Greenhouse Gas Emissions and Vehicle Fuel Efficiency Standards for Canada

GREENHOUSE GAS EMISSIONS AND VEHICLE FUEL EFFICIENCY STANDARDS FOR CANADA

Pollution Probe

February 2005

Written by Bob Oliver, P.Eng.

POLLUTION PROBE is a non-profit charitable organization that works in partnership with all sectors of society to protect health by promoting clean air and clean water. Pollution Probe was established in 1969 following a gathering of 240 students and professors at the University of Toronto campus to discuss a series of disquieting pesticide-related stories that had appeared in the media. Early issues tackled by Pollution Probe included urging the Canadian government to ban DDT for almost all uses, and campaigning for the clean-up of the Don River in Toronto. We encouraged curbside recycling in 140 Ontario communities and supported the development of the Blue Box programme. Pollution Probe has published several books, including Profit from Pollution Prevention, The Green Consumer Guide (of which more than 225,000 copies were sold across Canada) and Additive Alert.

Since the 1990s, Pollution Probe has focused its programmes on issues related to air pollution, water pollution, climate change and human health, including a major programme to remove human sources of mercury from the environment. Pollution Probe’s scope has also expanded to new concerns, including the unique risks that environmental contaminants pose to children, the health risks related to exposures within indoor environments, and the development of innovative tools for promoting responsible environmental behaviour.

Since 1993, as part of our ongoing commitment to improving air quality, Pollution Probe has held an annual Clean Air Campaign during the month of June to raise awareness of the inter-relationships among vehicle emissions, smog, climate change and human respiratory problems. The Clean Air Campaign helped the Ontario Ministry of the Environment develop a mandatory vehicle emissions testing programme, called Drive Clean.

Pollution Probe offers innovative and practical solutions to environmental issues pertaining to air and water pollution. In defining environmental problems and advocating practical solutions, we draw upon sound science and technology, mobilize scientists and other experts, and build partnerships with industry, governments and communities.

February 2005

Pollution Probe is pleased to publish this in-depth look at options for designing a vehicle fuel efficiency standard that will effectively reduce greenhouse gas emissions in Canada. We believe Canada can join leading regions and countries, such as the European Union, Japan, Australia and China, as well as leading states, such as California and the seven Northeastern states (among others), that are either implementing or calling for the introduction of new greenhouse gas/fuel efficiency standards for cars and light trucks.

With the coming into force of the Kyoto Protocol, Canada is legally committed to reducing its greenhouse gas emissions by six per cent below 1990 levels by the first Kyoto Commitment Period of 2008–2012. The Climate Change Plan for Canada (2002) contains a commitment to improve fuel efficiency in new cars and light vehicles by 25 per cent by 2010, with the expectation that this would result in a reduction of 5.2 megatonnes of carbon dioxide-equivalent emissions. This reduction is badly needed as emissions of greenhouse gases in Canada are still increasing, despite the signing and ratification by Canada of both the Rio Declaration (1992) and the Kyoto Protocol (1997), which committed Canada to controlling its emissions.

Public support for fuel efficient vehicles is a matter of much debate. Polls, such as a recent Harris Interactive Poll in the U.S. and a Canadian poll commissioned by the David Suzuki Foundation, show that consumers are considering purchasing or leasing more fuel efficient vehicles (Harris), or that Canadians want the federal government to follow California’s leadership to set new greenhouse gas reducing/fuel efficiency standards for new vehicles (Suzuki).

Auto manufacturers maintain that they just sell consumers the vehicles they want, and that consumers don’t value fuel efficiency as highly as luxury features and safety. Pollution Probe believes the public will increasingly demand fuel efficiency and that meeting this demand will become a competitive advantage for progressive auto manufacturers in the very near future. Canada cannot afford to fall behind, given the importance of the auto sector to the Canadian economy and jobs. Our highly skilled workforce is clearly up to the task of making this transition, but it won’t happen on its own.

A modern, effective greenhouse gas/fuel efficiency standard for new vehicles is clearly needed. This report demonstrates the technological achievability of a standard, and it outlines several options for designing a standard that can work for Canada. The time to start work on this standard is now.

K. B. Ogilvie Executive Director

Ackowledgements

Sponsors

Pollution Probe expresses its sincere appreciation to the main sponsors of this report on Greenhouse Gas Emissions And Vehicle Fuel Efficiency Standards For Canada. Their generous contributions enabled Pollution Probe to research and write the report, conduct a workshop on Structuring an Effective Fuel Efficiency/Greenhouse Gas Emissions Standard for Light-Duty Motor Vehicles in Canada on January 25th, 2005, and will allow Pollution Probe to continue working over the next year on the establishment of an new standard and complementary policy measures that will lead to reductions in greenhouse gas emissions from light vehicles. The main sponsors are:

The William and Flora Hewlett Foundation The Oak Foundation

In addition, Pollution Probe expresses its appreciation to Natural Resources Canada for its contribution towards the expert review process for the report, which included both individual reviews and comments from the January 25th, 2005 workshop. Pollution Probe also expresses its appreciation to the Energy Foundation for its assistance with this project.

Reviewers

Pollution Probe extends its special thanks to the many people and organizations that reviewed the report and provided comments and to the participants at the January 25th, 2005 workshop, whose presentations and discussions contributed to this report. In many cases, the comments were incorporated directly into the text. In other cases, they appear in text boxes denoted Reviewer’s Commentary.

Pollution Probe is solely responsible for the contents of this publication.

This report was researched and written for Pollution Probe by Bob Oliver, P.Eng. The main reviewers and editors were Ken Ogilvie and Mary Pattenden. Layout was done by Krista Friesen at Pollution Probe.

Contact Information:

Bob Oliver Mary Pattenden Project Manager Climate Change Programme Director Pollution Probe Pollution Probe (416) 926-1907 x237 (416) 926-1907 x243 [email protected] [email protected]

Table of Contents

Reading Guide...... 6

Executive Summary...... 7

SECTION I: BACKGROUND REPORT

Chapter 1: The Automobile in North America — A Canadian Perspective...... 12 1.1 Introduction ...... 13 1.2 The Automotive Industry in Canada...... 17 1.3 Automobiles and Climate Change...... 28

Chapter 2: Automobile Fuel Efficiency Standards in the United States and Canada ...... 29 2.1 Cafe Standards in the U.S...... 30 2.2 CAFC Standards in Canada...... 41 2.3 Complying with CAFÉ and CAFA Standards — A Hypothetical Case ...... 45

Chapter 3: How Automobile Technology Was Made Cleaner and More Efficient...48 3.1 A Primer on Energy Use in the Modern Automobile ...... 49 3.2 Fuel Efficiency and Automotive Technology Trends Under CAFE and CAFC...... 67

Chapter 4: Motor Vehicle Fuel Efficiency Standards — Effectiveness, Issues and Debate ...... 91 4.1 CAFE in the U.S. — Effectiveness, Issues and Debate...... 92 4.2 CAFC in Canada — Effectiveness, Issues and Debate ...... 132

Chapter 5: Actions Underway to Improve Automobile Fuel Efficiency and Emissions ...... 136 5.1 International Activity...... 138 5.2 Activity in the United States ...... 154 5.3 Activity in Canada ...... 172

Chapter 6: California’s Regulations FOR Vehicle Emissions — Air Pollution and Climate Change...... 182 6.1 California’s Role in U.S. Motor Vehicle Emissions Regulation...... 183 6.2 California’s Global Warming Pollution Regulations...... 191

Chapter 7: Technologies to Reduce Greenhouse Gas Emissions ...... 196 7.1 Today’s Automotive Technology — How Far Can It Take Us?...... 197 7.2 Alternative Vehicle Fuels...... 215 7.3 Alternative Vehicle Drive Technologies...... 221

SECTION II: DISCUSSION OF OPTIONS

Chapter 8: Picking the Best Route — Considerations for GHG Reductions Through Vehicle Fuel Efficiency and Complimentary Actions ...... 229 8.1 Developing New Standards...... 231 8.2 Programs to Support Motor Vehicle Fuel Efficiency/GHG Emissions Standards....246

APPENDICES Appendix A: Motor Vehicle Emissions — Air Pollution and Global Warming...... 248 Appendix B: The Motor Vehicle Fuel Consumption Standards Act [Canada] ...... 251 Appendix C: California Assembly Bill 1493, Pavley ...... 265 Appendix D: Drivetrain Efficiency and the Weight-based Approach ...... 270 Appendix E: Additional References...... 273

Reading Guide

Automobile and Motor Vehicle

In this report, the terms “automobile” and “motor vehicle” will be used interchangeably in reference to self-powered, four-wheel vehicles, primarily designed for personal transportation and light commercial work on the nation’s roads and highways. This includes the typical family sedan, sports cars, vans, minivans, pickup trucks and sport utility vehicles as mass-produced by today’s automobile manufacturers and sold through private dealers to the public. Generally, such vehicles are grouped into two categories — passenger cars and light trucks — for which there are specific definitions under U.S. and Canadian regulations.

Fuel Efficiency

In this report, the term “fuel efficiency” refers to the amount of fuel energy converted into distance traveled by a vehicle. Under this definition, a more fuel-efficient vehicle will require less fuel to travel a given distance. Fuel efficiency can be measured according to a variety of metrics, but most commonly as fuel economy (miles per gallon, mpg) and fuel consumption (litres consumed per hundred kilometers traveled, L/100 km). Note that as fuel efficiency improves, fuel economy increases but fuel consumption decreases.

Fleet

In this report, the term “fleet” refers to a group of vehicles, the nature of which will depend on the context of the discussion. For example, “fleet” could refer to a group of vehicles built or sold by a specific manufacturer in a given model year, or by all manufacturers in that model year. It could also refer to a group of either cars or trucks, or both vehicle types combined. A fleet of vehicles may also be defined according to whether it is imported or domestic-built. Beyond reference to a specific model year, the term “fleet” may also mean the entire population of registered vehicles in a given region. How the term is employed will be made clear as its context shifts throughout the report.

Fleet-Average

In this report, the term “fleet-average” refers to a certain, measurable vehicle characteristic (e.g., fuel efficiency or weight) represented as an average value within a given fleet of vehicles.

Executive Summary

This report presents background information and options for the development of a greenhouse gas emissions and related vehicle fuel efficiency standard for Canada. The report is based on extensive research and critical review by experts in Canada and the United States. It is designed to serve as a resource for the development of a standard for Canada. It is not a prescriptive document; rather it provides background information on standards for reducing vehicle GHG emissions and increasing fuel efficiency and presents the options and issues to be addressed in developing a new and effective standard.

The Canadian Government is developing policy options to reduce greenhouse gas emissions from the light-duty motor vehicle fleet in Canada. In particular, it is considering the development of a standard for more fuel-efficient vehicles in order to deliver immediate and long-term reductions in GHG emissions. In the Climate Change Plan for Canada (2002), the government reported that negotiations for a 25 per cent improvement in new vehicle fuel efficiency by 2010 were underway.

The use and production of light-duty motor vehicles in Canada has long played an important role in the country’s economy. The auto industry is a major part of the manufacturing sector and it supports a large labour force in vehicle assembly and parts manufacture. Approximately 90 per cent of the vehicles produced by the auto sector are exported to the U.S. Conversely, most of the vehicles purchased by Canadians are imported from the United States, Japan and Mexico.

Light-duty vehicle use is a significant source of GHG emissions, contributing about 12 per cent to Canada’s total emissions. Under the Kyoto Protocol, Canada is required to reduce GHG emissions by six per cent from 1990 levels by the first Commitment Period (2008–2012). Any broadly-based plan to reduce emissions across the country must include light-duty vehicles.

In the mid-1970s, the U.S. and Canadian governments implemented measures to reduce fuel consumption in light-duty vehicles, mainly in response to the economic crisis resulting from the World Oil Shock of 1973. In the U.S., the Corporate Average Fuel Economy (CAFE) standard was implemented to improve vehicle fuel efficiency. A legislated CAFE target for passenger cars was set at 27.5 miles per US-gallon (mpg), to be met by all manufacturers serving the U.S. market. In response, the industry as a whole increased passenger car fuel economy by almost 100 per cent between 1974 and 1985.

Canada opted for a voluntary approach for its fuel efficiency standard. Company Average Fuel Consumption (CAFC) targets were set to match the CAFE standard in the U.S., but were represented as a fuel consumption metric (i.e., fuel consumed for a given distance traveled). The CAFC target is currently set at 8.6 L/100 km for passenger cars, which is equivalent to the U.S. standard of 27.5 mpg. Under the CAFC program, manufacturers voluntarily comply with the targets, but no provisions exist for fines or corrective action, as is the case with CAFE.

During the first ten to fifteen years of their existence, the standards in the U.S. and Canada were very effective in reducing fuel consumption in the light-duty vehicle fleet, and generated co- benefits that included cleaner air, lowered fuel costs for drivers and, in retrospect, significant GHG emissions reductions. The auto industry was able to comply with the standards, and the market did not suffer significant distortions in competitiveness or cost, according to the National Academy of Sciences in the United States.

The trend of increasing fuel efficiency began to reverse in the late-1980s, and has gradually declined ever since. The main factor underlying this downward trend has been the increasing use of light trucks for personal transportation.

When CAFE and CAFC standards were first designed, it was intended that vehicles such as pickup trucks and cargo vans would also be included, since they represented a full 20% of new light-duty vehicles sales. A “light truck” category was created to accommodate pickup trucks and cargo vans as well as other work-oriented vehicles. The functional qualities of these vehicles, which generally included off-road capability and large cargo capacity, were used to define what would be considered a light truck.

Light trucks were generally designed for heavy use in the commercial and industrial sectors. As such, they were assigned a lower CAFE target than passenger cars. The CAFE target for light trucks has fluctuated somewhat over the years, but from 1996 to 2004 it was set at 20.7 mpg (11.4 L/100 km under CAFC). Recent changes have been announced, and by 2007 the target will be set at 22.2 mpg (10.6 L/100 km).

While pickup trucks and cargo vans continue to make up roughly 20% of the market today, the light truck definition has permitted manufacturers to design a much broader array of new vehicle models that qualify as light trucks. This includes minivans and sport-utility vehicles introduced to the market throughout the 1980s and 1990s and, more recently, cross-utility vehicles. As these vehicles meet certain technical criteria related to off-road capability and cargo space configuration, they qualify for the light truck category for which a lower fuel efficiency target has been set. This despite the fact minivans, sport- and cross-utility vehicles are primarily used as passenger cars. Sales of minivans, sport- and cross-utility vehicles have ballooned, increasing the light truck marketshare to 50 per cent of all light-duty vehicle sales in the U.S. and 40 per cent in Canada.

The growth of the light truck category has meant that fewer vehicles sold today are subject to the higher fuel efficiency standard for cars and more are subject to the lower standard for trucks. Thus, the light-duty vehicle fleet as a whole (the combined passenger car and light truck fleet) has experienced a downward trend in fuel efficiency since the late-1980s. So long as sales of vehicles classified as light trucks continues to grow, the overall fleet will trend further away from the CAFE and CAFC target for passenger cars and closer to the target for light trucks. Hence, even if CAFE and CAFC targets for cars and trucks remain unchanged, the combined fleet fuel efficiency average may continue to decline.

Researchers and economists have long argued over the relative effectiveness of fuel efficiency standards compared to other measures, such as higher fuel taxes, to achieve reductions in fuel consumption and GHG emissions. In general, while higher fuel prices can induce behavioural changes in the market and create some demand for fuel efficient vehicles, it is not the most effective or economically efficient way to encourage the technology developments needed to maximize fleet-wide fuel efficiency levels. For example, higher fuel prices in Europe and Japan have failed to bring available and socially beneficial technologies to market, so both jurisdictions have now implemented vehicle standards to correct for this market deficiency. Moderate and technically achievable standards for vehicle fuel efficiency and GHG emission levels can be a low-cost option both for industry and society.

In other major automotive jurisdictions around the world, fuel efficiency and GHG emissions standards have been implemented in recent years. This includes Europe, Japan, Australia, China and California (as a state with legal authority to regulate vehicle emissions separate from the U.S. government). The targeted reductions in fuel consumption and GHG emissions in each jurisdiction are as much as 30 per cent below current levels. The Kyoto Protocol and actions taken to mitigate the impact of climate change are the main drivers of these policies, although the spin-off benefits are also very important.

In support of California’s recently announced GHG emissions regulations for vehicles, several other states have passed legislation to adopt the California standard, including New York, Massachusetts, Vermont, Maine, New Jersey and Connecticut. Other states are considering

legislation to adopt the California standard, including Rhode Island and Washington. Combined, these states represent more than 30 per cent of the U.S. auto market.

The technology to improve vehicle fuel efficiency and reduce GHG emissions has been entering the market for decades. Unfortunately, this has not always translated into lower fuel consumption levels. From the mid-1970s to the mid-1980s, technical improvements in engine design, drivetrain components, light-weight materials and aerodynamics were focused on raising vehicle fuel efficiency levels to comply with CAFE and CAFC standards. However, once manufacturers achieved CAFE targets in the mid-1980s, continuing improvements in technology were used to increase vehicle power and to accommodate added vehicle weight due to increased size and luxury features instead of reducing fuel consumption.

There are many energy-efficient and GHG emission reducing technologies available today, and many more that are nearing market readiness. With the proper standards in place, these technologies can be used to improve fuel efficiency and reduce GHG emission levels in the light- duty vehicle fleet. Without standards, these technologies could instead be used as they have been in the recent past — to accommodate increasing engine horsepower, vehicle weight and luxury features.

Developing a Standard

For a standard to effectively deliver the intended reductions in fuel consumption and GHG emissions in a vehicle fleet, consideration must be given to its structure. This includes the appropriate selection of a baseline, targets and the rules for achieving the targets (compliance). Moreover, structuring a standard in different ways can produce different results.

1. The baseline constitutes the point of comparison to mark progress. For a new Canadian standard, the baseline could be current CAFC targets or actual fleet-wide fuel consumption levels for the 1990 model year (these are nearly equivalent values). It could also be the fleet- wide fuel consumption levels in any model year for which there is comparable data. The choice of baseline can alter the actual magnitude of the targets.

2. The target represents the goal to be achieved and the timeframe to achieve it. A target can be selected to align the automotive technology development with environmental imperatives, such as climate change.

3. Defining the rules by which a target is to be achieved completes the structure of a standard.

The results achieved by a target can vary significantly depending on the choice of a baseline. Since fuel efficiency levels fluctuate year to year, a 25 per cent improvement from a baseline year of 2005 could result in a much different result than a 25 per cent improvement from 1990 levels. The structure of a standard can also influence the actual fuel efficiency improvements achieved by the overall vehicle fleet.

The structure of a standard can take many forms and is defined by its metrics and constraints. The metric describes and measures the type of targeted improvement required under the standard. The constraint determines how the target is applied to the fleet.

Examples of metrics include:

• A common fuel consumption target for all manufacturers, based on a sales-weighted average. For example, under current CAFC requirements, the fleet-average fuel consumption levels of passenger cars sold by each manufacturer must average no more than 8.6 L/100 km.

• A uniform percentage improvement (UPI) in fuel consumption for each manufacturer. For example, each manufacturer could be required to reduce the average fuel consumption level of its fleet by a proportionately equivalent amount (e.g., 25 per cent), and • A standard based on some vehicle attribute, such as weight or size. For example, vehicles could be classed by weight, with different targets assigned to each class.

Examples of constraints include:

• industry-wide — a single target is applied to the auto industry overall as though it were a single manufacturer, • industry-wide by vehicle type — industry-wide targets are applied to cars and trucks separately • manufacturer-specific — the target is applied separately to each manufacturer, and • manufacturer-specific by vehicle type — targets are applied to cars and trucks separately, for each manufacturer.

To provide context for these metrics and constraints, the following chart illustrates how standards from different jurisdiction around the world fit these definitions. Japan appears twice in this chart because its “top-runner” approach to setting fuel efficiency standards has elements of an industry-wide UPI standard and a manufacturer-specific, by vehicle type, attribute-based standard.

Metric Attribute- Constraint Common Target UPI based Industry-Wide European Union Industry-Wide by Vehicle Type Japan Manufacturer-Specific Australia Manufacturer-Specific by Vehicle Type U.S., California, Canada Japan, China

Given sufficiently comprehensive fleet data, it is possible to model the impacts of different options for structuring a standard. This can help policy makers evaluate the relative merits of various approaches to structuring a standard.

There are several additional aspects to consider when evaluating a standard and its structure:

• Effectiveness — This represents the capacity of the standard to deliver the intended result or target. • Efficiency — A standard is considered efficient if the cost impact of its implementation compares well to the value of the societal benefits it achieves. • Fair Distribution of Impacts — Different structures for standards can favour one manufacturer over another or one compliance strategy over another. While it may not be possible to develop a standard that is totally equivalent for all, it is possible to minimize inequities. • Side Effects — A standard may produce a range of positive or negative effects that are ancillary to the primary aim of the standard. • Political Acceptability — To succeed, a standard requires strong political commitment. • Harmony with Societal Norms — A standard must be aligned with the values, conventions and overall priorities of society, including social, economic and environmental concerns.

The choice between mandatory and voluntary standards may have broad implications for government and industry. Voluntary standards can be effective if industry is committed to achieving the targets. Otherwise, the standards will require backstop legislation or regulations.

The monitoring and reporting requirements of the standards will have to meet the needs of the government and other stakeholders to monitor progress towards the target.

Harmonization of the Canadian standard with other jurisdictions (e.g., California and the Northeast States) can broaden the market for vehicle technology that reduces GHG emissions. While it is difficult to fully align standards totally for different jurisdictions, due to variations in fleet mix, for example, it is possible to develop complementary standards that ensure that vehicles produced to meet a standard in one jurisdiction can also be used to meet standards in other jurisdictions.

Complimentary Measures

While manufacturers can build fuel-efficient vehicles, GHG emissions reduction targets will not be achieved unless the vehicles are sold. Hence, supportive programs that promote understanding and encourage the use of more fuel-efficient and low-GHG emitting vehicles are key to the successful implementation of a greenhouse gas and fuel efficiency standard. In addition, setting a standard to reduce GHG emissions from vehicles can encourage Canadian industry to develop and use more innovative technology that could also serve a growing world market for more fuel- efficient vehicles.

This report illustrates the need for a comprehensive approach to designing an effective greenhouse gas and fuel efficiency standard for Canada. The report was prepared to serve as a resource for this purpose.

The development of the standard design, however, should not be used to delay the confirmation of a specific target for light-duty vehicle fuel efficiency improvements for the first Kyoto commitment period. Industry requires a firm target and standards to move forward with plans to produce vehicles that support the reduction of GHG emissions in Canada.

Chapter 1: The Automobile in North America — A Canadian Perspective

This chapter provides a brief introduction to the role of the automobile and its impact on North America and Canada.

The information provided here is general in nature and is meant to provide context for the issue of motor vehicle fuel efficiency in Canada. The subject matter is grouped under three section headings:

• Section 1.1 provides an introduction to the evolution of the automobile and how its increased use has helped to shape Canadian society. The major negative impacts on the environment are also discussed.

• Section 1.2 deals with the automotive industry in Canada and how it has historically developed. A snapshot of the current state of the light-duty vehicle industry in Canada is also provided.

• Section 1.3 introduces the Kyoto Protocol and the Climate Change Plan for Canada, which are key drivers for improved vehicle fuel efficiency in Canada.

1.1 Introduction

This section provides a brief introduction to the automobile, including the benefits it offers and the issues it raises.

Automobiles — The Main Benefits

It is impossible to discuss the culture and economy of Canada and the United States without reference to the automobile. The enhanced mobility provided by this technology would eventually permeate almost every aspect of society. In 1900, there were less than 14,000 automobiles on the road in the United States — most were either electric, steam or gasoline-powered. Within the next 15 years more than 240 firms would begin manufacturing automobiles. However, the dominant automaker would be Henry Ford, who introduced mass production and the assembly line, pushing production to more than 500,000 cars per year.

With the advent of affordable personal transportation, governments were pressed to develop the infrastructure needed to support widespread use of automobiles. The U.S. Federal-Aid Highway Act of 1916 began a decades-long public works project to pave and improve the 125,000 miles of existing roadways in the nation. The Act was rewritten in 1956 to fund the Interstate Highway System, aimed primarily at new, long-distance road construction, and entrenching the automobile’s position as the primary option for personal mobility in the nation. Canada’s adoption of the automobile and a national road system followed a similar trend, with the Trans-Canada Highway Act in 1949 laying down the structure for a Federal-Provincial cost-sharing program that would see the east and west coasts finally connected by paved highway in 19621.

In some ways, the wealth required for the transformation to an automotive culture was directly supplied by the automobile itself. Requiring steel and other raw materials for its construction, oil for its operation and technical expertise for its continued development, a robust economy quickly developed around the auto industry. Immediately benefiting from this activity Chart of projected vehicle stock in economically were the many thousands of people developed (OECD) and developing nations. employed in the industry — the financial impact trickled down to suppliers, retailers and those who maintained the infrastructure that supported automotive travel. This transfer of wealth fed back into the system as more and more people developed income levels that qualified for automobile financing arrangements and the industry continued to grow along with the national economy.

Today, automotive manufacturing is the single largest industry in the world. By the end of the 20th century there were more than 230 million registered automobiles in Canada and the U.S. combined2, or about three for every four people. With the rapid Source: Presentation by Peter Wiederkehr Environment increase in personal automobile Directorate, OECD Paris, France at the Windsor Workshop, June 2004, Toronto, Canada. Clean Transport: A global ownership in economically developing perspective on motor vehicle emissions through 2030. nations, such as China and India, it

1 http://www.transcanadahighway.com/general/transcanadahighway.htm 2 Statistical Review of the Canadian Automotive Industry: 2002 Edition, Aerospace and Automotive Branch, Industry Canada (1999 figures).

appears inevitable that the global auto industry will continue to grow.

Traditionally, those individuals and families with automobiles experienced greater general mobility for recreation, shopping and other uses than those reliant on walking and public transit. In particular, it offered many of them greater opportunity to increase their income levels. No longer were individuals tied to jobs located close to home, an aspect of increasing importance as North America shifted towards two-income families. In this way, the automobile gradually became a necessity, rather than a luxury in many regions.

As motor vehicle ownership grew, it greatly influenced the development of land-use, particularly in and around cities and towns. Urban development began to work under the assumption of personal vehicle ownership. This led to sprawling low-density suburbs in which the automobile became the most practical mode of travel in the absence of effective public transit service3. Town squares and pedestrian markets were replaced with “Mega Mall” complexes in which the areas reserved for parking dwarfed the actual retail space4. By 2001, the average American household was making about six car trips per day and 87.5 per cent of commuting to work was conducted in private motor vehicles5.

Automobiles — The Main Issues

The rise of the automobile has also exacted a price. Its widespread use has diminished the quality of the natural environment, is a factor in energy security, and is among the leading causes of death in North America due to traffic accidents6.

Today’s automobiles run on hydrocarbon fuels mostly derived from crude oil, such as gasoline and diesel. Burning these fuels to power vehicles generates toxic compounds and smog-forming emissions that degrade air quality. Smog incidences, in particular, can place people — especially children and those with respiratory conditions — at increased risk of hospitalization and, in the worst cases, premature death7. Furthermore, oil and fuel spills can place the quality of surface and ground water at risk, especially given the presence of chemical fuel additives that are soluble in water. Should limited ground water resources become contaminated with even minute quantities of petroleum chemicals, they can be rendered unfit for human consumption. Just one litre of gasoline can contaminate one million litres of groundwater8. Nitrous oxides in vehicle exhaust contribute to excessive nitrogen loads in lakes and soil. Even the act of filling a gas tank can produce fuel vapour, which can mix with rain and pollute storm water runoff9.

3 Moving Together, A report from the Transportation, Air Issues & Human Health Conference, 2004; http://www.pollutionprobe.org/Publications/Air.htm. Understanding Sprawl – A Citizen’s Guide, David Suzuki Foundation, 2003; http://www.davidsuzuki.org/Climate_Change/Sprawl.asp 4 "Typically, they [megamall stores] range in size from 90,000 to 200,000 square feet, are located as often as possible near highway interchanges or exits, use the same windowless box store design with several acres of a single-floor layout, and require vast surface parking." (Grantz, Cities Back from the Edge, p. 192.) 5 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 8-7, 8-15. 6 Motor Vehicle Traffic Crashes as Leading Cause of Death in the United States, 2001, NHTSA, 2003; http://www.nhtsa.gov/people/Crash/LCOD/RNote-LeadingCausesDeath2001/ Canadian Injury Data, Health Canada, 1999; http://www.phac-aspc.gc.ca/injury-bles/cid98-dbc98/index.html 7 Yaffe, Air Pollution Burden of Illness in Toronto, 2004; http://www.city.toronto.on.ca/health/hphe/air_and_health.htm 8 Papa, Edwards, The Source Water Protection Primer [Pollution Probe, 2004], 26. 9 http://www.nrdc.org/water/pollution/storm/chap2.asp

Serious efforts to reduce air pollutants from automobile emissions began in California with the creation of the Motor Vehicle Pollution Control Board in 1960 and were followed nationally with the U.S. Federal Clean Air Act in 1970. Over the following decades the emission standards were expanded to cover more pollutants and become even more stringent. Regulating emissions led to improved engine design, the Air Pollutant Emissions Control Timeline in North America introduction of catalytic converters and a variety of other technology improvements in the automobile. As shown in the inset chart, significant reductions in specific automobile emissions have been achieved. However, much of this progress has been offset by the large increase in the number of vehicles on the road and in the distances they are Source: Moving Together, A report from the Transportation, Air Issues & Human driven. As a result, Health Conference, 2004; http://www.pollutionprobe.org/Publications/Air.htm. the automobile remains a major contributor to serious environmental concerns, such as smog and acid rain. Increasing automobile use has motivated the expansion of the road and highway infrastructure and the sprawling urban development that it supports. This has led to the loss of wildlife habitat and agricultural land.

The motor vehicle is also a major contributor to climate change. Light-duty vehicles generate about 15 per cent of all greenhouse gases in North America10. While catalytic converters can reduce many pollutants from automobile exhaust, such emission control systems cannot remove carbon dioxide, the main greenhouse gas. Hence, there is a renewed interest in new automobile fuel efficiency standards as a way to reduce fuel consumption and greenhouse gas emissions overall. The contribution of motor vehicles to climate change represents a double-hit to air quality, as the warming climate contributes to the increasing frequency and severity of smog events11.

Increasing use of motor vehicles is a significant factor in U.S. dependence on foreign oil imports, as well. Crude oil represents over 90 per cent of the total raw petroleums delivered to U.S. refineries. About 60 per cent of that crude oil is imported from other countries. Since light- duty vehicles consume about 55 per cent of all the petroleum energy produced in the U.S., they are the largest single contributing factor to foreign oil dependence and the economic vulnerability that it represents12. The initial Corporate Average Fuel Economy Standards, introduced in the United States in 1975, were driven by concerns about foreign oil dependence. These concerns still remain in the U.S. today.

On the other hand, Canada produces more oil than it consumes and is a net exporter of this energy to the U.S. However, much of Canada’s future oil production capacity is based on non- conventional reserves, such as the Alberta tar sands. Extracting oil from the tar sands is an

10 David L. Greene, Oak Ridge National Laboratory and Andreas Schafer, Massachusetts Institute of Technology, Reducing Greenhouse Gas Emissions From U.S. Transportation. May 2003. and Canada’s Greenhouse Gas Inventory 1990-2002. August 2004. 11 Towards an Adaptation Action Plan: Climate Change and Health in the Toronto-Niagra Region, Pollution Probe, 2002. 12 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 1-14, 1-15, 1-17., 2-4, 2-7.

energy-intensive process and generally more expensive than pumping for crude oil. As a net exporter of goods to the U.S., Canada benefits from the economic health of its largest trading partner. If the price of oil imports and foreign oil dependence were to impact negatively on the U.S. economy, Canada could also suffer.

1.2 The Automotive Industry in Canada

This section presents an overview of Canadian experience in the auto manufacturing business. It includes a brief history of the industry and Canada’s role as a net exporter of automotive products.

The First Half of the 20th Century

The history of the modern, mass produced automobile began in the United States, in 1908, with Henry Ford and his revolutionary “Model-T”. Until then, few automobiles were affordable due to relatively small production runs. Steam power was still the mainstay of powered farm equipment, electric carriages outsold all other forms of personal-use transportation13; and horses outnumbered 14 cars 3,000 to one in the U.S. . In 1908, The 1908 Model T had a 2.9 litre 4 cylinder motor producing with an efficient approach to 20 horsepower (15 kW), a top speed of 45 mph (72 km/h), and reputedly achieved 20 – 25 mpg (source: manufacturing gasoline engine http://www.canadiandriver.com/articles/bv/modelt.htm). automobiles, Henry Ford introduced the world to the mass-produced Model-T at a sale price of $85015. By 1922, the price had dropped below $300 (less than $3,000 today, adjusted for inflation16).

The market for the Model-T was initially quite limited. In the early 20th century, there were only about 14,000 automobiles in the U.S. and few paved roads, mainly in the cities. However, the Federal-Aid Highway Act of 1916 began a decades-long public works project to pave and improve the 125,000 miles of existing roadways in the nation. By the end of the 1920s, the number of automobiles on U.S. roads topped 26 million — a saturation point for the market at the time17.

Canada was engaged in the auto industry right from the beginning. In 1904, Henry Ford opened 1908 McLaughlin-Buick “Model-F” — In the first year the Walkerville Wagon Company in Windsor, of production, 154 units were built in at the 18 McLaughlin Motor Car Company in Oshawa Ontario . Ford shipped automotive parts across source: http://www.gmcanada.com/inm/gmcanada/ the Detroit River and assembled cars in english/about/OverviewHist/model_f_last.html Canada, thereby avoiding the 35 per cent tariff that existed on imported vehicles.

At the same time, Colonel Sam McLaughlin was expanding his family’s carriage business to build motor cars. In 1908, significant production began at the McLaughlin Motor Car Company when the rights were obtained from the Buick Motor Company to build their engines and chassis in

13 Mary Bellis, The History of the Automobile, http://inventors.about.com/library/weekly/aacarssteama.htm 14 Converge: where transportation and environment meet, www.converge.nscu.edu 15 Model T – The Free Dictionary, http://encyclopedia.thefreedictionary.com/Ford%20Model%20T 16 Computed using The Inflation Calculator, http://www.westegg.com/inflation/ 17 Converge: where transportation and environment meet, www.converge.nscu.edu 18 http://archives.cbc.ca/IDD-1-73-326/politics_economy/auto_pact/

Canada19. The first car to roll off the line was the McLaughlin Model-F. McLaughlin later merged his business with General Motors to form General Motors of Canada in 1918.

The 1920s were the golden age of Canada’s auto industry. In 1922, total production exceeded 100,000 and by 1929 Canada was exporting up to a quarter-million automobiles20. In retrospect, it was at this time that the auto industry in Canada reached its zenith, with production volumes matching that of the U.S. and exceeding those of countries like France, Germany and Britain. At this time, the American companies were producing record numbers of vehicles in Canada, as it provided them with access to other markets in The Commonwealth. A popular car of the day was the rugged Gray-Dort For example, Ford had cars built in Canada for (1917 model shown here), built by Gray Dort Motor Car Company of Chatham, Ontario. While the sale in Africa, Australia, Latin America and New company lasted (1915 – 1925 ), it produced almost Zealand. 30,000 vehicles in plants located in nine cities from Montreal to Vancouver. source: When the depression struck, auto production http://www.windsorpubliclibrary.com/digi/wow/plants/g ray-dort.htm declined. Although there were later examples of car models designed and built in Canada, only those with established connections to U.S. companies survived the Great Depression, despite a 35 per cent tariff protection. When WWII broke out in 1939, all automobile production ceased as plants were retooled for military production.

After the war, Canada’s auto industry continued to slide as worldwide competition increased. From 1945 to the early 1960s, European manufacturers rapidly stepped up production. American manufacturers focused on production for their own market, and Canada was left producing vehicles primarily for it own small population. Worse, the small number of cars built for Canada had to be spread across a broad array of model lines, which raised labour and production costs. Canada had two choices: create a small number of vehicle lines primarily for sale in Canada and protect the industry from outside competition; or integrate into a continental market with the U.S. and regain the cost-efficiencies of high volume production runs of specific models for sale in both countries.

The 1960s

The Auto Pact

When faced with the challenges of a small market, Canada chose continental integration of the auto market. On January 16th, 1965, Prime Minister Lester B. Pearson and President Lyndon B. Johnson signed the Canada- nd United States Automotive Products Agreement, known as Signing of the Auto Pact (2 from left: Pearson, and to his right: Johnson). the Auto Pact. It was essentially a free trade agreement source: http://www.dfait- with some limitations. Without border tariffs, U.S. maeci.gc.ca/canada- companies were free to consolidate production of a magazine/issue06/6t14-en.asp specific model within a single assembly facility, regardless of where it was to be sold. They would also enjoy uninhibited access to the Canadian market

19 http://www.gmcanada.com/inm/gmcanada/english/about/OverviewHist/model_f_last.html 20 http://archives.cbc.ca/IDD-1-73-326/politics_economy/auto_pact/

(roughly a 10 per cent gain in sales potential). Canadians would benefit from expanded auto production and related employment and lower-priced cars. In short, Canada and the U.S. become one contiguous market. The Auto Pact defined the Canadian-built automobile as having at least 60 per cent Canadian content in parts and labour. It required of member companies that for each of their cars sold in Canada, a car must be built in Canada — otherwise tariffs would apply. The original Auto Pact members were General Motors, Ford, Chrysler, American Motors, Volvo and some heavy truck makers. At first, the Auto Pact resulted in some plant closures and layoffs in Canada. However, by 1972 the Canadian auto industry experienced its first trade surplus with the U.S., as heavy investment by the “Big-3” Detroit auto makers began to generate substantially increased production levels. Employment levels in the auto industry also increased, from 70,600 in 1965 to 125,000 1978, representing nine out of 10 new jobs created in Southern Ontario21. The trade surplus fluctuated during the intervening years.

California State Air Quality Regulations

In the 1940s, California began to suffer from its first severe smog episodes. In 1952, it was discovered that its smog problems were the product of two abundant ingredients in the state — automobile emissions and sunlight. This was the same year in which 4,000 people died in London’s “killer” fog (smog generated from the combined emissions of coal-burning factories and the growing number of diesel-powered buses on London’s streets). California took action by enacting legislation to establish air quality standards and controls for automobile emissions. By 1962, California had mandated the nation’s first emissions control technology for automobiles.

The 1970s

The U.S. Clean Air Act

Based on the success of the California regulations, the U.S. Congress passed the Clean Air Act in 1970, requiring a 90 per cent reduction in hydrocarbon and carbon monoxide emissions from automobiles. The first generation of catalytic converters was built in response to the new regulation. Over the course of the decade, emissions standards, both in California and nationally across the U.S., were adjusted and expanded to include nitrogen oxide.

Corporate Average Fuel Economy — CAFE

In 1973, the Organization of Petroleum Exporting Countries (OPEC) stopped oil shipments to countries that had supported Israel during the Yom Kippur War. In response to the concerns about the oil shortage and growing foreign oil dependence, the U.S. Congress passed legislation to regulate motor vehicle fuel economy. As part of the Energy Policy and Conservation Act, Congress committed the auto industry to double their average fuel economy levels (for automobile fleets sold in the U.S.) by 1985. In response to the aggressive regulations, automakers achieved vast improvements in the fleet-average fuel economy of passenger cars, peaking in 1988 at 22.1 miles per gallon22.

Under the CAFE legislation, light trucks were assigned a less stringent standard, in respect of the larger, heavier characteristics required for commercial and heavy-duty operation. This was not considered an issue at the time, since light trucks only comprised 20 per cent of light-duty vehicle sales (pickup trucks and cargo vans) and were generally driven far less than passenger cars. Later in the 1980s and 90s, however, manufacturers began selling light trucks into the personal- use, family-oriented vehicle market.

21 http://archives.cbc.ca/IDD-1-73-326/politics_economy/auto_pact/ 22 Hellman, Heavenrich, Light-Duty Automotive Technology and Fuel Economy Trends: 1975-2003 [US EPA], pg. iii. This value is based on real-world estimates, about 15 per centlower than the laboratory measurements used to evaluate compliance with CAFE regulations.

Company Average Fuel Consumption — CAFC

In 1976, Canada introduced the Company Average Fuel Consumption (CAFC) program. Like the U.S. CAFE legislation, this initiative was part of the Canadian Government’s broad efforts to reduce energy consumption in all sectors of the economy. The fuel consumption targets, measured in litres-per-100 km, were equivalent to the CAFE standards, measured in miles-per- gallon. Later, in 1982, the Motor Vehicle Fuel Consumption Standards Act (MVFCSA) was presented to Parliament to regulate minimum CAFC standards for specified fleets of motor vehicles, complete with financial penalties for non-compliance. The MVSFCA was never proclaimed, however, because the auto industry agreed to comply voluntarily with the requirements of the Act.

The 1980s

Japanese Automakers Build Assembly Plants in Ontario

By setting up plants in Canada, foreign auto makers were able to gain access to the world’s largest auto market — the U.S. — while benefiting from Canada’s low dollar, highly skilled labour force and established supplier base. Honda led the way with its Alliston, Ontario plant, which began producing Accord models in 1986. Toyota began assembling Corolla models in Cambridge in 1988. Since then, these auto makers have steadily increased their share of passenger car production in Canada. During the 1980s, General Motors began to partner with Japanese companies. Towards the end of the decade, for example, GM and Suzuki built the joint-venture CAMI automotive plant in Ingersoll, Ontario.

Honda and Toyota have thus far enjoyed sustained growth in production at their Ontario plants. While their workforces remain non-unionized, their employees earn a wage similar to that of their union counterparts at GM, Ford and Daimler-Chrysler.

The 1990s

North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) debate raged in the late-1980s and early 1990s. Prior to NAFTA, avoiding import tariffs under the Auto Pact required that for each car sold in Canada, one must be built in Canada. The Japanese companies, however, had not joined the Auto Pact and thus paid tariffs for each vehicle imported to Canada, including those from their U.S. plants.

With the signing of NAFTA in 1992, border tariffs between Canada, the U.S. and Mexico were eliminated on automobiles. This made the Auto Pact of marginal value to Canada, as most auto imports were from within North America already. The primary benefit remaining for Auto Pact companies was that they could still import their vehicles built outside North American tariff-free, under the one-car-built for one-car-sold rule. Honda and Toyota, however, continued to pay tariffs on cars imported from Asia.

End of the Auto Pact

On February 19, 2001, the World Trade Organization ruled that the Auto Pact constituted an illegal international trade barrier, as it favoured U.S.-based over foreign-owned automakers. As NAFTA had previously eliminated much of the benefit provided by the Auto Pact, this development was considered by many analysts to be inconsequential for the Canadian auto industry. Canada’s plants had become among the most productive and efficient in North America, and its parts industry had become a leader on the international stage. Moreover, Ontario was now

operating eight truck manufacturing plants, more than any other jurisdiction in North America. Combined, these factors placed Canada’s auto industry as the eighth largest in the world.23

A Look at the Automotive Industry in Canada Today

Production and International Trade

The following charts and tables show the industry’s size, productivity and trade value and put into perspective Canada’s place on the global scale. Unless otherwise specified, the data for this section were sourced from Industry Canada’s Statistical Review of the Canadian Automotive Industry: 2002 and 2003 Editions24.

Vehicle Production Levels of Major Auto Producing Countries (1,000 of units produced)

Rank Nation 1965 1980 2003 1 U.S. 11,114 8,010 12,087 2 Japan 1,876 11,043 10,286 3 Germany (incl. former East Germany) 2,976 3,879 5,507 5 China n/a n/a 4,444 4 France 1,642 3,378 3,620 6 South Korea 0 123 3,178 7 Spain 229 1,182 3,030 8 Canada 846 1,374 2,553 9 U.K. 2,177 1,313 1,846 11 Brazil 185 1,165 1,827 10 Mexico n/a 490 1,575 12 Italy 1,176 1,612 1,322 13 Russia (incl. former Soviet Union) 634 2,199 1,280

The automotive sector includes the manufacturing of light-duty vehicles, heavy-duty vehicles, the various vehicle bodies and trailers, as well as parts.

Light-Duty Vehicle Segment: • Passenger cars, pick-up trucks and minivans • Produced at 13 high-volume assembly plants in Ontario in 2002 (12 plants in 2003) • 2.6 million units produced in 2002 • Value of shipments in 2002: $62.1 billion • More than 90 per cent of production value is exported

Heavy-Duty Vehicle Segment: • Heavy trucks • Produced at 27 low-volume assembly plants across the country • 30,800 units produced in 2002 • Value of shipments in 2002: $3.7 billion • More than 85 per cent of production value is exported.

23 http://archives.cbc.ca/IDD-1-73-326/politics_economy/auto_pact/ 24 Industry Canada Automotive website, http://strategis.ic.gc.ca/epic/internet/inauto-auto.nsf/en/am01613e.html#MANU

Vehicle Body and Trailer Segment: • Vehicle bodies and cabs, truck trailers and non-commercial trailers • Value shipments in 2002: $2.7 billion • More than 35 per cent of production value is exported

Automotive Systems and Parts Manufacturing: • Components for motor vehicles • Manufactured and assembled in 895 plants across the country • Value of shipments in 2002: $32.7 billion • About 60 per cent of production value is exported

In terms of automotive products, Canada is currently in a trade surplus position due to the high volume of exports to the U.S.

Canada’s Auto Industry 2003 Trade Balance with Other Jurisdictions ($1,000s) (total motor vehicle and parts production)

Canada - U.S. % of totalCanada - Mexico % of total vehicle $56,570,733 71.4% vehicle $52,165 12.1% exports exports parts $22,697,766 28.6% parts $379,897 87.9% vehicle $23,833,684 40.2% vehicle $2,726,599 56.6% imports imports parts $35,452,047 59.8% parts $2,087,433 43.4% balance $19,982,768balance -$4,381,970 Canada - Japan % of totalCanada - Other % of total vehicle $74,730 56.6% vehicle $450,365 24.8% exports exports parts $57,216 43.4% parts $1,364,999 75.2% vehicle $4,066,965 70.8% vehicle $4,253,657 65.0% imports imports parts $1,678,682 29.2% parts $2,290,359 35.0% balance -$5,613,701balance -$4,728,652 Canada - Total % of total vehicle $57,147,992 70.0% exports parts $24,499,878 30.0% vehicle $34,880,905 45.7% imports parts $41,508,522 54.3% balance $5,258,443

Some observations based on the above chart: • Canada currently maintains a global trade surplus of more than $5.3 billion in vehicles and automotive parts. • 99 per cent of Canada’s vehicle exports and 93 per cent of Canada’s parts export value are to the U.S. • 68 per cent of Canada’s vehicle import value is from the U.S., followed by Japan and Mexico. • 29 per cent of Canada’s total automotive export value is parts.

These numbers are represented graphically, below:

Canada’s Auto Industry 2003 Trade Balance with Other Jurisdictions

Canada - U.S.

Canada - Mexico exports

imports Canada - Japan trade balance

Canada - Other

-20,000 0 20,000 40,000 60,000 80,000 100,000 $1,000,000's

In 2003, the number of light-duty vehicles assembled in Canada totaled approximately 2.5 million (exclusively in Ontario), or about 16 per cent of total NAFTA production levels. This means that roughly one in six new vehicles sold in the U.S. was assembled in Canada.

The Canadian auto industry has enjoyed a 31 per cent labour cost advantage over the U.S., with the low Canadian dollar as a prime factor (based on an average exchange rate of C$1 to US$0.664 between mid-2002 and mid-2003). The number of vehicles assembled per plant worker was as follows:

Canada: 52 U.S.: 37 Mexico: 31

In addition, industry consultants have estimated that Canadian plants use only 23.25 labour hours to produce a vehicle, compared to 25.09 hours in the U.S. This means that Canadian plants produce more vehicles in less time and require fewer people to complete the work.

Value Generation for Canada

Total Canadian industry GDP currently stands at just over $1 trillion, of which approximately 17 per cent comes from manufacturing activities25. Ontario, representing about 40 per cent of Canada’s total industry GDP and half of its manufacturing GDP26, is home to the nation’s light- duty vehicle assembly plants and most of its automotive parts manufacturing operations.

The automotive industry, at about $20 billion in Ontario and an additional $1 billion across the rest of Canada, contributes 2 per cent to total GDP and 12 per cent to manufacturing GDP in Canada. In Ontario, this amounts to roughly 5 per cent of total GDP or about 21 per cent of manufacturing GDP27, as shown in the following table.

25 Industry Canada, Monthly Economic Indicators, February 2004, pg. 3. Industry Canada, Aerospace and Automotive Branch, Statistical Review of the Canadian Automotive Industry: 2003 Edition, Table 3.5. 26 Ministry of Agriculture and Food, Ontario GDP for Selected Industries, 2003, www.gov.on.ca/OMAFRA/english/stats/food/gdp.html. 27 Industry Canada, Aerospace and Automotive Branch, Statistical Review of the Canadian Automotive Industry: 2003 Edition. Ontario Real GDP by Major Manufacturing Sectors, www.2ontario.com/welcome/bcei_206.asp.

Ontario GDP Breakdown by Industry

2003 GDP per centof Industry Sector In constant 1997 $CND Province Total ($ millions) All Sectors (Total) $423,890 100% Manufacturing (including the Auto Sector) $88,266 21% Auto Assembly & Parts Manufacture $20,048 5%

By comparison, the next largest manufacturing industry group in Ontario, primary metals production, represents 15 per cent of manufacturing GDP28. Outside of the manufacturing sector, the construction industry essentially matches the auto industry in terms of GDP. Finally, there is the broadly based “services industry” sector, representing banking, insurance, retail, wholesale, tourism, etc, which contributes about $290 billion to Ontario’s GDP, or 70 per cent of the total. However, in terms of a single-sector generator of wealth, the auto industry is one of the largest in Ontario and in Canada as a whole.

The auto industry is also one of the largest single-sector sources of jobs in the province, and directly employed about 166,500 Ontarians in 2002, broken down as follows:

• 51,000 in vehicle assembly, • 98,000 in parts manufacture, and • 17,500 in truck body and trailer manufacture29.

This represented about 3 per cent of Ontario’s total workforce and 13 per cent of the manufacturing workforce. Moreover, employment in the auto industry is among the highest wage labour occupations in Ontario. On average, the industry pays roughly $20.05 per hour30, or about $42,000 per year. Primary vehicle assembly work pays even higher wages at about $28 per hour. Significant overtime can considerably increase the annual wage. These salaries support a large population of middle-income families who, in turn, contribute to the overall economy.

According to the Canadian Vehicle Manufacturers Association, about one in six people in Ontario are directly or indirectly employed by the auto industry. This figure may represent services such as car dealerships and maintenance shops, however, which exist because people buy cars, not necessarily because cars are built in Ontario. The Canadian Auto Workers Union estimates that 7.5 jobs are created nationally for each job created by a major auto manufacturer.31

Light-Duty Vehicle Assembly Plants in Canada

There are 12 high-volume production plants in Ontario today, manufacturing a variety of light-duty vehicles, primarily for the North American market. The following chart summarizes the specifics of each plant and the graphic on the following page provides additional information of interest to this report.

28 Ministry of Agriculture and Food, Ontario GDP for Selected Industries, 2003, www.gov.on.ca/OMAFRA/english/stats/food/gdp.html. 29 Industry Canada, Aerospace and Automotive Branch, Statistical Review of the Canadian Automotive Industry: 2002 Edition. 30 Economic Structure, Labour Force, www.2ontario.com/facts/fact06/asp. 31 Getting Back in Gear: A New Vision for Canada’s Auto Industry, CAW, 2002.

Ontario Light-Duty Vehicle Plant Location and Production Data32

Production Actual Company Assembly Site Capacity Production in Vehicle Models (units) 2003 (units) Oshawa – car plant 371,294 Monte Carlo, Impala 566,000 (a) GM Oshawa – car plant 246,855 Allure, Grand-Prix Oshawa – truck plant 234,000 (a) 321,895 Silverado, Sierra pickups Oakville – minivan 294,000 173,952 Freestar, Monterey Ford Oakville – truck plant 208,000 (b) 112,796 F-Series St. Thomas – car plant 237,000 174,681 Crown Victoria, Grand Marquis Caravan, Voyager, Town & Windsor – minivan plant 273,000 (a) 286,883 DaimlerChrysler Country, Pacifica Brampton – car plant 254,000 160,643 300, Magnum Alliston – car plant 192,787 Civic, Acura EL Honda 368,000 (a) Alliston – truck plant 199,443 Pilot, Acura MDX Cambridge – car plant 214,209 Matrix, Corolla Toyota 211,000 Cambridge – truck plant 13,334 Lexus RX 300 CAMI (GM-Suzuki Ingersoll 107,000 50,964 Equinox Partnership) Provincial Total 2,752,000 2,519,736 (a) Running at over-capacity. Capacity is defined as production over two normal 8-hour shifts. (b) plant shut down in 2003.

32 Chart data from Statistical Review of the Canadian Automotive Industry: 2002 Edition, Industry Canada; and data from Ward’s Communications.

In Ontario, large cars, minivans and pick-up trucks represent the bulk of the models produced, in terms of production volume. In Canada, light-duty truck production roughly equals passenger car production.

Broken out by company, Ontario’s portion of total NAFTA vehicle production is as follows:

Total NAFTA Production by Company

Company NAFTA Production Total (2002) Ontario’s Portion GM 5,128,714 17.7% Ford 4,057,352 12.7% Daimler-Chrysler 2,663,940 20.1% Honda 1,138,717 31.7% Toyota 885,719 24.6% CAMI (GM – Suzuki) 62,746 100%

Ontario’s auto industry is primarily an exporter of goods and is heavily dependant on the U.S. consumer market. As such, changes in the U.S., such as shifts in consumer demand or in vehicle regulations, would have a greater impact on Ontario’s auto industry than would similar changes in Canada.

Regarding the Future of the Auto Industry In Canada — Some Points to Consider

• Sales and employment have grown most rapidly in parts manufacturing and truck assembly in Canada over the last several years. • While General Motors, Ford and DaimlerChrysler lead in vehicle assembly and employment in Canada, Honda and Toyota have been increasing production and employment levels at a greater rate since the late-1980s. • In terms of North American production, Honda and Toyota now produce a greater share of their vehicles in Canada than General Motors, Ford or DaimlerChrysler. • Canada produces twice as many vehicles per capita than the U.S. or Mexico, and Ontario is home to almost all Canadian auto industry operations.33 • The auto industry has become integral to Canada’s economy — especially in Ontario. Seemingly, its future success will require the industry to capitalize on existing strengths — productivity, efficiency, parts and technical skills — while developing specialties in niche automotive design. These advantages will become even more crucial should North American auto sales, which have been on a tremendous upward surge over the last decade, encounter periods of decline in years to come.

33 Industry Canada, Statistical Review of the Canadian Automotive Industry: 2002 Edition, 2003.

Reviewers’ Commentary • It was pointed out that although Honda and Toyota have situated a large share of their total NAFTA production in Canada, this does not necessarily represent a larger commitment to Canada’s auto industry than that of the “Big-3” (GM, Ford, DaimlerChrysler. In terms of employment impact in 2001, the Big-3 sustained 52 jobs in Canada per 1,000 vehicles sold in Canada, while Honda and Toyota sustained 22, according to a CAW report (Getting Back in Gear: A New Policy Vision for Canada’s Auto Industry, 2002). • Although Canada is currently the eighth-largest auto producing nation, it has fallen from its 1999 peak of fifth-largest. Output and employment levels have since fallen. • It may be that the productivity comparison between Canada, the U.S. and Mexico (52:37:31 vehicles assembled per worker) is misleading. This probably reflects the fact that Canada has relatively fewer auto parts plants than the US or Mexico. While Canada leads North America in vehicle assembly productivity, the margin over the U.S. is about 10 per cent and over the Mexicans about 30 per cent.

1.3 Automobiles and Climate Change

This section summarizes the main international agreements related to climate change and their implications for automobile manufacturing and use in Canada.

Climate Change and the Kyoto Protocol

Concern about the impacts of climate change is mounting, as scientists continue to study, observe and report on rising levels of greenhouse gases in the atmosphere and the pace of climate change. In response to the warnings of scientists, the United Nations Framework Convention on Climate Change was developed through international negotiations and it committed signatories to work towards “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”. During the Earth Summit in Rio de Janeiro, in 1992, 166 countries signed the Convention, including Canada and the United States.

Following adoption of the Framework Convention on Climate Change, the participating countries initiated another round of negotiations to decide on more detailed commitments for the industrialized countries. After two and a half years of intense negotiations, the Kyoto Protocol was adopted in 1997 and included targets for reductions in GHG emissions by the industrialized countries. As of February16, 2005, the Kyoto Protocol has international treaty status and is legally binding.

When Canada ratified the Kyoto Protocol, in December 2002, it agreed to reduce its GHG emissions from 1990 levels by six per cent. Canada then established the Climate Change Plan for Canada, which itemizes proposed actions for different sectors with their expected reductions in GHG emissions. This includes a set of actions for the transportation sector.

The Climate Change Plan for Canada (2002) includes a target for a 25 per cent improvement in new motor vehicle fuel efficiency to achieve a GHG emissions reduction of 5.2 MT by 2010.

Reducing Fuel Consumption and Greenhouse Gas Emissions in Motor Vehicles

Between 1974 and 1984, motor vehicle fuel efficiency standards in Canada and the United States (CAFE/CAFC) required automakers to reduce the average fuel consumption of motor vehicles by half, in response to the oil crisis. Since then, the targets have not been significantly increased. Canada is now negotiating new standards with the auto industry to reduce the average greenhouse gas emissions by motor vehicles in response to the global climate change crisis.

The new standards to reduce fuel consumption and greenhouse gas emissions will include targets with timelines. The challenge is to design the standards in such a way that they will be both effective in achieving the targets and as fair as possible to all manufacturers.

Achieving the targets for reducing GHG emissions from the total Canadian fleet of light-duty vehicles will require the manufacture of more fuel efficient vehicles. It will also require changing consumer buying patterns toward selection of more fuel-efficient vehicles.

Chapter 2: Automobile Fuel Efficiency Standards in the United States and Canada

This chapter summarizes the structure of the CAFE and CAFC programs and demonstrates how they are applied.

