission technology. Part IV discusses the market barriers that control systems, such as catalytic converters, on-board must be overcome. Part V describes six specific changes computers, and oxygen sensors, no viable technology in federal policy to lower incremental cost and has yet been developed to practically remove CO2 from accelerate the commercialization of BEVs, namely: vehicles, which is produced directly from the combustion of the fuel itself. 1. Award of Lifetime CO2 Set-Aside Allowances in the Cap & Trade Program A. CO2: A Compounding Problem 2. Creation of a Battery Guarantee Program The unchecked growth in transportation sector CO2 3. Inclusion of Electricity In the Clean Air Act (“CAA”) emissions presents a thorny problem for policy-makers. Renewable Fuels Standard Because CO2 resides in the stratosphere for more than 100 years it accumulates over time. For centuries, the 4. Enhanced vehicle tax credits: provide investment tax CO2 level was relatively stable at about 270 parts per credits exceeding those for hybrid and alternative million (“ppm”). As the combustion of fossil fuels grew, fuel vehicles however, the CO2 level gradually increased so that by 5. Fueling Infrastructure Tax Credits: Equal Federal 1950 the level reached 320 ppm. By 2007, the CO2 level Investment Tax Credit Treatment As Alternative Fuel reached 380 ppm, the highest level since humans first 6 Vehicle Refueling Infrastructure Ethanol, CNG, and walked the Earth. Ambient CO2 levels continue annually Hydrogen to increase on average 2 ppm. Recent evidence suggests that the rate of CO build-up is accelerating 6. A 1.2 MPG CAFE Incentive Credit to Match Ethanol, 2 with population expansion and economic development CNG, and Hydrogen. that is tied to increased use of energy. Similar to compounding interest on credit card debt, each year of II. PETROLEUM USE AND CLIMATE CHANGE “business-as-usual” adds to our CO2 deficit reduction burden. If we are to avoid a catastrophic temperature The U.S. transportation sector currently accounts for increase of more than 1.9°C—which could melt the approximately two-thirds of our petroleum use and Greenland icecap and raise sea level by 23 feet—most roughly one-quarter of our total energy consumption. scientists say we need to keep the ambient CO level We are completely dependent on petroleum to fuel our 2 from exceeding 490 ppm.7 Most scientists also say that cars and trucks, which emit about one-third of our CO , 2 stabilization of CO concentrations below the 490 ppm the principal greenhouse gas (“GHG”) pollutant 2 target level will require CO emissions to peak during contributing to global warming. In some heavily- 2 the period 2000–2015 and then to decline thereafter.8 traveled states, such as in California and New Jersey, We therefore have a very short window of time to bring cars and light trucks account for nearly one-half of all about a reduction in global emissions if we wish to limit CO released to the atmosphere. CO emissions from the 2 2 temperature increase to only 1.9°C. The sooner we find transportation sector are growing faster than from any alternatives to fossil fuel vehicles the lower the cost to other sector. From 1990 to 2005, emissions from cars society of meeting the target ambient CO and trucks grew 25% as total vehicle-miles-traveled 2 concentration below 490 ppm, since vehicle emissions (“VMT”) are increasing each year an average of 1.9%. 9 are the fastest-growing source of CO2. The two primary federal programs regulating OEMs— the Corporate Average Fuel Economy (“CAFE”) B. Surging Transportation Emissions in the Developing standards and the CAA Title II mobile source emissions World: A Huge Market Opportunity program—rely upon a command and control approach. As incomes rise in India, China and the rest of the While these programs have vastly improved tailpipe developing world through globalization more people emissions of criteria pollutants they only marginally are purchasing gasoline-powered automobiles, much as have improved fuel economy and will not force the has occurred over the past 100 years in the United © 2008 Cozen O’Connor. All Rights Reserved. 2 SHORTENING THE PATH TO ENERGY INDEPENDENCE: A POLICY AGENDA TO COMMERCIALIZE BATTERY-ELECTRIC VEHICLES Printed in the August 2008 Electricity Journal States where 800 in 1,000 people now own an developing nations on the path of sustainable automobile. For the first time in history, automobile transportation, however, is closing fast. ownership is possible for millions of Indian families, where only 12 in 1,000 people now own an automobile.