The material presented in this chapter interprets the legal text relating to the CAFE/CAFC standards. The subject matter is grouped under three section headings:

• Section 2.1 reviews the history leading to the development of the CAFE program in the U.S. and gives an explanation of the legislation.

• Section 2.2 reviews the development of the CAFC program in Canada and identifies the main differences between its structure and that of the CAFE program.

• Section 2.3.presents a hypothetical case in which an auto manufacturer considers its strategy for compliance relative to several options permitted under the current structure of the CAFE (and CAFC) standards.

2.1 Cafe Standards in the U.S.

This section presents the history that led to the implementation of automobile fuel efficiency standards in the United States and discusses how the rules and regulations under the Corporate Average Fuel Economy (CAFE) program are structured.

The World Oil Shock of 1973 "Of course [the world price of oil is The story of fuel efficiency standards begins with the World going to rise," the Shah told the Oil Shock of 1973. On October 17th of that year, Arab New York Times in 1973. members of the Organization of Petroleum Exporting "Certainly! And how... You Countries (OEPC) announced that they would no longer ship [Western nations] increased the oil to nations that had supported Israel in its conflict with price of wheat you sell us by 300 Syria and Egypt during the brief but violent Yom Kippur War. per cent, and the same for sugar Aimed primarily at the United States and Western Europe, and cement... You buy our crude oil and sell it back to us, redefined OPEC made good on its threat, and in 1974 U.S. oil imports as petrochemicals, at a hundred dropped from about 1.2 million to 19,000 barrels per day — times the price you've paid to us... a decrease of more than 98 per cent. As the price of oil It's only fair that, from now on, you quadrupled to $12 per barrel (almost $47 USD in real 2002 should pay more for oil. Let's say dollars), the price of gasoline rose from a national average of 10 times more." — The Shah of 38.5 cents in May 1973 to 55.1 cents a gallon (equivalent to Iran in a 1973 interview with the $2.15 in 2002) in June of 1974. 34 New York Times.

The price shock came at a time of economic stagnation and rampant inflation in North America, plunging the industrialized world deeper into recession and causing the first U.S. fuel shortage crisis since WWII. Motorists faced long lines at the pump. Gas rationing was enforced in many countries. In the U.S., for example, vehicles with plate numbers ending in an odd-numbered digit could fill up on odd-numbered days of the months, and even-numbered plates could pump gas on even-numbered days.

Although the embargo officially came to an end in May of 1974, the effects of the embargo lingered throughout the rest of the decade and were followed by a second energy crisis related to the Iranian revolution in 1979. Oil prices continued to rise, peaking in early 1980 at $35.69 USD per barrel ($80.93 USD present day value, adjusted for inflation)35.

The U.S. government’s immediate response to the oil shortages included a variety of measures aimed at reducing the domestic consumption of oil. One notable action was the introduction of a national speed limit set at 55 mph (which also resulted in a 23 per cent drop in traffic fatalities between 1973 and 1974) 36. Energy conservation became a central theme of government in the late 1970’s and early 1980’s. Public education programs were deployed to encourage more efficient use of energy. For example, catch-phrase slogans appeared on office light switch panels source: http://en.wikipedia.org/wiki/1973_energy_crisis that read, “Last Out, Lights Out: Don’t Be Fuelish”.

34 http://en.wikipedia.org/wiki/1973_energy_crisis 35 http://www.forbes.com/static_html/oil/2004/oil.shtml 36 http://en.wikipedia.org/wiki/1973_energy_crisis

Automobile Fuel Efficiency Draws Attention

As part of its efforts to reduce oil consumption, the government began to look at automobiles as an opportunity for significant reductions. Then (as now), the transport sector was the largest consumer of oil domestically (53.1 per cent37), with passenger cars representing the largest share. The cars of the day were generally large and heavy. On average, the new 1974 model year fleet only traveled 13.6 miles on a gallon of gasoline38. At the same time, it appeared that the market was ready for better fuel economy, as smaller, more fuel-efficient imports had been steadily increasing their market share — approaching 20 per cent of new sales in the mid- 1970s39. The buying public may not have been interested in the imports for their fuel-efficiency characteristics, per se. Rather, the imports fell into a more affordable price range for lower- income earners during a period of economic stagnation and rapid inflation. Nevertheless, these market circumstances encouraged the domestic automakers to begin introducing their own smaller, less expensive models.

U.S. Congress Mandates Fuel Economy Standards — CAFE is Born

Motivated by the economic imperative to reduce the amount of oil consumed by the light-duty vehicle sector, the U.S. Congress set an ambitious target to double the fuel economy of new model fleets in just ten years and made it law. The Energy Policy and Conservation Act (EPCA), passed in 1975, represents the most comprehensive response to the World Oil Shock on the part of the federal government. The Act added a section to the Motor Vehicle Information and Cost Saving Act (a consumer information and protection law enacted in 1972) that provided for the establishment of Corporate Average Fuel Economy (CAFE) standards. The new section was called Title V: Improving Automotive Efficiency and it effectively mandated a doubling of fuel economy levels in 10 years for passenger cars.

Specifically, this 1975 law required that the 1985 model year fleet of passenger cars must average at least 27.5 mpg (double the 1974 level of 13.6 mpg). To ensure that industry would successfully transition to this goal, Congress set interim CAFE targets for passenger cars during the intervening years, starting in 1978 at 18 mpg and ramping up to 27.5 mpg in 1985. In spite of their expressed concerns about achieving the target, automakers improved their fleet-average fuel economy levels to 27.0 mpg by 1985, falling short of the mandate by ½ mile per gallon, but being credited with successfully achieving the goals of Congress nonetheless. The 27.5 mpg target was relaxed for a few years, on grounds that it constituted an unreasonable constraint, but by the 1990 model year, all manufacturers were meeting and even exceeding the 27.5 mpg goal legislated by Congress. The responsibility to set CAFE targets for light trucks was delegated to the Secretary of Transportation (to be discussed later).

The Structure of CAFE Explained

Some Important Terminology

Fuel Economy — A measure of vehicle fuel efficiency, given by the distance traveled by consuming a specific amount of fuel. Under CAFE the chosen measure is miles per gallon (mpg). Fuel economy increases as fuel efficiency increases. The more miles a vehicle can travel on a gallon of fuel, the higher its fuel economy. A vehicle’s fuel economy rating is measured according to a standard laboratory test protocol set forth by the Environmental Protection Agency

37 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book — Edition 23 [Oak Ridge National Laboratory, 2003], 1-19. 38 http://www.nhtsa.dot.gov/cars/rules/cafe/HistoricalCarFleet.htm 39 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book — Edition 23 [Oak Ridge National Laboratory, 2003], 4-5.

(EPA). The EPA test simulates a mix of highway and city driving (cruising conditions mixed with urban-area stop-and-go driving) — discussed later.

Manufacturer Fleets — In terms of CAFE regulations, this is defined as the total number of vehicles sold within a certain category. There are two primary fleet categories for which a manufacturer may build light-duty vehicles: the passenger car fleet and the light truck fleet. Each fleet is assigned a separate CAFE target and vehicles from the passenger car fleet may not be counted as part of the light truck fleet (or vice versa) in calculating its CAFE level. They are considered mutually exclusive categories. There is a third fleet defined under the regulation, representing passenger cars imported or assembled with significant foreign content by the manufacturer (to be discussed later).

Corporate Average Fuel Economy (CAFE) — Defined as the sales-weighted average (an average across the number of vehicles sold) fuel economy of a (corporate) manufacturer’s fleet for a specific model year. In terms of CAFE regulations, this refers to a specific model year fleet of passenger cars or light trucks (not both) sold in the U.S. market. A manufacturing company may build many vehicles (some for sale in the U.S. and some for sale elsewhere in the world), but its CAFE rating is based only on those vehicle sold in the U.S. Since it takes time for the vehicles on a dealer lot to sell and for such sales data to be collected, it may not be possible to determine CAFE levels for a specific model year for several years thereafter. The government allows manufacturers three years to submit final sales data and relies on estimated data in the interim.

What the Act Says

The original text of the section on “improving automotive efficiency”, enacted by Congress in 1975, has since been codified as Chapter 329 of Title 49 (regarding transportation) in the United States Code, called “Automotive Fuel Economy”40. Authority for administering the Act is delegated to the Secretary of Transportation, who can change the CAFE standards if they no longer represent the “maximum feasible” level. This determination must be made in consideration of four factors:

1. technological feasibility, 2. economic practicability, 3. effect of other standards on fuel economy, and 4. the need of the nation to conserve energy.

However, Congress approval is required in the case of alterations above 27.5 mpg or below 26.0 mpg, so the range of independent action that the Secretary make take is actually quite limited — at least in regards to passenger cars. More on that next.

Cars & Trucks — How Automobiles are Defined under CAFE

The code, as written by Congress, defines automobiles Definition: A vehicle’s Gross as a 4-wheel vehicle that is propelled by a fuel, is Vehicle Weight Rating (GVWR) is manufactured primarily for use on public streets, roads the vehicle’s own weight plus the and highways and: weight of the maximum load the vehicle is rated to carry. Subtracting (A) is not more than 6,000-lbs GVWR, the curb weight of a vehicle from its (B) is more that 6,000-lbs GVWR but less than 10,000-lbs GVWR reveals the vehicle’s GVWR if the Secretary decides by regulation that — maximum payload capacity. (i) an average fuel economy standard is feasible, and

40 http://assembler.law.cornell.edu/uscode/html/uscode49/usc_sup_01_49_10_VI_20_C_40_329.html; http://www.access.gpo.gov/nara/cfr/waisidx_02/49cfr523_02.html

(ii) an average fuel economy standard under this chapter for the vehicle will result in significant energy conservation or the vehicle is substantially used for the same purposes as a vehicle rated at not more than 6,000-lbs gross vehicle weight.

Essentially, this means that any motorized vehicle with four wheels and a GVWR of less than 10,000-lbs could be subject to CAFE standards, if the Secretary of Transportation thinks it will help conserve energy and seems reasonable to do so. The code then goes on to create two categories of automobiles — “passenger automobiles” and “non-passenger automobiles”.

“Passenger Automobile” means an automobile that the Secretary decides by regulation is manufactured primarily for transporting not more than 10 individuals, but does not include an automobile capable of off-highway operation that the Secretary decides by regulation — (A) has a significant feature (except 4-wheel drive) designed for off-highway operation, and (B) is a 4-wheel drive automobile or is rated at more than 6,000 pounds gross vehicle weight.

“Non-Passenger Automobile” was not defined by Congress, but has been construed to mean automobiles that are not “passenger automobiles” (i.e., everything else).

Under the authority granted to the Secretary of Transportation, responsibility for carrying out the provisions in the code were delegated to the National Highway Traffic Safety Administration (NHTSA). In late-1976, NHTSA issued a Notice of Proposed Rulemaking to further define “non- passenger automobiles”, allowing input from the public and industry. NHTSA reviewed the Energy Policy and Conservation Act conference reports and determined that Congress intended passenger automobiles to be considered those vehicles made primarily for the transport of individuals. The following is an excerpt from the conference reports:

“The passenger automobile category would exclude vehicles not manufactured primarily for transportation of individuals — such as light duty trucks, mobile homes, and multipurpose vehicles not manufactured primarily for transportation of individuals.”41

Looking at the nature of the light-duty vehicles on the road in the mid-1970s, NHTSA considered differentiating automobiles as those built primarily for transporting individuals from those built primarily for utilitarian purposes, according to whether they were built on a passenger car chassis versus a truck chassis. Eventually, NHTSA issued regulations that created a classification scheme, based on its own deliberations and the input of various individuals and organizations, but also based very much on how most vehicles were actually designed in the mid-70s.

The NHTSA regulations, which have served to define light-duty vehicles under the CAFE program ever since, are summarized below:

Passenger Automobile — An automobile that is manufactured primarily for transporting not more than 10 individuals and is not capable of off-highway operation.

Light Truck — An automobile that is manufactured primarily for off-highway operation. This is defined as an automobile having • 4-wheel drive or is over 6,000-lbs GVWR AND • has physical features consistent with those of a truck — meaning it must meet at least four of five geometric measures (approach angle ≥28O, break-over angle ≥14O, departure angle ≥20O, running clearance ≥ 20cm, and front and rear axel clearance ≥ 18cm each).42

The regulations ALSO include as light trucks any vehicle that is designed to perform at least one of the following functions:

41 [Docket No. 2003–16128]. Federal Register / Vol. 68, No. 248 / Monday, December 29, 2003 / Proposed Rules, 74926. 42 49 CFR 523 – Vehicle Classification. http://www.access.gpo.gov/nara/cfr/waisidx_02/49cfr523_02.html

• Transport more than 10 persons, • Provide temporary living quarters, • Transport property on an open bed, • Provide greater cargo-carrying than passenger-carrying volume, or • Permit expanded use of the automobile for cargo-carrying purposes or other non-passenger- carrying purposes through the removal of seats by means installed for that purpose by the automobile’s manufacturer or with simple tools, such as screwdrivers and wrenches, so as to create a flat, floor level, surface extending from the forward-most point of installation of those seats to the rear of the automobile’s interior.

It should also be noted that NHTSA declared these regulations in force for the model year 1980 onward and specified that they would be limited to automobiles of not more than 8,500-lbs GVWR. Although NHTSA had the authority to raise the weight range up to 10,000-lbs GVWR, as provided by the act (EPCA), they chose instead to set a slightly more stringent standard for light trucks under 8,500-lbs GVWR, as there were few vehicles in excess of this weight range.

What the CAFE Regulations Allow

Applying the definitions given above to the style of automobiles on the road today, the reader may be surprised as to what can be classified as a light truck. Here are some examples:

Big Pickup Truck (> 6,000-lbs GVWR) — It can transport property in an open bed, has greater cargo-carrying capacity than passenger space, is rated at over 6,000-lbs GVWR and has physical features feature consistent with those of a truck. Verdict: light truck

Small Pickup Truck (< 6,000-lbs GVWR) — It can transport property in an open bed, has greater cargo-carrying capacity than passenger space and has physical features consistent with those of a truck. Verdict: light truck

Big SUV with 4WD (>6,000-lbs GVWR) — It is capable of off-highway travel, is rated at over 6,000-lbs GVWR and has physical features feature consistent with those of a truck. Verdict: light truck

Small SUV (no 4WD and < 6,000-lbs GVWR) — It is capable of off-highway travel and has physical features consistent with those of a truck. Verdict: light truck

Minivan — Seats in the rear passenger area can be removed without the use of special tools, leaving a flat floor behind driver’s seat. Verdict: light truck

Small Cross-over Vehicle (XUVs are often marketed as a “sport-wagons” or compact SUVs) — Possibly a higher running clearance, and/or seats in the rear passenger area can be removed or folded down without the use of special tools, leaving a flat floor behind driver’s seat. Verdict: light truck

The following figure reveals the classification under CAFE regulations of several popular models.

Passenger Car or Light Truck? Note the Subaru Outback, which despite its past classification as a passenger car will next year be considered a light truck under CAFE regulations. This is due to an increase in ground clearance by approximately 1.5 inches. (http://www.azcentral.com/class/marketplace/cars/0117wheels17subaru.html)

Chevrolet Cavalier – Passenger Car Ford F-150 – Light Truck Toyota Sequoia – Light Truck 28 mpg 17 mpg, GVWR ~6,950-lbs 16 mpg, GVWR ~6,500-lbs

Dodge Magnum – Passenger Car Honda CRV – Light Truck Subaru Outback – A Passenger Car 24 mpg 25 mpg, GVWR ~4,320-lbs in 2004, a Light Truck in 2005. 25 mpg, GVWR ~4,500-lbs

Source: photos — http://auto.consumerguide.com/auto/; fuel economy data — www.fueleconomy.gov

As explained earlier, it was decided that CAFE standards would not be set for vehicles in excess of 8,500-lbs GVWR, since there were very few such vehicles on the road at the time. Since then, however, sales of such vehicle have increased substantially and many are marketed primarily as personal use vehicles.

Exceeding the CAFE Weight Limit Some examples of vehicles not covered by CAFE standards – GVWR greater than 8,500 lbs. At the end of 1999, there were 5.8 million such vehicles on the road in the U.S.

Dodge Ram 2500 Chevrolet Suburban 2500 GM Hummer H2

So What’s the Problem with Light Trucks?

The issue before regulators is that CAFE is no longer achieving the goal set by Congress — decreased oil consumption among the personal vehicle fleet. Congress was mainly concerned about passenger cars and thus set for them more stringent CAFE targets, leaving trucks for NHTSA to worry about as they were a small part of the problem (at the time). As shown above, however, more and more personal-use vehicles are falling under the “light truck” classification and yet are held to a less stringent CAFE standard. This has led to an overall decline in the average fuel economy of the combined passenger car and light truck fleet. This issue will be discussed further in Chapters 3 and 4.

CAFE Standards — Assignment of Responsibility and Administration

As the Secretary of Transportation has delegated authority to NHTSA, all aspects of CAFE standards have become the purview of that agency, including:

1. establishing and amending CAFE standards (for passenger cars and light trucks), 2. promulgating regulations concerning CAFE procedures, 3. definitions and reports, 4. vehicle classification, 5. enforcement, and 6. adjudicating credit plans (discussed later).

As explained earlier, Congress set the CAFE target for passenger cars at 27.5 mpg for the 1985 model year. However, for the model years 1986 to 1989, NHTSA exercised it authority to slightly alter those standards in consideration of market conditions that were deemed to render the regulation impracticable and infeasible43. CAFE targets were set at 26.0 mpg in 1986–88 and at 26.5 mpg in 1989.

In 1990, the CAFE level was set at 27.5 mpg once again. Since then, however, NHTSA has never approached Congress to request the authority to raise 27.5 mpg standard, and that level remains unchanged to this day despite significant advances in automotive technology. Light truck standards had also been set each year, usually hovering between 20.0 and 20.5 mpg for most of the late-1980s and early-90s.

In 1994 NHTSA proposed to raise the light truck CAFE levels beyond 20.7 mpg for the 1997 model year. However, the House of Representatives prevented this by attaching a rider to the “Department of Transportation and Related Agencies Appropriations Act” for the fiscal year 1996 and it was successfully passed. This rider, existing as section 330 of the act, read as follows:

“None of the funds in this Act shall be available to prepare, propose, or promulgate any regulations … prescribing corporate average fuel economy standards for automobiles … in any model year that differs from standards promulgated for such automobiles prior to enactment of this section.”

The section was left in place and unchanged for the next six years, effectively freezing CAFE standards — for passenger cars and light trucks — until the model year 2002. The appropriations freeze was lifted at the request of the Secretary of Transportation, Norman Y. Mineta. NHTSA has since raised light truck CAFE standards to 22.2 mpg for the 2007 model year. NHTSA is also currently considering reforms to the structure of CAFE, acknowledging the limitations of the program (in its current state) to address the issue of increasing light truck use.

Some main points regarding the administration of the CAFE program are presented here.

Measuring Fuel Economy Levels

The U.S. Environmental Protection Agency (EPA) is responsible for calculating the average fuel economy of each manufacturer’s fleet. This is done in one of two ways:

• the manufacturer provides its own fuel economy test data, or • the EPA will acquire a sample vehicle and test it in their laboratory at The Office of Transportation & Air Quality in Ann Arbor, Michigan.

Typically, the EPA will perform tests on about 30 per cent of the existing vehicle models. The test procedure to determine vehicle fuel economy is specified in Title 40 of the Code of Federal

43 NHTSA web site: www.nhtsa.dot.gov/cars/rules/CAFE/rulemaking/ANPRM_Dec22-2003.html

Regulations. It involves loading the vehicle’s drive system with a dynamometer and measuring the composition of the tailpipe emissions to determine the rate of fuel consumption and thereby calculate fuel economy. The test is performed under two cycles — one simulating highway driving conditions and one for city (urban) driving. These two results are combined to produce a harmonically weighted average of 55 per cent city and 45 per cent highway driving44:

Fuel Economy = 1 / [(.55 / fuel economyCITY) + (.45 / fuel economyHIGHWAY)]

The 55/45 driving cycle was established in the mid-1970s as a representation of the estimated share of city versus highway travel for the average U.S. driver. It should be noted, however, that these are not the values displayed on fuel economy labels in automobile showrooms. Since 1985, the EPA has adjusted its test results downward to more accurately represent “real world” fuel economy levels for consumers. Due to observed increases in the levels of suburbanization and traffic congestion over the past 30 years, the EPA estimates that its laboratory test results overstate actual fuel economy levels by about 15 per cent45. Some environmental and consumer advocacy groups claim that actual fuel economy levels experienced by drivers is much lower than the adjusted EPA values. For example, the Bluewater Network claims actual fuel economy levels experienced by American drivers average as much as 34 per cent lower than EPA test results46.

Regardless of these discrepancies, EPA’s 55/45 driving cycle test results are nevertheless valid as a means of comparing relative fuel economy among vehicle models for the purposes of CAFE.

Calculating CAFE Levels for Manufacturer’s Fleet

An auto manufacturer’s CAFE is its fleet-wide average fuel economy, with separate calculations made for up to three potential fleets: domestic passenger cars, imported passenger cars and light trucks. For example, a given company manufactures a fleet of passenger cars for sale in the U.S., made up of several different models. Suppose some of the models are built by the company in its foreign plants and later imported to the U.S. for sale. The foreign-built import fleet is considered distinct from the domestic fleet and subject to its own fleet CAFE calculation. This is called the two-fleet rule (which does not exist under Canada’s CAFC program for the reason that almost all vehicles sold in Canada are imported).

In the U.S., a light-duty vehicle is considered to be part of the domestic fleet if at least 75 per cent of its manufacturing cost is of U.S. or Canadian origin. Light trucks have not been subject to this distinction since model year (MY) 1996 as the captive import share of light trucks was practically negligible. “Captive import” refers to an imported motor vehicle sold under the brand name of the importing company, but built by a foreign manufacturer (e.g., Brand-name Ford vehicles sold in the U.S., but built by Ford Motor Company of Canada Limited).

Sample CAFE calculation: [The CAFE calculation must be conducted for each of the manufacturer’s fleets. For simplicity, this sample will only focus on a manufacturer’s light truck fleet.] Suppose a given manufacturer builds and sells a fleet of light trucks made up of four distinct models, as given in the table below.

44 Formal EPA test procedure protocols: US HWFET describes highway driving; US FTP 75 describes city driving. 45 EPA, Office of Transportation and Air Quality, Fuel Economy and Emissions Programs Fact Sheet 46 Fuel Economy Falsehoods: How government misrepresentation of fuel economy hinders efforts to reduce global warming and U.S. dependence on foreign oil, Bluewater Network, 2002.

mpg GVWR Sales Volume Model rating [lbs] [units] Vehicle A 22 3,000 130,000 Vehicle B 20 3,500 120,000 Vehicle C 16 4,000 100,000 Vehicle D 10 8,900 40,000

Since Vehicle D exceeds 8,500 GVWR, it is excluded from the calculation. Therefore, the manufacturer’s light truck CAFE is calculated as follows:

Total Sales Volume vehicle A quantity vehicle B quantity vehicle C quantity = CAFE + + vehicle A fuel economy vehicle B fuel economy vehicle C fuel economy

350,000 130,000 120,000 100,000 = 19.27 mpg + + 22 20 16

This model year’s fleet of light trucks CAFE rating does not meet the current standard of 20.7 mpg. The manufacturer will have to pay a penalty fine.

Penalties Under CAFE

If a manufacturer’s vehicle fleet fails to meet the prescribed CAFE standard, a penalty fine is charged in the amount of $5.50 for each 0.1 mpg under the CAFE target value, multiplied by the total number of those vehicles manufactured in a given model year.

Sample CAFE calculation: Continuing with the example given above, the manufacturer’s fleet of light trucks fell short of the 20.7 mpg standard set under CAFE. The penalty fine is calculated as follows:

(CAFE Standard – Fleet Average CAFE) / 0.1 mpg x ($5.50 x Production Volume) = Total Fine

(20.7 mpg – 19.27 mpg) x / 0.1 mpg x ($5.50 x 350,000) = $27,527,500

Note that the manufacturer pays the fine on the entire fleet, even though 130,000 of vehicle model A met the CAFE standard. This reinforces the idea of CAFE as an average measure to which the entire fleet of vehicles sold contributes.

While Ford, GM, Toyota and Honda have never been fined for failing to meet CAFE standards, other international manufacturers have paid more than $500 million USD in civil penalties since 1983. In fact, most European manufacturers regularly pay civil penalties ranging from less than $1 million to more than $20 million, annually. For the model year 2002, passenger car fleets from four different manufacturers failed the CAFE standard: BMW, Daimler-Chrysler (D-C’s import fleet), Fiat and Lotus. Two light truck fleets also failed: BMW and Volkswagen. In fact, foreign manufacturers usually build more efficient fleets in their home countries, but not for export to North America. Instead, they focus on the less fuel-efficient luxury and sport car market in the U.S. and Canada and simply consider CAFE the price of doing business in a foreign market.

CAFE Tradable Credit System

The CAFE rules allow manufacturers to earn credits for exceeding the CAFE standard in one model year, and to use those credits to improve a prior or subsequent model year’s performance. The amount of a credit is determined by multiplying each 1/10th of a mpg by which a manufacturer exceeds the CAFE standard in a given model year by the number of vehicles manufactured in the

same model year. In other words, excess CAFE value can be traded to subsequent model years at a 90 per cent discount rate on each vehicle.

These credits can be applied to any three consecutive model years immediately prior to, or subsequent to, the model year in which the credits were earned. Recall that accurate CAFE calculations cannot be made until all sales data for a certain model year are submitted to the EPA and NHTSA. Until then, a manufacturer must estimate its fleet CAFE value from sales forecasts. A three-year period is allotted to manufacturers to compile data on a given model year, after which the CAFE value is made official.

Outside of the three-year range the credits expire. This means that if CAFE estimates are below the standard for a given model year, a manufacturer can make up the difference by increasing sales of more fuel-efficient vehicles during the following three years, to generate the required credit value. Credits cannot be transferred between manufacturers or within a manufacturer’s distinct fleets (for example, an automaker cannot apply credits from its passenger car fleet to its light trucks).

CAFE Alternative Fuel Credit System

Vehicles powered by “alternative fuels” are credited with artificially high fuel economy ratings under the CAFE program (the legislation defines several alternative fuel types — essentially any automotive fuel that is not gasoline or diesel). For a vehicle operating on an alternative fuel, its actual fuel economy rating in mpg is divided by 0.15, and this becomes the assigned value under the CAFE program. For example, if a compressed natural gas-powered vehicle is measured at 15 mpg, it would be considered to have a fuel economy rating of 15 / 0.15 = 100 mpg, for fleet CAFE calculations47.

This does not mean that the vehicle actually travels 100 miles on a gallon of compressed natural gas. In fact, many alternative fuels vehicles sport a lower level of real fuel economy than comparable gasoline-powered vehicles. The 100 mpg credit simply provides the manufacturer with an incentive to build vehicles that run on fuels other than gas or diesel, in alignment with the objective of the CAFE legislation to reduce national dependence on foreign oil.

In the case of “dual-fuel” vehicles (also called “flexible-fuel” vehicles — those that can operate on both conventional and alternative fuels), the CAFE rating is calculated as the average of the fuel economies under conventional and alternative operating modes. Suppose the vehicle in the above example can run on gasoline and compressed natural gas. For the purposes of CAFE, it would be rated at (15 + 100)/2 = 57.5 mpg.

The problem with the dual-fuel vehicle credit system under CAFE is that although such vehicles can run on alternative fuels, there are no data indicating this is normally the case. Given the limited number of alternative fuel pumping stations across the country, it is likely that dual-fuel vehicle owners usually fill up on conventional fuel, making only sporadic use of their vehicle’s capacity to run on an alternative fuel.

Alternative fuels are discussed in greater detail in Chapter 7.

CAFE Exemptions

Various exceptions to CAFE standards exist for some subsets of light-duty vehicles. For example, emergency vehicles and vehicles of production runs under 10,000 may be considered for exemption. In terms of national fuel consumption, however, these exemptions do not currently

47 http://assembler.law.cornell.edu/uscode/html/uscode49/usc_sec_49_00032901----000-.html

amount to fleets of any great significance. The reader is directed to the actual legislation for a complete list of exemptions considered under CAFE standards48.

CAFE Preemption

CAFE legislation prohibits any action on the part of state or municipal governments to enact their own fuel economy regulations that are different in any way from the federal law. This is known as federal preemption and it is written into the U.S. Code as follows:

“When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter.” — § 32919

CAFE Targets Today

The following chart summarizes the CAFE targets as they have been set for manufacturers’ passenger car and light truck fleets. Note that light truck CAFE standards have been increased for the 2005–2007 period.

CAFE Standard Model Year Passenger Car 27.5 mpg 1990 – present 20.7 mpg 1996 – 2004 21.0 mpg 2005 Light Truck 21.6 mpg 2006 22.2 mpg 2007

48 http://assembler.law.cornell.edu/uscode/html/uscode49/usc_sec_49_00032902----000-.html

2.2 CAFC Standards in Canada

The information for this section is primarily derived from Federal Government websites for Transport Canada49, Natural Resources Canada50 and Industry Canada51.

The Canadian Government responded to the Oil Shock of 1973 with a range of initiatives similar to those in the U.S. In 1975, the same year that CAFE was legislated in the U.S., Canada established the Joint Government-Industry Voluntary Fuel Consumption Program “to promote energy conservation in the transportation sector through the design, manufacture and sale of fuel efficient motor vehicles”52. Under this program, Transport Canada began collecting and publishing fuel economy data from the auto manufacturers and publishing it in the annual Fuel Economy Guide (now the Fuel Consumption Guide, published annually by the Office of Energy Efficiency at Natural Resources Canada). Labeling of fuel consumption ratings also became mandatory for new cars and light trucks at this time.

Canada Establishes the CAFC Program

In 1976, under the Fuel Consumption Program, the Federal Cabinet approved the establishment of Company Average Fuel Consumption (CAFC) targets. CAFC targets were set to represent the same level of vehicle fuel efficiency as provided by the CAFE standards in the U.S. At the time, harmonized targets were chosen to ensure the Canadian light-duty vehicle fleet would keep pace with improvements in the U.S., ensuring that a less fuel-efficient fleet would not emerge north of the Canada-U.S. border. As with CAFE, a vehicle’s CAFC rating is calculated as a sales- weighted harmonic mean based on 55 per centcity travel and 45 per centhighway driving, based on the test procedures set forth by the EPA.

Fuel Consumption — A measure of vehicle fuel efficiency, given by the amount of fuel consumed by a vehicle traveling a given distance. Under CAFC the chosen measure is litres per 100 kilometers (L/100 km). Fuel consumption decreases as fuel efficiency increases. A vehicle’s fuel consumption rating is measured according to a standard laboratory test protocol set forth by the Environmental Protection Agency (EPA) and adopted by Transport Canada. The EPA test simulates a mix of highway and city driving (cruising conditions mixed with urban-area stop- and-go driving) — as discussed in the previous section on CAFE.

Manufacturer Fleets — Defined in exactly the same way as under CAFE regulations, with two primary fleet categories for which a manufacturer may build light-duty vehicles: the passenger car fleet and the light truck fleet. Each fleet is assigned a separate CAFC target and vehicles from the passenger car fleet may not be counted as part of the light truck fleet (or vice versa) in calculating its CAFC level.

Company Average Fuel Consumption (CAFC) — Defined as the sales-weighted average (an average across the number of vehicles sold) fuel consumption of a (company) manufacturer’s fleet for a specific model year. In terms of the CAFC program, this refers to a specific model year fleet of passenger cars or light trucks (not both) sold in Canada. This is analogous to the definition of CAFE in the U.S.

The CAFC program is essentially the same as CAFE in the U.S. and to this day Transport Canada continues to set CAFC targets in lock-step with NHTSA’s rulemaking for CAFE. However, there are some significant differences. Most notably, CAFC targets are voluntary and

49 Transport Canada; http://www.tc.gc.ca/roadsafety/fuelpgm/menu.htm 50 Natural Resources Canada; http://oee.nrcan.gc.ca/english/programs/motorvehicles.cfm?text=N&printview=N 51 Industry Canada; http://strategis.ic.gc.ca/epic/internet/inauto-auto.nsf/en/am01206e.html 52 Transport Canada website; http://www.tc.gc.ca/roadsafety/fuelpgm/prog/menu.htm

there has never existed a law regarding its enforcement — although Canada passed (but never proclaimed) legislation that provides for regulated targets, as discussed next.

Motor Vehicle Fuel Consumption Standards Act

In 1982, the Motor Vehicle Fuel Consumption Standards Act was passed by Parliament. The text of the legislation is included in Appendix B and is also available from the Department of Justice Canada, or at http://laws.justice.gc.ca/en/M-9/index.html.

The Act provides for the Minister of Transport and the Minister of Natural Resources to recommend CAFC standards, which would be issued as legally binding standards on auto manufacturers. However, the act was not proclaimed because the auto industry affirmed its commitment to voluntarily meet the standards set under the existing Fuel Consumption Program. The Act was set aside as contingency legislation to be brought into force should the industry fail to meet the goals of the Act.

In general, the auto industry seems to have maintained its commitment to the fuel consumption targets. There are only a few cases of manufacturers exceeding the CAFC limits. In 2000, vehicles under the BMW, Jaguar and Volvo monikers fell into this category. These vehicles are not numerous enough to strongly influence national fuel consumption levels. Moreover, manufacturers’ fleets of passenger cars in Canada have tended to be slightly more fuel-efficient than those in the U.S., and light truck efficiency in Canada has matched that of the U.S. very closely, according to available data.

If the Act were proclaimed, it would grant the government legal authority over the CAFC program. This would allow the “Governor in Council” to set more stringent standards and establish rules that would achieve greater reductions in fuel consumption. For example, the Act grants Transport Canada the authority to: • acquire vehicles from companies to test and verify their fuel consumption data, • direct inspectors to perform on-site inspections of manufacturer’s facilities, • charge fines for non-compliance, • establish a credit system for flexible compliance, • establish an alternative fuel incentive for flexible compliance, and • establish exemption conditions as deemed appropriate.

These powers are roughly equivalent to those of the NHTSA and the EPA under transportation legislation in the U.S.

Data Collection

Of particular significance in the Act is the authority to collect data. Currently, Transport Canada is supplied with fleet sales and fuel consumption data by the manufacturers on a voluntary basis under the Fuel Consumption Program. At times, companies will supply their own fleet CAFC calculations to Transport Canada in lieu of actual data53. In these situations, the companies are trusted regarding the accuracy of their assertion.

The fact remains, however, that while the Act remains “not in force” there are no legal grounds upon which the Government of Canada can regulate auto manufacturers, as is the case in the U.S.

53 http://www.tc.gc.ca/roadsafety/fuelpgm/cafc/page3.htm

CAFE Targets Today

The following chart summarizes the CAFC targets as they have been set for manufacturers’ passenger car and light truck fleets. Note that light truck CAFC targets have been changed slightly for the 2005–2007 period to match recent CAFE increases in the U.S.

CAFC Standard Model Year Passenger Car 8.6 L / 100 km 1990 – present 11.4 L / 100 km 1996 – 2004 11.2 L / 100 km 2005 Light Truck 10.9 L / 100 km 2006 10.6 L / 100 km 2007

A Comparison of CAFC with CAFE

• To convert mpg to L/100 km, Vehicles and fleets are classified and defined in the same divide 235 by the mpg value. way under both programs. As such, passenger cars and To convert L/100 km to mpg, light trucks are subject to the same structural definitions as divide 235 by the L/100 km set forth in the CAFE regulations. value. • As fewer than 10 per cent of vehicles sold in Canada are actually built in Canada, there is no point in separating the passenger car fleets into domestic and import designations. Therefore, unlike CAFE, there is no “two-fleet” rule for passenger cars. • Although the targets have historically been harmonized among the two countries, there is no legislative authority over CAFC in Canada. Furthermore, company sales and fuel consumption data are voluntarily submitted under CAFC, but legally required under CAFE. • Fuel economy under CAFE and fuel consumption under CAFC are both measures of the same thing: motor vehicle fuel efficiency. The only difference is that they are represented by different metrics — mpg vs. L/100 km. The following chart demonstrates the equivalence of the CAFE and CAFC targets by model year.

Passenger Cars Light-Duty Trucks Model Year CAFE CAFC CAFE CAFC 1977 1978 18.0 13.1 1979 19.0 12.4 17.2 1980 20.0 11.8 - 1981 22.0 10.7 - 1982 24.0 9.8 17.5 1983 26.0 9.0 19.0 1984 27.0 8.7 20.0 1985 27.5 8.6 19.5 1986 26.0 8.6 20.0 1987 26.0 8.6 20.5 1988 26.0 8.6 20.5 1989 26.5 8.6 20.5 1990 27.5 8.6 20.0 11.8 1991 27.5 8.6 20.2 11.6 1992 27.5 8.6 20.2 11.6 1993 27.5 8.6 20.4 11.5 1994 27.5 8.6 20.5 11.5 1995 27.5 8.6 20.6 11.4 1996 27.5 8.6 20.7 11.4 1997 27.5 8.6 20.7 11.4 1998 27.5 8.6 20.7 11.4 1999 27.5 8.6 20.7 11.4 2000 27.5 8.6 20.7 11.4 2001 27.5 8.6 20.7 11.4 2002 27.5 8.6 20.7 11.4 2003 27.5 8.6 20.7 11.4

2.3 Complying with CAFÉ and CAFA Standards — A Hypothetical Case

This section presents a hypothetical case in which a manufacturer considers its options for compliance under the rules of the CAFE and CAFC programs. In the previous two sections, the structure of the programs were presented. Here, the effectiveness of that structure in ensuring that fuel conservation is maximized among the personal-use, light-duty vehicle fleet will be tested.

Suppose there is an automobile manufacturer producing vehicles for sale in the U.S. market. The manufacturer’s product line is composed of four models:

The Practica: A four-door sedan designed for highway travel, seating five comfortably, with a fair- sized trunk compartment separate from the passenger space. Its GVWR is less than 6,000-lbs.

The Sportica: Assembled on the same production line as the Practica, but designed with hatchback access to a rear cargo area behind the back seats. Marketed as a “sporty” station wagon. In all mechanical respects, it is the same as the Practica, but with a different body style.

The Lugger: This is a standard pickup truck designed for off-highway work, with a high running clearance and lots of towing capacity. Its GVWR is is about 7,500-lbs.

The Titanica: This is a very large “SUV”, with 4- wheel drive. It is based on a pickup truck chassis so, like the Lugger, it can operate off- highway. Despite its truck-like construction, it is equipped with passenger car luxury and marketed as a family-oriented clipart source: http://www.kamsart.com/clipart/free- vehicle. Its GVWR is 8,400-lbs. clipart-Auto.html

Applying the vehicle classification rules under CAFE to the fleet, it is clear that the Practica and the Sportica will be considered passenger cars, as they are primarily designed for highway operation (neither are over 6,000-lbs GVWR, or have 4-wheel drive, or have physical feature consistent with that of a truck). The Lugger and the Titanica are considered light trucks, as they are capable of moderate off-highway operation (they are both over 6,000-lbs GVWR and have physical features consistent with that of a truck).

The EPA has conducted fuel economy tests on the four models with the following results:

Fuel Economy Model Rating The Practica 30 mpg The Sportica 28 mpg The Lugger 22 mpg The Titanica 15 mpg

Applying CAFE calculation rules to the passenger car fleet yields values between 28 and 30 mpg, meeting the minimum 27.5 mpg standard. This is obvious because the Practica and the Sportica each individually meet the standard and so any sales mix of the two will also meet the standards.

Among its light truck fleet, however, the manufacturer must be careful about the ratio of Titanica sales to that of the Lugger. The Lugger’s fuel economy rating exceeds the minimum CAFE standard for light trucks currently set at 20.7 mpg, but the Titanica’s fuel economy is far below that rating. In fact, to meet the CAFE standard the manufacturer must ensure that at least seven Luggers are sold for each Titanica.

The problem faced by the manufacturer is that the Titanica is a very popular model. Market demand for the SUV far exceeds that of the pickup truck, but to meet the demand for the Titanica the manufacturer must find a way to sell seven times as many Luggers, or pay fines under the CAFE regulation. In this way, potential sales of the SUV are limited by the demand for the manufacturer’s pickup truck. Moreover, the limited production runs of the Titanica combined with its market demand has allowed the manufacturer to increase the SUV’s price and profit margin significantly.

This compounds the problem faced by the manufacturer, as the profit margin on the Titanica makes it the most financially attractive model in its product line. Ideally, the manufacturer would like to sell as many Titanicas as the market can consume. Therefore, the manufacturer considers its options under the CAFE compliance rules:

Simple Compliance — Sales of the passenger cars — the Practica and Sportica — are only limited to market demand, since compliance with passenger car CAFE standards is guaranteed (as explained above, both individually meet the CAFE target, so any sales-based average of the two will also meet the standard). However, compliance with the light truck fleet standard requires seven Luggers to be sold for each Titanica, and therefore sales of the SUV are constrained by market demand for the pickup. It can be a frustrating situation for the manufacturer. But this constraint ensures that the light-duty vehicle fleet achieves a high average level of fuel economy, and conserves fuel.

Reclassify to Comply — In this option, the manufacturer has noted that if the Sportica design were slightly altered to increase running clearance and raise the bumpers (giving it features consistent with those of a truck), or if the rear seats were designed to fold down, allowing the cargo area to be expanded over a flat floor (flat floor provision), it could qualify for the light truck classification.

Let’s assume the manufacturer chooses to make the design changes to the Sportica in order that it may be considered a light truck. This changes the dynamics of the light truck CAFE calculation for the fleet. For example, CAFE standards could be met by maintaining a sales ratio of 1 Lugger to 2 Titanicas to 3 Sporticas (1:2:3). The business case improves considerably for the manufacturer under this scenario! For the Sporticas that were going to be sold anyway, the manufacturer manages to sell 2 Titanicas for each Lugger under this scenario, while maintaining compliance with CAFE standards. Revenues and profits would certainly increase. However, the average fuel economy of the fleet declines and more fuel is consumed than would otherwise be the case.

Bulk-up Compliance — The manufacturer notices that the popular Titanica is just shy of 8,500- lbs GVWR — the weight limit past which vehicles are not considered subject to CAFE standards. Currently, the Titanica is 8,400-lbs GVWR. If the manufacturer can find a way to increase the GVWR of the vehicle by an extra 101-lbs, it will no longer be subject to CAFE standards and as many Titanicas can be built and sold as the market can consume. In this scenario, the remaining three models — the Practica, the Sportica and the Lugger — can each be sold in any quantity

and according to any fleet mix, as each meets the minimum CAFE standards for passenger cars and light trucks, as required.

The simple problem with the “reclassify” and “bulk-up” strategies for compliance is that both could lead to an increased use of vehicles with poor fuel economy. CAFE legislation was developed to reduce automotive fuel use among the driving public. It seems unlikely that Congress also intended the regulations be used as a strategy to increase light truck sales. In essence, this use of the regulation permits the driving public to migrate from the more stringent passenger car standard towards the less stringent light truck standard.

These scenarios illustrate the weaknesses of the CAFE rules (as they currently exist) to ensure that fuel efficiency is maintained at the “maximum feasible level”. Since CAFC essentially follows the same structure as CAFE, it is subject to the same potential shortcomings.

Reviewers’ Commentary • It was suggested that, fundamentally, the issue is not one of different classifications existing, but rather the inconsistent application of fuel efficiency targets to passenger cars and light-trucks. In principle, if the full spirit and intent of the U.S. law were carried out and applied evenly across vehicle classes, the nuances of classification would be less of an issue. In other words, there wouldn't be large technical designing disparities among vehicle classes if standards had been truly set for each at the "maximum feasible, economically practicable" level as stated in the Energy Policy and Conservation Act.

Chapter 3: How Automobile Technology Was Made Cleaner and More Efficient

This chapter provides an overview of the technological developments that helped to make automobiles more fuel efficient and generate fewer emissions. It also offers an overview of the general trends in automobile use and fuel consumption levels.

As described in the previous chapter, automobile fuel efficiency levels increased during the 1970s and 80s, with each new model year. In addition, the level of toxic emissions generated by new automobiles also declined during this time. These advancements were achieved partly through changes in vehicle attributes, such as weight and power and partly through improvements in automobile technology. However, while the attributes and technology continued to change throughout the 1990s and up to the present day, the average fuel efficiency levels of light-duty vehicles have not increased. In fact, fuel efficiency levels have steadily dropped during this time, mainly as a result of the increasing share of light trucks (SUVs, XUVs and minivans) in total light- duty vehicle sales.

This chapter presents fuel efficiency information in a way that is accessible to those with no prior knowledge of how automobiles operate. Here’s how the chapter breaks down:

• Section 3.1 provides a brief review of some fundamental concepts that explain how energy is utilized in an automobile. The basic components of a typical automobile are described here, along with their respective impacts on overall energy use. The discussion then focuses on the internal combustion engine, fuel composition and vehicle emissions. This section provides the reader with an understanding of the relationship between vehicle attributes and fuel efficiency.

• Section 3.2 first shows general trends in fuel consumption and automobile use in the light- duty vehicle sector, as well as changes in vehicle attributes and sales mix, followed by specific trends in automotive technology since the 1970s, when the U.S. CAFE program began. This section provides the reader with an understanding of how fleet-wide fuel efficiency is impacted by regulations, technology and market trends.

3.1 A Primer on Energy Use in the Modern Automobile

This section provides the reader with an overview of the following:

• the fundamental concepts of mass, force and energy as applied to automobiles, • the primary mechanical components of the modern automobile, • how energy is distributed throughout the automobile, • internal combustion engines and related exhaust emissions, and • the factors that determine motor vehicle fuel efficiency.

With knowledge of this subject matter, the general trends in automobile design over the last 30 years and their resulting impact on vehicle fuel efficiency (as illustrated later in section 3.2) can be better understood and appreciated.

Energy in Motion

Most automobiles utilize mechanical systems that convert the energy stored in a volume of petrochemical fuel (e.g., gasoline), into the energy of motion. The amount of energy in the fuel that is ultimately converted into useful motion is a measure of the automobile’s fuel efficiency. People are In this document, fuel efficiency refers often surprised to learn that of the total fuel consumed in to the amount of fuel energy converted into actual vehicle distance traveled, a typical engine, only 10–20 per cent of the fuel energy usually measured in miles per gallon is converted into actual vehicle motion! Therefore, (fuel economy) or litres per 100km improving the fuel efficiency of an automobile increases traveled (fuel consumption). the capacity to drive further on a tank of gas.

To better understand the interrelationships between energy, motion and, ultimately, fuel efficiency in automobiles, it is helpful to conduct a quick review of the fundamentals of mass, force, work and energy.

Mass

Mass is a measure of the amount of matter in an object and it is directly related to how much something weighs. Some familiar things and how much their respective masses weigh at ground level are shown below (kg — kilograms, lbs — pounds):

Average person 70 kg (155 lbs) Honda Civic Sedan 1,150 kg (2,500 lbs) Ford Explorer SUV 2,000 kg (4,400 lbs)

Technically, weight is a measure of gravitational force – take away gravity and objects experience weightlessness, even though their mass is unchanged. However, since gravity is essentially constant in this discussion, “mass” and “weight” can be used interchangeably.

Force

For a mass to accelerate, a net force must be applied. When a car is at rest, there is no net force acting on it. The force of gravity pulls it downward, but the ground pushes it upward by the same amount. The conflicting forces are acting upon the car, but because they are equal in magnitude and opposite in direction, the forces cancel each other out — no net force. When a car is traveling along a highway at a constant speed, there is also no net force applied. The engine is rotating the wheels, which applies a forward force at the point of contact with the road, but the opposing forces of the air on the car and the road on the wheels are equal and act in the opposite direction (frictional forces, described shortly). These forces cancel each other and the car experiences no

net force, so it continues to travel at a constant speed. This forms the basis of Isaac Newton’s First Law of Motion:

An object at rest tends to stay at rest and an object in motion tends to stay in motion with the same speed and in the same direction unless acted upon by an unbalanced force.

When a net force is applied, the car will accelerate. Acceleration is defined as any change in an object’s speed or direction. So, whether a car speeds up, slows down or turns a corner, it is experiencing acceleration, which is due to an applied force. The greater the rate of acceleration, or the greater the mass to be accelerated, the more force is required. In fact, force is defined as the product of mass and acceleration:

Force = mass x acceleration

Therefore, as mass increases, more force is required to develop a given rate of acceleration. By the same principle a reduced mass requires proportionately less force.

This also relates to another important physical concept: inertia. Inertia is the tendency for objects to resist a change in their state of motion. Objects at rest tend to stay at rest; objects in motion tend to remain in motion. Newton’s First Law, noted above, represents this concept. The more massive an object, the more inertia it has and the more force is required to accelerate the object. In terms of automobile design, vehicle weight and inertia can be considered the same thing (“overcoming the inertia” is how engineers often describe the act of acceleration). An automobile In automobile design, engineers often refer coasting down the highway also has inertia, which to a vehicle’s “inertia weight”, which is the must be overcome by the brakes to reduce speed vehicle’s curb weight plus 300 lbs, to account for passengers and cargo. It is (called negative acceleration, or, less properly, also called “loaded vehicle weight” (LVW). “deceleration”).

Since mass is measured in kg and acceleration in m/s2 (m — metre, s — second), the units of force must be kg·m/s2. For simplicity, one kg·m/s2 is called a Newton, N. Recall the Honda Civic identified earlier, weighing 1,150 kg. To reach a speed of 100 km/h in 15 seconds requires the following force:

• 0 to 100 km/h (27.8 m/s) in 15 s requires an acceleration rate of 1.85 m/s2. • Force = mass (1,150 kg) x acceleration (1.85 m/s2) = 2,130 N.

So, a net force of 2,130 N must be applied to the car to reach 100 km/h in 15 second (keep this example in mind, as it will be used to discuss Work, Energy and Power, later).

Note that in this example, it is the net force that generates the motion. This is critical, because in addition to overcoming the inertia, the automobile must also counter the opposing forces of friction. Friction is a force generated between two surfaces in contact with each other that resists their relative motion and it is an important focus of automotive design. As an automobile travels faster, it encounters increasing resistance from friction generated by air “dragging” across the automobile’s outer surfaces. This force is commonly referred to as “aerodynamic drag”. Changing the vehicle’s shape can present less area for the air to act against and minimize the amount of frictional force developed. Altering the surface texture of the vehicle body can also reduce the air friction, or aerodynamic drag. Frictional forces also exist between the tires and the road. While a given amount of friction is required to keep tires from slipping as the automobile accelerates (called “traction”), less friction with the road is desirable when the car is coasting, called “rolling resistance”, which will act to slow the car.

The following figure illustrates the major forces at work on an automobile in motion, as described above.

Aerodynamic Drag Constant Speed

(no acceleration)

Rolling Friction Rolling Friction

Forward Force

Cruising Speed (no acceleration)

Total (Net) Force = Forward (Tire-to-Road) Forces – Frictional Forces = 0 (zero) [forward force of rotating tires on road] – [aerodynamic drag + rolling friction] = 0

Work and Energy

In terms of physics and engineering, work is defined as the application of a force over a distance, given by the following equation:

Work = Force x Distance

If force is applied, but no motion occurs, then no work is done. If an object is moved, say a distance of one meter by applying a force of one Newton, then one Newton-metre of work (N·m) has been performed. Returning to the Honda Civic example,

• The car accelerated at 1.85 m/s2 for 15 seconds. • At that rate, it would cover a distance of about 210 m. • The net force applied over that distance was 2,130 N. • So the work performed in moving the automobile is (2,130 N x 210 m) = 447,300 N·m.

To provide some meaning to this calculation, consider a situation in which the Honda Civic sits on a hilltop and begins rolling down the hillside under the force of gravity. Suppose the hillside was sloped such that the car accelerated at exactly 1.85 m/s2, as in the above example. By the time the car covers a distance of 210 m, can you guess how much work the force of gravity had performed on the car? The answer is the same as if the car were accelerated on level ground under force generated by the engine. So regardless of where the force originates (either the car’s engine or gravity), the amount of work performed is the same.

Consider also, that driving up the hypothetical hillside requires the same amount of work performed by the car’s engine as the work done by gravity to bring the car back down the hill. Look at it this way: the engine invested a specific amount of work to get the car up to the top of the hill. Engineers call this investment energy. When the car rolls back down the hill, the invested energy is spent, as it is converted to speed. Essentially, work represents the amount of energy used, and in order for work to be done, energy must be converted from one form to another.

There is chemical energy stored in the gasoline in the car’s fuel tank. The car’s engine converts some of that energy into work, which forces the car up the hillside. Once at the top, all the work performed by the engine to reach the summit has been converted into what is called potential energy (stored energy, or the potential for energy to do work). The force of gravity pulls the car back down the hill, accelerating it through increasing speeds as the potential energy is converted

into kinetic energy (energy represented as motion). In this hypothetical example, no energy is lost — it simply changes its form in the following way:

1. chemical energy to kinetic energy — as the car’s engine converts the energy in the fuel into motion to drive up the hillside, 2. kinetic energy to potential energy — as the car’s reaches the hilltop and stops, its kinetic energy has been fully banked as potential energy, and 3. potential energy back to kinetic energy — as the car rolls back down the hill, the store of potential is converted back into motion.

In each case, the amount of work done is equivalent to the amount of energy converted from one form to another. Therefore, we can also refer to work as energy conversion. Since energy, work and energy conversion are simply different perspectives on the same thing, they are measured according to the same units of measure. When measuring work, it is customary to use N·m. When speaking about energy we usually refer to the joule (J), which is equal to 1 N·m. Other units of measure have been developed to represent energy conversion that are more convenient for different applications. For example:

Newton-metre, N·m standard measure of work, equal to 1 J Joule, J standard measure of energy (energy conversion) Calorie, cal chemical or food energy Watt-hour, W·hr electrical energy

Understanding the concept of energy conversion, or work, is important to evaluating the merits of different automotive technologies. As indicated at the beginning of this section, fuel efficiency is a measure of how much fuel energy is converted in useful work. In the Honda Civic example, above, the amount of work done in accelerating the vehicle was 447,300 N·m. Suppose the Civic’s capacity to convert fuel energy into motion (its fuel efficiency) is about 15 per cent. To produce the required amount of work, the vehicle must actually consume (447,300 N·m / 0.15) = 2,982,000 J of fuel energy! Clearly, the more fuel efficient the vehicle, the less fuel it requires to travel. The remaining 85 per cent of the fuel energy was either expelled from the vehicle engine as heat energy or lost to friction in the car’s mechanical components, rolling resistance and aerodynamic drag.

“It all seems quite obvious. So why is it so important?” The concepts of mass, force, work and energy are the primary factors that influence fuel efficiency. For policy-makers, this means that improving national fuel consumption levels will require either:

• a reduction in vehicle mass, • technology improvements that minimize lost fuel energy, or • a combination of both.

Section 3.2 will describe how past changes in automobile weight and technology affected national fuel efficiency levels. For now, the remainder of this section will deal with the concepts of power and torque, which are also important aspects of automobile design that have an impact on fuel efficiency.

Power

The time rate at which work is done (the speed at which energy is converted) is called power. The fundamental measure of power is the Watt (W), defined as 1 joule per second (1 W = 1 J/s). Returning to the Honda Civic example, 447,300 J of energy were required to accelerate the vehicle from 0–100 km/hr in 15 seconds. Therefore, the power applied by wheels to the vehicle was (447,300 J / 15 s) = 29,820 Watts (J/s). By convention, 746 Watts (W) = 1 horsepower (hp). So the power output at the wheels required to accelerate from 0 to 100 km/h in 15 seconds is approximately 40 hp.

If one wished to reach 200 km/h in the same 15 second Example: The 2002 Honda Civic LX sedan is equipped with a 115 interval, it would require 160 hp engine. The more “sporty” Civic EX coupe has a 127 hp engine. hp. That is, doubling the The 0– 60 mph acceleration rating of the LX is 10.2 seconds, while 1 acceleration rate requires the EX gets there in 9.4 seconds . Disregarding the fact that the EX four times as much power. is a bit lighter than the LX, the extra 10 per cent in engine power So power demand increases yields only an additional eight per cent in acceleration performance. Thus, increasing power generally yields diminishing returns in with the square of speed. performance. This explains why a significant increase in engine power only slightly increases acceleration performance. Furthermore, it is evident that doubling vehicle mass requires twice as much power to achieve the same acceleration performance.

Torque

Torque is closely related to power and can often play a greater part in automobile acceleration. Earlier, the concept of force was reviewed as it is applied to move an object in a linear direction. Force can also be applied to cause rotation. When a wrench is used to tighten a bolt, a “twisting” force is applied that causes the bolt to turn. This twisting force is called torque and it is measured in pound-feet (lb-ft). Suppose a force of 1 pound is applied to the wrench handle at exactly 1 foot from the nut. This would generate a torque of 1 lb-ft on the nut. The SI54 metric measure of torque is Newton-metres (N·m), not to be confused with the measure for work. Torque is a special expression of force in that it results only in rotational motion (not linear motion).

As will be described later, an automobile engine converts the chemical energy in fuel into rotational kinetic energy in the engine’s crankshaft. Earlier, work and energy were defined as the application of a force to an object over a given distance. In rotating systems, work and energy are defined as the application of torque over a period of rotation (one rotation of 360o is defined as 2π radians, where π equals 3.14). Thus, the energy supplied by the rotation of the engine’s crankshaft is the product of the torque and the number of rotations multiplied by 2π. This means that if an engine applies 300 N·m of torque for 1,000 revolutions (2π x 1,000), about 1,885,000 N·m-revs (Joules) of energy has been supplied.

The time rate at which this energy is delivered is, naturally, the power output of the engine. If the 1,000 revolutions occur over a period of 60 seconds (1,000 rpm), then the power output is roughly 31,400 J/s (Watts), equivalent to about 42 hp. This example illustrates how torque and power are related and is summarized below:

Power ≈ Torque x Rotational Speed

This is a critical relationship in automotive design. It means that for a given power output, one can inversely vary torque and speed. In other words, while holding power constant, one can raise speed while lowering torque, or raise torque while lowering speed.

In North America, it is customary to represent speed in rpm, torque in lb-ft and power output in hp. Resolving the various numeric factors yields a simple equation for power and torque.

Horsepower [hp] = Torque [lb-ft] x rpm 5,252

54 SI – Système International d'Unités (International System of Units)

From this equation, it is clear that horsepower and torque are numerically equivalent when an engine turns at 5,252 rpm (this is true no matter the engine). Consulting the engine specifications on a 2004 Honda Civic 1.7 L standard engine55, the following engine characteristics are identified:

115 hp @ 6,100 rpm and 110 lb-ft @ 4,500 rpm

What this specification advertises is the maximum power and torque capacities of the engine. Due to the design of the engine, these separate, but related, characteristics reach their optimal values at different engine speeds. Let’s apply the equation for power and torque to fill out the picture:

Power output is given as 115 hp @ 6,100 rpm. At this rpm, the torque output is 99 lb-ft. Torque output is given as 110 lb-ft @ 4,500 rpm. At this rpm, the power output is 94 hp.

In the Civic engine, power output (the rate at which energy is converted in the engine) is higher when the engine runs faster, but provides more torque when the engine runs a bit slower. For city driving this is a good design, as more torque provides better acceleration at the lower speed range in which most people normally drive. Although automotive advertisements will often focus on horsepower levels, it is often the torque component of power that more accurately represents the acceleration performance sought by consumers. High levels of horsepower in automobiles are primarily applicable in high-speed racing conditions, for towing heavy loads, or for when the vehicle itself is inordinately heavy. Under typical urban driving conditions, however, high-level horsepower ratings on family automobiles often just represent a source of wasted fuel.

Components of the Modern Automobile

Having reviewed the concepts of energy, power and torque, it is almost time to consider how energy is distributed throughout an automobile as a system of components. This will help illustrate where energy is being converted into useful work and where is it lost, defining the overall fuel efficiency of an automobile. Before this analysis, however, a brief review of the basic components of the modern automobile is in order. These components will continue to be referred to throughout this document, especially as the discussion turns to ways they can be made to operate more efficiently.

The Internal Combustion Engine

Today, most automobiles are powered by an internal combustion engine, a device that converts fuel energy into rotational motion, or kinetic energy. The precise manner in which this occurs will be described later. For now, it is only important to recognize the following process:

1. fuel from the automobile’s tank is pumped into the engine, 2. fuel is mixed with air inside the engine and combusted, 3. combustion creates heat and pressure, which rotates the crankshaft, and 4. the hot combustion gases exit the engine through the exhaust system.

The crankshaft is the primary source of mechanical, rotating energy that drives all other vehicle systems. The energy to turn the wheels, charge the battery, drive the pumps and provide power for all electrical and electronic components is supplied by the crankshaft.

The exhaust system is connected to the engine at the exhaust manifold (or exhaust headers), which channel the flow of combustion gases through emission and noise control devices before exiting the tailpipe. Before the 1970s, very few emission control devices existed on automobiles. Now, due to air quality regulations, virtually all light-duty vehicles in North America have some

55 http://www.honda.ca/HondaEng/Models/CivicSedan/2004/features.asp

form of catalytic converter installed to reduce most toxic and smog-forming emissions. Resonators and mufflers are used to reduce engine noise transmitted through the exhaust system.

The Drivetrain

In this document, the drivetrain refers to all automobile components between the crankshaft and the road. The road is in contact with the tires, which are in turn attached to the wheels. The wheels are turned by an axel that is connected to the driveshaft. The driveshaft is Typical engine and drivetrain component layout. turned by the engine’s crankshaft source: http://auto.howstuffworks.com/transmission.htm/printable through the transmission. The transmission includes a series of gears that allows the engine crankshaft and the driveshaft to rotate at different speeds. The importance of this is that it allows the engine to operate close to its optimal range (usually about 2,000 to 3,000 rpm) while varying the speed of the driveshaft to match the needs of the driver.

Consider the table below, which demonstrates how a transmission speeds up the driveshaft though progressive gearing, while engine speed remains constant.

RPM at Transmission Output Gear Ratio Shaft with Engine at 3,000 rpm 1st 2.315:1 1,295 2nd 1.568:1 1,913 3rd 1.195:1 2,510 4th 1.000:1 3,000 5th 0.915:1 3,278

As shown, the output speed increases as the gear ratio decreases. Recall the torque/power equation, Power ≈ Torque x Rotational Speed.

Since the power output of the engine is constant at 3,000 rpm, the above equation indicates that first gear supplies less speed, but more torque, to the driveshaft — ideal for accelerating an automobile from a stop. By fourth gear, the input and output speed and torque are matched; and in fifth gear, the power output of the engine is transmitted to the driveshaft in the form of higher speed and less torque — ideal for cruising down the highway. Ideally, an engine would be attached to a transmission that allowed it to operate constantly at its most efficient speed, while producing an infinite range of gear ratios to match the driving conditions. Due to cost and mechanical limitations, however, most transmissions today come in 4 to 5-speed variations. Generally, adding gears permits the driver to operate the engine closer to its optimal speed for longer periods of time, improving automobile fuel efficiency.

Traditionally, transmissions come in two mechanical formats: manual shift and automatic control. Manual transmissions are controlled by the driver by way of a stickshift and are in direct contact with the engine crankshaft though a clutch. To shift gears in a manual transmission, a driver will momentarily disengage the clutch, which disconnects engine power to the driveshaft, make the shift and then reconnect engine power by re-engaging the clutch. The benefit of the direct connection offered by manual transmissions is that little power is lost across the clutch.

Automatic transmissions, on the other hand, shift gears without driver intervention and are indirectly connected to the engine though a torque converter. A torque converter is essentially a fluid pump device in which the engine crankshaft turns a pump that, in turn, drives fluid through a small turbine, causing it to rotate. The rotating turbine is connected to the driveshaft, thereby delivering power to the wheels. The benefits are primarily driver comfort and a significant boost in torque power during periods of acceleration. The downside is that some power is lost across the indirect fluid connection between the engine and the driveshaft, meaning that automatic transmissions can lead to lower levels of fuel efficiency.

The axel upon which the powered wheels turn is connected to the driveshaft through the differential. The differential is simply a set of beveled gears that redirect the rotation of the driveshaft to the wheels, as required. Depending on whether the automobile is designed for rear- or front-wheel drive, differential gearing can be located at the front or rear axel, as shown in the following figure. Front-wheel drive is a more complicated assembly than rear-wheel drive, but it is lighter and more compact, improving fuel efficiency and liberating more interior space for passengers.

Location of differential in rear-wheel drive and front wheel drive configurations. source: http://auto.howstuffworks.com/differential.htm/printable

The differential further reduces the speed of the drive shaft to the axels and wheels. In a way, the wheels and tires are also part of the transmission system. For example, torque can be increased through the installation of smaller tires. In the past, family cars would often be seen with smaller tires on the wheels if a heavy camper was in tow. Technically speaking, larger tires would be ideal for fuel-efficient cruising at higher speeds. However, neither of these strategies are recommended, as they may compromise the intended performance characteristics of the automobile.

Brakes are the last element of the drivetrain to be discussed, but certainly one of the most important — not only for safety considerations, but also for the energy they consume. Traveling at a given speed, an automobile has a specific amount of kinetic energy. This is energy has been transferred to the automobile by the engine, which has converted that energy from the fuel. To slow down, the kinetic energy must be converted to some other form. When the brakes are applied to the wheels, the energy of motion is converted into heat energy through friction, as the vehicle slows to a stop. The heat then dissipates to the surrounding atmosphere and is lost.

Brakes are mechanically actuated by a fluid that is pressurized by the driver’s foot on the brake pedal. The brakes are assisted by additional pressure supplied by the engine. Clearly, this system offers no option to recover the energy lost in braking. However, in new hybrid-electric vehicles, a feature known as “regenerative braking” provides a way for much of that braking energy to be saved and transferred back into the vehicle’s battery pack as stored electrical

energy. As will be discussed in section 3.3, regenerative braking in hybrid-electric vehicles offers an excellent opportunity to improve fuel efficiency.

The Electrical System

In most modern automobiles, all electrical components run on a 12-volt system powered by an alternator and battery, both mounted in the engine compartment. The alternator is essentially a small electric generator driven by the engine crankshaft. So long as the engine runs, electric power is supplied by the alternator, and excess energy is used to charge the battery while the automobile is in use. Upon starting the automobile, this stored energy is required to power the starter motor and “turn-over” the engine. Once the engine rotates a few times, it begins to operate under the energy supplied by the fuel.

Accessories and Small Components

Energy from the rotating action of the crankshaft is used to power a number of mechanical components in a typical automobile. These include various pumps for oil, fuel and coolant, as well as “power-assist” steering and braking systems, in which fluids are pressurized by engine-driven pumps to ease the mechanical load carried by the driver. Turning a steering wheel in older cars without power-assist could often be a very tiring part of driving around town. The more accessory systems power by the engine, the less energy is available to Alternator drive the vehicle, which reduces fuel efficiency. Using better-designed pumps can reduce this loss.

The electric system supports the operation of the on-board computer, the head lights and indicator lamps, interior lights, the enunciation panel, any and all “entertainment systems”, powered door Battery locks and windows, windshield defrosters and ventilation fans, to name a few components. New automotive designs Electricity from the battery may be needed to focused on occupant comfort are placing supplement the power supply when the load requirements exceed the alternator’s power capacity. an increasing load on the electrical source: http://www.autoshop101.com/ systems. For this reason and because electrically-powered pumps are much more energy-efficient, some manufacturers are increasing the electric capacity of their automobiles with 42-volt systems.

How the Energy is Distributed in the Modern Automobile

Having described the major components of the modern automobile in the last section, this section will illustrate how energy originating in the fuel is distributed among those components, where it is efficiently converted into useful work and where it is not. The following figure graphically displays that portion of available fuel energy consumed by each vehicle component, or otherwise lost in conversion.

Distribution of energy throughout a typical automobile system during urban driving conditions. source: http://www.fueleconomy.gov/feg/atv.shtml

In this case, the fuel represents 100 per cent of the energy available for conversion into mechanical work by the engine. As shown, less than 13 per cent of the fuel energy delivered to the engine actually makes it to the wheels and drives the car. The rest of the energy is consumed by the operation of various accessories and small components, or is lost in the form of waste heat, friction and idling. The following describes each of these elements in detail:

Engine — In theoretically ideal conditions, internal combustion engines are capable of converting about 50 per cent of the energy input (fuel) into kinetic energy (mechanical work). Under actual conditions, typical automobile engines usually Be careful of confusing thermal efficiency convert less than 40 per cent of the fuel energy with the meaning of vehicle fuel efficiency supplied into work, with the remainder lost as waste as used in this document, which is a combustion heat, plus some internal inertia and air- measure of vehicle distance traveled to fuel flow restrictions (pumping losses), friction and consumed. An engine may have a high mechanical deformation in the engine, collectively thermal efficiency rating, but if the vehicle it called engine losses. In engineering terms, the powers is inordinately heavy, it may still fraction of fuel energy converted into useful work is have a poor vehicle fuel efficiency rating (in called thermal efficiency. mpg or L/100 km).

Fuel burned while the car idles is also a source of tremendous waste, particularly when so much of stop and go city driving is spent idling. Think about it: an automobile consuming fuel while not moving has a fuel economy rating of zero. Not too impressive! Standby/Idle losses generally increase in urban driving conditions.

Finally, powering the various mechanical and electrical accessories further reduces the output energy of the engine.

Drivetrain — The remaining energy output from the engine is delivered to the transmission and driveshaft in the form of rotational energy (in this example). Here, friction within the transmission and differential gears, as well as power losses across the clutch or torque converter, represents the drivetrain losses.

The Balance of Energy Remaining for Motion — The remaining energy must be applied to overcome the following forces and move the vehicle (and to keep it moving):

• Aerodynamic Drag: A form of friction occurring between the automobile’s surface and the air, this force increases with relative speed. Overcoming this force at low speeds requires little fuel energy, but at highway speeds it usually represents the largest drain on the remaining fuel energy. • Rolling Resistance: While tires require sufficient friction to maintain grip with the road, their inherent static friction and tread design contribute to rolling resistance. Rolling resistance does not vary with speed as much as other retarding forces. • Inertia (acceleration and braking): Force must be applied to overcome inertia and accelerate the vehicle. Recall that energy invested in accelerating a vehicle is not lost until the brakes are applied. For this reason, engineers often express the energy required to overcoming inertia as “brake or braking energy”. Due to frequent braking, inertia can represent the largest single drain on energy during stop-and-go driving cycles. In contrast, a vehicle cruising at constant speeds only requires energy to overcome aerodynamic drag and rolling resistance.

The following table represents U.S. EPA estimations for the distribution of fuel energy in a typical automobile, according to urban and highway driving conditions.

Automobile System Energy Balance

Energy Consumed System Component Urban Driving Highway Driving Initial Fuel Energy 100% 100% Internal Energy Loads Engine (Combustion Heat & Internal Friction) 62.4% 69.2% Stand-by / Idle 17.2% 3.6% Accessories 2.2% 1.6% Drivetrain 5.6% 5.4% Sub-total 87.4% 79.8% External Energy Loads Aerodynamic Drag 2.6% 10.9% Rolling Resistance 4.2% 7.1% Inertia (Braking) 5.8% 2.2% Sub-total 12.6% 20.2% Total Energy Converted 100% 100%

In the above chart, note that only about 12 per cent to 20 per cent of the fuel energy input to the system is actually used to move the vehicle, as represented by the external energy loads. Note also the differences in energy consumption under the two driving conditions. Clearly, the automobile itself consumes less energy (internal energy loads) during highway driving, leaving more energy available for actual travel (external energy loads). This further demonstrates that today’s engine-powered vehicles are better suited to long-distance travel at highway speeds than urban stop-and-go commuting in which vehicle fuel efficiency drops significantly.

Fuel Energy and the Internal Combustion Engine

The previous two sections presented an overview of the primary automobile system components, plus the manner in which energy is distribution among them. This section will explain the manner in which that energy is generated through the combustion of fuel in an internal combustion engine.

Petrochemical Hydrocarbons — Today’s Most Widely Used Automotive Fuels

Hydrocarbons are molecules composed mainly of hydrogen and carbon atoms. Some hydrocarbons naturally exist as a liquid and some as a gas. Most serve well as fuels due to the ease with which they combust and release their internal energy as heat. Hydrocarbon fuels are produced in various ways. Ethyl Alcohol (C2H5OH), known as ethanol, is a biological product of fermenting grain sugars and is thus called a biofuel. Petrol, or gasoline, is derived from crude oil extracted from subterranean reserves and is called a petrochemical fuel. Some hydrocarbon fuels, such as methane (CH4), can either be produced biologically, as with the anaerobic decomposition of organic matter, or extracted from the earth in the form of natural gas. Depending on the source, therefore, methane could either be a biological hydrocarbon (biofuel) or a petrochemical hydrocarbon.

While many such fuels exist, the most popular are currently gasoline and diesel — petrochemical hydrocarbons refined from crude oil. Hydrocarbon configurations of gasoline range from seven to 11 carbons, but are most commonly present at the pump as heptane (C7H16) and octane (C8H18). The ideal configuration for diesel is cetane (C16H34). These particular fuels are very attractive for automotive use because they exist in liquid form and are relatively stable under normal atmospheric pressure. As a liquid, they contain a very high amount of energy in a relatively small volume, making them easy and profitable to transport by ship, truck and rail. By contrast, transporting a similar amount of energy in the form of methane, for example, requires the gas to be cooled and liquefied with high pressure equipment, then pumped into a specialized pressure vessel for transport. This requires substantial energy, expense and is potentially hazardous if the proper safety procedures are not observed.

Under open conditions and with the addition of a flame, hydrocarbon fuels will freely react with oxygen in the air — a process called oxidation or combustion. The chemical equation that describes the combustion of hydrocarbons like gasoline and diesel in air (containing roughly 21 per cent oxygen and 78 per cent nitrogen) is as follows:

56 Fuel (HXCY) + Air (O2 + N2) Î [Heat Energy] + CO2 + H2O + N2 (unaltered nitrogen)

This theoretical equation indicates that given sufficient oxygen and time to fully combust the fuel, the products of combustion should only be heat, carbon dioxide and water, with the nitrogen content of the air remaining unaffected. Gasoline freely burning in an open container might follow this reaction, but unfortunately, no useful work can be derived from the heat energy released in that situation. Harnessing work from the heat energy released in this reaction is the function of the internal combustion engine.

Internal Combustion Engines — Converting Heat into Work

By containing the air-fuel combustion in a compressed volume, engines are able to harness work from the heat energy released in the reaction. The heat causes the combustion gases to expand and the resulting increase in pressure generates a force that moves a piston. Recall that an applied force resulting in motion is work (work = force x distance), and a moving object has kinetic energy. Therefore, the sequence of events in an engine is as follows:

56 Where X and Y denote the typical hydrocarbon configuration of the fuel. For example, in gasoline X = 6 to 12, Y = 14 to 26.

1. chemical energy to heat energy — the internal chemical bonds in the hydrocarbon fuel molecules are converted into heat during combustion, 2. heat energy to kinetic energy — the heat produces pressure, which applies force to a piston (an object with mass), causing it to move.

This explains how internal combustion engines convert fuel energy into kinetic energy, which is used to produce work. In fact, the work produced is exactly equivalent to the amount of heat energy converted into kinetic energy, and the fraction of work extracted from the available heat is called the thermal efficiency of the engine.

thermal efficiency = work produced / heat generated = kinetic energy out / heat energy in

The rate at which the energy is converted is the rate at which work is done, which is defined as power (power = work / time). Therefore, increasing power requires either:

• that fuel be combusted (consumed) at a faster rate, • that the thermal efficiency is increased (more work extracted from heat), or • a combination of both.

In summary, increasing an engine’s thermal efficiency makes more power available to the automobile while minimizing the rate of fuel consumption in the engine. Recall that increasing thermal efficiency can help improve overall vehicle fuel efficiency (increasing the distance traveled per volume of fuel consumed).

The 4-Stroke Reciprocating Engine Cycle

The most common form of gasoline engine in today’s automobile is the 4-stroke reciprocating internal combustion engine (ICE). The basic components are the pistons, valves, camshafts and the crankshaft. A cross-section of the basic assembly is shown in the Cam inset figure.

As shown, a piston moves up and down within the Valve cylinders. The linear, reciprocating motion of the piston is translated into the rotary motion of the crankshaft (in the same way the up-and-down motion of a cyclist’s Crankshaft leg produces the rotating motion of the bicycle pedals). In addition to powering the car and all its various Piston pumps and accessories, the crankshaft also turns the camshaft(s). A camshaft is fitted with “egg-shaped” cams along its length, each of which controls the opening and closing of a valve as it rotates, thereby regulating the flow of air and fuel into the engine source: http://www.wordiq.com/ (intake valves) and combustion gases through the definition/Internal_combustion_engine exhaust (exhaust valves).

Further detail on the mechanical workings of the ICE will not contribute to the focus of this document. The ICE is not a particularly complex machine, but to explain its operation further would require a full chapter. Should the reader wish to learn more they are encouraged to consult with other sources of information. For now, it will suffice to describe the 4-stroke cycle in basic terms57.

57 The cycle described here actually specific to gasoline engines, but the same principles are at work in diesel engines as well. The main difference is that in a gasoline engine the air and fuel are pre-mixed, compressed and then ignited via

1. Intake Stroke. Starting with the piston at the top of the cylinder, the air-fuel intake valve opens and the piston moves down, creating a vacuum that draws air mixed with fuel into the cylinder. Once the piston has reached the bottom of its stroke, the intake valve closes. In older engines, fuel is continually added to the air as it flows though a carburetor on its way to the cylinder. Today, most engines use fuel injectors to spray a metered amount of fuel into the air just prior to entering the cylinder. This permits more precise control over the mix of air and fuel. 2. Compression Stroke. The intake valve closes and the piston moves back up the length of the cylinder, compressing the air-fuel mixture into a small volume (known as the combustion chamber). This generates higher pressure upon combustion, which produces more work and increases thermal efficiency. 3. Combustion / Power Stroke. When the piston reaches the top of its stroke, the air-fuel mixture ignites. Essentially a controlled explosion, the combustion reaction proceeds very rapidly, generating heat and pressure that forces the piston back down the cylinder. This is called the power stroke, and it is analogous to the downward push a cyclist applies to a pedal. This force is transmitted to the crankshaft, causing it to rotate. 4. Exhaust Stroke. Once again at the bottom of the cylinder, the piston begins to move upward, driven by the momentum of the crankshaft. The exhaust valve opens and the rising piston forces the expanded combustion gases out of the cylinder. Once the piston is at the top of its stroke, the exhaust valve closes and the cycle is complete. The cycle begins again with the opening of the intake valve, allowing a fresh mix of air and fuel to be drawn in as the piston descends.

The cycle repeats itself for every two turns of the crankshaft (the rate of rotation of the crankshaft is the speed of the engine). This means that an ICE running at 2,000 rpm completes this cycle about 17 times each second.

Clearly, the larger the cylinder, the more fuel it can admit and thus produce more power. However, it is impractical to design a large heavy engine on just one cylinder, due to the extreme vibration that it would generate with each oscillation of the piston. Instead, engineers design ICEs with small, multiple piston arrangements, which operate in opposing sequences to ensure that power is always being delivered to the crankshaft and that vibration from the oscillating pistons is minimized. The volume swept by the piston from its lowest point to its highest point is called displacement. The total displacement (sum of the source: http://auto.howstuffworks. volumes swept by all pistons) of the engine is normally referred com/engine.htm/printable to as the engine size and is usually measured in cubic- centimetres [cc], or litres (a 1,500 cc engine is also referred to as 1.5 litre engine). Engine displacement provides some indication of the available power output from the engine.

sparkplug, whereas in a diesel engine the air is compressed and then the fuel is injected, at which point it immediately ignites.

Exhaust Emissions

The combustion of fuel in an engine occurs under significant heat and pressure, and in a constrained volume with a limited amount of air. This is very different from the environment originally described above, in which the fuel freely combusted in open air. Recall that this ideal form of combustion produced only heat, carbon dioxide and water:

Fuel (HXCY) + Air (O2 + N2) Î [Heat Energy] + CO2 + H2O + N2 (unaltered nitrogen)

In a typical engine, the reaction looks more like this:

Fuel (HXCY) + Air (O2 + N2) Î [Heat Energy] + HXCY + CO + NOX + CO2 + H2O + N2

As shown, additional combustion products appear in the exhaust. These are explained below:

• HXCY — As the reaction takes place in an enclosed environment, some fuel escapes combustion, or is only partially combusted and then expelled from the engine with the exhaust. This situation is exacerbated by the short time allotted for combustion to occur, given the speed of reciprocation. The HXCY in exhaust can assume numerous forms, many of which are toxic and pollute the air, such as formaldehyde (HCHO). In air quality terminology, hydrocarbons are often called Volatile Organic Compounds (VOCs).

• CO — Carbon Monoxide is a product of partial fuel combustion and is highly toxic.

• NOX — Oxides of Nitrogen are produced when N2, a stable molecule that would otherwise remain unaffected, combines with available oxygen under conditions of high heat and pressure in the engine.

• If there is an excess of fuel in the reaction (a rich air-fuel mixture), then the combustion products may contain more HXCY and CO. If there is an excess of oxygen in the reaction (a lean air-fuel mixture, or lean burn), then the NOX emissions may be higher.

• The fuel type and quality of the fuel combusted can also contribute to other hazardous emissions, such as Particulate Matter (PM) and Oxides of Sulfur (SOX). Sulfur is a naturally occurring element in crude oil and often remains in refined fuels after processing.

Due to their negative impact on air quality and human health, VOCs, CO, NOX and PM emissions from vehicles are regulated by federal law in Canada and the U.S. New low-sulfur fuel regulations in North America will reduce SOX emissions significantly (as well as other pollutants due to the beneficial effect of lower sulfur fuel content on the performance of vehicle emission control systems). Appendix A contains further information on automobile emissions, and Chapter 6 discusses relevant regulations. For this discussion, it is sufficient to understand that the emissions generated by the engine are mainly the result of the following factors:

• temperature and pressure inside the engine, • time available for combustion to proceed (residence time), • air-fuel mix, and • emissions control systems (e.g., catalytic converters)

A poorly tuned engine can exacerbate any of these factors.

The quality of the fuel used in the engine can also greatly influence the composition of the emissions. Fuel quality, however, will not be discussed in this report.

Gasoline versus Diesel

The fundamental difference between gasoline and diesel engines is in their compression ratios — a measure of the change in total cylinder + combustion chamber volume as the piston rises during the compression stroke (max volume : min volume). The higher the compression ratio, the more work is extracted from the combustion heat and the greater the thermal efficiency of the engine. Automobile engine compression ratios on typical gasoline models range from 8:1 to 14:1, whereas diesel models can reach 25:1. This results in thermal efficiencies of about 25 per cent for gasoline engines and 35 per centfor diesel.

The reason gasoline engines have a lower compression ratio than diesel engines is due to the fuel itself. Gasoline mixed with air spontaneously combusts under relatively moderate pressure. If the air-fuel mixture combusts before the piston reaches the top of its compression stroke, power is lost and the engine can suffer damage. When using gasoline fuel, the ideal situation is to generate as much compression as possible without inducing spontaneous combustion, 15:1 and then spark-ignite the air-fuel mix. A gasoline Compression engine is, therefore, a spark-ignition ICE (the Ratio combustion is controlled with spark plugs).

Recall that gasoline is usually a blend of different hydrocarbon molecules, the number of carbons atoms in which can range from seven to 11. Seven carbon atoms form the heptane molecule (C7H16) and eight carbons denotes octane (C H ). Heptane endures 8 18 source: http://www.tpub.com/content/ relatively little compression before igniting, while doe/h1018v1/css/h1018v1_38.htm octane can sustain significantly more. By convention, gasoline is said to have an octane number of 90 if it has the same spark-ignition characteristics as a mixture of 90 per cent octane and 10 per cent heptane. A higher octane number allows an engine to be designed with a higher compression ratio, thus producing more power and better thermal efficiency.

The octane number of a specific gasoline can be “artificially” increased with special fuel additives. Tetraethyl lead was first used in the 1940s to boost octane number. However, it was phased out of use in automobiles by the 1980s, in part due its toxicity, but also to meet new mandates for the installation of catalytic converters on all gasoline-powered vehicles. Catalytic converters reduce VOCs, CO and NOX emissions in the exhaust, but require unleaded fuel to function (catalyst pollution controls are discussed further in section 3.2). Methyl tertiary butyl ether (MTBE) has been used as a replacement (largely in the U.S.) because it boosts octane without lead additives and acts as an oxygenate (releasing oxygen as it combusts). Traditionally, the extra oxygen supplied during combustion has been thought to reduce the amount of VOCs and CO in the exhaust. However, some government agencies, such as the California Air Resources Board, claim that there are no air quality benefits from oxygenate use in contemporary engines. MTBE is also thought to be a carcinogen and can pollute source water in the event of an accidental fuel spill. As a substitute oxygenate, some petrochemical refiners have turned to ethanol, as it is a biofuel and has no known severe health impacts.

In Canada, Methylcyclopentadienyl Manganese Tricarbonyl (MMT) has been a widely used gasoline additive to boost octane levels as an alternative to tetraethyl lead. Controversy has surrounded its use because auto manufacturers have conducted studies that show it lowers fuel efficiency and catalytic converter effectiveness over time.

In a diesel engine the air is first compressed and then the fuel is injected into the combustion chamber, self-igniting under the pressure. This is unlike a gasoline engine, where the air and fuel are mixed first and then compressed and spark-ignited. A diesel engine is, therefore, a compression-ignition ICE (no spark plugs — instead, specialized high-pressure fuel injectors are used). Cetane is a particular hydrocarbon configuration (C16H34), which happens to ignite very easily under compression. Because of this ideal quality, cetane was arbitrarily assigned a cetane number of 100, forming an index by which other diesel fuels could be rated according to the ease with which they ignite under pressure.

Like gasoline, typical diesel fuel is composed of many different hydrocarbons, each with its own specific cetane number. The actual cetane number at the pump represents the average cetane quality of the all the various hydrocarbons in the diesel fuel. Generally, diesel engines run well on a cetane number between 40 and 50, with no performance improvement past this range. Premium diesel often ranges between 45 and 50, but the premium moniker refers to the special lubricants and detergents in the fuel that help maintain the engine, plus some additives that vary based on seasonal and geographic factors.

Diesel engines are able to achieve high compression ratios because it is only air that is initially pressurized, with combustion commencing only after the fuel is injected. In addition, diesel fuel contains more energy per volume of fuel. When fully combusted, a litre of blended gasoline usually releases about 35 MJ of heat, compared to 39 MJ for diesel. Given the added energy density of the fuel and higher thermal efficiency of diesel engines, a typical diesel-powered automobile will consume 30 per cent less fuel for the same distance traveled by its gasoline counterpart. In other words, they’re much more fuel efficient.

On the other hand, gasoline engines are smaller, lighter and generally cheaper to manufacture. This was particularly true in the early days of the private automobile, over a century ago. Accustomed to their quiet electric-powered carriages, motorists already viewed internal combustion engines as a noisy and foul-smelling source of power. As such, gasoline engines were preferred over diesel as the lesser of two uncomfortable options. Thus, the development of gasoline engines and the supporting infrastructure dominated the light-duty vehicle segment for the next century (especially in North America). Meanwhile, diesel engine technology was mainly applied to heavy-duty vehicles, ships and equipment, where reliability and fuel costs are favoured over passenger comfort.

In today’s light-duty vehicle market, the comfort and performance differential between gasoline and diesel-powered automobiles is almost negligible, although the purchase price is still significantly higher for diesel power. This is primarily due to the larger size of the diesel engine (to accommodate the longer piston stroke needed for higher compression ratios), the heavier and stronger engine components (for operating under the comparatively higher temperature and pressure conditions) and the more sophisticated fuel injection equipment (specially designed to operate under the high pressure conditions of the combustion chamber).

Emissions represent another significant difference between gasoline and diesel engines. Gasoline engines normally mix air and fuel such that there is precisely enough oxygen to fully combust the fuel. This is called the stoichiometric ratio and it requires 14.7 pounds of air for every pound of gasoline (14.7:1). As explained earlier, a richer mix results in more VOCs and CO emissions because combustion is incomplete (oxygen-starved), while a leaner mix generates higher levels of NOX due to the excess oxygen and nitrogen in the mix (lean burn). Diesel engines naturally operate in lean-burn mode, more completely combusting the fuel and improving thermal efficiency, but generating more NOX as well. Diesel PM emissions also contain larger, more visible, particles of carbon. With respect to air quality, the debate continues on the relative health impacts between PM emissions from gasoline and diesel.

Greenhouse Gas Emissions

Of all exhaust emissions, carbon dioxide is the most directly related to fuel consumption. Increasing the amount of fuel consumed in an engine causes the amount of CO2 in the exhaust to increase by the same degree (all else equal). This is evident from the chemical combustion equations described earlier. CO2 is the most significant greenhouse gas emitted by automobiles, but certain VOCs and NOX emissions are also powerful GHGs. Specifically, CH4 and N2O have high global warming potentials (gwp) that make them about 21 and 310 times, respectively, 58 more potent that CO2 . Typical GHG emission levels for new light-duty vehicles in Canada are summarized in the following table.

Gasoline-Powered Diesel-Powered GHG Emission Passenger Car Light-Duty Truck Passenger Car Light-Duty Truck g/L g/L g/L g/L

CO2 (gwp = 1) 2,360 2,360 2,730 2,730 CH4 (gwp = 21) 0.12 0.22 0.05 0.07 N2O (gwp = 310) 0.26 0.41 0.2 0.2

Total (CO2e) 2,443 2,492 2,793 2,793

The results are given in grams per litre of fuel consumed, normalizing their impact to CO2- equivalent levels via their gwp values (CO2e). As shown, diesel-powered automobiles produce slightly more GHG emissions for each litre of fuel consumed than gasoline powered automobiles. However, since diesel engines consume 30 per cent less fuel per distance traveled (on average), the net impact is that a diesel engine produces less GHGs compared to a gasoline engine with similar performance characteristics.

Additional information on greenhouse gas emissions related to automobile use is included in Appendix A.

58 Canada’s Greenhouse Gas Inventory - 1990-2001, Table 1-1, August 2003.

3.2 Fuel Efficiency and Automotive Technology Trends Under CAFE and CAFC

This section provides the reader with an overview of the following:

• overall light-duty motor vehicle fleet trends with respect to vehicle population, vehicle use and fuel consumption, • market share trends by vehicle class, by model year, • fleet-average fuel efficiency levels, • specific vehicle technology trends, including emissions control, • attribute trends, such as power, weight and fuel efficiency, by model year, and • efficiency trends by manufacturer, by model year.

The trends are presented in such a way that their interrelationships can be seen. The focus will be on the period from the 1970s onward. The intent of this chapter is to reveal the actual impact that changing trends in automotive design and market sales mix have had on past levels of fuel consumption and the role that vehicle fuel efficiency regulations played.

Looking Back Over a Century of Automotive Design

Historically, as the spending power of consumers increased, so did average vehicle weight and power, with a corresponding decline in vehicle fuel efficiency. Though the fundamentals of automobile operation as a mode of transportation have changed little over time, certain vehicle attributes have varied significantly according to what the consumer market values most. In times of strong economies, when people have extra money to spend on vehicles, they have tended to value size and luxury over fuel efficiency.

Fuel consumption in the overall automobile fleet responds sluggishly to most changes in the market. Unlike the price of oil, which can respond to supply constraints with sharp and rapid increases, automobile use and fuel efficiency cannot respond as quickly to such changes. Automobiles last for more than a decade, and the consumer who purchases a gas-guzzling car the day before oil prices double must endure the economic hardship for as long as the vehicle is operated, or for as long as oil remains expensive.

An automobile manufacturer’s success is tied to their ability to respond to (and anticipate) the demands of the market. But what if the market fails to adequately represent the costs of climate change, air quality, rising oil prices or national energy security (i.e., societal costs that are external to the market)? The threat of another oil price shock, such as that which occurred in 1974, spurred the U.S. and Canadian governments to set national fuel efficiency standards for automobiles. Essentially, this move was an effort to reduce the “external” cost to the nation of high rates of oil consumption, a factor not well represented in the price of fuel. In other words, fuel efficiency regulations were a form of protection for the domestic economy.

As the weak economy of the 1970s progressed, consumers’ tastes shifted somewhat towards smaller, lighter and more fuel-efficient automobiles. Early on, small car imports from Japan and Europe did well in this environment. Later, U.S. manufacturers also began producing smaller and lighter vehicles, partly to compete for the small car market and partly due to the government plan to move forward on CAFE. Initially, weight reduction was the primary strategy to improve fuel efficiency, but by the 1980s this trend halted and vehicle weight remained fairly stable for several years. Fuel efficiency continued to rise, however, mainly due to improvements in the thermal efficiency of engines and reductions in drivetrain losses and aerodynamic drag.

By the late 1980s, manufacturers had achieved the CAFE target set by the U.S. Congress for passenger cars. From this time forward, no gains in fleet-average fuel efficiency occurred. Technology developments that had been used primarily to boost vehicle fuel efficiency were instead used to maintain vehicle fuel efficiency while boosting power and accommodating increased vehicle size, weight, and overall luxury and performance. These were vehicle characteristics favoured by consumers whose interest in fuel efficiency had been eroding with the steadily declining price of oil since the early 1980s.

Throughout the 1990s and up to the present, major strides in engine efficiency and drivetrain improvements continued, along with increased use of light-weight materials like aluminum. The combination of cheap fuel and economic optimism helped drive the demand for larger and more powerful automobiles. During this time, CAFE served as a minimum standard that helped to hold the line on fuel efficiency, but generated few incentives for improvement.

This is not to imply that all vehicle attributes are the exclusive result of a contest between market demands for power and CAFE requirements for efficiency. But it appears that in the absence of CAFE and CAFC targets, motor vehicle fuel efficiency would likely not have risen as high as it did in the1980s and would probably have sat at a much lower level than it did during the 1990s and today59.

Increasing sales of light trucks has been the primary contributor to the decline in fleet- average fuel efficiency levels from the late-1980s onward. Mainly composed of pickup trucks and cargo vans in the mid-1970s, the light truck fleet was assigned an appropriately lower CAFE target, recognizing that these vehicles were normally larger, heavier and used differently than passenger cars. At the time, the light truck fleet represented roughly 20 per cent of new vehicle sales. Today, even though pickups and cargo van marketshare remains at 20 per cent, the light truck fleet represents about 50 per cent of new vehicle sales in the U.S. and 40 per cent in Canada. This growth occurred during the 1980s and 1990s and was due to increasing sales of minivans sport-utility vehicles (SUVs).

As explained in section 2.1, the definition of what constituted a light truck under CAFE back in the mid-1970s was made according to the functional qualities of pickups and cargo vans at the time. These qualities generally included off-highway capability and large cargo capacity, and this broad definition has been used to classify minivans and SUVs as part of the light truck fleet. Thus, the current structure of CAFE (and CAFC) allows manufacturers to market personal use and passenger-oriented vehicles to consumers, while sidestepping the fuel efficiency targets set for passenger cars. This constitutes a two-tier system of fuel efficiency standards of which most consumers are not aware. The result is that, even though fuel efficiency levels have not decreased among the separate passenger car and light truck fleets, respectively, the fuel efficiency level for the combined light-duty fleet decreased steadily since the 1990s.

This “loophole” in the classification rules also permits vehicles that are based on passenger car platforms to be classified as light trucks. These are often referred to as cross-utility vehicles (XUVs). Examples of such vehicles include the Honda CRV (built on the Civic platform), the Chrysler PT Cruiser (built on the Dodge Neon platform) and the Dodge Magnum (built on the DaimlerChrysler 300 platform). These vehicles are considered part of the truck fleet because they satisfy one of several specific conditions, such as higher ground clearance or provisions for a flat-floor cargo area (a characteristic defined in the mid-1970s to accommodate cargo vans in the light truck fleet), for classification as a light truck. The significance of this development is that the manufacturers are able to accommodate increasing sales of larger SUVs by offsetting the negative impact of their poor fuel efficiency levels with the addition of more fuel-efficient XUVs into the light truck fleet mix. In essence, the North American automobile market is migrating to the less stringent light truck CAFE target and

59 NAS. (2002). Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards, pp. 3.

vacating the passenger car segment where federal compliance requires better fuel efficiency.

From this perspective, it is clear that fuel efficiency standards remain a major consideration for most high volume manufacturers in the North American market. CAFE regulations remain binding and very influential, not only on automobile design, but also on production planning, sales and marketing strategies – but not necessarily in the way they were probably intended. Rather than standing as a barrier to increasing oil dependence, the structure of the regulations may actually help encourage the market for vehicles with poor fuel economy. In short, the trend over the past 20 years in the North American fleet has been towards larger, heavier, more luxurious, more powerful vehicles that are less fuel-efficient, on average. This has contributed to greater oil dependence in the U.S. and increased greenhouse gas emissions in both the U.S. and in Canada.

The remainder of this section will focus on the specific trends that impacted fleet-average motor vehicle fuel efficiency levels, using graphs and illustrations. Unless otherwise stated, data used in this section were obtained from the following sources:

U.S. Fleet Data • “Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2004”; Hellman, Heavenrich, Advanced Technology Division, Office of Transportation and Air Quality, U.S. Environmental Protection Agency; http://www.epa.gov/otaq/fetrends.htm • “Transportation Energy Data Book: Edition 23”; Davis, Diegel, Center for Transportation Analysis, Engineering Science & Technology Division, Oak Ridge National Laboratory; http://www-cta.ornl.gov/data/Index.html

Canadian Fleet Data • Office of Energy Efficiency at Natural Resources Canada’s Energy Use Data Handbook Tables; http://oee.nrcan.gc.ca/neud/dpa/handbook_tran_ca.cfm?text=N&printview=N • “Energy Efficiency Trends in Canada”; 2004 Report; http://oee.nrcan.gc.ca/neud/dpa/data_e/publications.cfm?PrintView=N&Text=N • Industry Canada’s “Statistical Review of the Canadian Automotive Industry: 2002 Edition”; http://strategis.ic.gc.ca/epic/internet/inauto-auto.nsf/en/h_am01617e.html

Overall Fleet Trends: Population, Vehicle Use and Fuel Consumption

The following charts illustrate the overall light-duty vehicle fleet trends in the U.S. since 1970. This offers a view of how fleet population, vehicle use and fuel consumption trends interrelated prior to and since the CAFE program began in 1975. VMT — Vehicle Miles Traveled.

U.S. Fleet Population, VMT and Fuel Consumption, 1970–2001

U.S. Light-Duty Vehicle Population U.S. Light-Duty Vehcile Miles Traveled (1,000s registrations) (million miles)

250,000 3,000,000

2,500,000 200,000 Total Total

2,000,000 150,000

1,500,000 Passenger Cars Passenger Cars 100,000 1,000,000 Light Trucks Light Trucks 50,000 500,000

0 0

3 8 0 6 9 2 5 1 4 7 0 7 76 8 91 7 7 8 8 9 9 0 970 9 9 985 9 9 000 9 9 9 9 1 1 1 1979 1982 1 1 1 1994 1997 2 19 1973 197 1 1 19 1988 199 1 1 20

U.S. Light-Duty Vehicles - Fuel Consumed U.S. Light-Duty Vehicles - Fleet Trends (million gallons) (% Change)

140,000 160%

140% 120,000 Total 120% 100,000 VMT 100%

80,000 80% Population Passenger Cars 60% 60,000

40% 40,000 Light Trucks 20% Fuel Consumed 20,000 0%

0 -20%

3 8 3 8 7 76 8 91 70 79 82 85 91 94 97 00 970 9 9 985 9 9 000 9 97 9 9 9 9 9 9 0 1 1 1 1979 1982 1 1 1 1994 1997 2 1 1 1976 1 1 1 198 1 1 1 2

source: Transportation Energy Data Handbook: Edition 23, Oak Ridge National Laboratory.

Observations

• As shown in graphs 1 & 2, total vehicle miles traveled (vehicle use) and vehicle population continued to grow throughout the period, with light truck sales and use increasing at a faster rate than passenger cars, particularly during the 1990s. • As shown in graph 3, rising total fuel consumption was mainly driven by light truck use, while passenger car fuel consumption changed little over the period. • As shown in graph 4, up until the late 1970s, fleet fuel consumption tracked closely with vehicle population and use (VMT), indicating a fairly static level of fuel efficiency. However, around 1978, the amount of fuel consumed by the U.S. fleet made a sharp break from this trend and fluctuated for decade, but changes little, reflecting a sudden improvement in fuel efficiency levels. Later, in the early 1990s, fuel consumption began to track with vehicle use again, indicating that fuel efficiency returned to a static level with no overall improvements made. That time, however, increasing light truck use was also a major contributor to the trend.

U.S. Fleet Trends per cent change 31-year period (1970–2001)

Vehicle Population up 114% Vehicle Miles Traveled up 146% Fleet Fuel Consumption up 58% from passenger cars up 8% from light trucks up 333%

Of particular interest is the apparent effectiveness of the CAFE program on passenger cars. While vehicle use among passenger cars increased almost 80 per cent since 1970, fuel consumption in the fleet only rose by eight per cent.

The following charts illustrate the overall light-duty vehicle fleet trends in Canada since 1990. Data for a 30-year period (as in the preceding U.S. charts) were not available at the time of printing and hence the analysis is less robust. Additional information may be available for later revisions of this document.

Canadian Fleet Population, VMT and Fuel Consumption, 1990–2002

Canadian Light-Duty Vehicle Population Canadian Light-Duty Vehicle Kilometers (1,000s registrations) Traveled (million km)

20,000 450,000

18,000 400,000 Total Total 16,000 350,000 Passenger Car 14,000 300,000 12,000 250,000 10,000 200,000 8,000 150,000 6,000 Light Trucks 100,000 4,000

2,000 50,000

0 0

0 2 3 4 5 7 8 9 0 2 0 2 3 4 5 7 8 9 0 2 9 9 9 9 9 9 9 9 0 9 9 9 9 9 9 9 9 0 9 9 9 9 9 9 9 9 0 001 9 9 9 9 9 9 9 9 0 001 1 1991 1 1 1 1 1996 1 1 1 2 2 200 1 1991 1 1 1 1 1996 1 1 1 2 2 200

Canadian Light-Duty Vehicles - Energy Consumed (PJ)

1,200.00

1,000.00

Total

800.00

Passenger Car

600.00

400.00 Light Trucks

200.00

0.00

0 2 3 4 5 7 8 9 0 2 9 9 9 9 9 9 9 9 0 9 9 9 9 9 9 9 9 0 001 1 1991 1 1 1 1 1996 1 1 1 2 2 200 source: Office of Energy Efficiency at Natural Resources Canada’s Energy Use Data Handbook Tables; Industry Canada’s “Statistical Review of the Canadian Automotive Industry: 2002 Edition”

Observations

• Total vehicle kilometers traveled (vehicle use) and vehicle population grows at a very gradual rate throughout the period. • Rising fuel consumption was mainly driven by light truck use, while passenger car fuel consumption changed little over the period.

Canadian Fleet Trends per cent change 12-year period (1990–2002)*

Vehicle Population up ~7% Vehicle Miles Traveled up 9% Fleet Fuel Consumption up 12% from passenger cars down 3.3% from light trucks up 49%

* During this time period, the U.S. vehicle fleet increases were: vehicle population 22 per cent, VMT 27 per cent and fuel consumption 23 per cent.

Market Trends

The following chart illustrates the relative changes in the share of total light-duty vehicle sales in the U.S., among the different size classes, over the period from 1976 to 2002.

U.S. Market Share of New LDV Sales by Size, 1976–2002

source: Davis, S. & Diegel, S. (2003). Transportation Energy Data Hanbook: Edition 23. Oak Ridge National Laboratory. Figure 4.1

Observations

• In the late 1970s and early 80s, the market share of subcompacts and midsize cars increased at the expense of compact and large cars. This contributed to the overall weight reduction that occurred in the passenger car fleet at that time, resulting in sharply increased fleet-average fuel efficiency. The share of subcompact sales has diminished substantially since that time, yielding its market share to compact cars. • The Pick-up truck and large (cargo) van market share remained fairly steady throughout the entire period, indicating a steady demand for work- and commercial-oriented vehicles. • The minivan first appeared in the early 1980s in the light truck category, despite its clear design focus as a family- and passenger-oriented vehicle. • The SUV market share increases rapidly in the late 1980s and early 1990s, with large SUVs enjoying a quick boost in the mid-90s. The bulk of the SUV market share growth has been fueled by the sale of medium-sized SUVs. • By period’s end, about 50 per cent of new vehicle sales were among the light truck category. This shift had a profound effect on overall light-duty vehicle fleet-average characteristics, such as weight and fuel economy, as demonstrated in the next section of this report.

The following chart illustrates the relative changes in the share of total light-duty vehicle sales in Canada, among the different size classes, over the period from 1990 to 2000. Market data for a more detailed breakdown by vehicle size over a 26-year period (as in the preceding U.S. chart) were not available at the time of printing; hence, the analysis is less robust.

Canadian Market Share of New LDV Sales by Size, 1990–2000

100%

90%

80%

70% SUV Van & Minivan 60% Pickup 50% Luxury Full Size 40% Intermediate 30% Compact 20% New Light Vehicle Market Share Vehicle Light New 10%

0% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

source: Statistical Review of the Canadian Automotive Industry: 2002 Edition, Industry Canada

Observations

• Evidence of a trend similar to that of the U.S. is illustrated in this chart. Although not as pronounced, there was an erosion of passenger car market share by the SUV, Van and Minivan market classes up until the late 1990s, when the respective shares stabilized. After this, the SUV category began to erode the van and minivan market share. • Pickup truck market share remains fairly constant, as in the U.S., at about 15 per cent. Larger car market share, represented by the luxury and full-size segments, is also consistent, but represents market segment. • By period’s end, about 40 per cent of new vehicle sales were among the light truck category. This shift had a profound effect on overall fleet-average characteristics, such as weight and fuel economy, as demonstrated in the next section of this report. • The compact car market is more popular in Canada than in the U.S. and this currently contributes to a more fuel-efficient light-duty vehicle fleet in Canada. If the trend towards heavier, less fuel-efficient SUVs continues, this situation could change.

Fleet-Average Fuel Efficiency Trends (CAFE and CAFC)

The following chart illustrates the sales-weighted light-duty vehicle fuel economy for each model year from 1975 to 2004. The trends are based on EPA laboratory test results used to calculate CAFE levels for each manufacturer. Also included in the chart are the respective CAFE targets as they exist for the passenger car and light truck fleets, as well as the light truck share of vehicle sales (i.e., per cent truck).

U.S. LDV Fleet-Average Fuel Economy, 1975–2004

30.0 100% Passenger Cars 28.0 27.5 90%

26.0 80% Combined 24.0 70%

22.0 60% Light Trucks 20.7

20.0 50% % Truck 18.0 40% mpg (EPA Lab) mpg (EPA

16.0 30% % Truck 14.0 20%

12.0 10%

10.0 0%

5 3 1 7 85 9 0 9 9 0 19 1977 1979 1981 1983 1 1987 1989 1991 1 1995 1997 1999 2 2003

source: Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2004”; Hellman, Heavenrich, U.S. Environmental Protection Agency.

Observations

• The impacts of the CAFE program on the U.S. light-duty fleet appear evident in this chart. From 1975 to 1987, there was a rapid and sustained increase in average fuel economy, both in the passenger car and light truck fleets. • Once the passenger car and truck fleets achieved their respective CAFE targets, fleet- average fuel economy ceased to rise and instead fluctuated near the target levels. • Fuel economy in the combined fleet (car and truck) fell steadily after 1987, mainly due to the increasing market share of heavier, less fuel efficient trucks in the overall light-duty fleet mix. This illustrates how the combined fleet average has been moving away from the passenger car target set by Congress and towards the light trucks target set by NHTSA.

The following chart illustrates the sales-weighted light-duty vehicle fuel consumption for each model year from 1977 to 2000. Note that, in Canada, fuel efficiency improvements are represented by reduced fuel consumption levels. The trends are based on actual EPA laboratory test results used by Transport Canada to calculate CAFC levels for each manufacturer. Also included in the chart are the respective CAFC targets as they exist for the passenger car and light

truck fleets, plus the light truck share of vehicle sales (i.e., per cent truck). The time period covered is not as large as in the U.S. chart since the data were not available at the time this report was prepared.

Canadian LDV Fleet-Average Fuel Consumption, 1977–2000

15.0 100.0%

14.0 90.0%

13.0 80.0%

12.0 70.0%

11.0 11.4 60.0%

Light Trucks 10.0 50.0% Combined % Truck L / 100 km 9.0 40.0%

8.6 8.0 30.0% Passenger Cars

7.0 20.0% % Truck 6.0 10.0%

5.0 0.0%

7 5 9 79 81 83 87 89 91 93 95 97 97 9 9 9 9 9 9 9 9 9 1 1 1 1 198 1 1 1 1 1 1 199

source: Transport Canada website & data supplied by OEE at NRCan.

Observations

• The impacts of the CAFC program on Canada’s light-duty fleet appear evident in this chart. From 1977 to 1981, there was a rapid and sustained drop in average fuel consumption, both in the passenger car and light truck fleets. In this respect, the Canadian fleet achieved its fuel efficiency target ahead of the U.S., which lagged by about 6 years. • Passenger car fleet-average fuel consumption decreased until it exceeded the CAFC target and remained solidly below the required target, even trending down towards the end of the period. This indicates a preference among Canadians for more fuel-efficient cars, although preferences may have more to do with economic restrictions than style preferences. • Light truck fleet-average fuel consumption exceeded the CAFC target by a significant margin in early years, remaining steady until the late 1980s, after which it began to rise sharply (although this fluctuation probably just represents changes in light truck GVWR classification that occurred in 1988). From the early-1990s onward, light truck fuel consumption fluctuated around the CAFC target level. • Fuel consumption in the combined fleet (car and truck) increased steadily after the late 1980s, mainly due to the increasing market share of heavier, less fuel-efficient light truck vehicles in the overall light-duty fleet mix.

Automobile Technology and its Impact on Fleet-Average Fuel Efficiency Trends

In Section 3.1, the basic components of the modern automobile were described. This section briefly describes the major technology developments in some of those components that had an effect on fleet-average fuel efficiency.

Rear, Front and 4-Wheel Drive Systems

In terms of fuel efficiency, weight is the main difference between rear, front and 4-wheel drive systems. Front-wheel drive systems are typically lighter, because there is no driveshaft running to the rear axel, as is the case with rear-wheel systems. The differential gear is also smaller and lighter in a front-wheel drive system. Four-wheel drive systems not only have differentials on the front and rear axels, but they also require additional gearing equipment (e.g., transfer cases) that substantially increase weight. Moreover, the extra gearing represents added drivetrain power loss. In all, the negative impact on vehicle fuel efficiency of 4-wheel drive systems is quite substantial.

Between the late-1970s and the late-80s, the share of front-wheel drive systems in passenger cars increased from about 10 per cent to 80 per cent, displacing rear-wheel drive as the predominant drive system. This helped to reduce vehicle weight, improving fuel efficiency. Pickup trucks have remained mainly rear-wheel drive during this time. Considering that most pickups are designed to be heavily loaded over the rear axel, it makes sense to drive the rear wheels due to the added traction.

Four-wheel drive systems have dominated, and continue to dominate, the SUV market, limiting the fuel efficiency potential of that fleet. This is often an unnecessary source of added vehicle weight, as 4-wheel drive is not considered by insurance and transportation authorities to improve vehicle safety in normal driving conditions60. There are some specific applications where 4-wheel drive is useful: driving through deep snow or mud, engaging the transmission in low gear to help slow down a vehicle, and accelerating on slippery surfaces61. However, most urban motorists and highway travelers rarely have need of such technical capabilities, and few are properly trained in how to operate a 4-wheel drive vehicle in deep snow and mud, regardless. For some drivers, the increased traction available when accelerating in slippery conditions could possibly lead to a false assessment of their vehicles’ capacity to brake or control skids in such conditions. Four-wheel drive does not offer better braking or skid control, and the increased weight can necessitate even longer stopping distances.

The increasing use of front wheel drive systems in passenger cars initially helped to boost fleet- average fuel efficiency in the 1970s and 80s, mainly by reducing average vehicle drivetrain weight. However, 4-wheel drive systems are dominant in truck-based SUVs and as their market share increases, the former fuel efficiency gains from lighter drivetrains are being eroded.

Transmission Improvements

As described previously in section 3.1, adding gears to a transmission allows the engine to operate closer to its optimal rpm range while meeting the speed and torque requirements of the vehicle. The more time the engine can spend operating in its most efficient range, the higher the level of overall vehicle fuel efficiency.

Automatic transmission has dominated the light-duty vehicle market since the mid-1970s, with manual transmission never representing much more than 20 per cent of systems sold in the U.S.

60 “Automakers may tout features like traction control and four-wheel-drive to avoid crashes, and these may indeed improve performance on certain road conditions. But they have more to do with enhanced performance, faster starts, and cornering than with safety. There's no evidence they prevent crashes.” — Insurance Institute for Highway Safety; http://www.iihs.org/vehicle_ratings/sfsc.htm 61 Bradsher, High and Mighty: The Dangerous Rise of the SUV, Public Affairs, 2002; pp. 130-131

Three-speed automatics were the most popular transmission across the entire fleet of cars and trucks up until the late 1970s, when torque converter lockup technology became available. Recall from section 3.1 that power is lost across the indirect fluid connection that exists in the torque converter, which links the engine and the driveshaft. Torque converter lockup design employs a type of friction clutch similar to that used in manual transmission, which engages a direct mechanical connection between the engine and driveshaft. The “lockup” occurs as vehicle acceleration slows (as it approaches cruising speed), eliminating the energy lost due to fluid “slippage” in the torque converter and increasing vehicle fuel efficiency.

Torque converter lockup was first used in 3-speed transmissions, but “4-speed lockups” became the norm by the 1990s and today represents about 75 per cent of new light-duty vehicle sales. Five-speed lockups began making significant market share gains in the late 1990s.

The increasing share of 3- and 4-speed torque converter lockup transmission technology in new vehicle sales contributed to increasing fleet-average fuel efficiency in the 1980s, by minimizing lost energy in the torque converter and permitting the engine to operate closer to its optimal speed for longer periods of time. Since then, however, the energy savings have generally been used to boost vehicle weight, power and acceleration performance while holding steady fleet-average passenger car and light truck fuel efficiency.

Engine Size, Power Output & Specific Horsepower

Increased engine size, in terms of displacement (as described in section 3.1.4), can increase power output. Engine size decreased by about 40 per cent between the mid-1970s and mid-80s, after which time it essentially leveled out — except in the pickup and SUV markets, where it has since increased at a somewhat slower rate. Horsepower output also declined, but less dramatically and only during the mid- to late-1970s. From the early 1980s onwards, fleet-average horsepower increased steadily and quite substantially. This was mainly due to a variety of technical engine refinements, which boosted thermal efficiency and generated more horsepower per cubic-inch of engine displacement (CID). This factor is referred to as specific horsepower (HP/CID) and it has increased steadily since the mid-1970s (more than 200 per cent in the light- duty vehicle fleet).

Many engine improvements contributed to this trend. A few are listed below:

1. Improved combustion chamber design to ensure more complete combustion of fuel. 2. Introduction of overhead camshafts for more precise valve actuation. 3. Improved valve and multi-valve design to maximize airflow through the cylinders and minimize pumping losses. Most passenger cars in the mid-80s had two valves per cylinder (intake & exhaust), but now about 70 per cent of car engines have 4 valves per cylinder (light trucks have lagged, but are now following a similar trend). 4. Use of port fuel injection instead of air-fuel pre-mixing in a carburetor. Modern fuel injectors are electronically controlled for greater accuracy in the air-fuel mix ratio, maximizing combustion heat. 5. Overall use of lighter materials, compact assembly design and improved lubrication have minimized inertia and friction loads within the engine and have reduced engine mass.

In the same way that these engine improvements can be used to increase engine power without increasing engine size, they can also be applied to increasing fuel efficiency without sacrificing power or performance.

The improvements in engine design have steadily increased thermal efficiency and specific horsepower. These gains were applied to improving vehicle fuel efficiency in the late 1970s and early-80s, but have since been used mainly to boost vehicle weight, power and acceleration performance while holding steady fleet-average passenger car and light truck fuel efficiency.

Emissions Control

Regulations instituted first by the State of California in the 1960s and later by the U.S. and Canadian federal governments, require auto manufacturers to limit vehicle emissions that contribute to the formation of smog, that are directly toxic to human health, or otherwise impact negatively on air quality. The earliest automobile emission regulations mandated the inclusion of technology to limit the evaporation of combustion gases and fuel vapour from the crankcase of all passenger cars. From there, increasingly stringent and robust regulations have continually driven the development of emissions control technologies, culminating in today’s highly effective catalytic converters. On a per-vehicle basis, today’s automobiles are estimated to generate 90 per cent less air pollutants than those of the pre-regulation era. Chapter 6 contains further details on light-duty vehicle emissions and related regulations.

Technical developments in emissions control have varying impacts on vehicle fuel efficiency. Exhaust after treatment devices, such as catalytic converters, create a restriction to the free flow of combustion gases out the tailpipe and this increases engine pumping losses. Conversely, improved combustion chamber design ensures that more of the fuel is combusted, which improves thermal efficiency in the engine and reduces some emissions, such as VOCs and CO.

A quick overview of the major developments in emissions control technologies is given below. It is worth noting that some of these were mentioned in the discussion of engine improvements. This follows from the many co-benefits that improved engine design can have on emissions reduction.

Positive Crankcase Ventilation (PCV). When combustion gases expand in a cylinder, a portion may “blow past” the pistons, entering the crankcase (where the crankshaft and lubricating oil is located) as partially combusted fuel. Before PCV, these combustion gases were simply vented to the surrounding atmosphere. With PCV, the gases are circulated from the crankcase back into the engine where they mix with fresh air and fuel and are re-combusted. This minimizes evaporative emissions from the engine and improves fuel efficiency.

Fuel Vapour Control System. Fuel tank caps are fitted with pressure-relief and vacuum-relief valves that vent fresh air into the fuel tank as the fuel level drops. In the past, they also served to expel fuel vapours (i.e., VOCs) if pressure increased within the tank. Instead of simply venting the unused fuel vapour, modern fuel vapour control systems collect the fuel in a charcoal canister. When the engine starts, the fuel is drawn back out of the canister and into the engine. This system minimizes evaporative emissions from the fuel tank, saving fuel and improving fuel efficiency.

On-Board Refueling Vapour Recovery (ORVR). The gas tank and fill pipe are designed so that when refueling the vehicle, fuel vapors (i.e., VOCs) in the gas tank are collected in an activated carbon packed canister, without which the vapours would escape to the outside environment. When the engine starts, the fuel is drawn back out of the canister and into the engine.

Improved Combustion Chamber Design. Ensuring maximum fuel combustion lowers emissions levels and improves fuel efficiency. Chamber geometry that eliminates corners and pockets where the combustion flame front may extinguish or otherwise leave fuel “uncombusted” is ideal. “Hemi” engines use smooth, hemispherical-shaped chambers to achieve the geometric ideal; although they effectively limit the number of valves in each cylinder to two, which can increase pumping losses. Diesel engines rely on chamber pressure to ignite the fuel; hence, combustion is more complete, reducing VOC and CO emissions and improving fuel efficiency. Whether using gasoline or diesel fuel, improved combustion chamber design has reduced emissions and increased thermal efficiency in the engine

Camshaft Design. Designing the camshaft to close the exhaust valve earlier helps to retain some of the unburned fuel for subsequent combustion. The primary impact of this design has been to reduce VOC and NOX emissions during periods of engine idle. NOX emissions are reduced

because the retained combustion gases dilute the incoming air-fuel mixture, lowering the peak temperature of combustion and creating conditions less favourable to NOX formation.

Exhaust Gas Recirculation (EGR). When the engine is running at its nominal temperature (steady and hot), an EGR valve can divert a significant portion of the combustion gases back into the intake manifold. This dilutes the air-fuel mixture, which lowers the peak temperature of combustion, producing less NOX.

Vacuum Spark Ignition Control. Used to lower peak combustion temperatures and reduce NOX emissions, this was a mechanical method of delaying sparkplug firing. This mainly helped to reduce emissions during periods of low-speed acceleration. With the advent of electronic ignition control, this technology is no longer used in today’s vehicles.

Catalytic Converter. Catalytic converters reduce VOC, NOX and CO emissions by partially converting these compounds into less toxic substances, such as H2O, CO2 and N2. Catalytic converters were introduced in the mid-1970s. The catalytic converter is located along the exhaust pipe, close enough to the engine so it heats up function properly. Inside the catalytic converter, there is a honeycomb matrix coated with a combination of three platinum-group metals, or PGMs (platinum, palladium and rhodium). The honeycomb structure presents the most surface area in the least volume. This presents the least possible obstruction to the exhaust gases, while making maximum contact with the PGMs (it also minimizes the amount of PGMs required — expensive and limited mineral resources).

source: http://auto.howstuffworks.com/catalytic-converter.htm/printable

In the first stage of the converter, known as the reduction catalyst, the platinum and rhodium “catalyze” a reaction in which NOX is converted reduced to N2 and O2. In the next section, called the oxidation catalyst, VOCs and CO are converted (oxidized) into H2O and CO2 by exposure to platinum and palladium in the presence of sufficient oxygen. For the system to operate at maximum effectiveness, a specific amount of oxygen must be present — enough to oxidize the VOCs and CO; but not an excess of oxygen, which limits the amount of NOX that can be reduced. On older models, the oxygen was provided by an air pump controlled by an upstream oxygen sensor in the exhaust manifold. In modern vehicles, advanced controls help maintain the proper oxygen mix (e.g., stoichimetric ratio) in the catalytic converter.

While improving emissions, the catalytic converter “steals” some power from the engine, representing a slight loss in vehicle fuel efficiency. However, the benefits of cleaner air are considered by regulators to outweigh the reduced fuel efficiency.

Fuel Injection. Fuel injectors spray a specific amount of fuel into the air just before the intake valve opens and the mixture is drawn in. Fuel injection provides more precise control over the air- fuel mix ratio, resulting in more complete combustion and fewer emissions. This improves the thermal efficiency of the engine, as well.

Electronic and Computer Control. While the above emission control enhancements can be mechanically and electrically actuated to a certain degree, superior control over a range of driving conditions is better achieved with computer sensing and control, combined with electronically actuated systems. These systems are used to reduce emissions and increase thermal the efficiency of the engine.

Many emissions control technologies have focused on achieving greater combustion of fuel, which has led to better thermal efficiency levels in light-duty vehicle engines. Leading up to the mid-1980s, many of these technologies resulted in higher fleet-average fuel efficiency levels, but following the mid-1980s, increased vehicle weight, power and acceleration performance have been emphasized while holding steady fleet-average passenger car and light truck fuel efficiency.

For further data trends, the reader should consult “Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2004”; Hellman, Heavenrich, Advanced Technology Division, Office of Transportation and Air Quality, U.S. Environmental Protection Agency; http://www.epa.gov/otaq/fetrends.htm. This report contains charts that track specific vehicle attribute and technology trends as described in this section.

Fleet-Average Vehicle Attribute Trends

The following charts illustrate the U.S. sales-weighted light-duty vehicle attribute trends for each model year from 1975 to 2004:

• vehicle weight, • vehicle power, • drivetrain efficiency, • acceleration performance, and • power-to-weight ratio

In order to place these attributes in the context of fuel efficiency, the fuel economy62 levels are included, as well. The trends will be represented in terms of the per cent change from their 1975 levels, in order to better compare the data on the same set of axes.

A brief explanation of what each trend represents is given below:

Vehicle Weight. This refers to the inertia weight of the vehicle (curb weight + 300 lbs to include passengers and cargo).

Vehicle Power. The peak power output of the vehicle’s engine.

Drivetrain Efficiency. This is calculated by multiplying the vehicle weight by its fuel economy rating (i.e., ton-mpg). The ton-mpg value is the efficiency with which the vehicle mass is moved by the engine and drivetrain. Both heavy and light cars tend to have similar drivetrain efficiency ratings. This indicates that similar technology and component design is applied in most light-duty vehicles (cars and trucks), and is simply scaled up or down in size according to vehicle weight. In this way, the drivetrain efficiency calculation normalizes fuel efficiency to vehicle weight63.

Acceleration Performance. Time measured for 0–60 mph. This is related to engine power and transmission gearing.

62 The values utilized are the EPA adjusted fuel economy values, which better represent the actual driving experience as opposed to the laboratory test results used to determine CAFE levels. 63 See Appendix D for additional discussion on drivetrain efficiency and normalized ratings.

Power-to-Weight Ratio. This is the ratio of peak engine power output to vehicle inertia weight. It indicates the amount of power available to accelerate the vehicle’s mass.

The values of these vehicle attributes are of less significance than understanding how their trends relate to overall fleet-average fuel efficiency.

U.S. Fleet-Average Change in Vehicle Attribute Trends, 1975–2004 Power, Weight, Drivetrain Efficiency, Acceleration, Power-to-Weight and Fuel Economy

Passenger Cars Passenger Cars

100% 100%

fuel economy 80% 80%

60% 60%

40% 40% drivetrain Power efficiency 20% 20%

% change % change acceleration performance

0% 0%

Weight power-to- -20% -20% weight

-40% -40%

8 1 4 7 0 3 6 9 8 1 4 7 0 3 6 9 7 8 8 8 9 9 9 7 8 8 8 9 9 9 975 9 9 9 9 9 9 9 975 9 9 9 9 9 9 9 1 1 1 1 1 199 1 1 1 2002 1 1 1 1 1 199 1 1 1 2002

Light Trucks Light Trucks

100% 100%

80% 80%

fuel economy 60% 60% drivetrain efficiency 40% 40% power-to- Power weight

20% 20% % change % change acceleration performance 0% 0% Weight

-20% -20%

-40% -40%

8 1 4 7 0 3 6 9 8 1 4 7 0 3 6 9 7 8 8 8 9 9 9 7 8 8 8 9 9 9 975 9 9 9 9 9 9 9 975 9 9 9 9 9 9 9 1 1 1 1 1 199 1 1 1 2002 1 1 1 1 1 199 1 1 1 2002

source: Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2004”; Hellman, Heavenrich, U.S. Environmental Protection Agency.

The above charts provide a visual representation of the impacts that some of the technology developments have had on vehicle attributes since 1975.

Observations

• The 80 per cent fuel economy increase in passenger cars between 1975 and 1987 seems initially to have been achieved though weight and engine power reduction. However, by the early 1980s, technology-driven improvements in drivetrain efficiency and power-to-weight ratio halted the downward trend in power and weight attributes. The steady and continuing improvement in technology has allowed power and weight to increase while vehicle fuel efficiency was held constant from the late-80s onward. • A similar trend occurred in the light truck category, with fuel economy improving almost 60 per cent above 1975 levels. This was followed by a much greater increase in power and weight from the late-80s onward. • The increase in power-to-weight also resulted in an increase in fleet-average acceleration performance in passenger cars and light trucks.

In short, the only significant increases in the sales-weighted, fleet-average fuel economy among auto manufacturers’ U.S. fleets occurred between 1975 and 1987. In contrast, other vehicle attributes that directly impact fuel economy have been increasing steadily since the early- to mid- 1980s, at the expense of further gains in fuel efficiency.

To place this in perspective, in their 2003 Report on LDV fuel economy trends, Hellman and Heavenrich64 estimated that if fleet performance and weight distributions had been held at the same levels as in 1981 up to 2003, the CAFE level of the light-duty vehicle fleet would be about 33 per cent higher than present.

% Change in U.S. Fleet-Average LDV Attributes 1981 - 2004

120%

100%

80%

60%

40%

20%

0% Fuel Economy Weight Power 0 - 60 Time (1% higher) (27% heavier) (104% higher) (31% higher)

64 “Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2003”; Hellman, Heavenrich, U.S. Environmental Protection Agency.

The following chart illustrates the Canadian sales-weighted light-duty vehicle attribute trends for the combined passenger car and light truck fleet. At the time this report was prepared, data as detailed as that used in the U.S. analysis were not available.

Canadian Fleet-Average Change in Vehicle Attribute Trends, 1979–2000 Power, Weight, and Fuel Consumption

Combined Light-Duty Fleet

50%

40%

30% Power 20%

10%

% change Weight -10%

-20%

fuel consumption -30%

-40%

9 9 9 7 81 8 91 9 9 9 19 1 1983 1985 1987 19 1 1993 1995 1997 19

source: Data supplied by OEE at NRCan.

Observations

• As with the U.S. trends, Canadian fleet-average fuel consumption decreased until the mid- 1980s, mainly due to reductions in average power and vehicle weight. By the mid 1980s, fuel consumption levels essentially stopped improving and technology developments were generally applied to increasing vehicle power and weight, while holding fuel consumption levels to a slow rate of increase.

The Office of Energy Efficiency (OEE) at Natural Resources Canada (NRCan)65 has estimated that if weight and power were held constant at the 1990 fleet averages, fuel consumption in the year 2000 would be 8.0 L/100 km — almost 13 per cent lower than the level currently achieved.

65 OEE Presentation at The Windsor Workshop, Toronto, Ontario, June 15, 2004.

% Change in Canadian Fleet-Average Attributes 1982 - 2000

120%

100%

80%

60%

40%

20%

0% Fuel Consumption Weight Power (5% higher - less (26% heavier) (80% higher) efficient)

source: Office of Energy Efficiency at Natural Resources Canada.

The OEE also considered impacts of the light-duty fleet mix. They calculated that if fuel efficiency levels for individual vehicles had been held constant at 1990 levels, changes in fleet vehicle mix would result in an average fuel consumption level about 5 per cent higher than actual in 2000 (less fuel-efficient).

Conversely, if the sales mix of vehicles were held constant, fuel consumption would be down 5 per cent in 2000 from the 1990 level.

This supports the market analysis in the Market Trends and Fuel Efficiency Trends sections earlier and indicates that the trend towards increasing weight, power and market share of light trucks is resulting in higher rates of fuel consumption and a less fuel-efficient fleet in Canada.

Trends by Manufacturer

This section looks at the fuel economy trends of the U.S. light-duty vehicle fleet by marketing group. The major automotive company brands are assigned to the appropriate marketing groups, along with their 2004 fuel economy data, in the following table.

U.S. LDV Fleet Fuel Economy by Marketing Group

2004 Model Year Fuel Economy Marketing Group EPA Laboratory 55/44 (mpg) per Parent Passenger Light Combined centTruck Company Brands Company Cars Trucks Fleet GMC, Chevrolet, Pontiac, Opel, Saab, GM 29.1 20.5 24.1 49% Isuzu, Fiat, Subaru, Suzuki, Daewoo Ford, Jaguar, Volvo, Land Rover, Aston Ford 25.7 20.1 22.0 59% Martin, Mazda Daimler- Chrysler, Mercedes-Benz, Mitsubishi, 27.5 20.9 23.9 48% Chrysler Myundai, Kia Toyota Toyota, Scion, Lexus 32.6 22.6 27.0 47% Honda Honda, Acura 32.4 24.6 28.6 42% Nissan Nissan, Infiniti 28.3 21.1 24.1 51% Volkswagen, Audi, SEAT, Skoda, VW 29.1 19.2 27.8 9% Bentley Others 25.8 20.1 24.0 26% Whole LDV Fleet Average 28.7 20.9 24.4 48%

As shown, within the passenger car class, Toyota has the highest CAFE value and Ford the lowest. Among light trucks, Honda leads, with Volkswagen trailing behind the other groups. In the combined car and truck fleet, Toyota posts the highest CAFE level and Ford the lowest.

In the next figure, the trends in car and truck CAFE levels is charted from 1975 to 2004, according to marketing group.

Observations

• The horizontal lines through the graphs represent the current passenger car and light truck CAFE standard in the U.S. As shown, the foreign-based auto companies produced a mix of passenger cars that were originally closer to the CAFE target set by the U.S. Congress than were the domestic fleets. • With the exception of Volkswagen, light truck market share has moved towards the 50 per cent mark among both foreign and domestic companies. Honda shows a particularly steep rise after first introducing light trucks to the U.S. market in 1995.

Company-Specific Fuel Economy Trends in U.S. LDV Fleet, 1975–2004

The horizontal lines through the graphs represent the current CAFE standard in the U.S. for passenger cars (upper) and light trucks (lower horizontal line).

source: “Light-Duty Automotive Technology and Fuel Economy Trends: 1975 Through 2004”; Hellman, Heavenrich, Advanced Technology Division, Office of Transportation and Air Quality, U.S. Environmental Protection Agency; http://www.epa.gov/otaq/fetrends.htm

Reviewers’ Commentary • It was suggested that a discussion be included on tires. In particular, on how bias tire construction was replaced many years ago by radial construction, which lowered rolling resistance and increased longevity and safety. There should also be mention of how air conditioning impacts on fuel efficiency.

• Regarding the market shift toward vehicles classified as light trucks, it should be pointed out that consumers are simply migrating to products that meet their needs. For example, minivans have generally replaced the station wagon due to their utility.

• Regarding the improvement in fuel consumption in Canada from 1977 through 1981, CAFE implementation may be as likely a cause as CAFC targets. If so, the impact on Canada’s fuel consumption levels would have resulted despite CAFC implementation.

• It was suggested that consumer purchasing of larger and more powerful vehicles may be the root of the problem, and how this might be tackled in a manner that doesn’t disproportionately undermine the auto industry is the challenge.

Chapter 4: Motor Vehicle Fuel Efficiency Standards — Effectiveness, Issues and Debate

This chapter considers the broader impacts of automobile fuel efficiency standards and addresses the issues and debates regarding their implementation.

The material presented in this chapter is based on a series of studies that used both theoretical and statistical analysis to assess the effectiveness and impacts of CAFE standards/programs in the following areas:

• Energy security, air quality and climate change • Cost effectiveness • Fleet mix • Economy • Employment • Auto industry • Traffic safety

• Section 4.1 focuses on the CAFE program in the U.S.

• Section 4.2 focuses on the CAFC program in Canada.

4.1 CAFE in the U.S. — Effectiveness, Issues and Debate

This section examines the effectiveness of the CAFE program in the U.S. and reviews the main issues related to its impacts. It includes brief summaries of the results of various reports on the issues.

Impact of CAFE on Energy Consumption, Air Quality and Climate Change

Following the oil price shocks of 1973, the U.S. Government considered energy conservation to be an issue of national security. Under CAFE, the stated goal of Congress was to double national fuel economy levels in the passenger car fleet within ten years. The manufacturers essentially doubled fuel efficiency levels by 1985, on target. In the time since then, the CAFE targets for passenger cars have not been altered and actual fleet-wide fuel efficiency levels have remained static. Given the close alignment of these two values, many researchers consider CAFE to be the dominant factor in improving the average fuel efficiency of a given manufacturers’ fleet.

Energy Consumption

In their 2002 report, The Impact and Effectiveness of Corporate Average Fuel Economy (CAFE) Standards, a committee of the National Academy of Sciences66 concluded that CAFE achieved its objective. Among the many findings of their research, the NAS Committee wrote,

“The CAFE program has clearly contributed to increased fuel economy of the nation’s light-duty vehicle fleet during the past 22 years. During the 1970s, high fuel prices and a desire on the part of automakers to reduce costs by reducing weight of vehicles contributed to improved fuel economy. CAFE standards reinforced that effect. Moreover, the CAFE program has been particularly effective in keeping fuel economy above the levels to which it might have fallen when real gasoline prices began their long decline in the early 1980s.”

The gasoline price trends to which the NAS made reference are illustrated in the following figure. Notice that gasoline prices were high during the time of CAFE implementation and that they dropped considerably during the 1980s, remaining low throughout the 1990s. During this period of low fuel prices, vehicles became 20 per cent heavier and 25 per cent faster in 0–60 mph acceleration performance, on average. Yet fuel economy levels did not drop accordingly, but remained relatively constant. The NAS report indicated that without CAFE standards in place, fleet average fuel economy levels would have fallen along with fuel prices.

66 NAS. (2002). Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards.

source: Gasoline price trends based on 92-93 octane, purchased at stations in Fort Worth, Rio Vista, College Station & Houston. http://www.ghg.net/stuart/gasprice/gasprice.html.

The NAS Committee estimated national oil consumption in the light-duty vehicle fleet to be about one-third lower today compared to what it would have been without the CAFE program. The Committee obtained this result in spite of increasing trends in vehicle population and use. This overall reduction in oil consumption, the Committee estimated, was in large part due to CAFE standards. Based on this, and incorporating a two per cent increase in average vehicle use due to lower fueling costs, the Committee calculated the net oil savings due to CAFE today to be 43 billion gallons of gasoline per year, or 2.8 million barrels per day [mmbd] — this translates into about a 13 per cent reduction in U.S. oil demand.

Air Quality

The NAS Committee stated that, while focused on fuel economy, CAFE did not interfere with the implementation of emissions control regulations for air pollutants. In fact, the Committee points out that several key technologies used to increase fuel economy also contributed to reduced VOCs emissions. The Committee also cautioned that while some emerging engine technologies such, as lean-burn gasoline and increased use of diesel engines, have the potential to significantly improve fleet-average fuel efficiency, these technologies may also increase NOX emission levels past federal limits.

Climate Change

The amount of GHGs emitted is directly related to vehicle fuel efficiency. Recognizing this, the NAS Committee calculated the reduction in GHG emissions due to fuel economy levels achieved through CAFE standards. It determined that the current 2.8 million barrels per day saved due to

CAFE translates into national GHG emissions reductions of roughly 100 megatonnes of carbon annually. This amounts to a seven per cent decrease in total U.S. GHG emissions67.

In 2001, CO2 emissions from the transportation sector accounted for 32.8 per cent of total U.S. emissions68, with 60.4 per cent of this from motor gasoline69. Hence, all vehicles in the light-duty fleet represent about 20 per cent of the national total in GHG emissions. As the U.S. represents about one-quarter of the world’s total GHG emissions, it follows that 5 per cent of world emissions can be attributed to the U.S. light-duty vehicle fleet alone. As such, CAFE has not only contributed to significant energy conservation in the U.S., but also to substantial worldwide GHG emissions reductions.

The Cost-Effectiveness of CAFE

Some critics of CAFE believe that while the regulation was successful, it was not the most cost- effective way to achieve the goal of reducing energy consumption. Others disagree. The cost- effectiveness debate is summarized in the following four studies. It is helpful to keep in mind that there are two major influences on fuel consumption — the fuel efficiency level of the vehicle and the distance it is driven.

1) Why CAFE Worked — Greene (1997)70

This paper by Greene is a broad assessment of the main issues being debated on CAFE. It presents various objections to CAFE standards and uses historical evidence to assess the claims made. The following paragraphs outline the paper’s discussion of the regulatory nature of CAFE and its economic efficiency.

In his report, Greene begins by noting that markets generally fail to naturally allocate resources that address the impacts and costs of their activities on society. For example, the use of automobiles leads to increased air pollution, which costs the public in terms of respiratory illness, hospital care, lost productivity and a range of environmental damage. Such costs do not fully feed back into the market in the form of increased prices for automobiles or fuel. Therefore, these costs are considered external to the market and are called “market externalities”. In addition to air pollution, the oil and automobile market externalities include impacts from climate change, highway fatalities and the price of oil dependence. In short, these costs are not included in the price people pay to fuel and drive their automobiles.

A commonly proposed solution is to levy a tax that is roughly equal to the estimated damage caused by vehicle use. This could take the form of a tax on fuel, but it could also be based on the distance driven by an automobile, as in an odometer tax. The increased price of vehicle use could to create market demand for more fuel-efficient automobiles. But Greene points out that this traditional approach misses the mark. By increasing the price of driving, people will generally respond by driving less, or they may buy cheaper cars or simply pay less on other items in order to balance their budgets.

What the tax does not achieve is maximizing the fuel efficiency of vehicles to the most cost- effective level — a situation that could reduce market externalities without increasing the price of driving. The most cost-effective level is the point at which the added cost of technology to make an automobile more fuel-efficient is equal to the added fuel savings due to higher efficiency. The reason a tax on fuel or a tax on the activity of driving fails to create market demand for the

67 NAS. (2002). Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards. 68 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 11-4. 69 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 11-5. 70 Greene, Why CAFE Worked, 1997.

maximum level of cost-effective fuel efficiency is because these elements do not directly represent the damage caused by driving. This will be explained next.

Theoretically, for a tax to be 100 per cent effective it would have to fall directly on the external damage caused by driving and not on the fuel or act of driving itself. This approach takes on the structure of “polluter pays” and would feed back into the market a demand for cars that produce the least amount of external damage. Unfortunately, it is impossibly complicated to accurately evaluate and enforce such a tax on a person-by-person basis. An assessment of the full external costs generated by each automobile would be required, taking into account how it is operated and maintained, the road conditions to which it is subjected and a myriad of other factors that influence how much air pollution and greenhouse gases are actually produced while driving a particular vehicle. As Greene explains, this is simply impractical.

Instead, Greene illustrates that while competitive markets have failed to address the external costs of automobile use, regulations have been very successful in driving technology improvements that reduce these costs. For example, the catalytic converter was developed in response to regulations that set limits on toxic emissions from motor vehicles. In the same way, CAFE regulations have driven automobile fuel efficiency to levels that the market would otherwise not have required of the auto makers. An example of this can be found in the European fleet. Taxes have made the price of fuel is very high (in some countries, almost four times as high as in the U.S.) but engine technology and emissions controls are no more advanced there than in North America. By and large, Europeans simply drive smaller, cheaper cars in response to the high price of driving.

Greene also cautions that increased fuel efficiency lowers the cost of driving, which may inspire people to drive more (this is called the “rebound effect” and it will be discussed later). As a result, Greene supports the use of a well-chosen technology standard in combination with a tax on the activity involved — in this case fueling and driving an automobile — in order to achieve significant, technology-based improvements in vehicle fuel efficiency and maintain the reductions in fuel consumption and emissions that follow.

Fuel economy labels are also assessed by Greene. There are some analysts (e.g., Lutter and Kravitz, discussed shortly), who claim that CAFE standards are not needed and that it is enough for vehicles carry a fuel economy label. It is argued that if consumers understand the amount of money they can save, they will search out and buy more fuel-efficient vehicles. This, in turn, should encourage manufacturers to maximize the fuel efficiency of their fleets.

Greene asserts, however, that in purchasing an automobile, consumers engage in a multidimensional decision-making process that includes an assessment of price, size, reliability, safety, style, performance, handling and so forth. The option for cost-effective fuel efficiency becomes lost in a multitude of other value-based decisions. In addition, Greene claims that it is difficult (if not source: Why CAFE Worked, Greene, 1997, using U.S. DOE Data

impossible) for the consumer to assess the exact value of the future fuel savings in a given vehicle, and to compare that to the additional up-front cost of the fuel-efficient technology.

Consider the inset graph, which depicts the incremental cost of improved fuel economy among actual 1990 model year subcompact cars, the associated annual fuel savings and the net value to the vehicle owner. In this example, a prospective buyer would have to pay an additional $250 for a 35 mpg vehicle over one that gets about 30 mpg. The value of the fuel savings is in the range of $350, representing a net value to the consumer of about $100. But does this truly lead the consumer to the most fuel-efficient purchase?

No, says Greene. First, the net value to the consumer is fairly flat over a fuel economy range from 32 mpg to 38 mpg. This means there is no incentive to pay more for higher fuel economy in this range. Second, $100 probably represents a negligible fraction of the vehicle’s yearly ownership costs and is unlikely to be a factor into the purchase decision. Third, Greene wonders how consumers could possibly calculate the net value of increased fuel economy given their unique levels of vehicle use. Although the EPA-rated fuel economy label in the vehicle showroom may provide a basis of comparison among vehicles, the actual fuel savings could vary widely based on driver behavior. Furthermore, no information is provided to the customer on how the vehicle’s fuel economy level will be valued by the market when and if the vehicle is traded or resold. The consumer may value the fuel economy rating on the EPA label for other reasons, but the precise net value realized by the consumer as a result of the vehicle’s fuel economy may never be known.

Greene claims that this situation fails to provide manufacturers with strong market signals to maximize fuel economy. Significant investment is required on the part of manufacturers to produce a new vehicle line. As such, Greene believes that it is unreasonable to expect auto manufacturers to assume the individual risk of spending so much on a particular vehicle attribute, such as fuel economy, that might be wholly unvalued by the market.

Instead, Greene concludes that CAFE can generate greater reductions in fuel consumption while reducing the risk to manufacturers by establishing fuel economy as a market-wide design imperative.

In his study, Greene also addresses the phenomenon of the rebound effect. As the theory goes, mandated efficiency levels make it less expensive to fuel and drive a car, which can encourage more driving. This additional driving negates some of the fuel savings generated by the efficiency standard. Greene cites several econometric analyses71, which demonstrate that the cost-per-mile elasticity of vehicle travel generally falls in the range of -0.1 to -0.2. This means that if fuel economy is increased by 100 per cent, for example, people would generally only increase their vehicle use by 10 per cent to 20 per cent. In other words, 80 per cent to 90 per cent of a given fuel economy increase will result in actual fuel savings, all else equal.

In summary, Greene reaches two main conclusions on the impact of CAFE on energy consumption:

• In theory, CAFE regulation can be economically efficient — even in the absence of a matched tax on fuel or vehicle use. • In practice, CAFE regulation has worked, playing a leading role in improving fleet-average fuel economy levels.

71 Greene, Why CAFE Worked, 1997, citing Mayo & Mathis (1988), Gately (1990; 1992), Greene (1992), Jones (1993), Novola & Crandall (1995), Haughton & Sarkar (1996), Goleb et al. (1996), Goldberg (1996).

2) The Economic Costs of Fuel Economy Standards Versus a Gasoline Tax — Austin & Dinan (2003)72

Contrary to Greene’s study, the Congressional Budget Office in Washington (CBO) has proposed fuel taxes as a more cost-effective strategy to reduce energy consumption. The authors of the report, Austin & Dinan, concede that CAFE would be an effective way to reduce fuel consumption across the entire light-duty vehicle fleet. However, they also claim that an equally effective, but less expensive, strategy would be to increase the gasoline tax. In their analysis, they compare the relative impacts of reducing vehicle fuel consumption by 10 per cent over a 14-year time frame using two different methods:

1. increasing CAFE standards by 3.8 mpg, and 2. increasing the existing gasoline tax from 41 to 87 cents per gallon.

The computer simulation model used in the CBO analysis made several key assumptions in order to compare the two approaches:

• The real price of gasoline would not increase from the value used in the study of $1.50/gallon. • Boosting fuel economy requires manufacturers to completely redesign a vehicle, adding costs that would otherwise not be incurred. This cost is jointly shared by manufacturers in terms of forgone profit, and by consumers in terms of higher vehicle prices. • Vehicle fuel economy would not be achieved through reductions in power or performance, or by use of hybrid-electric vehicles. • The price elasticity of fuel consumption is -0.39. This value was developed by combining the price elasticity of vehicle miles traveled with the price elasticity of fuel economy. In this way, the CBO suggests that raising the price of fuel with a tax will have an additive effect on fuel consumption: people will initially drive their existing vehicles less, and subsequently trade in those vehicles for more fuel efficient models within 14 years. • The cost to society of increasing CAFE standards is measured by the loss in the potential “welfare” of its citizens. That is, since consumers have not recently demonstrated any value in fuel economy (over the 1990s they have generally purchased heavier, more powerful vehicles instead of more efficient ones), any price increase resulting from CAFE-induced efficiency improvements must represent a net loss in the consumer’s perceived value of the purchase. This reduces the funds available to them to spend on other products and amenities, which is valued as improving their personal welfare in this report.

In the end, the CBO model estimated the total cost of increasing CAFE standards for producers and consumers at $3.6 billion over and above the value of fuel savings (about $228 per vehicle). They estimated this cost could be lowered to $3.0 billion with credit trading. On the other hand, they projected that achieving the same result with an increase in fuel taxes would cost $2.9 billion.

72 Austin, Dinan, The Economic Costs of Fuel Economy Standards Versus a Gasoline Tax, December 2003.

3) Do Regulations Requiring Light Trucks To Be More Fuel Efficient Make Economic Sense? — Lutter & Kravitz (February 2003) 73,

and

4) The Economics of CAFE Reconsidered: A Response to CAFE Critics and A Case for Fuel Economy Standards — Gerard & Lave (September 2003) 74

In 2003, NHTSA proposed to increase light truck fuel economy by 1.5 mpg for the 2007 model year75. The analysis in NHTSA’s proposal concluded that if CAFE standards were increased for light trucks, the benefits to consumers would be more than twice the costs to manufacturers — the analysis did not take into account the cost of impacts on the environment and dependence on foreign oil.

The AEI-Brookings Joint Center for Regulatory Studies issued a report authored by Lutter & Kravitz that criticized NHTSA’s claim. Their indictment of the proposed increase in CAFE standards for light trucks was based on the following points:

• Consumers are fully informed of vehicle fuel economy ratings through mandatory labeling and, as consumers do not underestimate fuel prices, there is ample market signal to generate a correct level of fuel economy. • NHTSA overestimated the net cost-benefit to the consumer of higher fuel economy. • The net social benefits were also overestimated, particularly in that the rebound effect was not fully accounted for in NHTSA’s calculation. They also suggested that traffic congestion and vehicle accidents would increase.

As an alternative, Lutter & Kravitz suggested improving fuel economy labeling on new cars and adding a modest gas tax (a 1 cent per gallon levy).

A subsequent analysis was released by the AEI-Brookings Joint Center, authored by Gerard & Lave, seven months later. Gerard & Lave reviewed the earlier report, as well as other critiques of the CAFE program and found that the external costs associated with driving — safety, congestion, air pollution, GHG emissions and national security — as identified by these reports ranged from 8 to 10.4 cents mile (or more). Internalizing these costs via a fuel tax, as suggested by Lutter and Kravitz, would more than double the price of fuel. Thus, according to Gerard & Lave, the criticisms of CAFE by Lutter & Kravitz are actually arguments for dramatic increases in taxes.

In their report, Gerard & Lave further demonstrate that even rational and well-informed consumers will not necessarily choose more fuel-efficient vehicles. Even if this were the case, the value of future savings is different for individuals as compared to social groups. Gerard & Lave explain that a group of citizens (society) often value a given conservation measure more than an isolated person would be willing to pay. For example, society as a whole may be willing to pay extra for pollution-free power generation in order to realize environmental benefits 20 years down the road. However, it is unlikely individuals en masse would forego cheap, but dirty, conventional power by installing solar panels on their homes that would not pay back in terms of lifetime cost savings. This is intuitively obvious, but in economic terms it essentially means that society will accept lower discount rates in their investment evaluations than would most individuals.

The debate between these two parties continues within the AEI-Brookings Joint Center.

73 Lutter, Kravitz, Do Regulations Requiring Light Trucks To Be More Fuel Efficient Make Economic Sense? An Evaluation of NHTSA’s proposed standards, Joint Center, 2003. 74 Gerard, Lave, The Economics of CAFE Reconsidered: A Response to CAFE Critics and A Case for Fuel Economy Standards, Joint Center, 2003. 75 Docket No. 2002-11419, http://www.nhtsa.dot.gov/cars/rules/rulings/CAFE05-07/Index.html

In the preceding four studies, some of the major elements of debate on the issue of CAFE were presented. Most of the authors don’t contest CAFE as an effective option in terms of reducing energy consumption and stimulating technology improvements. Rather, detractors of CAFE believe there is a more cost-effective strategy to achieve the goal of reduced energy consumption, such as imposing a fuel tax.

For example, it has been claimed that forcing technology improvements will increase the price of new cars, which may lead people to avoid new vehicle purchases. This implies that older, more polluting cars may stay on the road longer before being retired. Proponents of fuel taxes say the measure would encourage people to drive their older cars less, improving air quality.

Greene76 would rebut this by saying that cars today are better built, last longer and will be used for the full extent of their useful life regardless (about 16.9 years77). Moreover, as a vehicle ages, the effectiveness of the catalytic converter in reducing toxic and smog-forming emissions deteriorates. At some point, the catalytic converter may cease to function altogether and the efficiency of the vehicle takes over as one of the main determinants of the level of VOCs, CO and NOX emissions. In this case, a technology-forcing standard, such as CAFE, would help ensure that emissions from aging vehicles are as low as possible.

Greene also points out that while CAFE works in isolation, it works better if accompanied by well- designed complimentary measures. The slight rebound effect generated by CAFE can be mitigated if CAFE standards are accompanied by a fuel tax, for example. As for emissions from aging vehicles, emissions testing programs can help promote catalytic converter maintenance and early vehicle retirement (e.g., Ontario’s Drive Clean program).

Asking Consumers What They Think

Further context to the debate about increased CAFE standards versus increased fuel price. Two recent surveys of U.S. consumers:

Automobile Buyer Decisions about Fuel Economy and Fuel Efficiency78 (published in September 2004), reported on a study of 57 households in California having ten separately defined “lifestyle” sectors. It concluded that people do not pay much attention to fuel cost over time or in their budgets, unless severely constrained economically. Detailed interviews were conducted in each of the lifestyle groups (including recent college graduates, off-road enthusiasts, state agency employees, farmers, IT professionals, military, hybrid-electric vehicle owners, etc.). In the study, household members were asked to review their past, present and expected future vehicle purchases in general, list their preferred vehicle attributes, and then quantify the impact of their vehicle’s fuel economy in relation to household budgets and fuel prices at the pump. The intent was to assess the economic rationality of consumers, the added price they would be willing to pay for increased fuel economy and the expected pay-back period for higher fuel economy. The researchers found that while consumers pay attention to the price of a tank of fuel on the day of purchase, the knowledge is quickly forgotten over a matter of days. Surveyed households were also unable to estimate the potential savings of better fuel economy over periods of time greater than one month, and most overestimated the pay-back period, thinking they could recover an investment of several thousand dollars in about two years. Not surprisingly, the study found that many factors play a primary role in people’s buying decisions and that fuel economy was considered as a feature, in much the same frame of reference as colour or style. In some, but not all, cases the hybrid-electric vehicle owners were motivated by the desire to lessen the impact of their driving activities on the environment.

76 Greene, Why CAFE Worked, 1997, pp. 16-19. 77 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 3-9. 78 Kurani, Turrentine, Automobile Buyer Decisions about Fuel Economy and Fuel Efficiency, Institute of Transportation Studies, University of California, 2004.

A Harris Interactive poll79 (published in December 2004) of almost 15,000 U.S. adult consumers found that 63 per cent were likely to purchase a new vehicle with enhanced fuel economy the next time they buy a vehicle. In addition, the polling results showed that consumers would be willing to pay $1,673 more for the enhanced fuel economy of a hybrid-electric vehicle and $667 for “clean diesel” technology. To place the awareness of the average consumer in context, however, it should be noted that 52 per cent of respondents thought their next vehicle purchase would likely be powered by a hydrogen fuel cell (whereas most experts believe affordable automotive fuel cell technology could be decades away). These results seem to support the University of California study findings that consumers value enhanced fuel economy, but not necessarily from an economically rational perspective.

These surveys appear to support the positions of Greene, Gerard and Lave, as described earlier, that while consumer may desire higher fuel economy levels, they are not equipped to accurately assess the fuel savings, nor do they define for manufacturers what fuel economy level is economically beneficial for their unique financial conditions.

The Impact of CAFE on Fleet Mix

Many of the analyses show that the CAFE program generated multiple effects, most of which contributed to overall reductions in energy consumption, air pollution and greenhouse gas emissions. However, the one area in which CAFE may have had a negative effect on fleet- average fuel efficiency is in its separate target for light trucks.

As illustrated in Chapter 3, an increasing share of light trucks in the fleet mix is producing a downward trend in fuel economy in the combined light-duty vehicle (passenger car and light truck) fleet.

CAFE light truck classification rules allow manufacturers to count small passenger-oriented vehicles as part of the light truck fleet — this lowers the average of the light truck fleet overall and, hence, allows the manufacturers to increase sales of larger vehicles. Vehicles primarily designed for personal use, but considered part of the light truck category, include SUVs, minivans and XUVs. This is often cited as a loophole in Title 49, Chapter V, Part 523 of the U.S. Code, which effectively permits NHTSA to classify automobiles as light trucks if they meet certain light truck characteristics. Hence, CAFE effectively sets up a two-standard system for fuel economy.

The structure of CAFE is such that, today, about half of the light-duty vehicles sold are subject to a strict standard and half are subject to a more lenient standard. The vehicle manufacturers have the option to choose which category requirements they wish to follow in designing new automobiles. As well, consumer demand has been increasingly favoring SUVs and minivans. Given the options, automakers have been favoring the production of light trucks over passenger cars, shifting the overall light duty fleet to a lower average fuel economy level.

The question is, were CAFE regulations responsible for this market shift? In other words, has the existence of two distinct standards dangled a carrot in front of the auto manufacturers, inspiring them to design truck-based vehicles that they otherwise would have ignored? There is some statistical evidence to support the role of CAFE in the market shift to light trucks. However, Greene (1997) and the NAS Committee (2002) believe that the CAFE “double-standard” probably had less of an effect than most people might imagine, although not negligible. Noting that there was a distinct shift in market demand from station wagons to SUVs when the option became available, the NAS wrote,

79 The Harris Interactive AUTOTECHCAST Study, 2005; www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=871

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“Therefore it must concluded that the trend toward trucks probably would have happened without CAFE, though perhaps not to the same degree.”

More significant incentives increasing the market demand for SUVs might be the gas guzzler tax, to which cars are subject but not trucks, and the accelerated corporate asset write-down schedules for large SUVs. These are discussed in Chapter 5.

The Impact of CAFE on the Economy

The Economist marked the 30th anniversary of the OPEC crisis with a feature article that discussed the vulnerability of America’s economy to Mid-East Oil pricing and production. In it, the author discusses the impact of CAFE:

“From 1977 to 1985, America's GDP rose by 27 per cent, but its oil use dropped 17 per cent by volume. The volume of America's net oil imports fell by nearly 50 per cent during that time. Mr. Lovins argues that the dramatic drop in oil intensity of the American economy “broke OPEC's pricing power for a decade”. The cartel fell into disarray in the late 1980s, and the world enjoyed relatively low and stable oil prices for much of the 1990s.”80

From this statement one can infer that CAFE likely did not damage the U.S. economy. Indeed, the CAFE program’s effect of reducing oil consumption in the transportation sector may have helped give the economy a boost. To understand the impact of oil consumption and CAFE on the U.S. economy, one must first consider the implications for the U.S. as a net importer of oil and, second, how oil prices impact GDP growth. Consider the inset chart. The shaded areas represent the amount of oil consumed in the U.S. transportation sector up to 2001 and the projected levels to 2025 (at present rates of growth). As shown, light-duty vehicles currently represent roughly 60 per cent of this consumption. The chart also shows the level of domestic oil production — a decreasing value over time. Clearly, in a business-as-usual scenario, the U.S. will have to import oil to source: Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – make up the growing Edition 23 [Oak Ridge National Laboratory, 2003], 1-18. shortfall. Note that this chart doesn’t even include the oil consumed in other sectors of the U.S. economy (at least an extra 30 per cent)!

This creates what is called the ”transportation oil gap”, measured as the difference between the amount of petroleum the U.S. produces and the amount of petroleum used by the transportation sector. In 2001, the U.S. transportation sector consumed about 68 per cent more oil than

80 http://economist.com/business/displaystory.cfm?story_id=2155405

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the nation produced81. With a stable, cost-effective supply of foreign oil, this would not present a problem. However, much of the world oil production is highly cartelized and does not operate according to competitive market principles. This leaves the U.S. economy exposed to the risk of oil price shocks.

The significance of this is illustrated in the following chart, based on Greene & Tishchishyna’s study of the cost of oil dependence82, illustrating the relationship between GDP growth and the price of oil.

It appears that whenever world oil prices spike upward, approaching or passing $30 USD per barrel, a period of negative GDP growth follows. According to Greene and Tishchishyna, oil dependence is not simply a matter of crude import demand, but a product of four main issues. First, a noncompetitive world oil market strongly influenced by the OPEC cartel; second, high levels source: Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand of U.S. oil imports; third, Book – Edition 23 [Oak Ridge National Laboratory, 2003], 1-11 oil’s critical role in the U.S. economy; and fourth, the absence of economical and readily available substitutes for oil.

According to Green & Tishchishyna, when monopoly power raises the price of oil above competitive market levels by, say, cutting production, the cost of oil dependence is felt in three primary areas:

1. Loss of Potential GDP — the economy’s ability to produce is hindered due to high energy prices; 2. Macroeconomic Adjustment Costs — sudden fluctuations in oil prices result in temporary price and wage dislocations in the market, leading to unemployment and underutilized resources; 3. Transfer of Wealth — by driving up prices, cartels create “monopoly rents” for their members, appropriating the wealth from oil consuming states.

In their analysis, Greene and Tishchishyna find that the oil market upheavals caused by the OPEC cartel since 1970 have cost the U.S. roughly $7 trillion (real 1998 USD) – 43 per cent in GDP loss, 26 per cent in macroeconomic adjustment costs and 31 per cent wealth transfer. Based on this analysis, improving vehicle fuel economy reduces the impact of foreign oil price fluctuations on the U.S. domestic economy.

81 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 2-1, 1-18. 82 Greene, D.L., N. I. Tishchishyna, Costs of Oil Dependence: A 2000 Update, Oak Ridge National Laboratory, 2000. Data updates from Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 1-11.

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As the U.S. accounts for about 25 per cent of world oil consumption83, any significant reduction will certainly impact on the world price of oil. The NAS Committee84 estimates the price elasticity of net oil supply to the U.S. to be 2.0–3.0, meaning that a one per cent decrease in U.S. demand will result in a 0.5 to 0.33 per cent decrease in world oil prices. As previously discussed in section 4.1.2, the NAS Committee estimated that CAFE generated a 13 per cent reduction in U.S. oil demand. This should have resulted in a four to six per cent reduction in world oil prices. In 2000, the average price for a barrel of oil was $28 USD, indicating that $1.00–$1.80 was saved on each barrel.

So, in addition to avoiding the purchase of an additional 2.8 billion barrels of oil in 2000, the savings from fuel economy improvements in 2000 are in the range of $3–$6 billion. For simplicity’s sake, the Committee further assumed that these benefits increased linearly from zero in 1970 to 2000 and calculated the cumulative benefits of CAFE in unadjusted dollars to be in the range of $40 billion to $80 billion.

Of course, this simplistic analysis doesn’t account for the range of social (public health) and environmental benefits that CAFE produced. Furthermore, it doesn’t account for U.S. military expenditures required to secure foreign oil reserves for production. The National Defense Council Foundation has estimated the price of defending oil supplies in the Middle East at $49 billion per year85.

The Impact of CAFE on Employment

If CAFE is meant to direct the efforts of manufacturers to produce more fuel-efficient vehicles, presumably it diverts their focus from other areas. This reallocation of resources could impact the manufacturers in a variety of ways. One aspect of concern is employment – in the automobile industry and over the entire job sector as well. Little work has been conducted on the past impact of CAFE on North American employment.

The NAS Committee86 could find no evidence that CAFE had any significant impact on employment levels in the industry. Though suffering from overcapacity in the early 1990s, in the remainder of the decade all automakers posted record gains in sales, profits and employment. U.S. employment in auto manufacturing reached its highest level ever in 1999 at more than one million. Not only were the traditional domestic manufacturers expanding operations, but also during the 1990s the number of foreign-owned assembly plants in the U.S. increased from eight to 11 — increasing annual production from 1.49 million to 2.73 million vehicles.

Considering the future impact of increasing CAFE standards is a different matter. Two studies have attempted to assess this impact.

1) Energy Information Agency Analysis

In its Docket on Reforming the Automobile Fuel Economy Standards Program87, NHTSA cites an analysis by the U.S. Energy Information Agency (EIA), which projects that too rapid an increase in CAFE standards could lead to a negative impact on jobs nationwide. In its model, EIA considers a sustained annual increase of 0.6 mpg in CAFE standards for light trucks, starting from 2007 (22.2 mpg) up to 2025 (33 mpg). The incremental cost to light truck manufacturers to

83 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 1-4. 84 NAS. (2002). Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards. pp. 20. 85 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 1-12. 86 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002. p.22. 87 NHTSA Docket No. 2003-16128, 2003.

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meet the annual increase is projected to rise, rapidly at first, and peak at $720 (in 2001 USD) per vehicle. The associated loss in GDP, discounted at seven per cent from 2004 through 2025, totals $84 billion — a divergence of 0.6 per cent from the reference case of no CAFE increase. This equates to a net loss of 16,000 jobs.

There are limitations to the model used in this study. First, it focuses only on a CAFE increase to the light truck fleet, with no corresponding increase for passenger cars. Second, it treats all manufacturers as identical entities, none of which has competitive advantages that might benefit from a change in CAFE standards - this is likely not the case. Third, the model doesn’t consider the possible benefits to GDP of decreased oil consumption due to CAFE.

2) Fuel Standards and Jobs — Management Information Services, Inc. (2002)88

In contrast to the EIA analysis, a study conducted by Management Information Services in Washington for the Energy Foundation projected a very different outlook for domestic employment. Using data from the NAS Study89 on the cost of new technology to increase automotive fuel economy, the impact of three scenarios was considered:

1. a “business-as-usual” scenario with no changes to CAFE standards, 2. a “moderate” scenario with a 20 per cent increase to CAFE standards beginning in 2010, and 3. an “advanced” scenario with a 30 per cent increase to CAFE standards beginning in 2010 and a 50 per cent increase in 2015.

The application of standard econometric analysis produced the results tabulated below.

Energy Foundation Study Net Employment Impact under 3 CAFE Scenarios

Net Employment Impact Future CAFE Scenario Jobs in 2010 Jobs in 2020 Jobs in 2030 Business-as-Usual 0 0 0 CAFE increases 20 per cent in 2010 +70,000 +30,000 +50,000 CAFE increases 30 per cent in 2010, 50 per +335,000 +345,000 +320,000 cent in 2015

The impact of the increased CAFE standards are projected to be spread across several industries, with associated gains and losses due to new employment and displacement of existing jobs. This is mainly due to shifts in the market to meet the demands of a more fuel-efficient economy. As shown in the charts below, taken from the report, jobs associated with the conventional fuel infrastructure are displaced by increases in other sectors, primarily in motor vehicles & equipment. There is also a general boost in employment (category “other”), presumably a result of increasing GDP tied to lower net energy costs for businesses and individuals.

88 Fuel Standards and Jobs, Prepared for The Energy Foundation by Management Information Services, Inc. & 20/20 Vision Education Fund, 2002. 89 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002.

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Impacts of Increased CAFE on Employment Levels by Industry

Impacts of Increased CAFE on Employment Levels by Occupation

According to the study, motorists would save between $30 and $70 billion in annual fuel costs by 2020, and $40 to $100 billion by 2030, which is balanced against increased vehicle costs of $16 to $55 billion.

According to the Energy Foundation Study, the employment impact also varies by region, with Michigan, Ohio, California, Indiana and Illinois being the primary benefactors of increased CAFE standards. The spread of net job gains and losses is illustrated in the following graphic, also taken from the report.

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Impacts of Increased CAFE on Employment Levels by Region

Source: Fuel Standards and Jobs, Prepared for The Energy Foundation by Management Information Services, Inc. & 20/20 Vision Education Fund, 2002.

Reviewers’ Commentary • Section on employment impacts should include a critical study in Regulation from a few years ago that concludes fuel economy standards would have large negative economic impacts. It should be pointed out that the problem with these studies is that they are based by their starting assumptions that consumers will value vehicles for their fuel economy characteristics, and not change their purchasing patterns under more stringent fuel economy standards. It is not possible to confidently predict how industry will cope with new standards or how consumers will react to higher vehicle prices, improved fuel economy and changes in vehicle appearance and performance that may result. Such studies are essentially educated guesses and not conclusive.

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The Impact of CAFE on the Auto Industry

As with employment, there is little work publicly available on the past impacts of CAFE on the overall health of the auto industry. However, the NAS Committee90 made several observations on the state of the auto industry during the time CAFE standards were in effect:

• First, the North American automakers had been losing market share to foreign imports since the 1960s, before CAFE came into effect. The small, fuel-efficient Japanese cars were already valued in the market for their perceived quality and affordability. Thus, the degree to which CAFE would have provided the Japanese with a competitive advantage was likely quite minimal. • Second, though the industry experienced severe losses in 1980 and 1992 due to low vehicle demand, it rebounded strongly. Between 1994 and 1999, the combined net income of GM, Ford and Chrysler was a record $93 billion. • Third, the rebound was strongly supported by the rising demand for light trucks — a market dominated by the “Classic Big-3”. Today, light trucks represent more than half of all vehicle sales among GM, Ford and DaimlerChrysler. Furthermore, in the late 1990s, the average profit on a light truck was three to four times that of a passenger car.

Given this history, it is hard to claim that the auto industry suffered under CAFE as a whole. However, looking into the future, however, the NAS Committee identified structural problems with the Classic Big-3 automakers, with or without changes to CAFE. The Committee noted that foreign automakers have stepped up their market share-eroding strategy on the domestic companies by aggressively entering the SUV and XUV markets. In 2001, market share among GM, Ford and DaimlerChrysler was about 64 per cent of all light-duty vehicles, down 10 per cent from a decade earlier. In terms of light trucks only, GM, Ford and DaimlerChrysler represent a 77 per cent share, but that is down nine per cent in the same time frame. Much of the Classic Big-3 profits in the past decade came from the sale of light-trucks, specifically SUVs. Now, with more foreign companies offering light truck products (especially in the XUV market segment), the NAS Committee expects that increased competition will likely cause light truck profits to fall.

A recent study by the Sustainable Asset Management (SAM) and World Resources Institute (WRI) assessed the state of the current automobile market and the potential impact of carbon constraints on the industry. Carbon constraint could take the form of a fuel economy regulation that leads to decreased fuel consumption and lower overall CO2 emissions. The study is summarized as follows:

Changing Drivers — The Impact of Climate Change on Competitiveness and Value Creation in the Automotive Industry — Austin, Rosinski, Sauer, le Duc (2003) 91

A combined effort by the Zurich-based Sustainable Asset Management (SAM) and the World Resources Institute (WRI) in Washington produced this study, which considers the divergent impacts of potential carbon emission constraints on the major automobile companies competing in the U.S. market. By measuring the rate of CO2 emissions (carbon intensity) produced by the existing manufacturers’ fleets, the study estimated the risk exposure and competitive imbalances experienced by each company should carbon constraints be imposed on the market.

For example, in order to meet a given carbon constraint by 2015, the relative average cost increase per new vehicle at BMW could be as high as $650, while at Honda, the same constraint may only require an additional $25. This represents a “value exposure” to the manufacturer, determined by the degree to which their profits are tied to the sale of high-carbon emitting

90 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, pp.22-23. 91 Austin, Rosinski, Sauer, le Duc, Changing Drivers – The Impact of Climate Change on Competitiveness and Value Creation in the Automotive Industry, 2003.

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vehicles — that is, the carbon-intensity of their profits. The following charts, taken from the report, illustrate these concepts.

Carbon Intensity of Profits by Manufacturer (2002), U.S. Market

Cost per Vehicle to Meet CO2 Emissions Standards by 2015

As shown, the more carbon-intensive the manufacturer’s fleet, the greater the cost impact to comply with potential carbon constraint regulations. However, this also presents an opportunity to those manufacturers able to capitalize on their investments in fuel-efficient technologies under the new carbon constraints.

The following chart shows the study’s assessment of the vehicle manufacturers’ capacity to succeed competitively at lower carbon-intensive technology. SAM and WRI based this upon the overall strength of a company’s management quality with respect to developing and deploying singular technologies, such as diesels, hybrid-electrics and fuel cells, balanced against their ability to successfully manage each of these technologies within their fleets.

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Management Quality Assessment

These measures were combined into two summary charts that estimated the overall risk and impact to each manufacturers’ EBIT (Earnings Before Interest and Taxes) from 2003 to 2015.

Risk and Opportunity Resulting From Carbon Constraint

Value Exposure is measured along the vertical axis. The higher on the scale the lesser the impact on vehicle cost.

Management Quality — the capacity to capitalize on investments in low carbon- intensity technologies — is measured along the horizontal axis.

Companies in the upper-right are better positioned to compete under a future carbon- constrained market (either by regulation or consumer demand).

Companies in the lower left appear to be more vulnerable.

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Potential Impact on Earnings (EBIT)

A point estimate for each company is provided along with a range of impact from Management Quality Assessment alone (upper limit) to Value Exposure Assessment alone (lower limit).

Toyota seems best positioned, while Ford appears to be most vulnerable.

A final word from the NAS Committee on CAFE and the Auto Industry:

The NAS Committee92 recommended that any changes to the structure of CAFE should ensure an “equivalence of impact” across the spectrum of auto manufacturers. If the costs of compliance were spread unevenly across the market, the Committee warns that unintended consequences could result. For that reason, the Committee is critical of any changes to the structure of CAFE that do not:

• guarantee all manufacturers can initially comply (unless there is clear and specific reasons to do otherwise), • follow a reasonable schedule permitting manufacturers to perform the necessary design changes in respect of economic limitations and longer term plans to improve vehicle efficiency (advanced R&D), or • permit flexibility in achieving compliance, such as tradable “fuel economy credits” between companies.

On the other hand, the Committee also notes that foreign manufacturers have developed vehicle lines that are both efficient, perform well and are increasing in popularity. The efficiency of these vehicles may originally be due to the higher fuel prices in their home markets, but whatever the case, the Committee suggests that increased CAFE standards could actually improve the competitiveness of domestic-based manufacturers.

Reviewers’ Commentary

• It is suggested that although the auto industry did not suffer as a whole under CAFE in the past, significant challenges exist today, notwithstanding the high profits of the mid- 1990s. It may be naïve to believe that imposing a disproportionate emissions compliance burden on the “Big-3” will encourage greater efficiency and innovative. The future will be a challenge for these companies, which are also the most heavily invested in Canada. The evolution of the auto industry in Canada must be managed in a fair way, with powerful measures to support Canadian investment and employment as the industry evolves.

92 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, pp.68-69.

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The Impact of CAFE on Traffic Safety

In 2003, 42,643 people died in traffic accidents in the U.S.93 Non-fatal injuries were about 2.9 million. Clearly, driving a vehicle is among the more dangerous activities in which North Americans are regularly engaged. However, due to many influencing factors, such as driver education, traffic regulations, highway design and vehicle safety improvements, the rate of traffic fatalities from vehicle collisions has been in decline for many decades.

U.S. Motor Vehicle Collision Fatality Rates, 1950–1998

Nevertheless, in the U.S., NHTSA is obligated to address the issue of traffic fatality and injury on the national welfare and to propose solutions to minimize these statistics. As improving the safety of road travel is their primary mandate, any impact that fuel economy regulations may have on light-duty vehicle safety is of great concern to NHTSA.

The NAS Committee94, in their study of the impact and effectiveness of CAFE standards, tried to assess the regulation’s impact on traffic fatalities from vehicle collisions. They relied on a statistical model developed by Kahane (for NHTSA in 1997)95 to estimate the impact of the average vehicle weight reductions that occurred after CAFE was implemented. Kahane’s model (which will be discussed in more detail later) was based upon data regression techniques to establish a theoretical relationship between vehicle weight and the risk of fatality in vehicle collision. Essentially, the model estimates the increased fatality risk associated with decreased vehicle weight.

The NAS Committee observed that average passenger car and light truck weight dropped by 700 lbs and 300 lbs, respectively, between 1976 and 1993 (this includes all vehicles on the road and does not represent the average weight difference between the 1976 and 1993 model year fleets). They used Kahane’s model to estimate the reduction in traffic fatalities that would occur if the

93 http://www.nhtsa.dot.gov/nhtsa/announce/press/pressdisplay.cfm?year=2004&filename=pr35-04.html 94 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, pp.24-30, 69-78, 117-124. 95 Kahane, Relationship Between Vehicle Size and Fatality in Model Year 1985-93 Passenger Cars and Light Trucks, 1997.

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weight of the fleet were returned to 1976 levels in 1993. The model estimated that in 1993, the increase in weight would save about 2,000 lives.

Due to this type of statistical modeling, some opponents of CAFE claim that the standards increase the risk of traffic fatality and thus represent a threat to public welfare. This is based on the idea that CAFE forces manufacturers to reduce the weight of their fleet. Indeed, during the early years of CAFE, improvements in fuel efficiency were partly achieved though vehicle weight reduction (up until the early 1980s).

Even so, the Committee warned that their estimate was debatable, as there was no way to be certain what amount of the weight reductions were due to CAFE versus fuel prices or competition with smaller foreign imports, for example. In fact, upon reviewing a draft of Kahane’s report in 1996, the National Research Council’s Transportation Research Board (NRC-TRB) expressed its concern with the application of the statistical model:

“…the committee finds itself unable to endorse the quantitative conclusions in the reports about projected highway fatalities and injuries because of large uncertainties associated with the results…”96

The main concern of the TRB was that the analysis did not account for what is considered the most prevailing cause of traffic accidents: driver behavior. Driver age, gender and aggressiveness were not factored into Kahane’s statistics, limiting the applicability of the model.

The NAS Committee itself was split on the value of Kahane’s model and an appendix was attached to explain the dissent on the issue97. In short, the dissenting members claimed that Kahane’s model is a measure of vehicle weight and not fuel efficiency. They point out that most of the fuel efficiency gains made under CAFE were achieved through technology improvements and not weight reductions. They further wrote that weight is far from the determining factor in most collision fatatlities and, using Kahane’s data, were unable to establish a statistical relationship between vehicle fuel economy and highway fatality risk.

Nevertheless, the debate continues over the risk to vehicle safety if changes to CAFE influence vehicle weight. In this section, the reader is presented with a very brief and basic overview of the theory behind vehicle collisions and the role of vehicle weight. Following that, several studies that represent the range of analyses on this issue are summarized. By presenting the assumptions, methods of analysis and observations made in these studies, it is hoped that the reader will be sufficiently informed to consider this issue within the scope of motor vehicle fuel efficiency policy.

Vehicle Collision — Basic Theory

This section reviews the basic definitions and physical concepts concerning vehicle collision. First, some concepts and terminology:

Crashworthiness — This refers to the ability of a vehicle to protect its occupants during a crash. Three elements contribute to the degree of risk of injury or fatality: 1. the contact between the occupant and hard surfaces inside the vehicle (windshield, dashboard, steering wheel), 2. the intrusion of hard surfaces into the vehicle’s cab (passenger compartment), or the inside cab surface coming in contact with the occupants due to cab distortion upon impact, and 3. acceleration (deceleration) of the cab and its occupants other than that associated with contacting hard surfaces (even in the absence of hard surface impact, high rates of acceleration can cause severe damage to occupants).

96 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, pp.27. 97 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, Appendix A – Dissent on Safety Issues, Greene & Keller, pp.120.

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Aggressivity — Describes the risk imposed by one vehicle in a collision with another. For example, the risk of injury to a passenger car occupant from a head-on collision with a truck is defined as the aggressivity of the truck to the car.

Compatibility/Incompatibility — Related to aggressivity, vehicle compatibility refers to the capacity of a vehicle to protect not only its own occupants, but those of the vehicle with which it collides. Conversely, incompatibility is a measure of risk transferred from one vehicle’s occupants to another, due to design differences. Example of a situation characterized by poor crash- compatibility: A large pickup truck in a front-on-side impact with a small car, in which the car occupant’s head is level with the height of the pick-up’s front bumper. In this case, the car occupant’s head is in danger of being struck by the intruding truck’s bumper — a very dangerous situation.

Standardized Crash Tests — NHTSA regulates crashworthiness through the Federal Motor Vehicle Safety Standards (FMVSS) and publicizes the results utilizing their 5-star rating system (according to the New Car Assessment Program — NCAP). Though the range of standardized crash tests in the program is quite limited compared to the myriad of collision characteristics encountered in “real-world” situations, it has still helped to produce very significant improvements in overall vehicle safety — especially in frontal collisions.

Conservation of Momentum — Momentum is defined as the product of a vehicle’s mass and its velocity (m x v). Since a moving vehicle has kinetic energy, momentum is also a measure of energy. The laws of physics state that the total momentum of an isolated system is always constant. This means that in a system consisting of two colliding vehicles, momentum must be conserved before, during and after the event.

Consider a head-on collision event between vehicle 1 and vehicle 2, each with respective masses (m1, m2) and velocities (v1 and v2). In head-on collisions, both vehicles usually remain in contact throughout the crash. Thus, the velocity after the collision, vf, can be considered the same for both vehicles. In this example, the conservation of momentum (and energy) can be represented by the following equation:

(before collision) m1v1 + m2v2 = (m1 + m2)vf (after collision)

This is equivalent to: m2v2 – m2vf = m1vf – m1v1 m2(v2 – vf) = m1(vf – v1)

Assuming the change in velocities before and after the collision of each mass is ∆v, the equation can be reduced to: ∆v1 = m2 ∆v2 m1

Impulse — This is defined as a change in momentum and it is analogous to a change in the rate of acceleration (or deceleration)98. From the equation in the above example, it can be seen that if vehicle 2 is heavier than vehicle 1, the change in velocity of vehicle 1 (∆v1) will be greater (quicker deceleration). In other words, the change in momentum, or impulse, will be greater in vehicle 1. The human body endures more damage as the magnitude of impulse increases, and thus the occupants of the lighter car will be at a higher risk of injury.

Recall that momentum and energy are conserved during the collision event. However, much of the kinetic energy represented by the speed of the two vehicles prior to the collision, is actually converted into the work of deforming the two vehicles during the collision. In this sense, the “energy of collision” is partially represented in the degree of deformation experienced by the two vehicles. The faster the speed, the more energy is absorbed in the collision and the greater the deformation of the vehicles. Under ideal circumstances, every part of the vehicle should absorb

98 F = ma Æ F = m x ∆v/∆t Æ F∆t = m∆v, where F∆t is impulse and m∆v is the change in momentum.

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the energy of the collision through deformation except the passenger compartment, so that the occupants are not crushed.

Essentially, when two vehicles of unequal weight collide, the occupants of the lighter vehicle are at much increased risk of injury, all else equal (equivalent crash aggressivity and compatibilities). This is a conclusion about which there is little debate.

Despite the apparent bleakness of the above statement, the theory actually offers an opportunity to mitigate the risk of injury between vehicles of unequal weight. The risk of occupant injury is based on the impulse magnitude during the crash event (the time-dependent force upon the occupants that causes the rapid deceleration). Given a particular “stiffness” in the frontal area of two vehicles, the actual time duration of a head-on crash is determined by two elements:

• the relative velocity of both vehicles at the moment of collision, and • the distance the front ends of both vehicles deform or “crush”.

In a head-on, high-speed collision the front ends of each vehicle will linearly deform (be forced backward) from their normal geometry by a certain amount called the “crush distance”. Generally, the greater the crush distance, the less rapid the rate of deceleration and the lower the magnitude of the impulse experienced by the vehicle occupants.

Often, the impulse experienced by the vehicle occupants is not constant during the crash. The following diagram illustrates the “crash pulse” profile of a light car colliding with a fixed barrier at about 35 mph (~55 km/hr).

Crash Impulse and Velocity Profile Deceleration measured in G’s (1 G = 32 ft/sec2) and Velocity in mph.

source: Ross, Wenzel, Losing Weight to Save Lives, 2001.

As shown, the impact begins at 35 mph and decreases to zero in about 100 milliseconds. During the collision, the vehicle’s cab and its occupants experience deceleration equivalent 37 times the

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force of gravity, even though the average force is a “mere” 14 Gs. The profile indicates that, initially, the car itself absorbed most of the impact energy as it was crushed, until the more rigid components of the vehicle (the engine, for example) halted the crushing effect. Past this point the remaining energy of the collision was transmitted to the vehicle’s cab (its passenger compartment) and occupants, whereupon the full deceleration effects must be endured.

If it were possible to extend the crush distance, such that the change in momentum could be spread out over a longer time period, the peak impulse could be reduced. Redesigning the crush zone of a vehicle (also called the crumple zone) to flatten the peak could also reduce the risk of passenger injury. This is an important concept as some studies on vehicle safety assume size and weight vary proportionately, when in fact if vehicle weight is reduced without altering vehicle size, the general risk of injury in collisions may actually drop. This is because more of the vehicle’s structure can be dedicated to crumpling, as opposed to being densely packed with rigid components. Supplemental restraint systems can also be designed to help reduce the peak impulse levels experienced by passengers.

Naturally, head-on collisions as described above represent only a portion of the many situations that can result in traffic fatality. Side collisions can occur across an infinite range of angles and positions and many collisions involve only one vehicle, such as the case in roll-over events. Moreover, driver behaviour and road conditions are often the dominant factor in most traffic fatalities, as opposed to vehicle weight and design. Since the full range of these factors is difficult to simulate, most vehicle safety studies are based on actual traffic injury and fatality statistics instead of theoretical equations derived from classical mechanics. Nevertheless, the above discussion has been presented to help the reader weigh the claims made by the authors of the following studies.

1) Study on Vehicle Weight, Fatality Risk and Crash Compatibility — Kahane (1997) 99

Kahane conducted two studies for NHTSA on the impact of changes in vehicle weight on the risk of occupant fatality. The first was in 1997, in which vehicle attributes for the model years 1985–93 were compared to their associated fatality rates in the calendar years 1989-93. Technically speaking, this study did not measure the direct fatality risk impact of removing 100-lbs of mass from a given vehicle. Instead, it looked at the fatality statistics for vehicles of a specific curb weight and compared those figures to vehicles that were about 100 lbs less100. What this analysis actually indicates, therefore, is the change in fatalities that would have resulted if consumer purchasing had produced a 100 lb lighter vehicle fleet. This approach was intended to provide a basis for estimating the impact of reducing the average weight of the light-duty vehicle fleet by 100 lbs.

Kahane’s regressions attempted to calibrate the data for confounding factors, such as driver age, gender, vehicle age, state, urban or rural location, day or night incidence and others. The analysis also established a relationship between vehicle size and weight based on historical parameters for track width (distance between driver and passenger side wheels), wheelbase (distance between front and rear axels), center-of-gravity, height and structural strength. The statistical model developed was retrospective in nature, as it was based on historic data. The relationship among the vehicle parameters was considered to be constant as weight was varied. Therefore, as a predictive model, its value is tied to how closely future vehicle designs match those of the 1989–93 model years. The report identifies this as a legitimate limitation and specifies that if vehicle weight were reduced while keeping size constant, the model might no longer hold.

99 Kahane, Relationship Between Vehicle Size and Fatality in Model Year 1985-93 Passenger Cars and Light Trucks, 1997. 100 The data utilized in Kahane’s analysis were drawn from the Fatal Accident Reporting System (FARS) and vehicle registration data form R.L. Pols National Vehicle Population Profiles.

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The results of the statistical experiment are summarized below according to the six predominant crash modes.

Summary of Kahane’s 1997 Fatality Risk vs. Curb Weight Analysis

Fatalities in Effect of 100-lb Net Fatality Change in 1993 Crash Mode 1993 Crashes Weight Reduction (as predicted by model) Effect of 100-lb Weight Reduction in Passenger Car Fleet (Holding Light Truck Weight Constant) Principal Rollover (not resulting from collision) 1,754 +4.58% +80 Hit Object (trees, barriers, etc.) 7,456 +1.12% +84 Hit Pedestrian / Bicycle / Motorcycle 4,206 -0.46% -19 Hit Heavy Truck (>10,000 GVWR) 2,648 +1.40% +37 Hit another Passenger Car 5,025 -0.62%* -31 Hit another Light Truck (pickup, minivan, SUV) 5,751 +2.63% +151 Overall 26,840 +1.13% +302 +/- 2σ confidence +214 to +390 +/- 3σ confidence +170 to +434 Effect of 100-lb Weight Reduction in Light Truck Fleet (Holding Passenger Car Weight Constant) Principal Rollover (not resulting from collision) 1,860 +.81%* +15 Hit Object (trees, barriers, etc.) 3,263 +1.44% +47 Hit Pedestrian / Bicycle / Motorcycle 2,217 -2.03% -45 Hit Heavy Truck (>10,000 GVWR) 1,111 +2.63% +29 Hit another Passenger Car 5,751 -1.39%* -80 Hit another Light Truck (pickup, minivan, SUV) 1,110 -0.54%* -6 Overall 15,312 -0.26% -40 +/- 2σ confidence -100 to +20 * not statistically significant

Essentially, the Kahane model suggests that reducing the weight of the passenger car fleet would increase the risk of fatality to the vehicle occupants, particularly in principal rollover accidents and collisions with light trucks, with a net increase in the total fatality rate. Reducing the weight of light trucks actually has a net reduction impact on fatality rates, with other passenger cars, pedestrians and cyclists comprising the main beneficiaries.

These results raised questions about the model itself. It was expected that reducing vehicle weight would have a negative impact on the fatality rate in collisions between vehicles of the same class (i.e., car-car and truck-truck crashes). This prediction was not supported by the results. However, many researchers point out that this is precisely what one would expect if weight were reduced uniformly across a vehicle fleet. For example, NAS Committee members (2002)101, Greene and Keller, point out that the laws of physics would suggest such a result. As indicated by the collision equations at the beginning of this section, it is not the absolute weight of either of the colliding vehicles, but the relative difference in vehicle weight that determines the risk to the occupants of the lighter vehicle. In fact, Greene and Keller used Kahane’s model to estimate the net change in fatality rate resulting from a 10 per cent reduction in the entire light-duty vehicle fleet (cars and trucks) for the 2000 model year, and found that no statistically significant change occurred within the model102. This suggests that a proportionate down-weighting of the entire light-duty fleet would result in fewer traffic fatalities, as would seem logical.

There is also much debate over the increase in rollover crashes due to weight reduction in passenger cars. Considering that the lower centre-of-gravity of smaller cars is thought to increase their stability, rollover would not seem a likely source of increased risk. This may simply illustrate the obvious limitation in traffic safety statistics: that many confounding factors exist which cannot

101 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, Appendix A – Dissent on Safety Issues, Greene & Keller, pp.120. 102 Kahane confirmed that the correct interpretation of his model was employed in this exercise.

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necessarily be separated in the data regression. This is not to say that Kahane’s analysis is wrong. Indeed, even those researchers critical of its application to the fuel economy debate consider Kahane’s analysis among the more respected works on this subject, given his meticulous attempts to account for the confounding factors.

Reviewers’ Commentary

• It should be pointed out that the Kahane model calculates fatality risks relative to "exposure", which is estimated using certain types of accidents. While this is a more sophisticated approach than measuring exposure based on vehicle registrations or distanced traveled, it still has important limitations. The exposure risk obtained under Kahane’s approach combines the probabilities that (1) an accident occurs in a certain exposure situation, and (2) that a fatality occurs in such an accident. While (2) may be directly related to vehicle weight, (1) is probably not. At most, (1) is an indirectly influenced by vehicle weight (e.g., the typical buyers of the heaviest cars tends to be older, male and tends to be more affluent. These factors influence the accident risk, and the fatality risk. While one might make statistical controls for the confounding effects of the first two factors, one cannot control for the effect of the third factor). Take, for example, the effect of affluence on accident risk in Chevy and GM pickup trucks. Though they are physically identical, the rollover experience of the Chevy is worse than that of GM trucks — even after controlling for all available factors in the accident records. A closer look reveals that Chevy offers less expensive options not available in the GM trucks. At the same time, the more expensive options for both Chevy and GM are identical. Thus, the Kahane model implies that when drivers of heavier cars shift to lighter cars, they also assume the driving patterns and driving habits of owners of light cars, which is very unlikely.

• Kahane’s methodology assumes that reductions in vehicle mass are accompanied by changes in characteristics that correlate with mass, such as size, design quality, etc. Simply put, applying Kahane’s results in the future would replace historical midsize (i.e., heavier) cars with historical subcompact (i.e., lighter) cars. Under this scenario, the effort to improve fuel economy would lead to more-expensive cars being replaced by less-expensive cars. This implicit assumption could represent a significant limitation in using the model to predict fatalities in new vehicle designs.

Another study of similar significance is the 1998 analysis by Joksch on fatality risks and vehicle type, discussed next.

2) Study on Fatality Risk in Collisions between Cars and Light Trucks — Joksch (1998)103

Joksch, Massie and Pichler at the University of Michigan Transportation Research Institute produced this important report in 1998. Contrary to Kahane’s Study, the Joksch analysis attempted to measure the effects of weight and size as separate factors in vehicle collisions. The analysis utilized data from FARS and the General Estimates System (GES) for calendar years 1991-94, with the objective of determining both crashworthiness and aggressivity of vehicles grouped into “families” with similar characteristics, but not necessarily by weight alone, as in the Kahane study.

The Joksch study also attempted to minimize confounding effects, as did the Kahane study. By limiting fatality data to drivers between the ages of 26 and 55, Joksch intended to account for the resilience of youth and the vulnerability of the elderly to fatality in collision events. In addition, the

103 Vehicle Aggressivity: Fleet Characteristics Using Traffic Collision Data, Joksch, 1998.

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study excludes data on vehicles with advanced passenger restraint systems, such as air bags, in order draw a clearer relationship between vehicle structure and fatality risk.

The report reviews some established relationships about fatality risk and vehicle weight. Empirically derived, for speeds up to 70 mph, the risk experienced in a head-on collision by the lighter of two cars increases with the fourth power to the ratio of their two masses, as shown by the following relationship.

4 risk to vehicle 1 / risk to vehicle 2 = (m2 / m1)

Accordingly, Joksch pays due respect to the role of mass ratio in vehicle collisions. The study goes further, however, noting the variability in wheelbase among vehicles of similar weight. As explained earlier, increasing the crush distance can help to better manage the energy of a collision and thereby protect the vehicle occupants. The Joksch study is, therefore, one of the few studies to consider the effect of size in addition to weight as a factor in fatality risk. With the available FARS and GES data, an attempt was made to establish a historical relationship between average vehicle weight and wheelbase. Wheelbase is not a perfect measure of vehicle size, but it was the only statistic available in the source data. Vehicles that deviated from the relationship were classified as “overweight” by the extent to which their mass exceeded the average level for a specific wheelbase category. The following charts illustrate the findings of the study.

Car-Car Collisions Car-Car Collisions Risk to Primary Driver by Primary Car Attributes Risk to Primary Driver by Other Car’s Attributes

Car driver fatality rate, per involved driver, in collisions Car driver fatality rate, per involved driver, in collisions with other cars, by wheelbase and overweight of his car. with other cars, by wheelbase and overweight of other Drivers 26-55 years old, no airbag. car. Drivers 26-55 years old, no airbag.

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Single Car Collisions Risk to Driver by Car Attributes

Car driver fatality rate, per involved driver, in single car collisions, by wheelbase and overweight of the car. Drivers 26-55 years old, no airbag. Same data in both views, but with opposite overweight scales.

This analysis supported many of the findings in the Kahane report. However, there were some additional refinements on the basic weight-to-fatality collision relationship.

• In a collision between a light and a heavy car, the increase in risk to the occupants of the light car is greater in magnitude than the decrease in risk to occupants of the heavy car. That is, increasing weight increases aggressivity but not necessarily crashworthiness, thus increasing the net risk of fatality. • While the risk to car occupants in single vehicle crashes and rollover declines with increasing vehicle size (as partially supported by Kahane in terms of size and weight), significant overweighting offers no reduction in risk. • Overweighting a vehicle (increasing its weight beyond the average for a given wheelbase) generated no apparent improvement in crashworthiness, although aggressivity does increase. The study cautioned that, in some cases, overweighting could be the result of a more powerful, heavier engine, suggesting the incremental aggressivity effects could be driver-related, as more aggressive drivers are often matched to more powerful engines, statistically speaking.

In general terms, the above observations tell us two things: scaling down a vehicle’s weight and size proportionately (according to their normal relationship), can decrease the vehicle’s crashworthiness; but increasing its weight while keeping size constant does nothing except place others at risk. This is an important modification on Kahane’s analysis because it identifies a vehicle design opportunity to decrease vehicle weight (and thus improve fuel efficiency) without altering the fatality rate.

The Joksch analysis reveals that while size and weight are related, they should not be considered one and the same in terms of fatality rates. While this may seem intuitively obvious, a statistical basis is still required to estimate the magnitude of their separate effects on vehicle safety.

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Reviewers’ Commentary

• One of the main differences between the Kahane and the Joksch study is that only probabilities of death in a collision are studied by Kahane. As such, weight-related factors that could impact the probability of collision in the first place were excluded.

• It should be pointed out that the above charts merely suggest trends that existed in the 1991–1994 model year data, and do not represent definitive rules of safe automotive design.

• It should be noted that vehicle compatibility is an issue that involves a collision of two vehicles, but the implications of weight and size extend to single-vehicle collisions as well, where more vehicle weight may be a benefit.

3) Effectiveness and Impact of CAFE Study — NAS Committee (2002)104

In 2001, NHTSA was directed by a Congressional budget committee to fund a study by the National Academy of Sciences (NAS) to consider the historical effectiveness of the CAFE program and estimate the broad ranging impact of increasing the standards. In 2002, the NAS published the results of the study, in which a portion of the analysis focused on vehicle weight and safety (as previously discussed at the beginning of this section). The NAS relied heavily on the Kahane (1997) study to estimate the impact of vehicle weight reduction, as very little time was available for the Committee to construct its own statistical model.

Duly recognizing the limitations of the Kahane model (it was also, by then, based on relatively old vehicle and fatality data), the Committee considered the impact of improving LDV fuel economy by 10 per cent, which included a 3.6 per cent weight reduction in passenger cars and 1.4 per cent in light trucks. The panel established this factor by looking at the weight reductions that occurred between 1975 and 1984, and the corresponding fuel economy increases in that time. This approach assumed that today’s vehicle manufacturers would respond to fuel economy targets in the same manner as in the 1975–1984 period. The result was an increase of 370 (+/- 110) passenger car and 25 (+/- 40) light truck related fatalities (based on 1993 fatality data).

The Committee also conducted a similar fatality risk analysis based mainly on the application of “cost-effective” fuel economy improvement through technology, which the panel had determined would improve by 12–27 per cent for cars and 25–42 per cent for light trucks. In this case, with some slight downweighting in the heaviest vehicle classes, the net impact to the 1993 fatality rate was estimated at an additional 65 deaths, although the Committee admitted this was a highly debatable figure.

Dissent by Greene & Keller

As described earlier, a division emerged within the Committee, as two of its members, Greene & Keller, were unable to support the estimation made by the Kahane model. The details of this dissent were attached as a supplemental appendix to the study105. In their supplemental report, Greene & Keller point out what they considered to be a flaw in the above analysis: it asked the wrong question. The study’s aim was to determine the impact of fuel economy standards on vehicle safety. However, the Kahane model is limited to considering only the weight reductions portions that may result from fuel economy improvements. Greene & Keller agree that reducing

104 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, pp.24-30, 69-78, 117-124. 105 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, Appendix A – Dissent on Safety Issues, Greene & Keller, pp.120.

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vehicle weight will improve fuel economy, keeping all else equal, but they point out that reducing engine power, all else equal, will achieve the same result. Referring back to the trends discussed in section 3.2, it is clear that engine power did indeed decrease after CAFE standards were implemented, as did weight. As such, Greene & Keller reason that the Committee’s conclusions are at least partially incorrect.

Greene & Keller also challenge the idea that to make a fleet of vehicles safer, the vehicles should be made heavier. They describe this as a “logical fallacy” resulting from the generalized claim: in a collision between two vehicles of unequal weight, the occupants of the lighter vehicle are at greater risk. In fact, it is the relative difference in the weight of the vehicles that contributes to the adverse risk, not absolute weight. So one might just as easily conclude that all heavy vehicles should be made proportionately lighter.

With respect to statistical analysis of traffic fatality data, Greene & Keller question whether it is possible to fully isolate the confounding effects of driver behaviour and environmental conditions from simple vehicle attributes, such as weight. Failing to adequately account for these effects when developing a correlation between vehicle weight and societal impact can lead to spurious policy decisions.

Greene & Keller’s position is supported by the comments of the TRB (noted at the beginning of this section). They also cite a critical review of the Kahane report by industry consultants, Pendelton & Hocking106, and the NRC’s review committee, which concluded that the uncertainties in the study’s estimates “make it impossible to use [the] analysis to predict with a reasonable degree of precision the societal risk of vehicle downsizing or downweighting107.”

As an interesting aside, Greene & Keller attempted to determine if any relationship existed between fuel economy and national fatality rate. They applied a time-series regression of total U.S. highway fatalities directly against light-duty fuel economy using “first differences” (a simple statistical technique that eliminates linear trends in a data set, revealing how system variables deviate from the trend). They found no statistically significant relationship between the average fuel economy of the light-duty vehicle fleet and traffic fatalities. Various other variables were tested, including VMT, population, and fuel prices, but none correlated with the fatality rate. The two exceptions were real GDP and the 55 mph interstate speed limit. The regression indicated that fatalities would decline if GDP was not growing, and that fatalities increased after the 55 mph speed limit was raised for rural interstates.

Reviewers’ Commentary

• To expand on the issue of confounding effects, driver behavior and environmental conditions are the key determinants of the likelihood of collisions, but their outcomes may be more dependent on the vehicle.

• There appears nothing profound in the Dissent by Greene and Keller — it simply indicates that there are more factors than vehicle weight that account for a fatality (i.e., young drivers in urban areas, collisions between vehicles of unequal weight, driver behaviour, etc.).

106 Pendleton, Hocking, A Review and Assessment of NHTSA’s Vehicle Size & Weight Safety Studies, 1997. 107 NRC (North, 1996), Committee letter to Martinez.

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The NAS Committee concluded their analysis by suggesting that if the future structure of CAFE were designed to encourage fuel efficiency through technology improvements instead of vehicle downweighting, their fatality risk projection would be nullified (at least, in part). The Committee also recommended that in order to improve the Kahane model, it should be updated with more recent traffic and vehicle data. In 2003, Kahane published the requested update to his 1997 model, which will be summarized last in this section.

First, a review of two reports that attempt to counter the value of the weight-based statistical analysis favoured by the NAS Committee and Kahane.

4) Are Larger, Heavier Vehicles Really Safer Than Smaller, Lighter Cars? — Ross & Wenzel (2002) 108

Marc Ross & Tom Wenzel collaborated while at Lawrence Berkley Laboratory on this statistical analysis in which risk was defined by driver death rates (driver deaths per year per million vehicles sold) — a format employed by the Insurance Institute for Highway Safety. In this study, only 1995–99 vehicle models with current safety designs (seat belts and air bags) were included and only when sufficient sales of those vehicles permitted robust analysis. Fatality data are charted by risk to the drivers of a given vehicle classification against the risk to drivers of other vehicles. The results are illustrated in the figure below. The small circles represent the weighted average risk to the driver of a given class of vehicle and the risk to other drivers in collision with those vehicles. For example, the average midsize car presents a risk to the driver of 72 deaths per year per million cars, while at the same time presenting a risk to other vehicles with which the car collides of 34 deaths per year per million cars. The shape around the circle represents the range in risk given by particular models with that vehicle class. So, along the horizontal axis, midsize cars range in driver risk from 24 (Toyota Camry) to 47 (Chevrolet Lumina).

108 Ross, Wenzel, Are SUVs Really Safer Than Cars?, 2002.

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Combined Risk to Driver and Others by Vehicle Type

Included in the figure are “combined risk” lines. These represent the sum of the risks to both drivers. The vehicle groups that fall under and to the left of these arbitrary diagonals represent a net lower risk of fatality.

The risk values calculated in this study are not only based on inherent vehicle design, but on how the vehicles are driven. In this, Ross & Wenzel emphasize the impact of driver behaviour as a potentially significant factor in vehicle fatalities, as opposed to vehicle attributes alone.

Several observations can be drawn from the above chart:

• The risk to drivers of average midsize and large cars is about the same as the average SUV. But, combined with the risk posed to other drivers, the SUV is about 25-30 per cent more dangerous. • The risk to the drivers of average compact and subcompact cars is greater than that of most other vehicle types. • Minivans are among the lowest combined risk (due to their popular use as a transporter of families, driver behaviour likely plays a role in the reduced risk). • Pick-up trucks experience the highest overall risk of fatality. This matches the Joksch study, in which twice as many deaths occurred in pick-up/car crashes as in car/car crashes.

These observations beg the question, “If minivans (which are often based on car chassis) are safest, and pick-up trucks (upon which large SUVs are often based) are least safe, then which is safer: cars or SUVs?”

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Below, a figure from the Ross & Wenzel study charts some popular car models according to risk. As shown, although compact and subcompact cars ranked poorly in risk-to-driver, some models rank better than the average combined risk for midsize and large cars. This study illustrates how broad statistical analyses on average vehicle attributes, such as size and weight, can lead to the false assumption that fuel efficiency and safety are antithetical values.

Combined Risk to Driver and Others by Specific Vehicle Model

Reviewers’ Commentary

• It should be noted that this analysis is based on statistical sampling, and as such driver behaviour will have a significant impact on the findings. Statistically, minivan drivers may be more cautious and experience fewer accidents. This does not mean that minivans are more or less safe in relation to another vehicle class.

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5) The Effects of Vehicle Weight and Size Parameter on Fatality Risk — Dynamic Research (2003)109

Van Auken and Zellner conducted a detailed analysis of fatality risk according to the Kahane model for Dynamic Research, Inc., publishing the results in January 2003. Their data were based on 1995–99 calendar year FARS data for 1985–98 passenger cars and 1985–97 light trucks. Instead of assuming that vehicle weight, wheelbase and track width vary proportionately as in the Kahane (1997) study, they hold wheelbase and track width constant while reducing weight.

In short, the study indicates that reducing weight while maintaining the outward size and geomertry of a vehicle results in a net reduction in fatalities. Based on 19,179 fatalities in 1999 U.S. crashes involving passenger cars and light trucks, the study results are summarized in the following chart.

Summary of DRI’s 2003 Fatality Risk vs. Vehicle Parameter Analysis

Estimated Net Change in Fatalities Due to Vehicle Parameter Due to Crash Crashworthiness & Combined Impact Change Avoidance Compatibility Estimate (2σ) Estimate (2σ) Estimate (2σ) Passenger Cars 100-lb Curb Weight -472 (259) -108 (156) -580 (260) Reduction 1.01” Wheelbase Reduction +514 (172) -147 (106) +368 (174) 0.34” Track Width +165 (134) +26 (81) +191 (134) Reduction Sum of Combined Weight +208 (339) -229 (205) -21 (340) & Size Reductions Light Trucks 100-lb Curb Weight -155 (179) -65 (114) -219 (179) Reduction 1.21” Wheelbase Reduction +41 (81) +133 (53) +174 (81) 0.57” Track Width +88 (103) +17 (67) +106 (104) Reduction Sum of Combined Weight -25 (222) +86 (143) +61 (222) & Size Reductions

For each parameter change, the impact on fatality risk is presented separately in terms of crash worthiness, crash avoidance and both impacts combined. As shown, if weight was held constant while wheelbase and track width were reduced, an increase in fatalities would result. These findings are similar to the conclusions reached in the Joksch study.

Reviewers’ Commentary

• It can be argued that this study reflects vehicle collision-compatibility issues and may not have direct bearing on fuel efficiency.

109 http://www.citizen.org/documents/Dynamic_Research_study_on_Weight_and_Safety_exec_summary.pdf

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6) Update to Kahane’s Vehicle Weight, Fatality Risk and Crash Compatibility Study — Kahane (2003) 110

Kahane updated his 1997 work in a study published in October 2003. Unlike the 1997 report, in which the data were based on fatality rates per million exposure years, the 2003 report is based on crash fatality rates per billion miles (VMT) for 1991–99 model year vehicles in 1995–2000 calendar year crashes. Intended to supercede the 1997 report and flush out any previous anomalies in the model, this updated analysis supports NHTSA’s ongoing research in passenger car/light truck crash compatibility. The study incorporates both weight and rigidity, as well as height mismatch between colliding vehicles.

An interesting result of the 1997 report was that fatalities in car-to-car crashes did not increase as weight was reduced. Greene & Keller claimed that this result was expected, based on the laws of physics, where the fatality risk is determined by the difference in mass between the two vehicles and not absolute vehicle weight111. However, the updated Kahane model seems to support a different conclusion.

On the next page, the 2003 study results are summarized in the following table, according to the same crash modes as used in the 1997 study (these modes represent more than 96 per cent of all crash fatalities in the U.S.112).

In this regression, Kahane found the trends he expected in his first study: across the board increases in fatalities with a lighter vehicle fleet — with one exception. The exception is a reduction in expected fatalities among the heaviest of the light trucks. As with his earlier study, Kahane points out that this is not a controlled experiment and while great efforts were taken to account for driver behaviour and other external conditions, there is not enough specific data to fully isolate the results as exclusive to vehicle attributes.

Other analyses accompanied these results, including a review of fatality rate by vehicle type and size, adjusted for such confounding factors as age, gender, location, time, speed limit and others. As with the Ross & Wenzel study, Kahane identified midsize and large cars, as well as minivans, as producing the lowest fatalities per crash involvement per VMT. He identified very small 4-door cars (which account for less than one per cent of sales), mid-size SUVs and compact pick-ups as having the highest fatality risk. Kahane also looked at vehicle compatibility and aggressiveness, finding (as did the Joksch study) that SUVs and pick-up trucks presented a much greater risk to others than experienced by their own drivers.

In contrast to Kahane’s work, there are other studies (e.g., Dynamic Research, 2003) which show that weight reductions lead to fewer fatalities if track width is held constant. Ross & Wenzel also point out that the Honda Civic and VW Jetta are small, 4-door cars that are involved in fewer fatal crash incidents than SUVs, showing that vehicle design can be a more significant influence than weight. Coinciding with the release of the 2003 Kahane report, Public Citizen issued a press briefing that identified examples of compact-sized passenger cars that have demonstrated historical trends towards better fuel economy, as well as fewer fatalities overall113.

110 Kahane, Vehicle Weight, Fatality Risk and Crash Compatibility of Model Year 1991-99 Passenger Cars and Light Trucks, 2003. 111 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, Appendix A – Dissent on Safety Issues, Greene & Keller, pp.120 112 Kahane, Vehicle Weight, Fatality Risk and Crash Compatibility of Model Year 1991-99 Passenger Cars and Light Trucks, 2003. pp. vii. 113 http://www.citizen.org/documents/kahane_2.pdf

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Summary of Kahane’s 2003 Fatality Risk vs. Curb Weight Analysis

Net Fatality Change in Fatalities in Effect of 100-lb Crash Mode 1999 (as predicted by 1999 Crashes Weight Reduction model) Effect of 100-lb Weight Reduction in Passenger Car Fleet (Holding Light Truck Weight Constant) PASSENGER CARS UNDER 2,950 LBS Principal Rollover (not resulting from collision) 995 +5.08% +51 Hit Object (trees, barriers, etc.) 3,357 +3.22% +108 Hit Pedestrian / Bicycle / Motorcycle 1,741 +3.48% +61 Hit Heavy Truck (>10,000 GVWR) 1,148 +5.96% +68 Hit another Passenger Car 934 +4.96% +46 Hit another Car < 2,950 lbs 1,342 +2.48% +33 Hit another Car > 2,950 lbs 4,091 +5.63% +230 Overall 13,608 +4.39% +597 uncertainty range: +226 to +715 PASSENGER CARS OVER 2,950 LBS Principal Rollover (not resulting from collision) 715 +4.70% +34 Hit Object (trees, barriers, etc.) 2,822 +1.67% +47 Hit Pedestrian / Bicycle / Motorcycle 1,349 -0.62% -8 Hit Heavy Truck (>10,000 GVWR) 822 +2.06% +17 Hit another Passenger Car 1,342 +1.59% +21 Hit another Car < 2,950 lbs 677 +3.18% +22 Hit another Car > 2,950 lbs 3,157 +2.62% +83 Overall 10,884 +1.98% +216 uncertainty range: +129 to +303 Effect of 100-lb Weight Reduction in Light Truck Fleet (Holding Passenger Car Weight Constant) LIGHT TRUCKS UNDER 3,870 LBS Principal Rollover (not resulting from collision) 1,319 +3.15% +42 Hit Object (trees, barriers, etc.) 1,687 +4.02% +68 Hit Pedestrian / Bicycle / Motorcycle 1,148 +1.24% +14 Hit Heavy Truck (>10,000 GVWR) 584 +5.91% +35 Hit another Passenger Car 2,062 +1.13% +23 Hit another Light Truck < 3,870 lbs 247 +6.98% +17 Hit another Light Truck > 3,870 lbs 1,010 +3.49% +35 Overall 8,057 +2.90% +234 uncertainty range: +59 to +296 LIGHT TRUCKS OVER 3,870 LBS Principal Rollover (not resulting from collision) 2,183 +2.56% +56 Hit Object (trees, barriers, etc.) 2,639 +3.06% +81 Hit Pedestrian / Bicycle / Motorcycle 2,043 +0.13% +3 Hit Heavy Truck (>10,000 GVWR) 860 +0.62% +5 Hit another Passenger Car 5,186 -0.68% -35 Hit another Light Truck < 3,870 lbs 1,010 -1.50% -15 Hit another Light Truck > 3,870 lbs 784 -3.00% -24 Overall 14,705 +0.48% +71 uncertainty range: -156 to +241

Reviewers’ Commentary

• It should be pointed out that VMT (distance traveled) is known to be an inaccurate basis for measuring statistical exposure for collision risk, especially in the case of head-on collisions. While this study is more thorough than Kahane’s 1997 work in accounting for confounding effects, the results may be treated with greater skepticism given it is based on VMT.

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CAFE and Vehicle Safety — What Are the Conclusions?

The studies on traffic fatality rates and the risk associated with certain vehicle attributes, as summarized and presented in this section, are not meant to form the basis of an argument for or against vehicle fuel efficiency standards. The material presented here simply illustrates the range of debate and analysis on the subject. The reader can use the findings as a guide in considering vehicle fuel efficiency issues and their potential impact on the level of injury and fatality risk borne by motorists and society at large.

The main points of consideration drawn from these statistical analyses are:

• In a head-on collision between two vehicles, the risk of fatality increases with the relative difference in their weight, all things held equal. Therefore, the risk of fatality is smaller in vehicles of similar weight and larger in vehicles of unequal weight, all things held equal.

• In a head-on collision between two vehicles of unequal weight, the risk of fatality is higher for the occupants of the lighter vehicle, all things held equal.

Logically, it follows that if all vehicles on the road weighed the same — be they light or heavy vehicles — the risk of fatality would be lower than if the fleet were a mix of light and heavy vehicles.114

• In a collision between lighter and heavier vehicles, the increase in risk to the occupants of the light car is greater than the decrease in risk to occupants of the heavy car. In other words, with increased weight comes a general increase in vehicle aggressivity, but not necessarily crashworthiness.115

• Overweighting a vehicle (increasing its weight beyond the average for a given wheelbase) may not improve crashworthiness, but may increase aggressivity, representing a net increase in fatality risk.

• It appears that CAFE could only have contributed to an increased traffic fatality rate insofar as it forced reductions in vehicle weight. The NAS Committee could not determine to what degree, if any, CAFE was responsible for vehicle downweighting.

• Raw fatality rate data demonstrate that the risk to drivers of certain small, light passenger cars is lower than that of certain larger, heavier pickup trucks and SUVs.

These statistical observations suggest that vehicle design plays an important factor in traffic safety.

The overriding limitation of the studies reviewed in this section is that they are retrospective in nature. None of the above-mentioned studies attempts to conduct an engineering assessment of the potential to build a safer and, at the same time, a more fuel-efficient, vehicle. Moreover, other transportation regulations can have a much greater impact on highway safety than vehicle attributes. For example, implementation of the 55 mph speed limit is thought to have prevented 2,000 to 4,000 crash-related deaths annually since 1973. Correspondingly, the

114 In “Motor Vehicle Fuel Efficiency & Traffic Fatalities”, Noland discusses the emergence of a “bi-modal” weight distribution in the light-duty vehicle fleet. Noland writes, “Of more importance is the current trend toward increasing SUV usage. If an increase in bimodal weight distributions with the vehicle fleet increases fatalities, then reducing the size (and increasing the efficiency) of SUVs might be a desirable policy both for reducing fuel consumption and traffic-related fatalities.” Robert B. Noland, The Energy Journal, Vol. 25, No. 4, 2004. 115 The reader is directed to NHTSA’s Research Program for Vehicle Aggressivity & Fleet Compatibility for further updates on this area of study: Paper #249, Summers, Prasad, Hollowell.

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relaxation of these limits in 1987 is thought to have contributed to a corresponding increase in traffic fatalities116.

It should be noted that, overall, neither vehicle weight nor design (and certainly not fuel economy) are the most significant factors in the risk of traffic fatality. In the U.S., driver behavior has been cited as a significant factor in 95 per cent of traffic collisions, followed by road conditions at 34 per cent, while the vehicles themselves are considered to be the primary cause in only 12 per cent of such events117. Thus, while vehicle attributes may play a significant role in the outcome of a collision, they are not usually a large factor in the cause of a collision.

Other Concerns About Light-Duty Vehicle Design and Traffic Safety

There are other aspects of light-duty vehicle design that are of growing concern to NHTSA and other traffic safety organizations. As seen in section 3.2, the increasing number of large SUVs on the road is contributing to an overall decline in fleet-wide fuel economy, but it is also contributing to increased vehicle aggressivity. Vehicles in the light truck category, such as SUVs, are not subject to the same safety restrictions as passenger cars. The height of the bumper on passenger cars, for example, is regulated such that in rear- or head-on collisions between cars, the bumper makes first contact, providing the occupants of both cars with some added crush zone protection. SUV bumpers, however, are not regulated to any height and thus the point of first impact with a car could occur much nearer the passenger compartment of the car — and perhaps nearer head-level of the passengers within.

The incidence of roll-over fatality is also much increased among SUVs and pickup trucks, as their higher ground clearance, higher center of gravity and rigid frame makes them much more susceptible to such events. Many large SUVs share their stiff frame and chassis construction with pickup trucks, which are designed for carrying heavy loads at low speeds in off-road conditions, such as those found in a This SUV to the right did not fare too well in its collision with this car. construction site. Passenger cars, source: Ross & Wenzel, “Are SUVs Really Safer Than Cars?”, 2002. on the other hand, are built low to the ground for stability and have more flexible frames suited to the higher speed conditions typical of highway travel.

Pedestrian safety is another issue of growing concern given the increased use of SUVs, pickup trucks and vans. When a pedestrian is hit by a car, the point of impact is usually between the vehicle’s front bumper and the person’s knees (well below their centre of gravity). In such situations, the pedestrian collapses onto the hood and windshield of the car, which absorb some of the collision energy and “soften the blow”.

116 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, pp.77 117 Evans, Traffic Safety & the Driver, 1991.

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source: http://www.automotive.tno.nl/Madymo/Publications/UMAmericas2003/ Madymo2003_LexvanRooij_Pedestrian3.pdf

When a pedestrian is struck by a pickup truck, SUV, van or minivan, the situation can be quite different. Instead of being struck low in the legs, the person is struck full in the midsection, potentially suffering severe internal injury and being thrown out in front of the vehicle — possibly into other traffic.118

source: Pedestrian collision with light-duty truck, Prof. Ing. Jan Kovanda, CSc., Ing. Hedvika Kovandová, PhD., Faculty of Transportation Science, Czech Technical University in Prague. http://www.fd.cvut.cz/Czech/Events/Sbornik/2003/Doprava_a_Telekomunikace/kovanda.pdf

A Concluding Word on Safety

The possibility was presented earlier in this section that the structure of CAFE itself may have been at least partially responsible for the shift in market share towards light trucks. Whether true or not, it certainly seems that future fuel efficiency regulations, if properly implemented, could actually help increase traffic safety by reversing this trend.

118 “Pedestrians are found to have a two to three times greater likelihood of dying when struck by an LTV [light trucks and vans] than when struck by a car. Examination of pedestrian injury distributions reveals that, given an impact speed, the probability of serious head and thoracic injury is substantially greater when the striking vehicle is an LTV rather that a car.” – The fatality and injury risk of light truck impacts with pedestrians in the United States, Lefler, Gabler, 2002.

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Reviewers’ Commentary

It should be noted that there is growing support for the perspective that safety is primarily a design issue and not entirely a weight issue. It is being overly simplistic to claim that overweighting a vehicle may not improve crashworthiness. From simple physics, overweighting could improve crashworthiness in collisions with lighter cars, although this could place the occupants of the lighter car at increased risk. At the same time, overweighting might increase roll-over potential if the extra weight raises the centre of gravity. Additional weight might also help in collisions with fixed objects, if such weight caused the fixed object to deform more than would otherwise be the case, or to breakaway entirely, thus reducing the energy absorbed by the vehicle. However, if the fixed object did not deform or breakaway, the overweighted vehicle would have to absorb more of the collision energy, decreasing its crashworthiness. It should be stated that weight is not the only vehicle characteristic that affects traffic safety in head-on crashes. Although Kahane demonstrated that frontal height and stiffness plays a role in the aggressivity of light trucks that strike cars in the side, these characteristics may also be important in head-on crashes, as well as crashes between cars. Recent research in Europe and Japan (reported at the international Enhanced Safety of Vehicles conferences) indicates that, with the adoption and widespread use of sophisticated belt restraints and air bags, intrusion is becoming a more important cause of fatalities than rapid deceleration. It should be stressed that these statistical analyses are backward-looking and very limited as predictors of how future automotive designers will address vehicle safety. A shortcoming of all the studies reviewed is that they are based on existing vehicle design, and thus reflect the current relationship between weight and size. The studies can only answer the question of what would happen if consumers bought lighter cars of current design. They cannot predict what would happen if automobile designers had strong incentives to develop vehicles that, while providing the same transportation service and current crashworthiness of today’s fleet, nevertheless weighed less. To add further perspective, an example of how increasing vehicle weight does not necessarily increase crashworthiness would be a car with an extremely powerful and heavy rear engine and a soft, short front section. Under such a vehicle configuration, increased weight in the rear may actually increase the fatality risk in a frontal or rear collision.

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4.2 CAFC in Canada — Effectiveness, Issues and Debate

Canadians essentially purchase from the same mix of light-duty vehicles offered in U.S. showrooms, and aside from a few minor differences (such as daytime running lights), the vehicle models are built to the same specifications in both countries. Thus, the discussions in section 4.1, relating to the effectiveness and impacts of CAFE standards in the U.S., are generally applicable to CAFC in Canada, as well. There are, however, some differences that are useful to consider.

The Effectiveness of CAFC in Reducing Energy Consumption

It is very difficult to assess the effectiveness of the CAFC program in Canada and it is particularly difficult to assess how effective it might have been in the absence of CAFE regulations in the U.S. The CAFC program itself would not likely have existed without CAFE.

Technically, no penalties are levied against Canadian auto manufacturers for exceeding the voluntary CAFC targets. However, the current passenger car and light truck fleet-average fuel consumption levels in Canada are significantly lower than the CAFC standards require, as estimated by Transport Canada119. This indicates some success with the early CAFC program.

As discussed in Chapter 3, Canadian consumers tend to buy more passenger cars than their U.S. counterparts. In fact, compact cars and minivans represent a much greater share of sales in Canada than in the U.S. where larger cars and SUVs sell better. This has led to a smaller, lighter, more fuel-efficient mix of vehicles in Canada, which is generally attributed to the lower buying power of Canadian consumers compared to those in the U.S.

The fact that Canada exports more than 90 per cent of the vehicles it manufactures and imports more than 90 per cent of vehicles that Canadians buy, makes it difficult to assess the extent to which CAFC targets drove the implementation of new technologies for vehicle fuel- efficiency. However, it is fairly clear that CAFÉ and CAFC together created a North American market for improved fuel-efficient vehicles.

The Impact of CAFC on Energy Consumption, Air Quality and Climate Change

In Canada, the transportation sector represents 26 per cent of the nation’s total GHG emissions, almost half of which comes from light-duty gasoline and diesel-fueled vehicles, or about 90 Mt of GHGs per year120. NRCan reports that “efficiency effects” in the on-road light-duty vehicle fleet reduced the amount of energy that would otherwise have been consumed by about 25 per cent over the period 1990 to 2002121. This represents GHG emissions reductions from business-as- usual levels of roughly 22.5 Mt.

Again, the extent to which these reductions are directly attributable to the voluntary CAFC targets is difficult to assess. However, the reductions mirror the U.S. GHG emissions attributed to CAFE standards.

119 http://www.tc.gc.ca/roadsafety/fuelpgm/cafc/page3.htm 120 Canada’s Greenhouse Gas Inventory 1990-2001, Environment Canada 121 OEE / NRCan, 2002 Energy Use Analysis Database. http://oee.nrcan.gc.ca/neud/dpa/home.cfm

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The Impact of CAFE on Fleet Mix and Light-Duty Vehicle Classification

Although light trucks occupy a smaller share of automobile sales in Canada (about 40 per cent compared to 50 per cent in the U.S.), light truck sales have been steadily increasing since the mid-1980s. As with the CAFE legislation in the U.S., the vehicle classification rules under CAFC allows sales for personal use vehicles like minivans and SUVs to be considered under the less stringent CAFC standards for light trucks.

As expected, the impact of rising light truck market share has negatively impacted fuel consumption across the combined light-duty fleet. In one NRCan study122, statistical regression analysis found the shift in sales mix within the passenger car and light-duty truck vehicle classes had very little impact on fleet-averaged fuel consumption. However, it was found that sales shifts from passenger cars to light trucks increased overall fleet fuel consumption by 0.5 L/100 km (i.e., more than six per cent) between 1988 and 1998.

The Impact of CAFC on the Economy, Employment and the Automotive Industry

There appear to be few studies on the economic, employment or market impacts of the CAFC program on the state of the Canadian economy, employment or even the auto industry. However, the Transportation Climate Change Table remarked in their Options Paper123 that:

“Given the long distances in Canada and the economy’s heavy reliance on trade, transportation costs play an important role in determining the competitiveness of Canadian goods.”

Of course, this assessment referred mainly to heavy transport equipment and not light-duty vehicles, but it does indicate that reducing the cost of travel through the proliferation of fuel- efficient vehicle technology could provide Canada with a competitive boost and benefit individual motorists.

In terms of oil price fluctuations, the impact on Canada’s economy is less clear. Unlike the U.S., Canada is a net exporter of oil, and the number one supplier to the U.S. market followed by Saudi Arabia and Mexico124. From this perspective, high oil prices are good for Canada’s energy business — at least in the short term. In the U.S., oil price shocks have always preceded periods of economic recession. This could lead to a downturn in certain Canadian industries dependent on the U.S. for business (e.g., the auto industry).

In terms of employment, the Canadian Auto Workers (CAW) have a positive outlook on Canada’s Climate Change Plan. In a 2002 policy paper, the CAW considered that a fuel efficiency improvement target of 25 per cent was not only achievable, but could also add valuable content to new vehicle production, possibly leading to an increase in available Canadian auto sector jobs125. This outlook was contingent, however, on structuring the goal such that it did not unfairly disadvantage the manufacturers in Ontario and was accompanied by appropriate investment for research and development.

As discussed in Chapter 1, the auto industry in Canada is a major contributor to the national GDP and is of particular significance to employment in Ontario. However, as more than 90 per cent of the vehicles assembled in Canada are shipped to the U.S. market, CAFE standards are probably of much greater impact on auto production in Canada than the CAFC program.

122 Schingh, Brunet, Gosselin Canadian New Light Duty Vehicles: Trends in Fuel Consumption and Characteristics 1988- 1998, OEE at NRCan, 2000. 123 Transportation Climate Change Table, Transportation and Climate Change: Options for Action, 1999. 124 Country Analysis Briefs, IEA / DOE, http://www.eia.doe.gov/emeu/cabs/canada.html 125 CAW Council, Taking the First Step: Climate Change, the Kyoto Protocol, and Canada’s Role, 2002.

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In one recent report prepared for the C.D. Howe institute126, Jaccard of Simon Fraser University recommends a vehicle CO2 emission standard as the best approach to drive efficient and alternative technology development in the light-duty vehicle fleet. According to Jaccard’s model, the proposed emissions standard could add eight to 14 per cent to manufacturers’ average vehicle cost by 2010.

In theory, the costing model used by Jaccard is sound. In practice, however, the increased cost to the consumer would be (at least) partially offset in fuel savings to the customer. Furthermore, the model assumes no similar emissions strategy is being pursued elsewhere in the North American auto market. In fact, California is currently pursuing such a program with even greater long-term emission reduction targets and, if successful, this program will spread to most northeast states as well (see section 6.2). Adjusting the inputs to reflect these conditions would likely reduce the cost projections for manufacturers. Even if Canada were to “go it alone” with an emissions standard, the model makes no provision for “fleet mix shifting”, in which the auto companies would simply sell fewer of their “low efficiency” models and market more of their “high efficiency” models from their existing product line. Admittedly, this could reduce consumer choice.

The Impact of CAFC on Traffic Safety

Detailed studies on Canadian traffic fatality statistics according to vehicle size, weight, or fuel consumption rates were not available at the time this report was compiled. However, it is reasonable to speculate that the nature of vehicle collisions in Canada is not significantly different from that in the U.S. Given that the Canadian fleet is, on average, smaller and lighter than the U.S. fleet, it would be interesting to perform a Kahane or Joksch-style statistical analysis of the impact that a size or weight increase might have on fatality rates. For now, however, the following figure will have to do.

Driver Fatalities by Vehicle Type, 1988–1997

source: http://www.tc.gc.ca/roadsafety/tp/tp13743/2000/pdf/Trends_88-97.pdf

As shown in the above figure, overall passenger car fatalities are on the decline in Canada. In single-vehicle fatal collisions, about 59 per cent were automobiles and 25 per cent were light trucks in 1997. In two-vehicle fatal collisions, car-car incidents make up the majority, but car-truck

126 Jaccard, Rivers, Horne, The Morning After – Optimal Greenhouse Gas Policies for Canada’s Kyoto Obligations and Beyond, C.D. Howe Institute, 2004.

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fatalities increased from 18 per cent to 24 per cent from 1988 to 1997127. As in the U.S., this is likely the result of the increasing number of light trucks on the road, replacing the number of passenger cars. These trends are illustrated in the following chart.

Driver Fatalities by Vehicle Type, 1988–1997

source: http://www.tc.gc.ca/roadsafety/tp/tp13743/2000/pdf/Trends_88-97.pdf

127 http://www.tc.gc.ca/roadsafety/tp/tp13743/2000/menu.htm

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Chapter 5: Actions Underway to Improve Automobile Fuel Efficiency and Emissions

This chapter provides an overview of actions already underway in jurisdictions around the world to improve automobile fuel efficiency and reduce greenhouse gas emissions.

As countries face the challenge of reducing greenhouse gas emissions to minimize the impacts of climate change, they are looking closer at ways to reduce GHG emissions from motor vehicles. In some countries or regions, vehicle fuel efficiency targets have been negotiated with the auto industry, and in others an emissions standard has been set to limit the CO2 generated by burning automotive fuels. Often within countries there are additional layers of legal and economic mechanisms that contribute to further reductions in fuel consumption.

• Section 5.1 discusses such activities on the International stage (Europe, Japan, Australia and China).

• Section 5.2 discusses activities in the U.S., focusing on complimentary regulations and instruments, including tax and “feebate” programs, government initiatives, industry and NGO recommendations.

• Section 5.3 discusses activities in Canada, such as tax and feebate programs, research and development funding and energy and climate change policies.

Note: As this chapter lists vehicle fuel efficiency targets and GHG emission reduction goals for several different jurisdictions, the natural tendency is to compare them to each another. The reader is cautioned, however, that different jurisdictions will often have different test protocols to measure fuel efficiency and emissions. Normally, the test protocols are meant to simulate the actual driving conditions experienced by drivers in a given region or country.

The following chart illustrates how the measured fuel efficiency of a specific vehicle can vary depending on the test protocol used.

Projected Fuel Economies from U.S., European and Japanese Driving Cycles

Projected Fuel Economy Driving Cycle for a 1995 Composite Midsize Vehicle Japanese 10/15 mode test cycle 17.5 mpg New European Driving Cycle (NEDC) 22.0 mpg U.S. EPA city cycle (LA4) 19.8 mpg U.S. EPA highway cycle 32.1 mpg U.S. CAFE cycle (55/45 city/highway) 23.9 mpg source: Transportation Energy Data Book: Edition 23, Table 4.26, www-cta.ornl.gov/data

Given these differences, comparing targets or improvement goals between jurisdictions can only be accurately made when the baseline, the test cycle and fleet vehicle mixes are made equivalent (normalized). In December 2004, the Pew Center on Global Climate Change produced a report that proposed a methodology for this purpose. Its findings are included at the end of the section 5.1.

The efficiency goals of major automobile jurisdictions are summarized in the following chart. It begins with the European Union, which first initiated its policy development in 1996, followed chronologically by other jurisdictions in the order in which they began similar actions.

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Country / Region / Goal Timeframe Notes Jurisdiction This is a voluntary goal, with no European Union Reduce vehicle penalties currently negotiated. emissions by 25 per Unlike CAFE, the goal does not 2008 centto an industry- represent an average value to Model Year wide, fleet average of be achieved by each company, 140g CO2/km. but by the entire manufacturing industry, collectively. Failure to meet the goal incurs civil penalties. Japan Weight-based standard. Reduce passenger car Manufacturers are ahead of fuel consumption by 2010 schedule and will likely meet the approximately 23 per Model Year targets by 2005 (5 years early). cent. Less stringent targets apply to light trucks (a relatively small portion of the Japanese fleet). Reduce vehicle fuel This is a voluntary goal, with no consumption by 18 per penalties currently negotiated. 2010 cent to an industry- Unlike CAFE, the goal does not Model Year represent an average value to Australia wide, fleet-average of 6.8 L/100 km. be achieved by each company, but by the entire manufacturing Further reductions to industry, collectively. 24 per cent to an A goal for all-terrain and light- 2015 industry-wide, fleet- duty commercial vehicles is Model Year average of under development 6.3 L/100 km). (approximately 30 per cent of fleet). Reduce vehicle fuel The goal represents a minimum China 2005 consumption by an level that all vehicles must Model Year estimated 10 per cent achieve (no fleet averaging). Further reductions of Monitoring and enforcement 2008 an estimated 20 per details are as yet unavailable. Model Year cent Weight-based standard. Reduce vehicle emissions by roughly This is goal is proposed as a 30 per cent to a per- State of California regulated target under California company, fleet average law. of: 2016 Like CAFE, the goal represents 205g CO /mi Model Year 2 an average value to be (passenger cars and achieved by each company, “light” light trucks) independently. 332g CO2/mi (“heavy” light trucks). No action on United States passenger cars. NHTSA announced new CAFE 2007 Increase light truck fuel standards for light trucks — the Model Year economy by 7 per cent first increase since 1996. to 22.2 mpg No action on Canada passenger cars. This action is simply Canada’s 2007 Reduce light truck fuel CAFC program matching U.S. Model Year consumption by 7 per activity on CAFE. cent to 10.6 L/100 km.

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5.1 International Activity

In this chapter, the primary actions undertaken by the major jurisdictions with significant vehicle use are summarized and reviewed.

The Oil Shock of the early seventies led to varied responses in different world regions related to motor vehicles. In North America, the U.S. regulated CAFE standards and Canada responded with the voluntary CAFC program. In Europe and Japan, fuel efficiency regulations were not implemented. There were several reasons for this. In Europe and Japan, the motor vehicle fleets were already more fuel efficient, mainly because of the high percentage of smaller cars. Historically, lower disposable income levels and higher fuel prices have generally deterred Europeans and Japanese drivers from buying the larger vehicles favoured by North Americans.

As shown in the chart below, the wholesale price of fuel varies somewhat from region to region, but it is the total fuel tax that mainly accounts for differences in the cost of driving. The fuel tax in Canada and the U.S. is far lower than in Europe or Japan, meaning that the total price at the pump in North American is less than half of what is charged for fuel in most other developed nations.

source: http://www.vtpi.org/tdm/tdm17.htm

The demand for fuel-efficient automobiles in Europe and Japan has resulted in lower per-capita CO2 emissions from light-duty vehicles. Moreover, diesel-powered automobiles are far more common in Europe where the price of diesel fuel at the pump is less than that of gasoline. This is significant as diesel-powered automobiles operate more efficiently than their gasoline-powered counterparts, traveling further on a litre of fuel.

Despite the fact that motor vehicle fuel consumption and CO2 emission levels are much lower in Europe and Japan than in other nations, their governments and auto industries have nevertheless negotiated agreements for further reductions. This is primarily motivated by the need to take action on Climate Change and to meet their Kyoto Protocol targets.

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Europe

Background

At any given time, the number of light-duty vehicles in Europe likely exceeds that of the U.S. by a per cent or two128. The exact figure is hard to determine as vehicle statistics in many of the developing countries within the European Union (EU) are not precise. However, in most EU 129 member states, personal vehicle ownership and use are on the rise , leading to increasing CO2 emissions as the demand for diesel and petrol (gasoline) increases. The only countries among the top 15 EU members to experience a decrease in CO2 emissions between 1991 to 2000 from personal vehicle use were the United Kingdom and Germany, whereas Portugal, Greece, Spain and Ireland all posted dramatic increases in personal vehicle use of more than 60 per cent. Taken as a whole, the EU-15 posted a 16.7 per cent growth in personal vehicle transportation during the same period.130

In this sense, the EU is experiencing light-duty vehicle use trends similar to those of Canada and the U.S., although the increase is not as dramatic and it is occurring across a more fuel-efficient fleet. Overall, CO2 emissions from personal vehicle transportation in the EU accounted for about 12 per cent of total emissions in 1999131. This is on par with Canada, but significantly less than U.S. light-duty vehicle emissions, which account for about 20 per cent of total emissions from fossil fuel consumption132.

Since the early 1990s, it was apparent that the European community intended to deal with light- duty vehicle CO2 emissions in a unified manner. The process began with the formation of the Motor Vehicle Emissions Group (MVEG) in 1991 to consider various policy options and advise the European Commission on how it should proceed.

Various measures were considered, including CO2 limits on different brands of cars, fleet-average CO2 emissions limits, carbon taxes based on specific vehicle model emissions levels, and tradable credits. Because each member state would experience different impacts from a given measure, it was difficult to extract an agreement from the Commission on any single policy option. The Commission’s lack of a unified strategy hampered its early negotiation efforts with the Association des Constructeurs Européens d’Automobiles (ACEA) in 1996. Moreover, the MVEG had previously been considering legislative approaches to the proposed policy options. In early 1992, however, the EU declared its preference for voluntary directives instead of binding regulations in its dealings with industry (Treaty of Maarstrict, 1992). This led the Commission to favour a “three-pillar strategy” that encompassed a voluntary agreement with industry, a framework for fiscal measures and a fuel economy consumer information program.

The meetings held between the EU and the ACEA during 1996 and 1997 were generally non- productive, in part because the two parties were represented by low-ranking officials. Nevertheless, an agreement was almost reached in 1997, built around a fleet average CO2/km emissions target. This was in part due to the desire of the Commission’s Director General for the Environment, Ritt Bjergaard of Denmark, to take some signs of progress on reducing vehicle emissions to UNFCCC COP3 in Kyoto in December133. The ACEA, however, could not come to an agreement on achievable CO2 emissions reductions, due largely to their unwillingness to disclose technical information to each another. At the time, and as is still the case, the auto

128 Statistical Review of the Canadian Automotive Industry: 2002 Edition, Industry Canada. 129 http://themes.eea.eu.int/Sectors_and_activities/transport/indicators/demand/TERM12%2C2003.10/index_html 130 Indicator Fact Sheet, TERM 2003 12a EEA 17 – Passenger Transport Demand by Mode and Purpose, European Environment Agency, 2003. 131 Keay-Bright, A Critical Analysis of the Voluntary Fuel Economy Agreements, Established Between the Automobile Industry and the European Commission, with Regard for their Capacity to Protect the Environment, European Environmental Bureau, 2001. 132 Stacy C. Davis, Susan W. Diegel, Transportation Energy Data Hand Book – Edition 23 [Oak Ridge National Laboratory, 2003], 11-1, 11-6. 133 United Nations Framework Convention on Climate Change (UNFCCC); Third Council of Parties (COP3).

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industry in Europe was extremely competitive and suffering from over-capacity — the table below demonstrates how close most manufacturers are in terms of market share134.

Manufacturer European Market Share Volkswagen 19.0% PSA Peugeot Citroen 12.1% Ford 11.7% JAMA (Japanese Automobile Manufacturers Association) 11.5% General Motors 11.4% Renault 10.9% Fiat 9.9% Daimler-Chrysler 5.5% BMW / Range Rover 4.6% KAMA (Korean Automobile Manufacturers Association) 3.1% Other 0.3%

In the end, all the ACEA found it could offer was a 10 per centCO2 emissions reduction from the 1995 baseline of 185g CO2/kg in 2005, which was far off the 40–50 per cent improvement in fuel economy previously suggested by the MVEG and the 35 per cent improvement sought by the EU. Bjergaard went to Kyoto without a commitment from the auto industry.

COP3 turned out to be a defining moment in the ongoing negotiations with the auto industry, as the Kyoto Protocol was signed by all participants. It committed the EU to an eight per cent reduction in total GHG emissions from 1990 levels by the 2008–2012 commitment period135. This development placed an objective and a timeframe on the auyo industry negotiations. Adding to the momentum generated by the signing of Kyoto, the negotiations were now being conducted at the policy level with the president of the ACEC and the Director Generals of the Environment and Industry (Bjergaard and Bangemann) communicating directly.

Not surprisingly, the negotiations were bogged down in the same debates that currently define the criticisms of CAFE in the U.S., namely safety, competitiveness and economic impact. Industry continued to offer 10 per cent reductions and the EU demanded at least 35 per cent. Obliging the auto makers to consider more ambitious targets, the EU negotiators began rolling out the legislative options originally proposed by the MVEG in 1991. In March 1998, the parties finally agreed to a voluntary program to reduce CO2 emissions by 25 per cent by 2008, compared to 1995 levels. The improvements were to be brought about mainly by technological developments and market changes linked to these developments.

Targets and Timelines

Baseline: MY (model year) 1995 – Fleet average emissions: 180g CO2/km.

Targets: MY 2000 – Industry to market vehicles producing not more than 120g CO2/km. MY 2003 – Fleet-average emissions: 165-170g CO2/km (intermediate target). MY 2008 – Fleet-average emissions: 140g CO2/km for ACEA member companies. MY 2009 – Fleet-average emissions: 140g CO2/km for KAMA & JAMA member companies (Korean and Japanese manufacturers. Percentage Improvement: MY 2003 – 9%-11% MY 2008 – 25% • In 2003, a review of the potential for additional improvements was also required, with a view to moving new car fleet average emissions further towards 120g CO2/km by 2012. Joint

134 Keay-Bright, A Critical Analysis of the Voluntary Fuel Economy Agreements, Established Between the Automobile Industry and the European Commission, with Regard for their Capacity to Protect the Environment, European Environmental Bureau, 2001. 135 Article 4 of the Kyoto Protocol allows EU member states to have their emissions considered collectively, with a combined CO2 reduction target of 8 per cent below 1990 levels.

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ACEA – European Commission monitoring of all the relevant factors related to the commitments and targets is also stipulated under the agreement. • Korean (KAMA) and Japanese (JAMA) automobile manufacturing associations agreed to the same conditions as the ACEA for sales in Europe, except that the final target would be achieved by 2009 instead of 2008, as shown above. This alteration was permitted because the fuel efficiency of the Asian fleets was proportionately higher than that of the ACEA.

• Note that a 25 per cent reduction in CO2 emissions from light-duty vehicle fuel efficiency improvements could be measured as a 25 per cent reduction in fuel consumption levels, or a 33 per cent increase in fuel economy levels136.

Analysis of the Standard

This is a voluntary agreement and, as such, is not enforceable, nor are there any penalties associated with breaking the agreement. However, there are indications that the European Commission would consider legislation if the ACEA fails to achieve the CO2 emissions objective for 2008. For the present, however, there is no force of law behind the targets.

Another concern with achieving the targets is that the agreement to reduce emissions is with the industry association and not with the individual companies. This could lead to conflicting business decisions among the member companies. For example, suppose a company introduces energy- efficient technologies that raise the price of its products above that of its competitors who are not introducing such improvements. If consumers do not value the company’s fuel-efficient vehicles and instead purchase the lower-priced conventional products of its competitors, the company may suffer financial harm due to the price disadvantage.

As the industry progresses toward the 140g/km emission target, this will become an increasingly significant issue. The 140 g CO2/km target was negotiated as conditional on the absence of any negative impacts to the health of the auto industry. If it can be proven that the voluntary commitment, or the terms of the agreement, have negatively impacted revenues, profits, employment levels or the competitiveness of a given company, the voluntary agreement could be nullified. It may be difficult to isolate such impacts from other market fluctuations, but a company may make this claim if it is under sufficient financial pressure and if it believes the market will not punish it for producing less efficient vehicles.

Furthermore, because the monitoring and reporting system under the agreement only tracks the average emissions from the entire ACEA fleet, and not on a per-company basis, neither the EU nor the public will know which companies are contributing most to achieving the voluntary standard.

Progress Check

In 2002, a report was produced by the ACEA to highlight its progress towards the 2008 target of 140 g/km average CO2 emissions. Among the five commitments as set out in the report, the ACEA claims to have fulfilled the following four:

1. As per the voluntary agreement, the ACEA brought to market vehicles emitting 120 g/km of CO2 or less. In 2000, 20 such models were made available for sale. In 2001, sales of these cars reached 306,500 units. 2. In moving toward the 2008 target, 23 per cent of ACEA sales were vehicles achieving 140 g/km of CO2 emissions in 2001. 3. In compliance with the voluntary agreement, fleet-averaged new car CO2 emissions for 2001 were 164 g/km.

136 Plotkin, Greene, Duleep, Examining the Potential for Voluntary Fuel Economy Standards in the United States and Canada, Argonne National Laboratory, 2002.

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4. Joint monitoring of relevant factors for the 1995–2001 period was completed and will continue for the 2002–2008.

ACEA Vehicle Fleet Trends in European Market 1995–2002

source: Monitoring of ACEA’s Commitment on CO2 Emission, 2003, ACEA

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As shown in the preceding figure, while overall fleet efficiency has improved and CO2 emission levels are down, weight, power and size have continued to increase. Furthermore, the market share of ACEA-manufactured vehicles achieving the target of 140 g/km or less is increasing at a solid pace. The ACEA has contended that further fuel efficiency increases may have been possible in this time, but competing design requirements have offset these additional gains. For example, during the period from 1983 to 1997, according to the ACEA, there was a 28 per cent gain in fuel efficiency from such actions as: • reducing vehicle weight, • improved aerodynamics, and • improved engine efficiency.

However, these gains were offset by other design demands that reduced vehicle efficiency by 20 per cent, such as: • vehicle safety, • emissions control, • noise control, • quality improvements, and • comfort improvements.

Combined, these factors account for the eight per cent improvement from the average fuel consumption rate of 7.1 L/100km in 1983 to 6.6 L/100km in 1997. The same “one-step-back” and “two-steps-forward” situation seems to be in play today, as is evident from the middle chart, above, showing the trends in mass, power, capacity and CO2 emissions.

Another aspect to consider is how well the CO2 target forces technology change, as opposed to fuel shifting. Diesel vehicle sales have been increasing rapidly, as shown in the following figure:

ACEA Vehicle Sales Share by Fuel Type

source: Monitoring of ACEA’s Commitment on CO2 Emission, 2003, ACEA

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In part, the increasing sale of diesel vehicles could be due to the price difference between petrol (gasoline) and diesel in a period of rising oil prices. On average, diesel prices are 23 per cent 137 lower than petrol in Europe , and while shifting to the cheaper fuel may lead to reduced CO2 emissions in the short term, the ultimate objective of making vehicles intrinsically more efficient is merely deferred with this strategy. This is an issue the EU will have to contend with as the target date approaches.

Japan

Background The Top-Runner Concept

In Japan, there exists a “Law Concerning the Rational Use of Energy”, the objective of which is to specify actions required to ensure that fuel resources are utilized in an efficient manner, respecting the socioeconomic conditions at home and abroad, thereby contributing to the sound development of the nation138. This law applies to automobiles and it directs the Minister of International Trade and Industry and the Minister of Transport to establish standards for energy consumption efficiency improvements for auto manufacturers to use as a reference when designing their products.

In keeping with this directive and Japan’s strategy to meet its Kyoto commitment (6 per cent reduction in GHG emissions from 1990 levels), the government and industry worked together in developing the “Top- Runner Program” for passenger vehicles. The idea was to first identify the most fuel-efficient vehicle in a source: http://www.eccj.or.jp/top_runner/chapter2-0.html given weight range, called the “top- runner”. Then the fleet-average fuel efficiency of all vehicles in that weight range should be improved to match the top-runner’s rating.

In general, the top-runner vehicle selected in each weight class represented non-specialized technology. As such, electric vehicles and hybrids were not considered top-runners – even if they had best-in-class efficiency. In fact, manual transmissions were also eliminated from representing the top runner in a given a weight class. In short, the top-runner selection had to sport average- priced technology that all manufacturers could apply to their respective fleets.

In Japan’s strategy, 1995 was set as the baseline year for fuel efficiency. The vehicle fleets were separated into gasoline and diesel categories, under which practical weight classes were

137 Plotkin, Greene, Duleep, Examining the Potential for Voluntary Fuel Economy Standards in the United States and Canada, Argonne National Laboratory, 2002. 138 ECCJ Japan Energy Conservation Handbook. http://www.eccj.or.jp/databook/2001e/04_02_01.html

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established for both passenger cars and light trucks. In studying weight characteristics of popular vehicle models, several statistical concentrations emerged around which the weight categories were defined. This approach produced nine weight classes for gasoline cars and seven for diesel, with eight gasoline and five diesel weight classes for light trucks (which are further broken down into manual and automatic transmissions). In addition, separate target years were established — 2010 for gasoline vehicles and 2005 for diesel.

Tabulating the weight classes for cars and trucks by fuel, weight class, car versus trucks and transmission type is not necessary to analyze the effectiveness of the Japanese standards and probably beyond the interest level of the reader, but if required, these tables are available from the Energy Conservation Center, Japan139. A graphic representation of the gasoline passenger car top-runner standard is provided below.

Japan’s Vehicle Efficiency Targets under the Top-Runner Program (JAMA Average Shown)

Top runners were established for each auto manufacturer supplying the Japanese market. Originally, surplus achievements in one weight class could not be applied to another class in which a manufacturer’s fleet was failing to achieve its efficiency target. In response to concerns of the U.S. and European manufacturers, the program was altered to permit the trade of efficiency surpluses, but the value of the surplus is discounted by 50 per cent when applied. Civil penalties apply for failure to achieve the program targets and, as such, the top-runner program is considered by some to constitute a regulation.

Targets and Timelines

The top-runner program does not impose sales targets for each weight class, meaning that sales of heavy vehicles could rise while sales of lighter vehicles drop, or vice versa. This makes it hard to predict the exact impact on CO2 reduction from Japan’s light-duty vehicle fleet by 2010. However, if the sales mix, according to vehicle weight, remains relatively constant between 1995 and 2010, then the overall program should yield a 23 per cent improvement in passenger car fuel economy (equating to a reduction in fuel consumption and CO2 emissions of about 18 per cent). The predicted improvements are listed below:

139 http://www.eccj.or.jp/databook/2001e/04_05_01.html; http://www.eccj.or.jp/databook/2001e/04_05_05.html

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Fuel Economy Approximate Fuel Consumption / Vehicle Type Target Year Increase CO2 Emission Decrease Gasoline Passenger Car 23% 18% 2010 Gasoline Light Truck 13% 12% Diesel Passenger Car 15% 13% 2005 Diesel Light Truck 7% 7% Source: Yamashita, Institute of Energy Economics Japan, Japan’s Long-Term Energy Supply and Demand Outlook, Presentation at Windsor Workshop, 2004

The government is discussing stricter targets for 2015140. Under consideration are targets based on fleet averages (as with CAFE), as opposed to weight class standards.

Analysis of the Standard

Concerns about the top-runner program centre on the weight-based approach. If a vehicle manufacturer specializes in a higher weight class, the program provides no incentive to build vehicles in lower weight classes to produce a more fuel-efficient fleet overall. It also leaves the door open for manufacturers to up-weight their vehicles and move them into a less stringent weight class. For example, a vehicle rated at 10 L/km and 1,500 kg may need to improve its efficiency significantly to achieve the 30.3 per cent increase within its weight class. However, by adding only 16 kg of mass to the vehicle, it falls into the next heavier weight class where only a five per cent improvement in fuel economy is required to meet the standard.

The regulatory environment in Japan influences the approach to fuel efficiency, as well. Currently, Japanese tailpipe emission standards for toxic air pollutants are lenient compared to those of Canada and the U.S. This permits the manufacturers to develop certain high-efficiency combustion technology that improves fuel consumption (thus reducing CO2 emissions), but generates higher levels of toxic emissions (such as “lean-burn” technology). Thus, manufacturers are less constrained in their technology choices in Japan than in North America and Europe. In addition, due to of the predominantly low-speed, urban driving environment in Japan, idle-off technologies and hybrid-electric drivetrains will have a significant efficiency impact, whereas aerodynamic improvements will be less important for achieving the standard.

This indicates that the Japanese standards will primarily drive technology improvements in engine and drivetrain design, particularly those that increase efficiency in low-speed, stop-and-go driving conditions. Since weight-based standards do not generally encourage vehicle weight reduction, the Japanese standards are not expected to encourage the development and widespread use of lightweight materials.

Progress Check

Thus far, Japan is ahead of schedule in achieving its 2010 targets for gasoline-powered vehicles. In fact, it appears that the manufacturers are voluntarily accelerating their efforts to meet the fuel economy targets under the top-runner program by 2005 (i.e., five years ahead of schedule)141!

Moreover, the Institute of Energy Economics (IEE) in Japan projects that the share of small cars will grow while sales of larger cars generally decline. According to Yamashita of the IEE, this shift in the market is related to growing environmental awareness and such demographical influences as a growing number of elderly and female drivers, who prefer smaller vehicles.

140 Khanna, 2004. 141 Yamashita, Institute of Energy Economics Japan, Japan’s Long-Term Energy Supply and Demand Outlook, Presentation at Windsor Workshop, 2004.

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Passenger Car Registration & Fuel Economy Outlook While diesel-powered vehicles have separate standards under the top- runner program, the technology is not expected to heavily influence the passenger car market, as less than one per cent of new car sales are diesel. This means that the standards have the potential to drive efficient technology development somewhat more than the European agreement, under which a fuel shift to diesel is a possible strategy.

source: Yamashita, Japan’s Long-Term Energy Supply and Demand Outlook, Presentation at Windsor Workshop, 2004.

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Australia

Background

While the Australian government has yet to ratify the Kyoto Protocol, it has claimed to be working towards a target of reducing GHG emissions from business-as-usual projections by the 2008– 2012 period142. This target amounts to limiting the rise in GHG emissions to eight per cent above 1990 levels. As part of its plan to achieve this goal, the government has stated its desire to see a 15 per cent improvement in new passenger car fuel efficiency over business-as-usual levels143.

In 2003, in consultation with the Australian government, the Federal Chamber of Automotive Industries (FCAI) introduced its “Voluntary Code of Practice” for reducing fuel consumption in new light-duty vehicles.

Targets and Timelines

In 2001, the national average fuel consumption (NAFC) level was about 8.3 L/100km. From this baseline, the current FCAI voluntary targets can be represented in the following manner:

Baseline: MY 2001 – Fleet-average fuel consumption: 8.3 L/100 km. Targets: MY 2010 – Fleet-average fuel consumption: 6.8 L/100 km. MY 2015 – Fleet-average fuel consumption: 6.3 L/100 km (proposed by FCAI). Percentage Improvement: MY 2010 – 18% MY 2015 – 24% The Voluntary Code of Practice also declares the FCAI’s intention to: • Develop fuel consumption reduction targets for other light-duty vehicles by mid-2004. • Develop a reporting method for vehicular CO2 emissions, expressed in g/km. • Expand the voluntary code of practice to set targets for a broader range of light-duty vehicle categories, such as all-terrain vehicles (4WD) and light commercial vehicles.

As indicated above, the FCAI has also proposed a longer-term co-operative NAFC target for passenger cars of 6.3 L/100km by 2015144. However, it claims that achieving these targets will be dependent on a range of factors, including more widespread uptake of higher octane (95 RON) petrol (gasoline) and the introduction of very low sulphur fuel to facilitate the introduction of advanced emission control technologies. At the time this document was compiled, no further information was available on the status of the FCAI’s efforts with respect to other vehicle categories.

Analysis of the Standard

The NAFC target applies to the industry as a whole, such that the average fuel consumption of all new model year passenger cars must meet the 6.8 L/100 km target, regardless of the variations in average fuel consumption among different manufacturer’s fleets. In this sense it is similar to the ACEA agreement with the European Commission and thus suffers from similar pitfalls.

Australia currently uses the European test protocol for measuring fuel consumption, but also uses the 55/45 city/highway drive cycle used in CAFE calculations. This means that while Australian driving habits may be similar to those of North Americans, the posted fuel consumption ratings may not be fully comparable.

142 http://www.planetark.com/dailynewsstory.cfm/newsid/17325/story.htm 143 FCAI, Voluntary Code of Practice – Reducing the Fuel Consumption of New Light Vehicles, 2003. http://www.fcai.com.au/media/2003/04/00000012.html 144 http://www.fcai.com.au/environment/

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There are differences in the fleet mix, as well. Australians generally purchase more passenger cars than light trucks, as shown in the chart below. Although light trucks sales are on the rise, passenger car sales still represented almost 70 per cent of new vehicle sales in 2001. In Canada, this figure was closer to 60 per cent.

The bottom line is that per cent changes in vehicle fuel consumption are somewhat comparable between the Canadian and Australian fleets — at least so far as passenger cars are concerned.

Progress Check

At the time of compiling this document, information on the FCAI’s progress towards its 2010 goal was unavailable.

Australian Automotive Sales

PMV – passenger cars; LCV – light trucks; HCV – heavy trucks. Holden is a GM-owned company. source: http://www.industry.gov.au/assets/documents/ itrinternet/Automotive_KeyStats200320031021170303.pdf?CFID=1020559&CFT OKEN=78601854

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China

Background

The rate at which China has transformed from an agrarian to an industrialized nation has contributed to some very difficult economic and environmental health problems across the nation. The number of vehicles in operation in China has increased steadily over the past decade, but the associated environmental regulations to control vehicular pollution have not kept pace. Historically, improvements in emissions control technology have been hampered by the lead content in China’s gasoline, and engine efficiency has been limited by the poor octane ratings often generated by the country’s petroleum refineries145. Road conditions and Motor Vehicle Registrations - China transportation planning have also presented (light & medium duty vehicles) barriers to smooth and efficient flow of traffic. 18,000 Of primary concern to the Chinese 16,000 government is the country’s growing 14,000 12,000 dependence on foreign oil imports. A net 10,000 exporter of crude oil until a decade ago, China 8,000 1,000's now imports one-third of its domestic 6,000 demand146. About 20 per cent of crude oil 4,000 2,000 input to the refineries is used to produce 0 147 gasoline for cars . Over the past several 98 years, the China Automotive Technology & 1992 1993 1994 1995 1996 1997 19 1999 2000 2001 2002 Research Center has been developing fuel efficiency standards to help reduce the source: Statistical Review of the Canadian Automotive demand for oil. The government also wanted Industry: 2002 Edition, Aerospace and Automotive the standards in place to ensure that foreign Branch, Industry Canada, Table 1.7 automakers bring the latest and best technologies to China.

The new standards were released in October 2004. The first phase of the standards will be implemented in July 2005, followed by a stricter second phase scheduled for 2008. The standards comprise a vehicle weight class system, such as that used in Japan. There are 16 weight categories, ranging from under 750 kg to over 2,500 kg, each with a specific pair of fuel economy standards (one for vehicles with manual transmission and one for automatics). Commercial vehicles and pickup trucks will not be subject to the standards.

The standard represents a minimum threshold that every vehicle must meet or exceed — not a fleet-averaged standard, as is used in other jurisdictions. This means that every vehicle sold in a given weight class must meet its class standard. At the time this document was prepared, however, the government had not yet declared how the program would be monitored and enforced.

Targets and Timelines

A full description of the Chinese standards was not available at the time this report was prepared. However, a World Resources Institute report148 and Chinese news sources149 have reported some details, which are included here.

145 Background Report: Vehicle Fuel Economy in China, The Development Research Center of the State Council, Tsinghua University Department of Environmental Science & Engineering, China Automotive Technology and Research Center, Chinese Research Academy of Environmental Science, 2001. 146 Bradsher, NYTimes, November 18, 2003. 147 Background Report: Vehicle Fuel Economy in China, The Development Research Center of the State Council, Tsinghua University Department of Environmental Science & Engineering, China Automotive Technology and Research Center, Chinese Research Academy of Environmental Science, 2001. 148 Sauer, Wellington, Taking the High (Fuel Economy) Road, World Resources Institute, 2004. 149 The Standard, 9-Oct-2004, http://www.thestandard.com.hk/stdn/std/China/FJ09Ad01.html

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Baseline: unknown Targets (the following is a sample from one of 16 weight classes): Phase I (July 2005) – [980 – 1,090 kg] weight class minimum standard, manual: 8.3 L/100 km minimum standard, automatic: 8.8 L/100 km Phase II (2008) – [980 – 1,090 kg] weight class minimum standard, manual: 7.5 L/100 km minimum standard, automatic: 8.0 L/100 km Percentage Improvement150: MY 2005 – 10 per cent(estimated) MY 2008 – 20 per cent(estimated)

Analysis of the Standard

It is impossible to properly analyze the standard since no specifics are yet available for study. Most significantly, the driving cycle upon which the standards are based is unknown, so it is difficult to assess the strategies for compliance.

The World Resources Institute report151 applied the U.S. driving cycle to the Chinese fleet and expressed the efficiency measure in fuel economy terms (mpg). This was done to facilitate a comparison with the U.S. CAFE standards. The Chinese standards were estimated to be slightly more stringent than CAFE. Furthermore, the standards will more easily be achieved for vehicles in the lighter weight classes as 66 per cent of the passenger car fleet already meets the Phase I requirements (35 per cent meet Phase II). In contrast, 96 per cent of the existing minivan and SUV fleet do not currently meet the Phase I standards.

If strictly enforced, these standards could make marketing light trucks for personal use very difficult. This alone could be helpful in keeping China’s fleetwide fuel consumption in check. The fact that each and every vehicle sold in China must independently comply with the standards is also significant. Whether this leads to a much higher fleet-average fuel efficiency level than the standards require is difficult to predict.

China’s decision to avoid regulating commercial vehicles and pickup trucks will not create a problem in terms of fleet mix. In North America, the market share of such vehicles has not fluctuated significantly in 30 years. More analysis of how this program will be monitored and enforced is required.

The Chinese fleet is already small and light compared to the North American fleet, so it is more difficult for fuel consumption improvements to be achieved through size and weight reductions. In order to bring the Chinese fleet into compliance with the proposed standards, improvements in engine design and fuel quality will be required. Because of the traffic congestion in areas like Beijing, where the average motor vehicle speed is about 19 km/h152, the biggest efficiency improvements are most likely to be had in gearing engine power to produce more torque instead of speed, as well as low-speed engine enhancements. High speed efficiency design, such as lowering aerodynamic drag, will not play a large role. These speculations, of course, are dependent on how closely the test cycle approximates actual driving conditions in China.

150 Feng An, Energy and Transportation Technologies LLC, Auto Project on Energy and Climate Change (APECC), China Program 151 Sauer, Wellington, Taking the High (Fuel Economy) Road, World Resources Institute, 2004. 152 Background Report: Vehicle Fuel Economy in China, The Development Research Center of the State Council, Tsinghua University Department of Environmental Science & Engineering, China Automotive Technology and Research Center, Chinese Research Academy of Environmental Science, 2001.

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Comparing the Relative Stringency of Targets in Various Jurisdictions

In December 2004, the Pew Center on Global Climate Change published a report153 that compared the impacts of various fuel efficiency and GHG emissions reduction targets in different jurisdictions around the world. As discussed at the beginning of this chapter, different jurisdictions have different drive cycle test protocols for measuring fuel efficiency and GHG emissions. As such, tests conducted on the same vehicle under different drive cycles will produce different results. Further complicating the attempt to compare targets is the fact that the type and mix of vehicles that make up a fleet vary significantly among jurisdictions.

The Pew Center report proposed a methodology for converting the different drive cycle test protocols and the various jurisdictional measures for efficiency and emissions (e.g., mpg, L/100 km, g CO2/mile, etc.) to a common baseline — in other words, normalizing the differences. From this common baseline, the relative aggressiveness of targets in different jurisdictions can be evaluated.

The following figures illustrate the report’s “apples-to-apples” comparison of different jurisdictions’ targets.

Note: Dotted lines denote proposed standards. Source: Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emissions Standards Around the World, Pew Center on Global Climate Change.

153 Feng An, Amanda Sauer, Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emissions Standards Around the World, Pew Center on Global Climate Change, 2004.

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Note: Dotted lines denote proposed standards. Source: Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emissions Standards Around the World, Pew Center on Global Climate Change.

The key findings of the report are presented as follows:

• The European Union (EU) and Japan have the most stringent standards in the world. • The fuel economy and greenhouse gas emission performance of the U.S. cars and light trucks — both historically and projected based on current policies — lag behind most other nations. The United States and Canada have the lowest standards in terms of fleet-average fuel economy rating, and they have the highest greenhouse gas emission rates based on the EU testing procedure. • The new Chinese standards are more stringent than those in Australia, Canada, California, and the United States, but they are less stringent than those in the European Union and Japan. • If the California GHG standards go into effect, they would narrow the gap between U.S. and EU standards, but the California standards would still be less stringent than the EU standards.

It should be noted that while the Pew Center report constitutes the first substantial work on the normalization and comparison of different jurisdictional targets, it should be considered as a guide, rather than a precise evaluation. Uncertainties exist about the choice of various baselines, and some proposed targets have yet to be defined and confirmed. In Canada, for example, the baseline selected for the report represents the current CAFC targets and not actual fleet-average fuel consumption levels. These uncertainties are relatively small in magnitude and may not significantly change the results of the above figures.

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5.2 Activity in the United States

Since the implementation of regulated CAFE standards, there has been little in the way of new programs that directly compel auto manufacturers to improve light-duty vehicle fuel efficiency or reduce greenhouse gas emissions at the tailpipe. As the sole authority to set fuel economy standards in the U.S. lies with the federal government, there has been no activity at the state level to regulate vehicle fuel efficiency.

However, vehicle emissions besides CO2 (such as VOCs, CO, NOX and PM) have been reduced under increasingly stringent regulations set at both the federal and state levels. In terms of stringency and scheduled implementation, the federal emission standards have generally lagged those set by California and subsequently adopted by some northeastern states, but have nonetheless been effective in stimulating the development of advanced automobile emissions control technology.

In addition to the CAFE standards, the federal and state governments have set fuel taxes and efficient vehicle purchase incentive programs aimed at promoting energy conservation. Beyond these regulations and financial instruments, there are also government funded research programs to help the automotive sector develop new technologies that could reduce fuel consumption, and hence CO2 emissions. Moreover, NHTSA is contemplating changes to the structure of CAFE to improve its effectiveness.

This section identifies and describes the major federal and state activities underway to improve light-duty motor vehicle fuel efficiency in the U.S. Reference is also made to various stakeholder groups that have established positions on these activities.

Federal Level Activity

The following items refer to laws, programs and initiatives that fall within the jurisdiction of the federal level of government.

Federal Fuel Tax

The price of gasoline includes the cost of crude oil, the refining process, distribution and marketing, as well as federal and state excise taxes. The federal excise tax on gasoline is currently 18.4 cents per U.S.- gallon154, and state excise taxes average about $0.21 per gallon.

The federal excise tax on gasoline amounts to about 12 per cent of the full price at the pump, although this percentage varies with the price of oil since the tax is a fixed value. Add in the average state excise tax and the customer sees about 25 per cent of the price of gasoline as taxes in the U.S., a very low rate compared to other developed countries.

154 http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/primer_on_gasoline_prices/html/petbro.html

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The federal excise tax generates large revenues for the federal government (upwards of $20 billion annually), most of which is deposited into a highway account. The remainder is applied to public transit and environmental expenses155.

While not originally intended to alter driving behaviour or vehicle purchasing habits among motorists, the federal excise tax increases the cost of fuel and thus increases the cost of driving. Theoretically, a higher fuel tax could create a greater market demand for more fuel-efficient vehicles than would otherwise be the case. At the current rate, the extent to which this would have an effect on fleetwide fuel efficiency is questionable. In any case, currently there are no plans for a fuel tax increase in federal legislation.

Gas Guzzler Tax

The Gas Guzzler Tax was established in the Energy Tax Act of 1978156. As with CAFE, the intent of the tax is to reduce domestic oil consumption. The tax is specifically designed to increase the purchase price of inefficient passenger cars and thereby create a market demand for fuel efficiency. The actual tax amount is separately listed on the window sticker of all new cars. This is intended to make the customer aware of the price penalty for purchasing an inefficient car. The tax schedule is given below:

MPG Rating Gas Guzzler Tax at least 22.5 no tax at least 21.5, but less than 22.5 $1000 at least 20.5, but less than 21.5 $1300 at least 19.5, but less than 20.5 $1700 at least 18.5, but less than 19.5 $2100 at least 17.5, but less than 18.5 $2600 at least 16.5, but less than 17.5 $3000 at least 15.5, but less than 16.5 $3700 at least 14.5, but less than 15.5 $4500 at least 13.5, but less than 14.5 $5400 at least 12.5, but less than 13.5 $6400 less than 12.5 $7700

One of the major failings of the Gas Guzzler Tax is that it does not apply to light trucks. In 1978, this probably seemed a reasonable limitation, but the increasing popularity of SUVs and XUVs means that about half of the light-duty vehicles sold in the U.S. today are exempt from the tax, despite the fact that most have low fuel economy levels and are primarily used for the same purposes as passenger cars.

Today, the Gas Guzzler Tax does not represent a significant portion of the total purchase price of most new passenger cars, as 22.5 mpg is easily achieved by the majority of models in the fleet. As such, the tax usually just applies to certain specialty sports cars and luxury vehicles with especially low fuel economy ratings.

“Clean Fuel” and Hybrid Vehicle Tax Incentive Program

Consumers who purchased either a new “clean fuel” or hybrid vehicle between 1992 and the end of 2003 may claim a “Clean Fuel” tax deduction of up to $2,000157. Eligible vehicles are those powered by the following fuels:

155 http://www.fueleconomy.gov/feg/gasprices/faq.shtml#Taxes 156 http://www.fueleconomy.gov/feg/info.shtml#gasoline 157 http://www.fueleconomy.gov/feg/tax_afv.shtml

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• natural gas, • liquefied natural gas (LNG), • liquefied petroleum gas (LPG), • hydrogen, • electricity (e.g., some gasoline/electric hybrids), or • any other fuel that is at least 85 per cent alcohol or ether (e.g., E85), plus the following hybrid vehicles: • Honda Insight, • Honda Civic Hybrid, and • Toyota Prius.

The program is currently being phased out, with the tax deduction amount decreasing by $500 each year from 2004 to 2006, after which it is uncertain whether or not it will be replaced by another incentive program.

NHTSA — CAFE Program Reform

In February 2002, the Secretary of Transportation asked Congress for the legal authority to reform the CAFE program, given the gradually declining fuel economy of the light-duty vehicle fleet since the mid-1980s. At of the time this report was prepared, Congress had yet to deliver an answer on this issue. However, in a 2003 docket submitted to the federal register, NHTSA solicited comments from the public and from industry on how the CAFE program could be restructured158. In the docket, NHTSA specified that while it cannot alter CAFE standards for passenger cars (the Energy Policy and Conservation Act assigns this authority solely to Congress) it believes that it is within NHTSA’s legal authority to pursue the following reforms:

1. revising the structure of light truck standards to create differing classes of light truck CAFE requirements; 2. revising the vehicle classification definitions for determining whether or not a vehicle is a light truck or passenger car for CAFE purposes; and 3. increasing the weigh limit for vehicles covered by CAFE standards from 8,500-lbs GVWR to 10,000-lbs GVWR.

In the docket, NHTSA describes what shape some of these reforms may take, as summarized below:

1) Multiple Classes of Light Trucks

Splitting the light truck category into sub-groups requires attributes that differentiate one truck from another. NHTSA identifies some obvious attributes, such as model type (e.g., pick-up, SUV, minivan, XUV), weight, size, or some combination of these qualities. As there is much data concerning weight and safety, NHTSA took a close look at a weight-based system of CAFE standards.

As discussed earlier in the analysis of the Japanese standard, incremental weight-based systems could provide manufacturers with an incentive to upweight vehicles. For vehicles near the upper limit of a given weight class, strategically adding weight can move them into the next-heavier class where the fuel efficiency target is less stringent.

158 Federal Register Vol.86, No.248, Docket No. 2003-16128.

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Continuous Weight-Based Standard Recognizing this, NHTSA considered a continuous weight standard. In this approach, CAFE levels vary continuously with vehicle weight, instead of in stepped intervals. The inset figure shows how this may be structured. On the graph, actual model year 2002 fuel economy and weight data for light trucks are plotted. The 2002 light truck CAFE standard (at 20.7 mpg) is shown as the horizontal dotted line. The solid lines represent continuous weight- based CAFE standards that would equate to the same 20.7 mpg fleet average. Restructuring the standard in this way represents the same source: NHTSA Docket 2003-16128 average fuel economy level overall, but ideally the manufacturer achieves no leniency by upweighting because the fuel economy target changes proportionately for each pound that is added.

In this particular example, NHTSA has also chosen to alter the profile of the weight-based standard slightly to encourage some downweighting in vehicles over 5,000 lbs. This is in recognition of statistical Continuous Size-Based Standard analyses that indicate lowering weight among the heaviest SUVs and trucks would have a beneficial impact on traffic safety159. See appendix D for further discussion on the implications of a weight-based standard.

Instead of weight, vehicle size could be used as the functional attribute on which to base fuel economy. The second inset figure depicts a continuous size-based standard. As shown, the same model year data have been plotted in terms of vehicle “shadow” (the ground area covered by the vehicle at rest). Here, a disincentive to reduce size is introduced source: NHTSA Docket 2003-16128 (mainly below 110 sq-in). This is intended to help maintain

159 As discussed in section 4.1 – Impact of CAFE on Traffic Safety.

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vehicle size while reducing weight, as some analyses have shown this as a strategy to improve traffic safety160.

Continuous Mixed-Based Standard A natural extension of the weight- and size-based approaches to separating the light truck fleet into multiple classes is to combine both attributes. NHTSA has considered how such a mixed attribute-based standard would appear, as shown in the third inset figure. In this example, CAFE levels can be specified for a specific combination of weight and size.

This approach may have special appeal within NHTSA, because it would allow the agency to strongly encourage vehicle designs that it believes are most safe. For source: NHTSA Docket 2003-16128 example, if the collision fatality rate is low among a fleet of vehicles with larger area and lower weight, NHTSA could set the mixed-attribute standards to favour a combination of downweighting and upsizing as a compliance strategy.

The CAFE program was delegated to NHTSA, and fuel economy was not part of its original mandate to make highway travel less dangerous. Given this, it is understandable that NHTSA’s efforts to design new CAFE structures can often become mixed with strategies to improve fleet safety characteristics and are thus less focused on the technical potential to achieve greater fuel economy. In this regard, NHTSA is in a difficult position, as it wants to avoid implementing a fuel economy regulation than could encourage vehicle “overweighting”, which could place the public at greater risk of injury.

2) Changing the Way “Light Trucks” are Defined

As discussed previously, a vehicle is classified as a light truck if it meets any one of a variety of conditions. The conditions of most concern in designing new standards are as follows: • flat floor provision, • open cargo bed, and • off-highway operation.

Flat Floor Provision — Currently, the regulations classify a vehicle as a light truck if the rear seats can be readily removed, leaving a flat floor extending from the driver’s seat to the rear bumper. This provision was originally based on the fact that passenger vans were simply cargo vans with seats added. Since vans were primarily used for commercial duty (and at the time there appeared to be little threat of people buying commercial vehicles for personal use), the flat floor provision was an effective way of including vans in the light truck category.

160 Discussed in detail in Section 4.1 – Impact of CAFE on Traffic Safety.

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In the early 1980s — and on the eve of releasing its new minivan product — Chevrolet asked NHTSA to assure that all future minivans would be classified as light trucks, even though they were clearly for personal use. NHTSA reaffirmed that any vehicle with a flat floor and the seats removed would be classified as a light truck. NHTSA now believes that this decision contributed to the development of the minivan market161 and, by extension, to the development of the XUV — passenger cars that are classified as light trucks — usually because they meet the flat floor provision or because their ground clearance has been raised just enough to meet light truck standards (see off-highway operation below). 2001 Chrysler PT Cruiser. From the perspective of vehicle platform, this is essentially a Dodge Neon that meets the flat floor provision. NHTSA does not necessarily want to do away with source: the flat floor provision, but it is considering ways to http://www.123review.com/reviews/chrysler/01_c re-establish the original intent of distinguishing hrysler_ptcruiser_walkaround_interior.html vehicles as light trucks due to their significant cargo carrying capacity and other utilitarian uses. One possible way would be to place a lower limit on the length of the flat floor cargo area — say five feet. This might eliminate small cars from being classified as trucks. Additionally, a minimum volume on cargo space provided by the converted flat floor could also be set, or a ratio of flat floor cargo volume to passenger volume.

Naturally, there is nothing inherently wrong with the flat floor design that consumers clearly value. NHTSA simply wants to eliminate the inclusion of what are essentially passenger cars in the fleet- average fuel economy calculations for light trucks. When passenger vehicles are averaged into the light truck fleet, there is an artificial improvement in fuel efficiency of the fleet. This reduces the incentive for manufacturers to design vehicle fleets with overall fuel economy improvements.

Open Cargo Bed — The open cargo provision refers to a vehicle’s capacity to transport property in an open bed, as with a pick-up truck. Any such vehicle is classified as a light truck, as open cargo transport was originally considered a work-related or commercial function. However, with the growing popularity of the “crew cab” in pick-ups (4-door cabs seating up to six adults), these vehicle are increasingly used in personal and family travel. Typically, adding a crew cab to a pick-up truck model displaces the open bed cargo space. In the case of smaller, ½-ton pick- ups, the crew cab option can reduce cargo volume by as much 162 as 25 per cent . Ford’s ½-ton Pick-Up in standard and crew cab formats. Is the crew cab’s function as a truck In the CAFE docket, NHTSA requested recommendations on compromised for passenger whether there should be a lower limit on open cargo bed volume capability? for light truck classification and whether crew cab pick-ups source: www.fordvehicles.com should be considered passenger cars. NHTSA also asked if there is a reasonable system of measurement that could be used to distinguish vehicles with open cargo beds as either cars or trucks.

161 Federal Register Vol.86, No.248, Docket No. 2003-16128. 162 Federal Register Vol.86, No.248, Docket No. 2003-16128.

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Off-Highway Operation — As discussed in Chapter 2, a vehicle is considered a light truck if it has either 4WD or is heavier than 6,000 lbs GVWR and meets four of the five following geometric characteristics: i. approach angle of not less than 28o, ii. breakover angle of not less than 20o, iii. departure angle of not less than 20o, iv. running clearance of not less than 20 cm, and v. front/rear axel clearance of not less than 18 cm.

These measurements were derived from the existing fleet of off-highway vehicles in the mid-1970s. Today, since other provisions for light truck classification regularly supersede these geometric characteristics, there are many vehicles classified as light trucks that do not meet the off-highway geometry requirements — including many XUVs. F – approach angle H – breakover angle G – departure angle NHTSA has suggested that modifying the angles and I – axel clearance clearances to represent today’s true off-highway vehicle source: www.fordvehicles.com geometries could encourage unsafe vehicle design, as manufacturers attempt to maintain light-truck classification among car-based vehicles not really meant for off-highway use. Instead, NHTSA suggests that specific combinations of the measurements must be met for light truck classification. For example, light trucks currently derived from passenger cars may be unlikely to meet the requirements for both the approach and departure angles, in combination with any one of the remaining measures (breakover angle or ground clearance).

Dropping 4WD from the list of light truck characteristics is also under consideration, as the technology is now widely dispersed among all types of light-duty vehicles and is no longer indicative of whether a vehicle is meant for off-highway use.

Obviously, the original list of conditions under which a vehicle could be distinguished as a passenger car or a light truck has generated a number of unintended loopholes. As such, NHTSA is also considering the possibility of distinguishing cars from trucks according to a single, unambiguous, or “fixed”, attribute. NHTSA believes the choice of attribute must be made carefully and has proposed two options: • vehicle curb weight, and • interior volume.

Based on the MY2002 vehicle fleet, NHTSA believes that the breakpoint between cars and trucks would be a curb weight of about 3,700 lbs. At this point, there are some large sedans that may be reclassified as trucks, and some small SUVs, XUVs and pick-ups could be reclassified as cars.

Interior volume could be measured according to certain standards; for example, total volume of the passenger compartment and trunk space or cargo areas combined. Applying this concept to the MY2002 fleet, NHTSA again found that a breakpoint of 130–135 ft3 would place some sedans and station wagons into the truck category, while some small SUVs, XUVs and small pick-ups would be considered passenger cars.

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3) Increasing the GVWR Limit

Recently, a number of new SUVs in excess of 8,500 lb GVWR have been introduced into the personal vehicle market, as described in Chapter 4. Due to their massive weight, they exceed the weight limit to which CAFE regulations apply. While there have been calls to increase the limit to 10,000 lbs, NHTSA is also considering the adoption of the EPA definition for vehicles in the 8,500–10,000 lb range. EPA has a category for Medium-Duty Passenger Vehicles (MDPV) — vehicles that are between the 8,500 and 10,000 lbs GVWR, but that are designed primarily for the transportation of passengers (with some additional exclusions for special purpose vehicles).

Either option would effectively draw these large SUVs under the regulatory umbrella of CAFE. NHTSA is concerned, though, about the potential impacts on work vehicles that would fall into the newly expanded weight range and the associated businesses that rely on such “medium-duty” vehicles for their load-carrying characteristics.

An obvious option to CAFE reform is setting a single mpg standard for the entire fleet of light-duty vehicles — passenger cars and light trucks included. However, NHTSA believes the wording of the EPCA limits their authority to consider this strategy. Such a reform must be initiated in the U.S. House of Representative and the Senate.

EPA — Changes to Fuel Economy Reporting

Since the laboratory protocol for measuring fuel economy was established in the mid-1970s, driving cycles have changed considerably in North America. The speed limit has been raised from the national level of 55 mph and traffic congestion has increased. This means that more fuel is consumed due to more high- speed driving, increased idling and more stop-and-go automobile operation. For the average consumer, it adds up to real-life fuel economy levels that are significantly less than what is stated on the EPA’s Fuel Economy Guide163.

The EPA cannot alter the laboratory protocol for measuring fuel economy, which is used by NHTSA to set CAFE levels, because it is set in law and can only be changed by Congress. source: http://www.detnews.com/2004/autosinsider/0405/31/a01- However, the EPA is considering 169158.htm an adjustment to the way it posts fuel economy levels for new automobiles in the showroom. This may lead to more a more realistic prediction of fuel costs for prospective auto customers, which could also nudge market demand towards more fuel-efficient models.

Congressional Action

There has been substantial legislative activity in the House of Representatives and in the Senate with respect to fuel economy, especially during the 107th Congress in 2002. However, much of the proposed alterations to the CAFE program were tied to the Senate Energy Bill, which failed to pass by the year’s end. Some of the highlights are listed below:

163 http://www.fueleconomy.gov/feg/feg2000.htm

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CAFE Amendments to the Energy Bill • McCain (R-AZ) introduced S.1923, requiring CAFE standards to be raised to 36 mpg for all passenger cars and light trucks by 2016. • Kerry (D-MI) and Hollings (D-SC) introduced S.1927, requiring a CAFE increase of 38.3 mpg for cars and 32 mpg for light trucks. • McCain and Kerry joined efforts and proposed a 36 mpg CAFE standard for all light-duty vehicles by 2015 in an amendment to the Senate Energy Bill introduced by Bingham (D-NM) and Daschle (D-SD). • Levin (D-MI) and Bond (R-MO) successfully attached a counter amendment that would delay any change to CAFE standards for two years and direct NHTSA to study the impact of CAFE increases and publish their findings in 2004. • Miller (D-GA) successfully attached a counter amendment that excludes pick-up trucks from any future CAFE mandated standards. • In September 2002, the House and Senate energy bills could not be reconciled in conference and the amendments were dropped.

Independent CAFE Proposals • Feinstein (D-CA) and Snow (R-ME) introduced bipartisan legislation S.255, seeking to close the “SUV loophole” by making light trucks subject to the passenger car CAFE standard of 27.5 mpg and by increasing the CAFE weight limit from 8,500 to 10,000 lbs GVWR. HR.1815 is the House companion bill. • Durbin (D-IL) introduced S.794 to increase CAFE levels to 40 mpg for both passenger cars and light trucks. Durbin also introduced a companion measure, S.795, to modify and make more effective the gas guzzlers tax and to make it applicable to light trucks and cars by 2006. • Boxer (D-CA), Clinton (D-NY) and Schumer (D-NY) introduced S.265 that closes the tax loophole, which effectively subsidizes the cost of purchasing SUVs in excess of 6,000 lbs GVWR (the big ones) by allowing small businesses an accelerated write-down of the vehicle as an asset. Originally intended as a tax aid for farmers and small construction companies that require large pick-up trucks, it has since made very large SUVs a popular choice among single-employee corporations and small sales teams who use the vehicles for personal transportation.

At the time this report was written, none of the above legislation had passed. Little has occurred since 2002 in the way of Congressional changes to the CAFE program.

Project for a New Generation of Vehicles and FreedomCAR

In 1993, President Clinton initiated the Project for a New Generation of Vehicles (PNGV). Its goal was to fund the development of several prototype family sedans that would achieve 80 mpg and be affordable in mass production, as well as meet the practical needs of U.S. motorists. The initial project deadline was 2004. Using a combination of diesel-electric hybrids engines and lightweight materials, GM, Ford and Daimler-Chrysler produced prototypes in 2000 that came very close to meeting the fuel economy rating, but failed to meet the cost and emissions requirements.

PNGV Prototypes [source: http://www.eere.energy.gov/vehiclesandfuels/]

GM Precept – 80 mpg Ford Prodigy – 72 mpg DCX ESX3 – 72 mpg

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In 2003, President Bush renamed the program “FreedomCAR”. He committed $720 million in continued funding, but stressed that the goal of the project should be focused on refining fuel cell performance, instead of broad development of fuel efficient technologies, per se.

Industry Groups

Generally speaking, industry groups have not been publicly active in lobbying for changes to the CAFE program and normally resist any proposed regulation that threatens to complicate their marketing strategies. However, due to the growing public awareness of the threat of global warming and degrading air quality due to increased vehicle use, as well as government commitments to reduce GHG emissions, many auto manufacturers and transportation sector associations have declared their positions on environmental and public health issues. In addition, NHTSA’s request for comment on possible changes to the structure of CAFE has required manufacturers to consider their preferred options. The positions of various industry groups are summarized below.

General Motors (GM)

• GM does not specifically recognize global warming as an immediate policy issue, instead characterizing it as a long-term environmental concern164. GM believes that the science surrounding climate change is still evolving and more research is required to determine the degree of economic and societal impact. • Critical of CAFE, GM claims that the regulations have failed to reduce foreign oil imports, have “hurt automotive safety” and forced the company to build vehicles that consumers do not value, selling them at little or no profit165. • GM claims that a government mandate on fuel efficiency will not effectively address concerns about climate change, as it will divert resources from the development of advanced vehicle technologies that could reduce CO2 emissions. • Voluntary measures and public-private partnerships to promote energy efficiency, relaxation of regulations and taxes that limit investment in advanced technology, and government- funded alternative fuel infrastructure development (hydrogen, in particular) are among GM’s recommendations for effective policy action. • GM has included “cylinder deactivation” enhancements to improve efficiency on some of its light truck products, and plans to sell a hybrid SUV in the future. However, it seems GM’s long-term technology development focus is on fuel cells. • GM, in partnership with the U.S. DOE and NRCan, has organized and coordinated “Challenge X” — a competition among North American engineering schools to develop a lower emission version of a Chevrolet Equinox (with success based on full life-cycle, well-to- wheels GHG emissions reductions). According to GM: “Challenge X shows that the cooperation of industry, government, and academia is the best approach to develop more energy-efficient and “greener” automotive technologies, to improve our economy and our environment, and to keep North American technology competitive on a global basis.”166 Response to CAFE reforms considered by NHTSA: • Attribute-Based System. GM does not support an attribute-based system. It has suggested, however, that a weight-based system would reduce the sales mix as a factor in compliance

164 http://www.gm.com/company/gmability/public_policy/environment/global_climate.html 165 http://www.gm.com/company/gmability/public_policy/environment/cafe_101/index.html 166 http://www.challengex.org/

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and also remove incentives to decrease vehicle weight, which GM believes will improve the safety of its products167. • Increasing GVWR to 10,000 lbs. GM does not support expanding the CAFE regulations to include vehicles up to 10,000 lbs GVWR, claiming that these vehicles represent a small fraction of SUV sales and are only bought in accordance with consumer’s “special needs”. • Vehicle Classification. GM believes that there is no need to redefine the distinction between cars and trucks and that XUVs, while based on cars, are purchased for different reasons that distinguish them from passenger cars. • Fuel Economy Credit Trading. GM also expresses reservations about a fuel economy credit trading system between companies.

Ford

• In Ford’s Corporate Citizenship Report 2003–2004, the company claims, “We will respect the environment and help preserve it for future generations.” In the report, the company states that improving fuel economy addresses concerns about climate change and energy security. • While Ford is opposed to CAFE standards that do not consider competitive and economic impacts, it does support the concept of NHTSA experts setting “maximum feasible” fuel economy levels. • Ford is currently marketing a hybrid-electric version of the Escape SUV. While Ford considers hybrid technology to be a near-term option for improved fuel efficiency, it claims fuel cell technology development is the long-term strategy for CO2 emissions reduction. “To secure their role in providing mobility to a growing and changing world, automobiles of the future must have dramatically lower smog-forming and greenhouse gas emissions.” — Bill Ford, Chairman and CEO of Ford168 Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Ford has stated that a system based on weight is more equitable than the current CAFE regulations169. • Increasing GVWR to 10,000 lbs. Ford does not support increasing CAFE weight limits. • Vehicle Classification. Ford does not support any redefinition of vehicle classes (cars vs. trucks), claiming that such a move would imperil CAFE compliance among the existing SUV, minivan and pick-up fleets. • Fuel Economy Credit Trading. Ford opposes credit trading as it would transfer wealth from domestic to foreign manufacturers. • At the New York Auto Show in April of 2004, Bill Ford publicly stated that increasing gas taxes and stronger government purchase incentives would be most effective in driving consumer demand for fuel efficient vehicles170.

167 Federal Register Vol.86, No.248, Docket No. 2003-16128. 168 http://www.ford.com/NR/rdonlyres/ef2ewzrmpfhf5ynh2ymsneueedcoetwhalfwsxp6sfd5mdhzjzcjhcs5jskdbl6zxezembirvluy nhzipyvotvwfkde/01_letter.pdf 169 Federal Register Vol.86, No.248, Docket No. 2003-16128. 170 http://www.detnews.com/2004/autosinsider/0404/09/a01-116845.htm

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DaimlerChrysler

• In its 2004 environmental report, DCX is clear about its objective to reduce CO2 emissions from its fleet. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. DCX is against any attribute-based system, claiming no method considered by NHTSA is superior to the current structure of CAFE171. • Increasing GVWR to 10,000 lbs. DCX is against increases to the CAFE weight limit, on the basis that the market segment is so small that no benefit would follow. • Vehicle Classification. DCX has suggested that if such changes were to be made to the definition of car vs. truck, then CAFE standards for the new classifications would have to be changed accordingly. • Fuel Economy Credit Trading. DCX supports a fuel economy credit trading system among companies.

Toyota

• Toyota has established a performance-based environmental accounting system, as detailed in its 2004 Environmental and Social Report. Its current fuel efficiency objective is to meet the fuel economy targets of the Top-Runner program five years ahead of schedule172. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Like DCX, Toyota is against any attribute-based system, claiming that the current structure of CAFE works173. • Increasing GVWR to 10,000 lbs. Toyota is against increases to the CAFE weight limit. • Vehicle Classification. Toyota states that however light-duty vehicles are classified, the same efficiency standards should apply to all manufacturers and that any restructuring of CAFE should provide incentives to exceed the set targets. • Fuel Economy Credit Trading. Toyota supports a fuel economy credit trading system between companies.

Honda

• Honda’s Environment Statement: “As a responsible member of society whose task lies in the preservation of the global environment, [the] company will make every effort to contribute to human health and the preservation of the global environment in each phase of its corporate activity. Only in this way will we be able to count on a successful future not only for our company, but for the entire world”174. In the 2002 Honda Ecology Report, global warming is defined as a real threat, caused by anthropogenic CO2 emissions. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Taking a contrary position to most other manufacturers, Honda stated that a size-based attribute system has advantages over a weight-based system, in that it drives fuel economy improvements through the use of lightweight materials and better vehicle packaging175. • Increasing GVWR to 10,000 lbs. Honda is not opposed to expanding CAFE regulations to include vehicles up to 10,000 lbs GVWR — a position contrary to most other industry groups.

171 Federal Register Vol.86, No.248, Docket No. 2003-16128. 172 http://www.toyota.co.jp/en/environmental_rep/04/index.html 173 Federal Register Vol.86, No.248, Docket No. 2003-16128. 174 http://world.honda.com/environment/environmental-policy/statement/index.html 175 Federal Register Vol.86, No.248, Docket No. 2003-16128.

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• Vehicle Classification. Honda states that SUVs and vans should be removed from the light truck class under CAFE. Honda further states that pick-up trucks are mainly used for work and that any exemption from the most stringent CAFE standards should be based on a minimum set of cargo bed measurements. • Fuel Economy Credit Trading. Honda supports a fuel economy credit trading system between companies.

Insurance Institute for Highway Safety (IIHS) Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Of primary concern to the IIHS is that changes to the CAFE structure should not promote weight reductions or increased sales of the smallest, least safe vehicles176. As such, the IIHS favours a weight-based system of CAFE compliance, but has also suggested that CAFE targets be based on manufacturer-specific, production-weighted averages of a particular mix of vehicle types.

Association of International Automobile Manufacturers (AIAM, representing most foreign import manufacturers) Response to CAFE reforms considered by NHTSA: • Attribute-Based System. AIAM does not favour a weight-based system for setting CAFE targets. Further, AIAM believes any changes to the CAFE regulations should be competitively neutral177. • Vehicle Classification. AIAM fees that the distinction between cars and trucks could be replaced with a continuous function based on vehicle weight or size.

The Alliance of Automobile Manufacturers (representing BMW, DaimlerChrysler, Ford, GM, Mazda, Mitsubishi, Porsche, Toyota, Volkswagen) • According to the Auto Alliance, “As the global debate on climate change continues, members of the Alliance believe it is prudent to reduce emissions, including carbon dioxide, from our plants, products and processes”178.

United Auto Workers (UAW) • The UAW supports the current structure of CAFE and advocates for moderate increases in CAFE standards that are technically and economically feasible, in addition to federal incentives for buyers of high-efficiency vehicles, such as those with hybrid-electric drives179. • With respect to climate change, the UAW has called on the White House to reverse its decision to abandon the United Nations Framework Agreement on Climate Change and believes the Bush Administration’s close ties to the oil industry has influenced its policy on global warming. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. The UAW opposes any changes to the current structure of CAFE and is not in favour of attribute-based systems for establishing targets.

With the exception of Honda and the UAW, most industry groups are either uncommitted or against mandated fuel efficiency targets, and are unclear about whether global warming should be a motivating factor in new vehicle design and marketing. NHTSA’s consideration of possible changes to the structure of CAFE has generally been met with opposition by the industry. However, should any changes be implemented, most domestic manufacturers say they favour a

176 Federal Register Vol.86, No.248, Docket No. 2003-16128. 177 Federal Register Vol.86, No.248, Docket No. 2003-16128. 178 http://www.autoalliance.org/environment/globalclimate.php 179 http://www.uaw.org/cap/03/issues/issue08.cfm

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weight-based attribute system of vehicle classification and CAFE targets — with Honda and the UAW as the notable exceptions.

Public Interest Groups

A multitude of public interest groups have staked out an equally varied number of positions on the issue of climate change and vehicle CO2 emissions. Since the argument supporting no change to CAFE is already well represented by industry, this section will summarize the positions of the public interest groups that support CAFE increases and stringent reforms. There are too many local and state-level groups to document here, so only the major national groups that have dedicated significant resources to the debate about vehicle fuel efficiency are listed.

Public Citizen • Public Citizen has taken a clear position on CAFE, advocating for increases in fuel economy standards to combat worsening air quality and related health issues, as well as reducing the number of large SUVs on the road, which the organization believes compromises traffic safety. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Public Citizen is concerned that a weight-based system would provide an incentive to make more vehicles in the heavier classes, which could lead to greater emissions across the fleet180. • Increasing GVWR to 10,000 lbs. Public Citizen supports the increase. • Vehicle Classification. Pubic Citizen believes that the light truck category should be reserved only for vehicles with significant off-road capability (such as a very high ground clearance) and for vehicles that are primarily used for commercial purposes, rather than truck-like vehicles that also serve as personal transportation. • Fuel Economy Credit Trading. Public Citizen is concerned that credit trading could undermine the impact of penalties. If such a system is implemented, Public Citizen says it should be designed conservatively so that unexpected loopholes are minimal and argues that it should not be linked to broader GHG reduction registries or credit trading systems.

Sierra Club • Sierra Club has promoted increasing CAFE standards as an effective way to address air pollution, CO2 emissions leading to climate change and protection from oil drilling in environmentally sensitive areas. • In recent years, Sierra Club has launched several public awareness campaigns to build support for CAFE increases and draw attention to the negative environmental impact of SUVs, including the Freedom Option Package181 and Jumpstart Ford182. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Sierra Club is concerned that a weight-based system would provide incentive to increase production of heavier vehicles, leading to lower efficiency and greater emissions across the fleet183. • Increasing GVWR to 10,000 lbs. Sierra Club supports the increase. • Vehicle Classification. Sierra Club is highly critical of the existing structure that allows cars that meet the “flat floor” provision to be classified as trucks.

180 Federal Register Vol.86, No.248, Docket No. 2003-16128. 181 http://www.sierraclub.org/freedompackage/freedom9b.pdf 182 http://www.jumpstartford.com/home/ 183 Federal Register Vol.86, No.248, Docket No. 2003-16128.

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• Fuel Economy Credit Trading. Sierra Club strongly opposes credit trading among manufacturers.

American Council for an Energy Efficient Economy (ACEEE) • One of ACEEE’s mandates is to foster innovative technologies, programs and policies for increasing motor vehicle fuel efficiency and reducing emissions184. • In addition to ongoing vehicle technology research, ACEEE has published the Green Book — an environmental guide to cars and trucks. • ACEEE recommends increasing CAFE standards by 60 per cent to 44 mpg for cars and 33 mpg for light trucks by 2012, with three per cent per year increases subsequently, or an equivalent fuel consumption cap. ACEE also recommends implementing market incentives and education programs to build demand for high-efficiency vehicles, enhancing the “gas guzzler tax” on very inefficient cars and light trucks, and introducing a labeling program to identify greener vehicles. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. Instead of a weight-based system, ACEEE proposes an interior volume standard, which is more closely tied to the vehicle’s usage. ACEEE is concerned that a weight-based system would provide an incentive to increase production of heavier vehicles, leading to lower efficiency and greater emissions across the fleet185. • Increasing GVWR to 10,000 lbs. ACEEE supports the increase. • Vehicle Classification. ACEEE is highly critical of the existing structure, which allows cars that meet the “flat floor” provision to be classified as trucks. ACEEE also supports the elimination of the car/truck distinction and argues for one CAFE standard for all light-duty vehicles. • Fuel Economy Credit Trading. ACEEE strongly opposes credit trading among manufacturers and stresses that cross-class fuel economy averaging should not be permitted.

Union of Concerned Scientists (UCS)

• With respect to light-duty vehicles, UCS has taken the position that to reduce CO2 emissions that cause global warming, CAFE levels must be raised and SUVs must be subject to stricter standards than pick-up trucks186. • UCS is a major supporter of California’s efforts to regulate global warming emissions from vehicles and has published technical and economic studies on the impact of mandated fuel efficiency improvements. • UCS has developed a technology component “blueprint” for an SUV with the same size and acceleration as the popular Ford Explorer, but achieving 30 per cent to 70 per cent higher fuel economy187. Response to CAFE reforms considered by NHTSA: • Attribute-Based System. UCS is concerned about a weight-based standard that may provide an incentive to increase production of heavier vehicles, leading to lower efficiency and greater emissions across the fleet188. • Vehicle Classification. UCS is highly critical of the existing structure, in which SUVs are subject to truck standards, despite being clearly designed for personal and passenger travel.

184 http://www.aceee.org/transportation/index.htm 185 Federal Register Vol.86, No.248, Docket No. 2003-16128. 186 http://www.ucsusa.org/ucs/about/page.cfm?pageID=979 187 http://www.ucsusa.org/clean_vehicles/cars_and_suvs/page.cfm?pageID=1249 188 Federal Register Vol.86, No.248, Docket No. 2003-16128.

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In short, most public interest groups are primarily focused on three action items: 1. increasing CAFE levels to their technically and economically feasible level as soon as possible, 2. altering the structure of CAFE to remove the SUV “loophole” and make vehicles subject to CAFE regulations as defined by their primary purpose (i.e., personal transportation or commercial duty), and 3. promoting market-ready, fuel efficient technologies, such as hybrid-electric motors and lightweight materials, instead of funding only long-term research and development projects, such as for hydrogen fuel cells.

The general feeling among most groups is that automakers should make full use of the existing options to reduce fuel consumption and CO2 emissions, rather than allow fuel economy levels to slowly erode in the hope that some “silver bullet” technology will solve the problem in the future.

State Level Activity

In the U.S., individual states often initiate programs that either directly or indirectly influence motorist behaviour and vehicle fuel consumption. However, U.S. law prevents individual states from enforcing fuel economy standards more stringent than the federal CAFE standards. Title 49 U.S.C. § 32919 relating to automobile fuel economy explains the pre-emption of state action, as follows: a. General — When an average fuel economy standard prescribed under this chapter is in effect, a State or a political subdivision of a State may not adopt or enforce a law or regulation related to fuel economy standards or average fuel economy standards for automobiles covered by an average fuel economy standard under this chapter. b. Requirements Must Be Identical — When a requirement under section 32908 of this title is in effect, a State or a political subdivision of a State may adopt or enforce a law or regulation on disclosure of fuel economy or fuel operating costs for an automobile covered by section 32908 only if the law or regulation is identical to that requirement. c. State and Political Subdivision Automobiles — A State or a political subdivision of a State may prescribe requirements for fuel economy for automobiles obtained for its own use.

Without the authority to enact fuel economy legislation, individual states have relied on a variety of voluntary programs, fuel taxes and efficient vehicle purchase incentive programs. While the range of programs are too numerous to detail here, some of the prominent state-level initiatives are listed in the following sections.

It should be noted that while the U.S. federal government has not acted in any significant manner on the issue of global warming, individual states have seized the initiative and implemented an impressive array of programs aimed at meeting aggressive GHG emissions reduction targets.

State Fuel Tax

As discussed earlier, more than 25 per cent of the price of gasoline is made up of federal and state fuel taxes. While this level of tax is significant, it is small in comparison to Europe and Japan, where fuel taxes can represent roughly 50 per cent to 80 per cent of the price at the pump. State fuel taxes are not meant to influence fuel consumption directly, but have established a higher cost of driving than would otherwise have been the case.

Fuel taxes vary by state and, as the inset figure shows, the U.S. west coast and northeast have the highest average fuel prices due to state taxes. The extent to which the existing level of tax alters driver behaviour, fuel consumption rates or efficient vehicle purchases is likely outweighed

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by the extra buying power of consumers in the more affluent regions. In other words, although state taxes make gasoline most costly in the western and northeastern states, automobile use and fuel consumption per capita in these regions are some of the highest in the country.

Efficient Vehicle Purchase Incentive Programs

A variety of incentive programs exist to promote the sale of alternative fuel and highly efficient vehicles. In most cases, the programs are either tax rebates or direct cash incentives available to the businesses or individuals. For example, under the Maryland Clean Energy Act, the state has effectively subsidized the cost of electric vehicles by $2,000 and hybrid-electric vehicles by $1,500. New York provides tax credits on the purchase of electric and hybrid-electric vehicles of up to $5,000. The California Energy Commission makes available similar offers through the Efficient Vehicle Incentive Program.

There are also public awareness and driver education campaigns on the benefits of efficient driving behaviour as well as alternative technology public transit projects funded at the state and municipal levels.

California and the North East States

Vehicle Emissions Regulations

California occupies a special place in federal legislation with respect to vehicle emissions. The state was the first in the U.S. to experience severe episodes of photochemical smog. The smog was the combined effect of a rapid increase in automobile use in the post-WWII era and the state’s unique atmospheric conditions, which exasperated the effect of smog-forming emissions from vehicles. To address the issue of air quality and public health, California enacted the country’s first vehicle emissions regulation towards the end of the 1950s. Since then, California has led the world in forcing the development of technology to reduce emissions (e.g., evaporative emission controls, improved engine design, catalytic converters) through a series of progressively stringent regulations.

While the federal government has pre-empted other states from enacting their own vehicle emissions standards, a special waiver provision was written into the U.S. Code that permits California to set standards separate from and more stringent than the federal regulations. This was done to preserve and encourage California’s role as a technology-forcing leader in automotive emissions, while saving the auto industry from having to comply with more than the two standards — Federal and California.

In keeping with this two-standard rule, the federal Clean Air Act allows other states to adopt the more stringent California rules as an alternative to the federal emissions standards. Historically, states in the North East of the U.S. have adopted California’s emissions standards. For example, New York, Massachusetts, Vermont, Maine, New Jersey and Connecticut have all passed laws to adopt the California LEV II (Low Emission Vehicles, Phase 2) program.

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Greenhouse Gas Emissions Regulations

In 2002, California’s Legislative Assembly passed Bill 1493, directing the California Air Resources Board (CARB) to adopt regulations that will achieve the maximum reduction of GHG emissions (primarily CO2) from motor vehicles that are both technically feasible and cost-effective. CARB has identified CO2 reduction levels of about 30 per cent, which are attainable through the application of a variety of market-ready automotive technologies.

As with other toxic and smog-forming pollutants under California’s LEVII program, CARB’s CO2 emissions regulations are measured in grams-per-vehicle-mile traveled. This allows the CO2 standards to be integrated into the structure of existing emissions program that protect California’s air quality.

To adopt the regulation, California must apply to the Federal Government for a pre-emption waiver, as described earlier. If the waiver request is granted, other states will be able to adopt the regulations. In that case, it is likely that most northeastern states will also follow the CO2 emissions standard (as is currently the case with LEV II).

The significance of California’s leadership in setting new GHG emissions standards is that it provides individual states with a powerful tool to take action on climate change. Due to its importance, the next chapter (chapter 6) has been dedicated to a discussion of vehicle emissions standards and California’s role in influencing automotive technology.

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5.3 Activity in Canada

Aside from Canada’s voluntary CAFC standards, little direct action has been taken by the federal government to improve motor vehicle fuel efficiency. Funding of joint government-industry research and tax incentives has been the preferred role of the government in the past, but future activity on fuel efficiency may take on a more assertive format. The nature of such actions will be influenced, for the main part, by the national imperative to reduce GHG emissions.

This section describes some of the higher profile activities underway at the federal and provincial levels of government.

Federal Initiatives

The federal government has the authority to regulate fuel efficiency (i.e., the Motor Vehicle Fuel Consumption Standards Act). In addition, the implementation of energy tax and tax incentives, discretionary funding and industry support, vehicle technology research and development and national strategic directives are also the purview of the federal government.

Government Programs: Information and Outreach, R&D Funding and Tax Incentives

Joint Government-Industry Voluntary Fuel Consumption Program

Under this program, vehicle sales and fuel consumption data are collected from auto manufacturers active in the Canadian market and the CAFC values are calculated and monitored by Transport Canada189. Voluntary CAFC standards are set under the program and are usually chosen to be equivalent to the CAFE targets in the U.S. The intent of the program is to hold auto manufacturers to their goodwill intentions of making products that reduce oil consumption across the light-duty vehicle fleet.

EnerGuide for Vehicles Program

Administered by NRCan and the Office of Energy Efficiency (OEE), this program oversees the annual publication of the Fuel Consumption Guide (under the EnerGuide logo) and the labeling of fuel consumption ratings on new cars190. Essentially, this program provides consumers with the information required to make fuel efficiency a factor in the decision to purchase a vehicle. The cost of this program is mainly funded by vehicle manufacturers.

Personal Vehicle Initiative (Auto$mart for personal vehicles)

An education and outreach program companion to EnerGuide for Vehicles, Auto$mart is intended to provide the public with tips and recommendations for purchasing, operating and maintaining vehicles for optimal fuel efficiency. The program is also aimed at informing the public about the environmental impacts of personal vehicles by providing materials for driver education programs191. 1996/97 expenditures for the program were about $1,000,000192.

The Government/Industry Motor Vehicle Energy Committee (GIMVEC) and Industry MOUs

In 1995 and 1996, the Motor Vehicle Manufacturers’ Association (MVMA) and the Association of International Automobile Manufacturers of Canada (AIAMC) each signed a Memorandum of

189 http://www.tc.gc.ca/roadsafety/fuelpgm/menu.htm 190 http://oee.nrcan.gc.ca/vehicles/home.cfm 191 http://oee.nrcan.gc.ca/vehicles/home.cfm?text=N&printview=N 192 Foundation Paper on Climate Change – Transportation Sector, Transportation Table, National Climate Change Process, 1998.

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Understanding (MOU) with NRCan, in which the parties recognized the role that fuel efficiency plays in reducing national GHG emissions, and committed to work together to minimize the barriers to efficient vehicle choice among consumers193. The MOU set up one committee to consider public education measures that would help develop a market for fuel efficient vehicles, and another to collect vehicle emission data from which the impact of light-duty vehicle use on Canada’s total GHG inventory could be projected. The agreement terminates at the end of 2005.

MOU between NRCan and the U.S. DOE on Road Transportation Energy Efficiency and Alternative Fuels

Signed in 2001, this MOU establishes the basis upon which Canadian and U.S. agencies will combine efforts and share information in the development of fuel-efficient technologies and alternative fuels for light-duty vehicles194. The agreement will terminate in May of 2006.

Transportation Efficiency & Alternative Transportation Fuels R&D Programs

There is a variety of programs that provide financial and in-kind support for research and development related to energy efficiency and greenhouse gas reductions that can include high efficiency engines and motors, low-emissions combustion technology, exhaust treatment and energy storage technology for automotive applications. The programs also support the development of alternative fuels.

TEAM (technology early actions measures to address climate change), PERD (program of energy research and development) and the CCAF (climate change action fund — no longer in operation195) are examples of government funding pathways that can be leveraged to support efficient vehicle technology development. There are numerous government agencies and laboratories that deliver the programs; however, most vehicle research is done under the administration of NRCan and the National Research Council.

As of 2003, federal funds provided through TEAM for a wide range of projects totaled almost $200 million196 and PERD funding totaled almost $60 million in 2001197. In 2000, the CCAF was primed with $150 million to distribute by 2003198, although much of these funds are actually supplied through TEAM and thus cannot be fully counted as additional federal investment in climate change action.

Sustainable Development Technology Canada (SDTC) is a $350 million fund set up by the federal government in 2001 to help commercialize technologies that contribute to an environmentally sustainable society199. Technologies with GHG reduction benefits are the main focus of the fund.

Scientific Research and Experimental Development Investment Tax Credit

A 20 per cent to 35 per cent tax rebate is available for Canada-based investments in scientific research and development. This tax credit could be applied to R&D in fuel-efficient automobile technologies.

193 http://oee.nrcan.gc.ca/english/programs/gimvec.cfm 194 http://oee.nrcan.gc.ca/english/programs/gimvec.cfm 195 http://www.climatechange.gc.ca/english/ccaf/ 196 http://www.climatechange.gc.ca/english/publications/team_200103/ 197 http://www2.nrcan.gc.ca/es/oerd/english/View.asp?x=659 198 http://www.climatechange.gc.ca/english/publications/ccaf_200203/ 199 http://www.sdtc.ca/en/index.htm

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Taxes on Gasoline Federal Fuel Tax

Excise taxes were not originally placed on fuels to induce energy conservation, but nonetheless apply a financial penalty to unnecessary vehicle use. Tax on gasoline is currently at 10 cents per litre and generates about $3.5 billion annually in federal revenues. On diesel fuel, the excise tax is 4 cents per litre, generating about $900 million annually in federal revenues200. Provincial taxes vary from 6.2 to 17 cents per litre, on top of which GST and provincial sales taxes are applied. In total, the various taxes make up about 40 per cent to 50 per cent of the price of gasoline source: http://www.caa.ca/gasprice/breakdown.html in Canada201.

In order to promote the use of alternative fueled vehicles, the federal excise tax is omitted on ethanol, methanol, natural gas and propane, to name a few. The ethanol and methanol portions of blended gasoline are also exempt. These exemptions reduced tax revenues by $859 million between 1985 and 1997202.

Vehicle Tax on Wasteful Energy

The federal government introduced two taxes in 1976 specifically designed to minimize the appeal of inefficient light-duty motor vehicle design.

High Energy Consuming Motor Vehicles — This tax is levied on passenger cars weighing more than 2,007 kg and on vans and wagons weighing more than 2,268 kg, according to the following schedule: • $40 for the first 45kg in excess of the threshold, • $50 for the next 45kg, and • $60 for each additional 45kg. There are exemptions for emergency and embassy vehicles. The tax generated about $5.4 million in 1996/97203.

200 Foundation Paper on Climate Change – Transportation Sector, Transportation Table, National Climate Change Process, 1998. 201 http://www.caa.ca/gasprice/breakdown.html 202 Foundation Paper on Climate Change – Transportation Sector, Transportation Table, National Climate Change Process, 1998. 203 Foundation Paper on Climate Change – Transportation Sector, Transportation Table, National Climate Change Process, 1998.

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Auto Air Conditioner Tax — Considered an unnecessary waste of energy, the tax on automobile air conditioners adds $100 to the purchase price of a new vehicle. This tax generated about $109 million in 1996/97204.

Ratification of Kyoto and the Climate Change Plan for Canada

The federal government ratified the Kyoto Protocol in December of 2002, committing the country to a reduction in annual GHG emissions of 6 per cent below 1990 levels by the Kyoto commitment period of 2008-2012 (i.e., 240 megatonne CO2e emissions reduction from “business- as-usual” projections). In order to meet this objective, the government developed the Climate Change Plan for Canada — a range of activities to reduce emissions in the main GHG emissions producing sectors.

In terms of GHG emissions from light-duty motor vehicles, the plan calls for a 25 per cent improvement in fleet-wide new vehicle fuel efficiency by 2010. This is expected to achieve a 5.2 205 Mt reduction in CO2e emissions towards the estimated 240 Mt emissions reduction target .

The 25 per cent fuel efficiency goal was previously studied in the Options Paper of the Transportation Climate Change Table, which was composed of government, industry and public sector stakeholders. The 25 per cent target was considered in the 1999 final report of the Transportation Table to be a “low to modest cost range measure”206.

This target was presented again in the Action Plan 2000 on Climate Change, which sought to launch negotiations with the auto industry and the United States to establish new fuel vehicle efficiency standard that would result in a 25 per cent reduction in GHG emissions from new vehicles by 2010207.

Currently, the federal government is involved in revising the Climate Change Plan for Canada. It is expected that the target for a 25 per cent improvement in fuel efficiency will remain. Four departments are involved in discussions with the auto sector, including the Departments of Environment, Industry, Natural Resources and Transport. NRCan is the lead department for discussions with the auto sector on new CAFC targets.

Targets: Basing the target on the Climate Change Plan for Canada, a 25 per cent reduction in fuel consumption beyond current CAFC standards (approximately equivalent to the actual 1990 fleet levels) would result in the following fleet averages for 2010:

6.45 L/100km for passenger cars 8.55 L/100km for light trucks.

Although the new targets are provided for two categories — passenger cars and light trucks (as is the case for the CAFC program) — the structure of the new program has not been decided.

There is little information available on current discussions on the structure proposed for a new CAFC program. Part of the discussion will be focused on whether the program should be voluntary or mandatory. While the current CAFC targets are voluntary, they are based on mandatory CAFE standards in the U.S. (note that about 90 per cent of motor vehicles produced in Canada are exported to the U.S. market). The new targets may not have this reference point.

204 Foundation Paper on Climate Change – Transportation Sector, Transportation Table, National Climate Change Process, 1998. 205 Climate Change Plan for Canada, 2002, 206 Transportation and Climate Change: Options for Action, Options Paper of the Transportation Climate Change Table, 1999 207 Government of Canada Action Plan 2000 on Climate Change, pp.5

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There is also the Motor Vehicle Fuel Consumption Standards Act to consider. As described in Chapter 2, this Act was passed by Parliament in 1982 but was never proclaimed. If proclaimed, the Act would provide for a range of regulatory powers for Transport Canada to collect manufacturer data and to set and enforce fuel consumption standards.

A New Auto Policy?

As discussed in Chapter 2, the WTO ruled the Auto Pact illegal in 2001. The Auto Pact had helped to maintain Canada’s place in the North American auto industry since 1965. During the Ontario election of 2003 and the Federal election of 2004, discussion arose over how Canada might position itself to compete in the global auto market without the security of local trade agreements, and about what role governments should play.

In April of 2003, the Ontario government followed up on a campaign pledge and committed $500 million to support the province’s auto sector. The Ministry of Economic Development and Trade created the Automotive Investment Strategy to administer the $500 million fund, which is earmarked for advanced-skills training, improved environmental and energy technologies, public infrastructure and funding of research and innovation208.

During the federal election of 2004, the Liberal Party platform document included the following statement:

“Our industrial heartland in central Canada is exposed to the full force of growing global competition, including competition with regions in the U.S. for new investment in state-of-the art facilities. That is why a Liberal government will work with industry, labour and the Province of Ontario to develop a national strategic framework for the auto industry. It will address issues related to skills, innovation, infrastructure, environment, and regulation.”209

Following on this pledge, the Minister of Industry committed to organize meetings with the Canadian Automotive Partnership Council (CAPC)210, which includes representatives from the auto industry, academia and the federal and provincial governments. The Council was created by the federal government in 2002 to lay plans for a new national auto policy211. The Council’s main objectives are focused on competitiveness and strengthening the Canadian auto industry. There isn’t any reference to motor vehicle fuel efficiency or to preparing for climate change mitigation measures on the Council’s website, although there is a working group on sustainability.

Provincial Initiatives

Each province has its own incentive programs for efficient vehicles and alternative fuels. The full range of these programs is not described here. Instead, this section gives a quick review of Ontario initiatives, as the province represents the home of the Canadian auto industry, plus the country’s largest vehicle population and most vehicle miles traveled. As a result, any significant action to alter Ontario’s vehicle efficiency, emissions or use will, in turn, have a significant effect at the national level.

Of note is the change of government in Ontario within the past two years. The new Liberal government has claimed it is prepared to act cooperatively with the federal government on measures to address climate change.

208 http://www.premier.gov.on.ca/english/news/AutoInvestment041404_bd1.asp 209 Moving Canada Forward: The Paul Martin Plan for Getting Things Done. http://www.liberal.ca/platform_en.pdf 210 http://strategis.ic.gc.ca/epic/internet/inauto-auto.nsf/en/am01561e.html 211 “National auto strategy read in next few months”; The Hill Times, August 16-22, 2004, Policy Briefing for Canada’s Automotive Industry.

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Ontario Programs for Vehicle Efficiency

Ontario’s environmental activities in relation to vehicles have mainly been motivated by air quality concerns, rather than CO2 emissions. However, some significant actions have been taken and are listed below:

Driver Education and Outreach

As with the federal government, the Ontario Ministry of the Environment and Ministry of Transportation are active in providing education and information materials on purchasing and operating vehicles with fuel efficiency in mind. Printed and on-line materials are available from the Ontario Government.

Drive Clean

This program212 applies to a variety of vehicles, including passenger cars, light trucks and even motorhomes. Owners of these vehicles must have them tested for toxic and smog-forming emissions (NOx, VOCs and CO) every two years. If the emission standards established by the Drive Clean program are exceeded, the vehicle fails the test and must either be retired or repaired such that the test can be passed (subject to repair cost limit). The goal of the program is to improve air quality in Ontario by reducing emissions from vehicles on the road that contribute most of the fleet’s smog-forming emissions. These vehicles usually comprise of older vehicles in which emissions control systems have ceased to function. The Drive Clean program accelerates the retirement of older, dirtier vehicles, displacing them with newer, cleaner vehicles that improve air quality. To the extent that the retired vehicles are less fuel-efficient than the vehicles with which they are replaced, this displacement will result in an improvement in fleet fuel efficiency.

MOU with the Federal Government on Climate Change

On May 21st, 2004, the Ontario Government signed a memorandum of understanding with Federal Government to cooperate and coordinate activities aimed at reducing GHG emissions, in keeping with the goals of the Kyoto Protocol. Several elements of the MOU could have implications for vehicle fuel efficiency, as quoted below:

“The Parties agree to: (a) pursue cooperation on addressing climate change within the context of sustainable development, including clean air; (b) identify priority areas for cooperation and the development of constructive partnerships to achieve cost-effective emissions reduction action; (c) coordinate opportunities for integrating climate change with other strategic initiatives, such as in the areas of energy and environment; …”

“To meet the above strategic objectives, the Parties agree to further coordinate their efforts on policies and measures to: reduce or prevent emissions of greenhouse gases and, where appropriate, also help achieve clean air goals; promote the development, demonstration and deployment of technologies addressing climate change; capitalize on opportunities for cost-effective economic development and job creation related to climate change; capitalize on opportunities to achieve other environmental and health co-benefits, such as reducing smog pollutants and their impacts, while addressing climate change; …”

212 http://www.driveclean.com/

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“The Parties agree to explore cooperation in the following priority areas: … 2. Energy Efficiency, Conservation and Fuels Develop and implement measures and technologies to increase the use of alternative transportation fuels and improve energy efficiency in buildings, transportation, commercial and industrial sectors, as well as government operations. Explore joint delivery programs in these areas, where appropriate; … 4. Innovation and Technology Continue cooperation and coordination of research, development, demonstration and diffusion of clean and efficient energy technologies; …”

The MOU provides the basis and the impetus for both levels of government to improve light-duty motor vehicle fuel efficiency, as it could lead to reduced GHG emissions, improved air quality and increased energy efficiency in the transport sector through technology development. Vehicle fuel efficiency measures could also satisfy the economic development and job creation objectives of the MOU, as it would focus the Ontario auto sector on creating products for the domestic market and an international market that is demanding more fuel efficient vehicles (given the California, Northeastern States, European, Japanese, Australian and Chinese activities on fuel efficiency standards).

The MOU expires in May of 2009.

Ontario Fuel Tax and Tax for Fuel Conservation

Not to be confused with the provincial gasoline tax at 14.7 cents per litre, the Tax for Fuel Conservation is specifically aimed at producing a financial disincentive to buy vehicles with high fuel consumption ratings. The tax is charged at the time of purchase. The rate schedule is provided in the following table.

Highway Fuel Use Ratings Tax on New Passenger Cars Tax on New SUVs L/100 km Under 6.0 -$100 $0 6.0 to 7.9 $75 $0 8.0 to 8.9 $75 $75 9.0 to 9.4 $250 $200 9.5 to 12.0 $1,200 $400 12.1 to 15.0 $2,400 $800 15.1 to 18.0 $4,400 $1,600 over 18.0 $7,000 $3,200

As shown, cars rated at under 6.0 L/100 km received a $100 rebate on purchase. This program was enacted in 1989 and has not been altered since 1991. In fact, the tax is not a very effective mechanism for promoting fuel efficiency, as roughly 90 per cent of all cars fall into the $75 tax category and most SUVs fall into the $400 and $800 categories. These figures usually represent less than 2 per cent of the vehicle’s purchase price and therefore do not typically influence the buying habits of consumers. The tax may become a significant factor on the purchase of exotic sport and luxury import cars that have poor fuel consumption ratings, but buyers of such vehicles would probably not be put off by a $7,000 tax on a sticker price that ranges into the hundreds of thousands of dollars.

Ontario’s waiving of the gasoline tax (Fuel and Usage Tax) on the portion of the fuel that is blended ethanol is related to GHG emissions reductions rather than fuel efficiency. Ontario’s stated objective is to reach a 10 per cent blend of ethanol in all gasoline sold within the province by 2010.

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Rebate for Hybrid-Electric Vehicles

The Ontario Ministry of Finance will refund the retail sales tax (8 per cent) on the purchase of any hybrid-electric vehicle, up to a maximum of $1,000, following the proper claim made on one’s annual tax return.

Industry and Consumer Groups

The positions of the various auto manufacturers and their associations in Canada do not differ significantly from those of the U.S. and will not be repeated here. The following positions have been taken by other industry and consumer groups in Canada.

Canadian Auto Workers (CAW) • The CAW support the Climate Change Plan for Canada’s target of a 25 per cent improvement in new vehicle fuel efficiency. In their report, Taking the First Step: Climate Change, the Kyoto Protocol, and Canada’s Role213, the CAW writes, “The federal government has proposed that the auto industry improve fuel efficiency of new vehicles sold in Canada by 25 per cent by the end of this decade, as part of Canada’s Kyoto implementation plan. This is a reasonable and realistic target for the industry. … Technologies exist which would allow average fuel efficiency to improve by 25 per cent; we don’t need to count on future breakthroughs to meet that target. …if the choice is left solely to individual consumers, then the higher up-front cost of fuel-efficient technologies will deter most buyers.” • The CAW favours efficiency regulations on a weight-based format, requiring improvements in vehicle fuel efficiency in all weight classes. • Automotive “content” is of central concern to the CAW, in order that value-added automotive work remains in Canada. The CAW believes that fuel-efficient technologies could mean more content and more work for Canadians. For example, hybrid-electric vehicles are a twin- engine powertrain, meaning twice the work for Canadians; but only if Canada can establish itself as a source of skilled labour for the production of fuel-efficient technologies. The CAW cautions that such positive outcomes would be dependent on the structure of the standard and the aggressiveness of the targets, as well as appropriate support for industry research and development.

Canadian Automobile Association (CAA) • The CAA supports the establishment of regulated fuel efficiency standards that would see new vehicle fuel efficiency increase by 25 per cent by 2010. Recommendation 9.8.2 in the CAA’s 2003-04 Statement of Policy214 reads, “The federal government should proclaim the Motor Vehicle Fuel Consumption Standards Act and implement the following progressively improved model year Corporate Average Fuel Consumption (CAFC) Standards, for Canada to achieve a 25 per cent improvement for 2000 standards of 8.6L/100 for cars and 11.4L/100 for light trucks by 2010.”

2000 2004 2005 2006 2007 2008 2009 2010 Passenger 8.6 7.6 7.3 6.9 6.6 6.3 6.0 5.7 Cars Light 11.4 10.9 10.4 9.9 9.4 9.0 8.6 8.16 Trucks

213 Taking the First Step: Climate Change, the Kyoto Protocol, and Canada’s Role, Policy Discussion Paper, CAW Council, 2002. 214 CAA, Statement of Policy 2003–2004. http://www.caa.ca/e/news-issues/pdf/statement-policy.pdf

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As shown in its schedule, the CAA has projected that 34 per cent and 28 per cent reductions in fuel consumption levels are feasible for passenger cars and light trucks, respectively. • The inset chart (right) from the CAA’s Statement of Policy also shows the results of a CAA member survey, indicating that reducing GHG emissions is considered a personal responsibility.

Other Public Interest Groups

With respect to motor vehicle fuel efficiency, the activities of some major public interest groups in Canada are summarized below.

Sierra Club of Canada

In 2003, the Sierra Club of Canada launched a campaign called CAFE Canada. In its report, titled Why Canada Should Regulate the Fuel Efficiency of Cars and Trucks215, the Sierra Club lists some of its positions as recommendations: • The government must immediately proclaim the Motor Vehicle Fuel Consumption Standards Act of 1981, and force auto-makers to do their part in protecting future generations from the impacts of climate change. • It is essential that the vehicles of the future — fuel-efficient vehicles — be built here in Canada. The federal government must develop proactive policies to ensure that the fuel- efficient vehicles of the future are built here in Canada, encouraging Canadian-based research into fuel-efficiency technologies and tying subsidies for any new car assembly plants to the production of more fuel-efficient vehicles. The federal government should also help the industry through incentives to get more fuel-efficient vehicles on the road. • During the federal election campaign, in June 2004, the Sierra Club of Canada commissioned a public opinion poll and issued questionnaires to the candidates on the role of motor vehicle fuel efficiency in the new auto policy. The poll was conducted by Environics Research Group and found that 94 per cent of Canadians would “support fuel efficiency regulations requiring better mileage to lower greenhouse gas emissions from Canadian cars and trucks.”216 • Following this poll, questionnaires were issued to each party covering a range of environmental issues. One of the questions noted the results of the Environics poll and asked, “If your party forms the government, will you regulate to deliver fuel economy improvements of 25 per cent by 2010, the goal of the current federal Kyoto Strategy?” The NDP, Bloc Québécois, Green Party and Conservative Party of Canada affirmed their intent to regulate fuel economy. The Liberal Party response, however, was that economic instruments and other complimentary mechanisms could be effective, instead of regulation217.

David Suzuki Foundation

The David Suzuki Foundation made several vehicle efficiency-related recommendations for the 2004 federal budget in its submission to the Standing Committee on Finance. These recommendations are part of “A Cleaner Car Campaign”, designed to advance the manufacturing and purchase of energy-efficient vehicles in Canada. Following this, the Foundation also commissioned a survey to gage the public’s views on vehicle GHG emissions standards. The survey was conducted by Léger Marketing. The main findings are summarized as follows:

215 http://www.sierraclub.ca/national/programs/atmosphere-energy/climate-change/cafe-backgrounder.shtml 216 http://www.sierraclub.ca/national/getinvolved/item.shtml?x=658 217 http://www.sierraclub.ca/national/vote-canada/2004/scc-election-questionnaire.pdf

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• Nine out of ten Canadians feel that government regulations are needed to increase fuel efficiency in vehicles. • 81 per cent believe emissions targets for vehicles should be mandatory, rather than voluntary. • 58 per cent endorse the target of a 25 per cent increase in efficiency by 2010. A further 29 per cent feel these targets should be even stricter. • 26 per cent believe industry arguments that the 25 per cent by 2010 target would be “very difficult”. • Almost nine out of ten believe that the Federal Environment Minister should introduce strict new emissions standards on automobiles, similar to those in California. • Mandatory efficiency increases of 25 per cent by 2010 enjoy strong majority support in all regions and age groups. There are no pockets of strong opposition.

Pollution Probe

In 2003, Pollution Probe, in partnership with the York Centre for Applied Sustainability, conducted a conference on Transportation, Air Issues and Human Health218. The recommendations contained in the conference proceedings include the following:

• The federal government should mandate improvements in personal vehicle fuel efficiency (including light-duty vehicles and all minivans and SUVs). Fuel efficiency gains of 25–30 per cent should be achievable by 2012 (i.e., the end of the first Kyoto Protocol Commitment Period). • The government must immediately proclaim the Motor Vehicle Fuel Consumption Standards Act of 1981, and force auto-makers to do their part in protecting future generations from the impacts of climate change.

In 2004, Pollution Probe began a project to help develop new motor vehicle fuel efficiency standards in Canada, in order to support the mitigation of climate change, improve air quality and to assess the potential for aggressive future reductions in fuel consumption. The project included a workshop held in January 2005, that engaged representatives from the Federal and Ontario governments, auto sector, auto union, U.S. experts and NGOs in discussions on the design for new fuel efficiency standards. This report on motor vehicle fuel efficiency and greenhouse gas emissions is also an output of this project.

218 http://www.pollutionprobe.org/Publications/datepublished.htm

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Chapter 6: California’s Regulations FOR Vehicle Emissions — Air Pollution and Climate Change

This chapter summarizes the background information on California’s new GHG emissions bill and describes the new regulations that have been initiated in California (and which may be adopted by other U.S. states).

The subject matter is grouped under two section headings:

• Section 6.1 provides an overview of vehicle emissions regulation history in the United States and the role of California in their development.

• Section 6.2 provides an overview of California’s global warming pollution regulations.

Note: For an overview of air pollutants and “criteria” emissions, refer to Appendix A.

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6.1 California’s Role in U.S. Motor Vehicle Emissions Regulation

As discussed in previous chapters, CO2 is the predominant emission from gasoline and diesel- powered vehicles and is the main greenhouse gas generated by the light-duty fleet. However, there are additional chemical compounds produced by vehicles that can seriously affect human health. These emissions are either toxic, contribute to the formation of smog, or both, and are referred to as air pollutants. Before scientists began studying the relationship between increased CO2 levels in the atmosphere and the global warming trend, air pollution was the primary focus of vehicle emission standards. In order to understand the role that California is playing in the development of GHG emissions standards, it is helpful to understand the role that California has played in regulating motor vehicle emissions for air pollutants.

This section briefly discusses the history of emissions regulations in the U.S. (and, by extension, Canada) with a focus on California’s experience in setting the agenda for cleaner vehicles. A review and analysis of the new California greenhouse gas regulation is also included. The reader may find it helpful to review Appendix A, which provides a summary of vehicle emissions by type and by source.

A Brief History of Vehicle Emissions Standards in the U.S.

Motor vehicle emissions became a concern to public health officials as early as 1943, with the first major U.S. smog event occurring in Los Angeles, where the local climate is highly conducive to smog formation. California was rapidly developing a car- dependent culture, fueled by a post-war boom in auto sales and major road construction. In 1952, Dr. Arie Haagen-Smit, a pioneer in the field of air pollution, discovered how smog formed and identified the part played by automobile exhaust. By Dr. Aire Haagen-Smit was appointed chair of the 1959, California had enacted legislation California Air Resources Board (CARB) by Governor Reagan in 1968. source: requiring the State Department of Public http://are.berkeley.edu/courses/EEP101/spring03/AllThat Health to establish air quality standards and Smog/home.html necessary "If GM is forced to introduce catalytic controls for motor vehicle emissions. converter systems across-the-board on 1975 models, the prospect of an With the aid of federal government programs (Federal Motor unreasonable risk of business Vehicle Act), automakers developed the first generation of catastrophe and massive difficulties with these vehicles must be faced. It emissions control technology, Positive Crankcase Ventilation is conceivable that complete (PCV), which eliminated evaporative HC (VOC) emissions stoppage of the entire production from the engine itself. California immediately mandated to be could occur, with the obvious standard on all passenger cars in the state from the model tremendous loss to the company, shareholders, employees, suppliers year 1963 onwards. In 1960, the state created the Motor and communities. Short of that Vehicle Pollution Control Board to test and certify emission- ultimate risk, there is a distinct control technologies. By 1966, the board had adopted the first possibility of varying degrees of ever tailpipe emissions standards, which enforced reductions interruption, with sizeable dislocations." of 72 per cent in HC and 56 per cent in CO from 1963 levels. Former GM VP Ernest The federal government replicated these standards and Starkman, in testimony to a applied them to all cars sold in the U.S., beginning with the 1972 Senate Committee. 1968 model year.

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1970 was a banner year in air pollution legislation, with the passing of the Federal Clean Air Act. This act established National Ambient Air Quality Standards (NAAQS) and mandated individual states to develop plans to achieve the air quality standards set for their respective regions. Also under this act, automobiles were required to emit 90 per cent less HC and CO from 1970 levels by the 1975 model year, and 90 per cent less NOX from 1971 levels by the 1976 model year. These magnitudes of reductions would require the development of catalytic converters. While the source: http://are.berkeley.edu/courses/EEP101/ spring03/AllThatSmog/home.html auto industry voiced concern over the potential cost of the new technology, the first two-way oxidation catalyst appeared on the road as part of the California Air Resources Board (CARB, formed in 1967) Motor Vehicle Emissions Control Program in 1975. The 1975 targets were extended to 1980 and were met without apparent economic hardship.

CARB continued to monitor air quality and refine the science of emissions measurement, adding categories of air pollutants and developing standards for testing. As a sign of progress, the 1980 levels of total vehicle emissions in the state matched those of 1970, despite a 40 per centincrease in the total vehicle miles traveled (VMT) per year. By 1990, total criteria pollutant emissions were actually below 1970 levels, and there were far fewer severe smog days.

California’s Special Status Under the Clean Air Act of 1990 and Federal Pre-emption

The federal government legally recognized the important role California had played in the development of vehicle emissions control technology, in the 1990 Amendments to the Clean Air Act. The Amendments gave California the unique right to set vehicle emissions standards that were separate and more stringent than federal regulations, thereby perpetuating the state’s leadership in designing innovative emissions control programs.

This special status operates in parallel with federal law set down in 1967, stating that federal vehicle emissions standards pre-empt any setting of differing state-level regulations. The purpose of this “preemption” was to protect the auto industry from having to meet a different set of emissions standards for each state. To resolve this conflict, the 1990 Clean Air Act Amendments made provision for a formal process in which California can request a waiver to federal preemption. The waiver request must be based on the existence of “compelling and extraordinary” conditions in the state that necessitate a more stringent emissions standard. Technically, if the Federal Government wishes to deny the waiver, it must prove that such “compelling and extraordinary” conditions do not exist. To date, a waiver request has never been denied.219

Other States have the Option to Follow Federal or California Regulations

Once California is awarded a waiver to federal pre-emption, the Clean Air Act allows other states to adopt the more stringent California emissions standards. The standards must be fully adopted, however, and no partial adoption is permitted. This ensures that the auto industry is required to meet a maximum of two emissions standards in the U.S. market — federal and California standards.

The federal government benefits from this two-standard arrangement because it permits California to continue acting as a “policy laboratory” of sorts, in which CARB can experiment with

219 For a legal analysis of the grounds for preemption waiver on the issue of greenhouse gas emissions, consult “California’s Authority to Regulate Mobile Source Greenhouse Gas Emissions”, Chanin, 2003.

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new emissions regulations and programs. Successful standards in California can then be exported to other states or even adopted nationally by the EPA. In this way, emissions standards have continually improved across the country — and soonest in the regions that needed it most. Historically, northeastern states have been the first to adopt the more advanced California standards, as that region also suffers from serious traffic congestion and poor air quality similar to that of California220.

Federal Tier 1 Emissions Standards

In addition to the California waiver provision, the Clean Air Act Amendments of 1990 also called for nationwide reductions in emissions of hydrocarbons (HC) of 40 per centand nitrogen oxides (NOX) of 60 per centby the turn of the century. This led to the implementation of “Tier 1” auto emissions standards in 1994. Relying on elements of California’s program for emissions control, the Tier 1 standards set a cap on several categories of air pollutants, measured in grams emitted per mile driven, as shown in the following chart.

Federal “Tier 1” Emissions Standards (g/mi) for Light-Duty Vehicles (< 8,500 GVWR) Fully Phased in and Enforced under Federal Test Procedures (FTP 75) as of 1999.

50,000 miles / 5 years 100,000 miles / 10 years* Category NOx NOx NOx NOx THC NMHC CO PM THC NMHC CO PM diesel gasoline diesel gasoline Passenger 0.41 0.25 3.4 1.0 0.4 0.1 - .031 4.2 1.25 0.6 0.10 Cars LLDT, LVW - 0.25 3.4 1.0 0.4 0.1 0.80 0.31 4.2 1.25 0.6 0.10 <3,750-lbs LLDT, LVW - 0.32 4.4 - 0.7 0.1 0.80 0.40 5.5 0.97 0.97 0.10 >3,750-lbs HLDT, ALVW 0.32 - 4.4 - 0.7 - 0.80 0.46 6.4 0.98 0.98 0.10 <5,750-lbs HLDT, ALVW 0.39 - 5 - 1.1 - 0.80 0.56 7.3 1.53 1.53 0.12 >5,750-lbs * Useful life 120,000 miles/11 years for all HLDT standards and for THC standards for LDT Abbreviations: LVW - loaded vehicle weight (curb weight + 300 lbs) ALVW - adjusted LVW (the numerical average of the curb weight and the GVWR) LLDT - light light-duty truck (below 6,000 lbs GVWR) HLDT - heavy light-duty truck (above 6,000 lbs GVWR) THC - Total Hydrocarbon NMHC - Non-Methane Hydrocarbon

Regarding Test Procedures: There are various test procedures available that conform to different driving conditions and duty cycles and, as such, different emissions levels apply. The emissions standards shown in the above chart are valid, according to the Federal Test Procedure 75 (FTP 75). However, new test standards are currently being phased-in that will include duty cycles that more accurately approximate aggressive highway driving (US06 cycle) and air conditioner operation (SC03 cycle) during vehicle use. This is known as the Supplemental Federal Test Procedure (SFTP).

Federal Tier 2 Emissions Standards

In 2000, the EPA exercised its right to further tighten emissions standards to ensure that the National Ambient Air Quality Standards (NAAQS) could be met and maintained. Known as “Tier 2”, the new, more stringent standards were to be phased in between 2004 and 2009 and would lead to a single emissions standard for all light-duty vehicles. To address the incentive that the

220 New York, New Jersey, Massachusetts, Connecticut, Vermont, & Maine.

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new regulations offered manufacturers to “bulk up” their largest light-duty vehicles (pick-ups and SUVs) past the 8,500-lbs GVWR limit and thereby avoid the regulations, a new category was added: medium-duty passenger vehicles (MDVP). MDVPs include vehicles with a GWVR from 8,500 to 10,000-lbs that are designed primarily for personal transportation.

Under the Tier 2 emissions standards, vehicle manufacturers can choose among eight different “certification bins” into which they can place their vehicle models, each with a differing set of emissions limits, but all subject to a fleet-average NOX level of 0.07 g/mi. Unlike the Tier 1 standard, which was a cap on emissions categories, the fleet-average approach under Tier 2 permits greater flexibility for manufacturers. It allows individual vehicle models to have emissions profiles appropriate for their operating characteristics221, but still holds the entire fleet to a more stringent emissions standard, on average.

During the Tier 2 phase-in period from 2004-2007, passenger cars and LLDTs (light, light-duty trucks) will be subject to an interim, manufacturer’s fleet-average standard 0.3 g/mi NOX. From 2004–2008, HLDTs (heavy light-duty trucks) and MDPVs not already certified to the final Tier 2 standard, will be subject to an interim fleet-average, phase-in standard of 0.20 g/mi NOX, with a cap of 0.60 g/mi for HLDTs and 0.90 g/mi for MDVPs. Sound confusing? The phase-in schedule may seem a bit complicated at first, but by 2009 all vehicles will be held to the Tier 2 standards, as illustrated in chart below.

Federal “Tier 2” Emissions Standards (g/mi) for Light-Duty Vehicles and Medium-Duty Passenger Vehicles (< 10,000 GVWR) Fully Phased in and Enforced under Federal Test Procedures (FTP 75) as of 2009.

50,000 miles 120,000 miles Bin # NMOG CO NOx PM HCHO NMOG CO NOx PM HCHO PM 8 0.100 3.4 0.14 - 0.015 0.125 4.2 0.20 0.02 0.20 0.018 7 0.075 3.4 0.11 - 0.015 0.090 4.2 0.15 0.02 0.02 0.018 6 0.075 3.4 0.08 - 0.015 0.090 4.2 1.10 0.01 0.01 0.018 5 0.075 3.4 0.05 - 0.015 0.090 4.2 0.07 0.01 0.01 0.018 4 - - - - - 0.070 2.1 0.04 0.01 0.01 0.011 3 - - - - - 0.055 2.1 0.03 0.01 0.01 0.011 2 - - - - - 0.010 2.1 0.02 0.01 0.01 0.004 1 - - - - - 0.000 0.0 0.00 0.00 0.00 0.000 Abbreviations: NMOG - Non-Methane Organic Gases HCHO - Formaldehyde

Note that the Tier 2 standards apply to vehicles with up to 120,000 miles (approximately 193,000 km) on the odometer, an increase from 100,000 miles under the Tier 1 standard. The same NOX limits apply to both gasoline and diesel engines. Tier 2 standards also provide regulations for sulphur in gasoline levels and for diesel fuel quality — this will help to reduce SOX levels in engine exhaust and permit more effective use of advanced catalytic control devices222.

California LEV Program

Before the federal government had even implemented Tier 1 standards, California had already implemented its Low-Emissions Vehicle (LEV) Program in 1990. Rather than have a static set of emissions limits, California’s LEV program was set up to move progressively larger portions of the new automobile fleet into increasingly more stringent vehicle emission categories, defined as follows:

221 Vehicles designed for different primary functions (e.g. high-speed operation in cars versus low-speed towing operation for trucks) may have different levels of emissions in each category and yet still have similar overall average NOX emissions. 222 Sulfur limits the effectiveness of catalyst materials.

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Tier 0 Existing in 1992 (phased out by 1995 in light-duty vehicles) Tier 1 Base Level Emission Vehicle TLEV Transitional Low Emission Vehicle LEV Low Emission Vehicle ULEV Ultra Low Emission Vehicle Zero Emission Vehicle (no tailpipe or evaporative emissions ZEV – electric or hydrogen fuel-cell vehicles)

The emissions levels associated with these categories vary according to vehicle type. The light- duty vehicle figures are given in the following chart.

California LEV Emissions Standards (g/mi) for Light-Duty Vehicles (< 8,500 GVWR) Enforced under Federal Test Procedures (FTP 75)

5 Years / 50,000 miles 10 Years / 100,000 miles Category NMOG CO NOx PM HCHO NMOG CO NOx PM HCHO Passenger Cars Tier 0 - 7.0 0.4 0.081 0.0152 Tier 1 - 3.4 0.4 0.081 0.0152 - 4.2 0.6 - - TLEV 0.125 3.4 0.4 - 0.015 0.156 4.2 0.6 0.081 0.018 LEV 0.075 3.4 0.2 - 0.015 0.090 4.2 0.3 0.081 0.018 ULEV 0.040 1.7 0.2 - 0.008 0.055 2.1 0.3 0.041 0.011 ZEV 0.000 0.0 0.0 0.00 0.000 0.000 0.0 0.0 0.00 0.000 LDT1, LVW <3,750-lbs Tier 0 - 9.0 0.4 0.081 0.0152 Tier 1 - 3.4 0.4 0.081 0.0152 - 4.2 0.6 - - TLEV 0.125 3.4 0.4 - 0.015 0.156 4.2 0.6 0.081 0.018 LEV 0.075 3.4 0.2 - 0.015 0.090 4.2 0.3 0.081 0.018 ULEV 0.040 1.7 0.2 - 0.008 0.055 2.1 0.3 0.041 0.011 ZEV 0.000 0.0 0.0 0.00 0.000 0.000 0.0 0.0 0.00 0.000 LDT2, LVW >3,750-lbs Tier 0 - 9.0 1.0 0.081 0.0152 Tier 1 - 4.4 0.7 0.081 0.0182 - 5.5 0.97 - - TLEV 0.160 4.4 0.7 - 0.018 0.200 5.5 0.9 0.101 0.023 LEV 0.100 4.4 0.4 - 0.018 0.130 5.5 0.5 0.101 0.023 ULEV 0.050 2.2 0.4 - 0.009 0.070 2.8 0.5 0.051 0.013 ZEV 0.000 0.0 0.0 0.00 0.000 0.000 0.0 0.0 0.00 0.000 1Diesel-fueled vehicles only 2 Methanol & ethanol vehicles only Abbreviations: LDT - Light-duty truck.

California’s strategy of setting up vehicle categories simplifies the implementation of new, more stringent emissions standards. Rather that introducing a whole new set of emissions limits every few years, the state can simply require the sale of more vehicles in one category and less of another, in order to phase in a lower emissions fleet, on average. Under the LEV program, the vehicle categories were phased in according to the following schedule:

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California LEV Program Implementation Schedule

Category 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Passenger Car & LDT1 Tier 0 100% 60% max 20% max 0% Tier 1 40% max 80% max TLEV 0.250 0.231 0.225 0.202 0.157 0.113 0.073 0.070 0.068 0.062 LEV NMOGNMOGNMOGNMOGNMOGNMOGNMOGNMOGNMOGNMOG ULEV Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. ZEV 10% min LDT2 Tier 0 100% 60% max 20% max 0% Tier 1 40% max 80% max TLEV 0.320 0.295 0.287 0.260 0.205 0.150 0.099 0.098 0.095 0.093 LEV NMOGNMOGNMOGNMOGNMOGNMOGNMOGNMOGNMOGNMOG ULEV Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg. Fleet Avg.

As shown, a requirement for at least 10 per cent of new automobile sales to be ZEV compliant was scheduled for 2003. Originally, the program was meant to produce ZEVs by 1998, but the standard was modified to provide manufacturers with further flexibility. Under these modifications, credit for pure ZEVs could be gained by producing “partial-ZEVs” (PZEV). This will be described further in the following section.

California LEV II Program

In 1998, the California Air Resources Board realized that the air quality goals of the Clean Air Act would not be achieved with the existing LEV program. There had been a dramatic increase in statewide vehicle miles traveled (VMT) and a rapid shift towards the use of light-duty trucks for personal transportation — these were mainly SUVs and subject to less stringent emissions standards at the time. This motivated CARB to develop a new program, named LEV II.

The LEV II program requires minivans, pick-up trucks and SUVs up to 8,500-lbs GVWR to meet the same emissions standards as passenger cars. Those standards will apply equally to diesel and gas-powered vehicles. Starting in 2004, fleet average emissions must be reduced each year through to 2010. Under LEV II, NOX levels for LEVs and ULEVs are scheduled to be reduced by 75 per centfrom the original LEV standard, to 0.05 g/mi. Average PM levels will also be dramatically reduced to 0.01 g/mi and the durability of emissions controls will be extended to 120,000 miles (or 11 years). These items are summarized in the following charts.

California LEV II Emissions Standards (g/mi) for Light-Duty Vehicles (<8,500-lbs GVWR)

5 Years / 50,000 miles 11 Years / 120,000 miles Category NMOG CO NOx PM HCHO NMOG CO NOx PM HCHO LEV 0.075 3.4 0.05 - 0.015 0.090 4.2 0.07 0.01 0.018 ULEV 0.040 1.7 0.05 - 0.008 0.055 2.1 0.07 0.01 0.011 SULEV - - - - - 0.010 1.0 0.02 0.01 0.004 ZEV 0.000 0.0 0.0 0.00 0.000 0.000 0.0 0.0 0.00 0.000

California LEV II Emissions Standards (g/mi) for Medium-Duty Vehicles

120,000 miles Category 8,500 - 10,000 lbs GVWR 10,001 - 14,000 lbs GVWR NMOG CO NOx PM HCHO NMOG CO NOx PM HCHO LEV 0.195 6.4 0.2 0.12 0.032 0.230 7.3 0.4 0.12 0.040 ULEV 0.143 6.4 0.2 0.06 0.016 0.167 7.3 0.4 0.06 0.021 SULEV 0.100 3.2 0.1 0.06 0.008 0.117 3.7 0.2 0.06 0.010

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Under LEV II, the ZEV program still exists. As with the original LEV program, auto makers can earn credits for introducing PZEVs, to make up the shortfall in pure ZEVs brought to market. Of the 10 per cent ZEV fleet requirement, 6 per cent can be met through the sale of PZEVs: vehicles that meet the SULEV standard for tailpipe emissions, that have “zero” evaporative emissions, and whose emissions control systems have a durability rating of 150,000 miles. However, five PZEVs must be produced to earn one ZEV credit to meet the credit requirements. Because pure ZEVs earn multiple credits — up to 40 per vehicle in the 2005-2008 time frame — this portion of the ZEV program has resulted in substantial PZEV production.

In addition, as of April 2003, auto makers that meet the specified threshold for pure ZEV production levels may also satisfy the remaining 4 per cent ZEV fleet requirement by marketing Advanced Technology-PZEVs. Other automakers may satisfy up to one half of the 4 per cent requirement with AT-PZEVs. AT-PZEVs are defined as follows:

Hybrid-Electric — Hybrid vehicles that do need to be plugged in. Credits are earned according to the voltage and amount of power supplied by the battery pack. Credit Eligibility: High voltage systems can earn from 0.25 to 0.5 credits for each car produced.

All-Electric Range — Vehicles that can travel at least 10 miles in electric mode (such as plug-in hybrids). Credit Eligibility: Ranging from 1 to 2.5 (in the case of a vehicle that can travel 125 miles on an electric drive alone).

Alternative Fuel — Pressurized gaseous fuels, such as natural gas. Credit Eligibility: 0.2 for natural gas powered vehicles. 0.3 for pure hydrogen.

Clean Fuels — Fuels that generate very low emissions over their entire life cycle (biofuels, for example). Credit Eligibility: Ranging up to 0.3.

Automakers may also earn credits for placing eligible vehicles in demonstration programs, supplying vehicles to ride-share programs, supporting the use of “intelligent transportation technologies” or are involved in projects related to transit use.

Under LEV II, the ZEV requirement applies to SUVs, pick-up trucks and vans, as well as passenger cars. By 2018, 5 per cent of vehicles manufactured for sale in California are required to be pure ZEVs, while 5 per cent must be AT-PZEVs and 6 per cent must be PZEVs.

Under LEV II, the ZEV percentage requirement applies to SUVs, pick-up trucks and vans, as well as passenger cars. By 2018, the overall ZEV credit requirement will be equal to 16 per cent of the vehicles offered for sale in California. Manufacturers must meet at least 5 per cent of this obligation by providing pure ZEV credits. Of the remaining obligation, 5 per cent can be fulfilled with credits from AT-PZEVs, and 6 per cent can be fulfilled with credits from PZEVs. Because PZEVs earn 0.2 credit, this means that at least 30 per cent of the vehicles offered for sale will be PZEVs.

Federal Tier 2 and California LEV II — Similarities and Differences

Similarities • Both the Federal Tier 2 and California LEV II emissions standards begin in 2004 and phase in a fleet-average standard for tailpipe emissions, increasing in stringency year-by year from 2004 until fully phased in.

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• The standards each incorporate a “bin” system, in which groupings of vehicles are defined by their emissions characteristics, providing manufacturers with some flexibility in the profile of their fleets, while holding the fleets to an average emissions limit. • Separate and less stringent emissions standards for light-duty trucks are phased out. • The “useful life” for which vehicle emissions control systems must meet the standards is extended to 120,000 miles. • Both programs place significantly tighter restrictions on evaporative emissions of VOCs, such as fuel vapours from the gas tank and the engine crankcase.

Differences

• Federal Tier 2 compliance is tied to fleet-average NOX emissions, while LEV II compliance is based on fleet-average non-methane organic gases (NMOG), which includes a variety of VOCs. This produces little practical difference, because the two measures are linked to the other emissions constituents in their respective bins or vehicle categories. • In general, the federal Tier 2 standards permit an overall higher level of emissions. There are more bins under Tier 2 than in the LEV II program, three of which Tier 2 bins allow greater emissions than any category in LEV II. Allowable PM levels are also higher in Tier 2, permitting more widespread use of diesel for light-duty vehicles. • LEV II has tighter standards for evaporative emissions. • While both systems will initially be very similar in terms of overall emissions, the LEV II program ratchets downward the emissions levels from 2004 to 2010, whereas the Tier 2 program remains the same every year. After LEV II phase-in is complete, NMOG emissions could be 39 per cent to 51 per cent lower than under Tier 2 standards, and NOX emissions could range from 11 per cent to 28 per cent lower. • Finally, LEV II provides for the ZEV program and the greenhouse gas emission control program (described next in section 6.2), while no such programs exists under Tier 2 standards.

Vehicle Emissions Standards in Canada

Currently, Canada has chosen to harmonize vehicle emissions standards with the Federal Tier 2 program in the U.S. Beginning in 2004 and reaching full phase-in by 2009, Canada’s “On-Road Vehicle and Engine Emission Regulations” will apply to all passenger cars and light-duty trucks, as prescribed under Tier 2 standards. Therefore, a fleet average NOX emissions level of 0.07 g/mi will also apply to the light-duty vehicle fleet in Canada by 2007.

Responsibility for enabling a regulated vehicle emissions standards lies with Minister of the Environment and the Ministry of Health under the Canadian Environmental Protection Act of 1999.

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6.2 California’s Global Warming Pollution Regulations

In 2002, the Governor of California signed Assembly Bill (AB) 1493 into law, which effectively adds greenhouse gases to the list of air pollutants regulated under the state’s vehicle emissions standards. In 2004, a set of standards was proposed to the California Air Resources Board (CARB) recommending a reduction in CO2e emissions of roughly 30 per cent by 2016.

Background

The California legislature and its Governor, in supporting AB 1493, have stated that climate change represents a special threat to the welfare of the people of California and is contributing to more severe smog episodes that will become worse as global warming continues. The Bill directs CARB to adopt regulations that achieve the “maximum feasible and cost-effective” reduction of greenhouse gas emissions from motor vehicles. The text of AB 1493223 permits CARB to explore a broad range of options in choosing an effective set of regulations, so long as it meets the specific aims of the Bill; namely, that the regulations:

• are economical to the consumer over the life-cycle of the vehicle; • provide sufficient flexibility for manufacturer compliance; and • apply the principles of the state’s Environmental Justice Policy; in particular, the principal that the regulations do not disproportionately impact low income and minority communities. Within the above constraints, the regulations must achieve the maximum feasible reduction in life- cycle GHG emissions (upstream emissions included) from motor vehicles.

The regulations proposed by CARB are to be adopted by January 1, 2005, but will not go into effect for at least one year. The original text of the regulations, along with recent amendments and fact-sheets, can be found at the CARB climate change website: http://www.arb.ca.gov/cc/cc.htm.

The wording of the Bill permitted the CARB staff to consider reductions from all sources of vehicle GHG emissions. Instead of limiting their study to just the direct GHG emissions from vehicles, the staff looked at the emissions generated over a vehicle’s entire life-cycle. Vehicle GHG emissions were grouped into four categories:

1. CO2, CH4 and N2O emissions resulting directly from the operation of the vehicle,

2. CO2e emissions resulting from the operation of air conditioning systems (indirect A/C emissions224), 3. refrigerant emissions coming directly from air conditioning systems (leakage and discharge at the end of vehicle life), and 4. upstream emissions associated with fuel production.

With these definitions in place, the CARB staff modeled technical options for reducing emissions from each category, including improvements to engine design, air conditioning operation and the use of alternative refrigerants. Packages of cost-effective technologies were grouped according to their market readiness as near-, mid- and long-term options. From this, the proposed implementation schedule for cost-effective vehicle GHG reductions was developed with phase-in periods for the near- and mid-term technologies, as summarized below:

223 The text of AB 1493 can be read at http://www.arb.ca.gov/cc/ab1493.pdf. 224 Isolating A/C operation and related emissions from the rest of the automobile system simplifies the analysis.

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Original Implementation Schedule Proposed by CARB Staff (presented as draft regulation on June 14th, 2004)

CO2 e emission standard by vehicle category Tier Phase-in Model Year (g/mi) PC / LDT1 LDT2 30% 2009 315 422 Near-term 60% 2010 284 385 100% 2011 242 335 30% 2012 233 328 Mid-term 60% 2013 223 321 100% 2014 211 311 Abbreviations: PC – passenger car LDT1 – light-duty truck up to 3,750-lbs loaded vehicle weight LDT2 – light-duty trucks from 3,751-lbs loaded vehicle weight up to 8,500-lbs gross vehicle weight rating and also including medium-duty passenger vehicles or MDPVs (personal use vehicles between 8,500-10,000-lbs gross vehicle weight rating – usually larger SUVs and passenger vans).

The CARB staff elected to align the proposed GHG emissions standard with the existing structure of the California LEV program. That is, both the LEV and GHG emissions targets are measured in fleet-averaged “grams per mile” and the vehicle categories PC/LDT1 and LDT2 are also equivalent. In this way, no specific vehicle models are banned under the regulations and the manufacturers may choose their own compliance strategies.

In consideration of feedback received from automotive consultants, the regulations were modified for the final proposal, which was later accepted by the California Air Resource Board, as shown below:

Final Implementation Schedule for CARB Greenhouse Gas Emissions Regulations (adopted by CARB on September 23rd, 2004)

CO e emission standard by vehicle category Model 2 Tier (g/mi) Year PC / LDT1 LDT2 2009 323 439 2010 301 420 Near-term 2011 267 390 2012 233 361 2013 227 355 2014 222 350 Mid-term 2015 213 341 2016 205 332

While the greenhouse gas emissions reduction technologies will increase the cost of a new vehicle, the associated reduction in fuel consumption makes it more economical to drive. The cost-benefit to the operator of the consumer is determined by subtracting the incremental cost of the GHG-reducing technology package from the total reductions in vehicle operational expenses (primarily fuel savings). From the baseline starting point of each of the six major automobile companies doing business in California (i.e., GM, Ford, DCX, Toyota, Honda, Nissan), CARB staff calculated the average CO2e emissions reductions and cost-benefits for each stage of the implementation schedule, to ensure that all manufacturers could comply.

In terms of cost-effectiveness of the targets, increases in vehicle costs will be fully offset by savings in fuel costs225 for the owner. For example, in the original implementation schedule, the

225 Fuel costs were conservatively estimated at $1.74 per gallon for gasoline and $1.73 per gallon for diesel, in 2004 dollars.

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anticipated technology packages required for compliance with the 2014 targets were expected to save the owner $539 over the life of the average PC/LDT1 vehicle, and $851 for LDT2 vehicles.

In addressing upstream emissions reductions, the GHG standard applies a CO2e emissions reduction factor to vehicles that use alternative fuels, with conventional gasoline as the baseline fuel.

As required by the Bill, CARB staff have also studied the environmental and economic impacts of the standard and determined that low-income communities and families would also benefit from the proposed schedule. Moreover, savings due to cost-effective vehicle emissions reductions are expected to be extended into other markets, thereby sustaining California’s economy. The increase in vehicle use due to lower operating costs (rebound effect) was also analyzed and found not to have a significant impact on long-term GHG emissions reductions.

In order to meet the compliance flexibility clause in the AB 1493, CARB also proposed a credit system for early compliance and alternative compliance. Under early compliance, manufacturers gain credits for meeting the standards ahead of schedule. Under alternative compliance options, a manufacturer may request credit for work on special projects that reduce California’s total GHG emissions. The value of alternative compliance credits will be considered by CARB on a case-by- case basis (similar to the LEV II compliance options for ZEVs).

Targets and Timelines

The final implementation schedule discussed above can be summarized as follows:

Baseline: MY 2002 – PC / LDT1 fleet-average emissions: 312g CO2e/mile. LDT2 fleet-average emissions: 443g CO2e/mile.

Targets: MY 2012 – PC / LDT1 fleet-average emissions: 233g CO2e/mile (near-term). LDT2 fleet-average emissions: 361g CO2e/mile (near-term).

MY 2016 – PC / LDT1 fleet-average emissions: 205g CO2e/mile (mid-term). LDT2 fleet-average emissions: 332g CO2e/mile (mid-term).

Percentage Improvement: MY 2012 – 25 per cent (PC/LDT1) & 19 per cent (LDT2) – near- term target MY 2016 – 34 per cent (PC/LDT1) & 25 per cent (LDT2) – mid- term target

Analysis of the Standard

As directed by the text of AB 1493, CARB has focused on the selection of targets that are achievable solely through the application of technology, with no alterations to vehicle characteristics, such as size, weight, power, performance or fleet mix, from the baseline model year (although manufacturers are free to pursue these options, as well). In addition, the regulations provide a range of flexible compliance mechanisms, ensuring that all manufacturers can achieve the goals set by the state. The targets have also been set such that they are “cost- effective” to the consumer and generate no adverse effects on the California economy, or on low- income communities.

This approach is probably the most comprehensive undertaken by any jurisdiction thus far. Even though the methodology itself does not appear outwardly aggressive in requiring no alterations to the fleet mix or vehicle performance characteristics, nor added cost to the consumer, it nevertheless achieves approximately a 30 per cent reduction in GHG emissions in the 2016 model year fleet. More importantly, the regulations are structural in nature, continuing to drive emissions levels downward past the mid-term timeframe. As new technologies come to market that reduce vehicle GHG emissions or take advantage of low-GHG-intensive fuels, the

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regulations will ensure that their application serves to continually reduce fleetwide GHG emissions into the future.

The uniqueness of California’s approach is that it targets GHG emissions due to vehicle use directly, rather than relying on the indirect route of fuel efficiency standards. This leaves no ambiguity regarding the goal of the legislation, providing regulators with the ability to incorporate new methods to reduce emissions as they develop. As a contrary example, the goal of CAFE was to reduce national dependence on foreign oil and fuel efficiency standards were set as the policy tool to achieve that goal. As previously discussed in Chapter 2, average fuel economy levels have continually dropped over the last decade in the U.S., deepening the nation’s dependence on foreign oil imports to fuel the domestic vehicle fleet. This illustrates the potential pitfalls of legislating the means to a goal rather than the goal itself. It should be noted, however, that it is often impractical to bind legislators to the achievement of certain goals, such as oil independence, which are influenced by many widespread, complex and uncontrollable factors.

California’s scheduled phase-in of regulated emissions reductions begins quite modestly in 2009, but quickly ramps up to the 25 per cent range in the 2011–2012 period, hitting the 30 per cent mark by 2016. Compared to most other jurisdictions that have adopted fuel efficiency standards to reduce GHG emissions, the Californian fleet is starting from a much higher GHG emissions baseline. Its vehicles are, on average, larger and heavier than those in Europe, Japan, Australia, China, or even Canada. As such, its mid-term schedule of a 30 per cent reduction will not likely produce a fleet as high in fuel efficiency, or as low in GHG emissions, as those in Europe or Japan. The degree of the improvement, however, is comparable to those jurisdictions.

Technically speaking, a persisting disadvantage of the California standards is that they are still based on a two-tier system, such as that in the current CAFE and CAFC programs. Fleet-average emissions standards are set for the passenger car/lighter light-duty truck fleet (PC/LDT1), separate from the heavier light-duty truck fleet (LDT2). While this tightens the “light-truck loophole” significantly (compared to CAFE, which effectively defines trucks by geometric features, instead of weight), it still permits the possibility that the emissions reductions scheduled for the PC/LDT1 fleet could be cancelled out if consumers were to buy only vehicles from the LDT2 fleet. However, since light trucks are broken into two weight classes under California’s emissions regulations — the lighter class is grouped with passenger cars with which they share many engine and drivetrain characteristics — the likelihood of overall emissions reductions is still very high.

As explained earlier, the European CO2 emissions standard has been met, in part, with improved technology, but also by increased sales of diesel-powered vehicles, which operate more efficiently. Switching from gasoline to diesel power is an unlikely compliance strategy under the CARB regulations. The LEV II program sets emissions standards for NOX and PM higher than most conventional diesel engines can achieve. Under the fleet-average system, some diesel- powered vehicles can be sold in California, but the LEV II program currently restricts widespread use of such vehicles. Thus, technology improvements (and not fuel switching) remain the optimal compliance strategy for manufacturers under CARB regulations. However, should diesel exhaust aftertreatment systems improve substantially — a distinct possibility given the new low-sulfur fuel regulations — diesel engine technology could become part of the solution in the future (particularly if delivered in hybrid-electric format226).

Progress Check

The regulations proposed by the CARB staff were accepted by the Board of Directors on September 23rd, 2004. The legislature has one year from January 1st, 2005 to consider the regulations, after which they enter into force. The Federal Government, through the EPA, must also issue a waiver to California permitting the State to set greenhouse gas emissions standards.

226 Discussed in Chapter 6 under Hybrid-Electric Drive Systems.

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In addition, on December 7, 2004, the Air Resources Board was sued by auto manufacturers seeking to overturn the regulation. Specifically, the Alliance of Automobile Manufacturers and several local dealerships filed suit in federal court (the United States District Court in Fresno), and General Motors, DaimlerChrysler and several local dealerships filed suit in state court (Superior Court of California, Fresno County). Given this state of affairs, it could be as early as 2006, or as late as 2007, before California’s greenhouse gas emissions standards are officially in force, or they might not be enforceable at all.

How California’s GHG Emissions Standard Could Impact the Northeast States and Canada

As explained earlier in this section, most of the Northeastern states adopt the more stringent California vehicle emission standards to address public health and air quality problems arising from intense vehicle use in their own regions. At the time this document was prepared, California’s LEV II emissions program has been adopted by New York, Massachusetts, Vermont, Maine, New Jersey and Connecticut. The governments of these states, plus Rhode Island and Washington, have all indicated their intention to adopt California’s greenhouse gas emissions regulations. Combined, these states represent about 30 per centof the U.S. market.

Were Canada to adopt fuel efficiency or GHG emissions reduction standards, such that the same vehicles would serve to meet Canada’s standards and the California standards, then this would contribute to the creation of one of the largest markets for low-GHG emitting vehicles in the world (with about 5 million units sold annually), rivaling the European Union in size.

In their 2001 Climate Change Action Plan, The New England Governors & The Eastern Canadian Premiers (NEG/ECP) committed to reducing GHG emissions from the transportation sector227. Adopting the California Standard (or an equivalent standard in Canada) is an available policy option that could help in this regard.

NEG/ECP Members. source: http://www.negc.org/premiers.html

227 http://www.negc.org/documents/NEG-ECP%20CCAP.PDF

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Chapter 7: Technologies to Reduce Greenhouse Gas Emissions

This chapter provides the reader with an understanding of how modifications to conventional automobile technology can dramatically increase fuel efficiency and reduce greenhouse gas emissions. Also included is a review of how alternative fuels and alternative drivetrain technologies may figure in the context of improving motor vehicle fuel efficiency.

The subject matter is grouped under three section headings:

• Section 7.1 describes market ready and near-market ready technology enhancements to conventional automobiles that can dramatically increase vehicle fuel efficiency.

• Section 7.2 offers an overview of alternative vehicle fuels.

• Section 7.3 summarizes the main alternative vehicle drive technologies.

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7.1 Today’s Automotive Technology — How Far Can It Take Us?

After a hundred years of technology development, one might think that the automobile has already reached a peak in terms of fuel efficiency and performance. If this were true, then the only way to reduce fuel consumption in a given automobile would be to reduce its weight. The lower the weight, the less energy required to move the automobile, all things being equal. In fact, shifting production to smaller, lighter cars was a strategy employed by North American auto makers to boost vehicle fuel efficiency in the early 1970s.

Fortunately, the era of truly fuel-efficient vehicles may be just beginning. Traditionally, automotive designers have focused on maximizing the thermal efficiency of internal combustion engines (ICEs). Great strides have been made in increasing specific fuel efficiency (energy consumed per unit of engine power produced) of ICEs, but overall vehicle fuel efficiency (energy consumed per distance traveled) has changed little over the last 15 years. Now, new and innovative strategies to reduce fuel consumption are being applied to automobiles as a whole system. This “holistic” approach to automobile fuel efficiency promises even greater gains.

Consider, for example, the strategic application of electric-hybrid technology. An ICE only generates power efficiently within a narrow range of operation, usually at cruising speeds. By off- loading some of the power demanded of the ICE during relatively inefficient low-speed operation, and onto an electric motor, which operates much more efficiently at lower speeds, overall fuel efficiency is increased without specific technology improvements to either the engine or the electric motor.

There exist many other such options to boost vehicle fuel efficiency and reduce GHG emissions, many of which are summarized in this section. The magnitude of improvement attainable with these technologies has been assessed in several major studies. The five most recent and substantial of these studies are considered here, complete with their estimates for the level of cost-effective reductions in average vehicle fuel consumption and GHG emissions through the applicable of specific combinations of technologies, referred to as “technology bundles”.

Conventional Automotive Technology Can Boost Fuel Efficiency — And Here’s How

Design improvements have been continually applied to the automobile since its inception. Competition has forced automotive designers to find new ways to increase vehicle performance to meet the demands of the market and of society. Those demands often take the form of a broad range of product preferences among individual consumers, such as power or comfort. Elsewhere, the demands can be specific government performance regulations, such as fuel consumption restrictions or pollution controls.

In many cases, a specific technology improvement can raise choices for auto designers. For example, variable valve lift technology allows the engine to operate more efficiently, converting more of the fuel’s energy into mechanical power. The designer then faces a choice: decrease fuel consumption and keep power output constant, or increase power and keep fuel consumption constant. The answer will be dictated by the market demand for either more power or less fuel consumption, or by government regulations, or by a combination of the two.

Generally speaking, CAFE regulations in the U.S. have driven most manufacturers to use their automotive technology advances to raise the bar in terms of power and weight, while holding the line on vehicle fuel efficiency. Given the relatively cheap price of fuel, it is likely that automakers would have increased engine power and vehicle size at a much greater rate since the late 1980s, had CAFE standards not forced them to develop ways to increase engine efficiency. Even today, every ounce of fleet-averaged increase in power and weight must be achieved with a

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corresponding increase in fuel efficiency. From this perspective, CAFE regulations are still binding on the North American auto industry today (in terms of vehicle design and fleet sales) and likely to a much greater degree than most consumers realize.

The following list of automotive technology developments represent options to improve overall vehicle fuel efficiency and reduce GHG emissions. Section 3.1 reviewed the basic elements of vehicle technology and section 3.2 described the trends in vehicle design that led to changes in overall fleet fuel efficiency from the mid-1970s onward. This list shows the direction that automotive technology could take should the industry receive the required signals from the market and/or government. Indeed, some of these technologies are already in use in vehicles today, but so far occupy a relatively small portion of the fleet.

As explained above, just about any of these advancements could be used to boost power or vehicle weight, offsetting any potential decrease in fuel consumption or GHG emissions. Where possible, an estimation of the potential reduction in fuel consumption (which is directly related to GHG emissions) is included, based on various sources of information228. These are not absolute values and are subject to significant variation depending on how they are implemented. Moreover, the potential reductions as listed are not necessarily additive, and some technologies work synergistically with each other, while some do not. Therefore, the reader should view these numbers as a comparative guide, illustrating the differences in magnitude of efficiency impacts among different technologies on an individual basis. The following section reviews the overall fuel efficiency impact of these technologies when broadly applied to the light-duty vehicle fleet, as simulated in various technical studies.

Variable Valve Timing (VVT, also known as Cam Phasing) — In conventional engines, the crankshaft and camshaft are connected by a timing chain, such that the camshaft rotates once for every two rotations of the crankshaft. No matter the speed at which the engine operates, the valves must open and close at the exact same point during the 4-stroke engine cycle. However, as engine speeds vary, so do the properties with which air, fuel and combustion gases flow past the valves and through the combustion chamber. The camshaft can be designed so that the opening and closing of valves maximizes efficiency, but only at a given engine speed. Pumping losses increase the further engine speed varies from that optimal point, decreasing power output and efficiency.

VVT allows the opening and closing of valves to be varied with engine speed, such that pumping losses are minimized and peak engine power is maintained over a wider range of vehicle operation. This can be achieved in a number of ways. For example, two sets of cams with different valve actuation profiles can be separately engaged — one for low speed and one for high speed operation. Technically speaking, three or more camshaft profiles are possible for even better efficiency. Cams can also be designed with a three-dimensional profile; that is, a shape that varies along its length with lower speed valve actuation on one end and higher speed actuation at the other. By hydraulically sliding the camshaft back and forth along its length, valve timing can be continuously varied to provide peak power across a range of engine speeds. BMW employs a gearing system that can either delay or advance the rotation of the camshaft relative to the engine rotation cycle, optimizing valve timing accordingly. A multitude of additional, ingenious methods exist to mechanically control valve timing to operate engines at peak efficiency over a range of driving conditions.

Potential Fuel Consumption Reductions from VVT: 3 per cent

228 Advanced Technology Vehicle Program, Transport Canada; Reducing Greenhouse Gas Emissions from Light-Duty Motor Vehicles – Interim Report, NESCCAF, 2004; Effectiveness & Impact of Corporate Average Fuel Economy (CAFE) Standards, NAS, 2002.

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Variable Valve Lift (VVL) — Typically, valves open to a set degree and for a specific duration, called valve lift, as determined by the cam profile in a conventional engine. For a specific engine speed, the valve lift can be chosen to minimize pumping losses by allowing the optimal flow of air though the combustion chamber. Pumping losses increase as the engine speed varies from this optimal point, reducing power output and lowering engine efficiency. As with variable valve timing, several options exist to vary valve lift and maintain peak efficiency over a wider range of engine speeds.

Potential Fuel Consumption Reductions from VVL: 2 per cent

Camless Valve Actuation — Building upon the efficiency gains with variable valve timing and lift, precision control of valve operation can be achieved with electric or hydraulic actuation technologies, replacing entirely the camshaft and valve train. Electronic control makes possible the continuous varying of valve operation over the entire range of engine operating speeds and conditions, ensuring pumping losses are always minimized and power and efficiency are always at peak levels.

Potential Fuel Consumption Reductions from Variable Valve Train Technology: 12 per cent

Turbocharging — The more pressurized the air in the combustion chamber, the more power it can generate. Acting as linear pumps, pistons generate most of the pressure in the combustion chamber of an engine. As described in sections 3.1, diesel engines generate power more efficiently than gasoline engines due to their greater compression ratios. However, a larger, heavier engine is required to accommodate the longer piston stroke that generates the additional compression. A turbocharger can be added to provide added compression without significantly increasing engine size or weight.

The turbocharger is made up of a small, rotary compressor located in the air-intake, which pre- pressurizes, or “charges”, the air before it enters the combustion chamber, adding about 50 per cent more air. The compressor is powered by a shaft connected to a turbine in the exhaust stream. As hot combustion gases are Schematic representation of a Turbocharged system. expelled from the engine, source: http://auto.howstuffworks.com/turbo.htm/printable they pass through the turbine, which drives the compressor. In this way, some of the waste heat energy is reclaimed from the exhaust and used to augment the compression capacity of the engine. From a performance standpoint, turbocharging can be used to either increase engine power or maintain that level of power while decreasing engine size and fuel consumption.

Recall that increasing compression beyond a certain point can cause spontaneous combustion of the air-fuel mixture, causing the engine to malfunction (knocking). For this reason, high octane fuels are often recommended for engines with turbochargers. Intercoolers can also be used to cool the air before entering the combustion chamber to reduce the risk of knocking. Due to its propensity to induce knocking, turbocharging generally functions best when the engine is operating under light-loads (normal operation).

Potential Fuel Consumption Reduction from Turbocharging: 7 per cent

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Cylinder Deactivation — Engines today are often designed to produce a high level of power, which can provide a vehicle with impressive acceleration and speed characteristics. However, this high output capacity usually goes to waste under most safe and responsible driving conditions, resulting in an engine that is oversized and consumes more fuel than necessary. Cylinder deactivation effectively reduces engine size by temporarily overriding camshaft control and holding the valves shut over a given cylinder(s). In this way, a V-8 engine can be run as a 6 or 4-cylinder engine, with a corresponding reduction in pumping losses and fuel consumption. Computer control is required to automatically engage or deactivate cylinders to match operating conditions.

Potential Fuel Consumption Reduction from Cylinder Deactivation: 6 per cent

Variable Compression Ratio (VCR) — Compression ratio is a fixed value in conventional engines and is determined by the geometry of the cylinder and combustion chamber, and the length of the piston stroke. Increasing the compression ratio produces more power and increases efficiency, but too high a compression ratio can cause the air-fuel mixture to spontaneously combust and the engine to malfunction (knocking). Furthermore, the tendency of an engine to experience knock varies with operating conditions, such that under light loads, the air-fuel mixture can endure higher compression ratios than under heavy loading. Since a conventional engine’s compression ratio must be chosen conservatively, to avoid knock under all conditions, the potential for added compression under light loads (idling, highway cruising) is lost.

VCR technology allows the combustion chamber’s geometry to be continuously modified to optimize compression ratio — that is, maximize compression without producing engine knock under any loading condition. Saab’s method of achieving variable compression involves physically raising the top half of the engine, including the valve train and cylinders, away from the pistons and crankshaft to decrease compression ratio under heavy loads. A prototype model can vary compression ratio from 8:1 to 14:1. It should be noted, however, that VCR is considered by many auto analysts to be a long-term technology.

Saab’s Variable Compression Ratio Technology. When the engine assembly is rotated 4 degrees toward crankshaft rotation (left) the engine has an effective compression ratio of 14:1. When rotated away from the crankshaft rotation by 4 degrees (right) compression ratio is only 8:1. The electrically operated supercharger helps boost power. source: http://popularmechanics.com/ automotive/auto_technology/2 000/5/saab_compression_en gine/

Potential Fuel Consumption Reduction from VCR: 10 per cent

Gasoline Direct Injection (GDI) — In conventional engines, the air and fuel is mixed prior to entering the combustion chamber. Using Gasoline Direct Injection (GDI) technology, the air is drawn into the chamber first and then the fuel is added with an injector. This allows more precise control over the air-fuel mix ratio and improves the consistency of the mix for optimal combustion. While this alone leads to improved efficiency, GDI technology also permits the engine to run in “lean-burn” mode, defined as when the air-fuel mix is greater than the ideal stoichiometic ratio of 14.7:1. Under light load operating conditions, an engine may run on a lean fuel mix, generating significant fuel savings. The downside is that lean-burn operation generally leads to significantly

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increased levels of NOX emissions, requiring some form of additional exhaust aftertreatment to comply with federal emissions standards.

Potential Fuel Consumption Reduction from GDI: 6 per cent

Reviewers’ Commentary

When operating in “lean-burn” mode, GDI would be expected to generate greater fuel savings than represented here. The 6 per cent reduction may be more representative of GDI functioning in stoichiometric mode.

Homogeneous Charge Compression Ignition (HCCI) — In a conventional gasoline engine, the air and fuel are ideally well-mixed prior to entering the combustion chamber, where the mix is subsequently compressed and spark-ignited (SI). In a conventional diesel engine, the air is first compressed in the combustion chamber and then the fuel is injected, which immediately combusts under the high heat and pressurized conditions. This is known as compression ignition (CI), and while the higher compression ratio in the diesel engine produces greater efficiency, combustion initiates before the air and fuel become fully mixed, which contributes to higher NOX and PM emissions. Homogeneous Charge Compression Ignition (HCCI) technology uses the best features of both SI and CI to achieve high efficiency while keeping emissions low. The key is in developing a completely homogeneous air-fuel mix (charge) throughout the combustion chamber. Unlike the more stratified charge typical in a diesel engine, the homogeneous charge ignites at multiple sites simultaneously, leading to lower localized flame temperatures and shorter combustion duration. This minimizes the conditions in which PM and NOX form in diesel engines, and allows CI to be used in gasoline engines as the potential for knocking is minimized.

Potential Fuel Consumption Reduction from HCCI: varies with fuel, ~20 per cent

Reviewers’ Commentary

Controlled Auto Ignition (CAI) is often confused with HCCI. CAI may be more applicable to gasoline engines than HCCI, and may be closer to commercialization. As with HCCI, CAI relies on compression to raise the temperature and ignite the air-fuel mix, but heat is also supplied by exhaust gas. This makes the combustion process easier to control, but the estimated fuel consumption reduction only ranges from three to six per cent.

High-Speed Direct Injection Diesel (HSDI) — In heavy-duty diesel powered vehicles, the fuel is injected directly into the combustion chamber (called direct-injection, DI). While this generates pronounced vibration in the engine, it also produces excellent fuel efficiency. In light-duty diesel powered vehicles, the fuel is usually first injected into a pre-mix chamber, from where it can feed the combustion process in the main chamber (called indirect-injection, IDI). This smoothes out the combustion impulse and reduces vibration, making the vehicle more comfortable to drive, but reducing efficiency in the process. With the emergence of electronically-controlled high-speed injectors, this lost efficiency can be regained as DI can occur in a manner that better controls combustion and reduces vibration. However, high NOX and PM remain as barriers which could be addressed with adequate aftertreatment systems.

Potential Fuel Consumption Reduction from HSDI: up to 30 per cent (diesel only)

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5 and 6-Speed Automatic Transmissions (Increased Step Gear Ratio Transmissions) — This technology is simply the continuation of a trend that began in the late-1970s, in which more vehicles with automatic transmissions came with a 4th, or “overdrive” gear”, in addition to the classic 3-speed transmission (as discussed in section 3.2). Increasing the number of gears allows the engine to operate closer to its optimal efficiency over a greater range of vehicle speeds. Today, about 20 per cent of new passenger cars are equipped with 5-speed automatic transmission.

Potential Fuel Consumption Reduction from Increased Gear Ratio: 3 per cent

Electronically Shifted Manual Transmissions (ESMAT) — ESMATs are identical in operation to manual transmissions, but the clutch and shift operations are automated via hydraulic or electronic actuators controlled by the onboard electronics. Manual transmissions generally operate more efficiently than automatic transmissions, which lose significant amounts of energy in the torque converter. By automating manual shift control, the driver enjoys the convenience of an automatic transmission with the added efficiency of a solid clutch system. In fact, shift points can be electronically programmed for optimal efficiency.

Potential Fuel Consumption Reduction from ESMAT: 7 per cent

Continuously Variable Transmissions (CVT) — CVT technology was described in section 3.2, as it already exists as a relatively inexpensive option on vehicles, such as the Nissan Murano, the Ford Freestyle and the Ford 500, and is approaching 10 per cent market share in new passenger cars. Essentially, it builds on the principle of adding gears to improve efficiency by allowing the gear ratio to be infinitely varied between the lower and upper limit. In this way, the engine can operate at optimal efficiency across a wide range of vehicle speeds, with the greatest reductions realized in urban, stop-and-go driving conditions.

Potential Fuel Consumption Reduction from CVT: 7 per cent

42-Volt Electrical Architecture — The conventional 12-volt, 3 kW battery included in most of today’s automobiles provides sufficient power to operate the starter motor and operate some accessories, but opportunities exist to reduce fuel consumption that require more available power. Such improvements include: • Idle-Off and Launch Assist – This technology allows the engine to shut down when the brake is applied at stops (idle-off), and restarts with the assistance of an electric motor (launch assist) as soon as the brake is released. In this way, fuel wasted during idling is eliminated. Ideally, idle-off/launch assist is implemented with an integrated starter/alternator motor placed in-line with the engine and transmission, so that maximum efficiency benefits can be realized. • Regenerative Braking – This technology recaptures some of the energy lost while braking by engaging the integrated starter/alternator motor to run as a generator, slowing down the vehicle by transferring its kinetic energy into electrical energy stored in the battery pack. • Electric Accessory Drives – Many accessories in today’s automobiles are hydraulically powered by fluid pumps driven by the mechanical rotation of the engine crankshaft. Water pumps, oil pumps, power steering and air conditioner compressors are all powered by the engine, which itself is running less efficiently than would an electric motor. Powering these mechanical accessories with electric motors makes much more efficient use of the available energy in the system.

These systems can be fully-powered by a 42-volt, 12 kW electric system and an appropriate battery. 42-Volt electrical architecture can be broadly applied across the light-duty vehicle fleet for substantial efficiency gains.

Potential Fuel Consumption Reduction from 42-Volt System (fully implemented): 20 per cent

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Reviewers’ Commentary

The reviewer predicts that a general fleet switch-over to 42-volt electrical architecture is unlikely due to cost barriers.

Hybrid-Electric Drive229 — A 42-volt electrical system as described above with full implementation of idle-off/launch assist, regenerative braking and electric accessory drives actually represents what is called a “mild hybrid” system in automotive marketing parlance. In a “full hybrid” system, the electrical storage capacity of the system is increased with a larger battery pack*. This added electrical energy permits the vehicle to operate solely on the electric motor for relatively brief periods. Since electric motors are more efficient at converting energy, they are best used to displace the engine when it operates least efficiently, such as accelerating from a stop. In addition, the electric motor can function simultaneously with the engine when an added power boost is required at higher speeds (a sudden increase in torque, for example). Since the electric motor can assist the engine during periods of acceleration, a smaller engine is sufficient. Together, these qualities can generate very large reductions in fuel consumption and emissions.

Potential Fuel Consumption Reduction from Full Hybrid-Electric Drive: 30 per cent

* Debate exists about what qualifies as a “mild-” or “full-hybrid”, as both provide excellent fuel efficiency. This is discussed further in section 7.3.

12-Volt Accessory Improvements — As described under the 42-volt electrical architecture description, most accessories are driven by the engine through fluid pumps. In particular, the oil pump, water pump and power steering pump (which operates continuously, but is only required intermittently) could be powered by the standard 12-volt system currently found in almost all cars. Converting to electric powered pumps would reduce losses in the engine and conserve fuel. Also, today’s standard alternators operate at about 60 per cent efficiency, but advanced alternators are available that are up to 80 per cent efficient. These represent simple efficiency gains that don’t require elaborate vehicle redesign.

Potential Fuel Consumption Reduction from 12-Volt Accessory Improvements: 4 per cent

Lubricating Oil — Improved lubricants are available that further reduce frictional losses within the engine and thereby conserve fuel and reduce emissions.

Potential Fuel Consumption Reduction from Lubricating Oil: 1 per cent

Aerodynamic Drag Reduction — Minimizing the aerodynamic drag force developed due to friction between the air and the vehicle’s surface can reduce engine load and fuel consumption. While today’s vehicles are much more aerodynamic than those of 20 years ago, further reductions in the drag coefficient are achievable through the application of various air flow management components. While these components can add weight to a vehicle, the extra load is offset by the reduction in drag.

Potential Fuel Consumption Reduction from Aerodynamic Drag Reduction: 2 per cent

Vehicle Weight (Mass) Reduction — As discussed in section 3.1, the power and torque required to accelerate an automobile is primarily dependent on its mass. Lowering a vehicle’s curb weight reduces the load on the engine, which results in reduced fuel consumption and GHG emissions. Short of reducing vehicle size, several options exist to lower vehicle weight. High-strength, low- alloy steels, aluminum, magnesium titanium, carbon-fibre and plastics can meet the performance

229 Hybrid-electric drive systems are discussed more thoroughly in section 7.3.

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requirements of conventional steel in certain automotive applications and yet weigh significantly less.

Light-Weight Material Use: For every 10 per cent reduction in vehicle mass, fuel consumption can be reduced by 5 to 7 per cent

Rolling Resistance Reductio0n — The force required to sustain forward motion of the tires is a measure of their rolling resistance. Rolling resistance can be reduced through specialized tread and tire geometry, as well as improved materials in the belt and traction surfaces. Some tire manufacturers offer high-efficiency tires that perform equally well as high performance tires, but that lower rolling resistance by 20 per cent.

Potential Fuel Consumption Reduction from High Efficiency Tires: 3 per cent

Aggressive Shift Logic — This technology permits shift points in an automatic transmission to switch between “sport” and “economy” modes. In sport mode, the upshift and downshift points are set to maximize acceleration performance, while in economy mode the transmission eases the pressure on the engine by shifting at lower speeds to maintain a smooth ride and optimal fuel economy.

Potential Fuel Consumption Reduction from Aggressive Shift Logic: 2 per cent

Early Torque Converter Lockup — As described in section 3.2, the torque converter lockup feature mechanically locks the engine crankshaft to the transmission, eliminating energy lost in the torque converter. While torque converter lockup technology has been standard on most new vehicles with automatic transmission since the mid-1980s, the lockup does not engage until relatively high speeds. This is meant to minimize low-speed engine vibrations transmitted through the solid lockup connection and into the vehicle interior. However, this also represents a lost opportunity to save fuel. With early torque converter lockup, transmission efficiency can be increased and GHG emissions reduced. Today’s engines don’t vibrate a badly as in earlier years and idle-off and launch-assist hybrid technologies can significantly reduce low-speed engine operation, eliminating much of the vibration in question.

Potential Fuel Consumption Reduction from Early Torque Converter Lockup: 1 per cent

Further technologies that could provide even greater reductions in fuel consumption and GHG emissions are currently under development, but are not considered here because their future applications are uncertain and are still years away from commercialization. The purpose of this section was to illustrate the technologies that are commercially available today, or are near market-readiness. As with any technology, these improvements will continue to be refined and perfected as they penetrate the market and become standard automotive components.

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Landmark Studies in Fuel Efficiency and Global Warming Emissions

The following sub-sections summarize and highlight five technical reports that consider many of the above-listed technology improvements and the magnitude of fuel efficiency improvements and GHG emission reductions that may be achieved through their implementation. Although many such studies have been performed by numerous groups in varying levels of detail, these five have been selected due to their technical depth, recognized expertise of the contributors and authors and the currency of the content (all published within the past five years).

The Transportation Climate Change Issue Table — Options for Action, 1999

Following the signing of the Kyoto Protocol in 1997, Canada’s First Ministers established fourteen Issue Tables, each assigned the task of studying the potential for GHG mitigation for a specific sector of society. The Issue Tables ranged from Agriculture to Industry, including a Transportation Table. The Transportation Table was established in early May of 1998 and consisted of twenty- six representatives drawn from government, transport sector private organizations, environmental groups and other stakeholders, reflecting a broad range of interests. The Table was required to submit to the Ministers of Transport a “Foundation Paper” later that year, which was to summarize the current state of knowledge and activity on GHG mitigation in the sector. Using the Foundation Paper as a starting point to conduct further research, the Table was then required to submit an “Options Paper” in May of 1999, which identified specific measures to reduce GHG emissions from the transport sector, including their respective levels of cost, risk and impact.

The Table organized the measures identified through a variety of commissioned studies into categories of ascending likelihood:

Most Promising Measures — Cost-effective measures (ranging from no more than $10/tonne of GHG reduction to net positive payback). These are the lowest-hanging fruit options that can be readily implemented. Promising Measures — Low to modest cost are associated with measures in this category, possibly requiring further analysis and development to produce effective GHG reductions. Less Promising Measures — Higher cost measures that may have GHG reduction potential in the medium to long-term and/or require considerable technological development. Unlikely Measures — Measures the table felt were too expensive or difficult to implement or otherwise had limited potential to reduce GHG emissions.

The Table considered more than 100 incremental and quantum improvements to vehicle technology that could result in reduced fuel consumption and GHG emissions. Low-cost improvements included reductions in vehicle weight, engine friction, aerodynamic drag, improved tires and cylinder deactivation. The costly technologies included hybrid-electric drive systems and fuel cells.

In the end, the Table identified GHG reduction measures through technical efficiency improvements in the Canadian light-duty vehicle fleet under the “Promising” and “Unlikely” categories, as summarized in the following chart.

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Transportation Issue Table, Options for Action (Road & Vehicles Fuels Package) Summary Results

GHG Reduction Financial Total Direct Measure (megatonnes) Cost1 Cost2 Government 2010 2020 ($/tonne) ($/tonne) Cost3 25 per cent reduction of current CAFC Promising standard by 2010, contingent on 5.2 14.1 $56 $74 $3 Measure harmonized target with U.S. 25 per cent reduction over actual Unlikely CAFC level by 2010, contingent on 6.5 16.5 $92 $105 $3 Measure harmonized target with U.S. 1 Financial Cost refers to only the monetary cost of the measure, separate from the Total Cost. 2 Total Cost refers to the Monetary Cost plus the valuation (as per Transport Canada’s guidelines) of non-monetary costs and benefits, such as reductions in travel activity and changes in consumer surplus or choice. 3 Direct Government Cost refers to cost of government activity required by the measure.

The 25 per cent target was largely based on the European and Japanese targets, which had just been announced at the time and which were roughly equivalent to a 25 per cent lowering of fleet average fuel consumption levels. The Table approached this in two ways. First, the 25 per cent reduction was applied using the existing CAFC targets as a baseline. Since the actual average fuel consumption of the Canadian fleet is substantially lower than the target, this represented a true reduction of less than 25 per cent. The table projected that this would reduce GHG emissions by 5.2 Mt from business-as-usual (BAU) levels by 2010. There would be a financial cost of $56/tonne to incorporate the required technologies into the vehicle fleet. The additional cost of lost value to the consumer of certain vehicle choices and attributes would bring the total to $74/tonne.

Furthermore, the Table pointed out that these costs were dependent on similar reductions in the U.S. fleet. Given the high level of integration within the North American auto market, the Table claimed that the cost of compliance would effectively double if Canada required a separate mix of vehicle technology within its fleet to achieve higher efficiency targets than those in the U.S. The unlikely measure of 25 per cent below the actual fleet-average fuel efficiency level was not recommended by the Table.

Observations: The Options submitted by the Transportation Issue Table are the results of consensus among various stakeholders, including representatives from the auto industry. Since 1999, when the 25 per cent target was listed as an option, little had been done in the U.S. or Canada to reduce GHG emission levels from their new model fleets. In fact, GHG emissions have increased, as market share has shifted to the light truck category (due to increased sales of SUVs, XUVs and minivans). At the same time, many of the technologies considered by the Table have already been introduced, including those classified as “more costly” such as hybrid-electric drives (ten models available among five manufacturers in the 2005 model year). Nevertheless, this target has been carried into the “Government of Canada Action Plan 2000 on Climate Change” and, later, in the “Climate Change Plan for Canada”, released in 2002”.

The Transportation Table website contains the Foundation Paper and Options Report: www.nccp.ca/NCCP/national_process/issues/transportation_e.html

The National Academy of Sciences Study — Estimating the Gains and Costs, 2001

In legislation for fiscal year 2001, the U.S. Congress requested that the National Academy of Sciences (NAS) conduct a study to evaluate the effectiveness and impacts of CAFE standards. A committee was struck that included various researchers and experts in the fields of economics, energy and automotive technology. The NAS Committee considered a broad range of issues relating to the auto industry and the CAFE program that included fuel efficiency, economics, market competitiveness, industry employment, traffic safety and public health. In 2002, the NAS Committee published its study report, “The Effectiveness & Impact of Corporate Average Fuel

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Economy (CAFE) Standards”, which served as the most comprehensive analysis of the CAFE program to date. Elements of this study are considered in Chapter 4, citing those aspects of the report relating to oil consumption, GHG emissions and automobile design. The study also included the committee’s estimation of potential fuel economy improvements in the U.S. light-duty vehicle fleet, which are summarized here.

Through interviews with automobile and parts manufacturers, the Committee established a set of cost estimates for the range of technology improvements under consideration, most of which are listed earlier in this section. The Committee determined that increasingly aggressive technology implementation produced significantly higher levels of fuel efficiency, but at an increasing level of cost. For example, fuel consumption for large cars could be reduced by 14 per cent at an incremental cost of $675, or by 39 per cent at $3,455. For large SUVs, the figures were 20 per cent at $769 and 42 per cent at $3,235. As demonstrated, the Committee found that incremental technologies applied to different vehicle classes can yield somewhat surprising results. Large cars achieved three per cent less improvement over the baseline than large SUVs and yet those improvements cost $220 more.

In order to provide some context to these calculations, the Committee selected appropriate technology packages that are cost-effective — that is, the application of technologies for which the incremental cost increase is fully offset by fuel savings over the vehicle’s period of use.

Several assumptions were made to make this analysis possible: • gasoline is priced at $1.50/gallon, • a vehicle is driven 15,600 miles in its first year, after which travel decreases 4.5 per cent annually, • actual on-road fuel economy is 15 per cent less than the EPA rating (see section 2.1), • vehicle performance, size and fleet mix are held constant to baseline reference, and • a 3.5 per cent fuel economy penalty is applied to account for increasing vehicle weight due to safety features.

To further refine its analysis, the Committee considered cost-effectiveness under two financial scenarios: • the consumer considers fuel economy savings over the entire life of the vehicle (14-year useful life, with a 12 per cent discount rate), and • the consumer intends to dispose of the car early and thus only considers fuel economy savings during this short time period (an arbitrary choice of three years was selected, with a zero per cent discount rate).

The results are tabulated below according to the vehicle classes selected by the Committee, based on data for the 1999 model year.

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NAS Study (Tables 4-2 & 4-3) Summary Results

Average Cost-Effective Technology Impact Baseline Fuel Vehicle Class Economy Fuel Economy Increase per cent Cost Savings mpg mpg increase 14-Year Payback, 12 per cent Discount Rate Cars Subcompact 31.3 35.1 +12% $502 $694 Compact 30.1 34.3 +14% $561 $788 Midsize 27.1 32.6 +20% $791 $1,140 Large 24.8 31.4 +27% $985 $1,494 Light Trucks Small SUV 24.1 30.0 +25% $959 $1,460 Mid SUV 21.0 28.0 +34% $1,254 $2,057 Large SUV 17.2 24.5 +42% $1,629 $2,910 Minivan 23.0 29.7 +29% $1,079 $1,703 Small Pickup 23.2 29.9 +29% $1,067 $1,688 Large Pickup 18.5 25.5 +38% $1,450 $2,531 3-Year Payback, 0 per cent Discount Rate Cars Subcompact 31.3 30.3 -3% $11 $11 Compact 30.1 29.1 -2% $29 $29 Midsize 27.1 26.8 -1% $72 $76 Large 24.8 25.4 +3% $173 $190 Light Trucks Small SUV 24.1 24.7 +2% $174 $193 Mid SUV 21.0 22.7 +8% $341 $407 Large SUV 17.2 19.7 +15% $567 $740 Minivan 23.0 24.2 +5% $247 $284 Small Pickup 23.2 24.4 +5% $247 $285 Large Pickup 18.5 20.8 +12% $477 $608

As shown, cost-effective fuel economy improvements over the useful life of the vehicle range from 12 per cent in subcompacts to 42 per cent in large SUVs. When a very short-term outlook is considered, the fuel economy improvements that pay for themselves range from negligible in smaller cars to 15 per cent for large SUVs. Under this scenario, fuel economy changes for smaller cars are actually shown as negative. This is due to projected safety improvements that will increase the weight of the car, resulting in a 3.5 per cent penalty in fuel economy. If the weight increase is ignored, the subcompact fuel economy actually increases by ½ per cent.

Observations: Several factors must be considered in comparing these results with the previous study.

• First, a 25 per cent increase in fuel economy is equivalent to a 20 per cent reduction in fuel consumption230. As such these ranges of efficiency improvement equate to fuel consumption reductions of 11 per cent in subcompacts to 30 per cent in large SUVs, given the 14 year payback conditions. • Secondly, the Committee established no specific time period for achieving these reductions, except to say that most technologies considered in the calculations could be fully implemented in new model year fleets within the next 10 years. • Thirdly, full hybrid-electric systems were not considered among the applicable technologies. When this report was prepared, the Honda Insight and the Toyota Prius hybrids were first entering the market, and the committee did not consider the technology sufficiently proven,

230 20 per cent reduction in fuel consumption = 0.80*X gallons per mile 1/0.80 gallons per mile = 1.25 miles per gallon = 25 per cent increase in fuel economy.

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particularly in terms of reliability and safety. This may seem somewhat odd, given the rapid uptake of hybrid vehicles in the market, but it illustrates one of the overarching concerns of the Committee: traffic safety. In the case of hybrids, the concern was that a sudden failure of the battery system on a hybrid would leave the vehicle with insufficient acceleration, which the Committee felt would compromise safety. As the above summary illustrates, the study even assumed that weight must necessarily increase by 5 per cent to match future safety requirements.

No other major study on CAFE has placed as much emphasis on weight as a necessary factor to maintain vehicle safety characteristics. As discussed elsewhere in this document, the Committee could not reach consensus on this issue, requiring an appendix to the report that fully explained the position of the dissenting members. The Committee also stressed that their estimations not be construed as a recommendation. Their analysis was based on cost-effectiveness in a market not constrained by future increases in CAFE standards. They also assumed artificially that future market shares among vehicle classes would remain as they were in 2002. In these types of analyses such assumptions are necessary but are also inherently limiting, as vehicle class market shares have historically fluctuated and are likely to continue as such. The Committee also estimated the price of gasoline at $1.50/gallon in their model, but as of September 2004, U.S. gas prices were hovering at $2.00/gallon231. These simple factors could significantly alter the study’s calculations.

“The Effectiveness & Impact of Corporate Average Fuel Economy (CAFE) Standards” can be viewed at the National Academies website: http://www.nap.edu/books/0309076013/html/

The Argonne National Laboratory Study — Examining the Potential, 2002

The Argonne National Laboratory’s Transportation Technology R&D Center was jointly commissioned by the U.S. Department of Energy and Natural Resources Canada to evaluate the recent fuel economy initiatives in Europe and Japan, examine the technical potential to improve fuel economy in the North American light-duty vehicle fleet and consider how a voluntary fuel economy standard in the U.S. could be most effectively implemented. Argonne’s automotive technology evaluation differs from previous studies by the Issues Table and the NAS in that it included hybrid-electric systems in its cost-effectiveness calculations. The study considered several other issues related to fuel efficiency, but for the purposes of this section, only the study’s analysis of cost-effective fuel economy improvements are summarized.

As in previous studies, the Argonne group enlisted the support of industry experts to assemble realistic technology bundles that could be implemented by the year 2015, each with an increasing level of cost and corresponding improvement in fuel economy. These bundles were chosen to achieve efficiency improvements while maintaining certain vehicle characteristics valued by the automotive market, such as engine power and vehicle size.

2015 MODT — Moderate Technology, including VVL, VVT, 5-speed automatic transmission and reduced drag. 2015 HT — High Technology, including weight reduction through increased use of aluminum in engine and structure, engine downsizing (6 to 4 cylinder while maintaining power output), additional drag reduction and CVT. 2015 HT + 42V — High Technology with 42-Volt Electrical Architecture, supporting idle-off integrated starter-generator and electrically powered accessories (essentially, a mild hybrid). 2015 HT + 300V — High Technology with a “Toyota Prius-Style” 300-Volt Electrical Architecture, supporting full hybrid operation.

231 http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_home_page.html

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The following chart summarizes the impact of these technologies as applied to two hypothetical vehicle models — a midsize car and a 4WD compact SUV — maintaining vehicle performance attributes constant with a 2000 MY baseline.

Argonne Study, Tables 4-5 & 4-6 Fuel Economy vs. Technology Bundle

Parameter 2000 Base 2015 MODT 2015 HT 2015 HT + 42V 2015 HT + 300V Midsize Car Fuel Economy 26.5 mpg 30.9 mpg 35.1 mpg 37.9 mpg 47.4 mpg Retail Price Increase base $585 $1,244 $2,504 $4,870 Lifetime Fuel Savings base $984 $1,631 $2,003 $2,936 4WD Compact SUV Fuel Economy 20.3 mpg 24.5 mpg 28.4 mpg 34.0 mpg 38.9 mpg Retail Price Increase base $665 $2,063 $3,595 $5,830 Lifetime Fuel Savings base $1,490 $2,479 $3,503 $4,156 - Assumed gas price at $1.35/gallon - 4 per cent fuel economy penalty applied for Tier 2 Emission Standards - Vehicle lifetime assumed 150,000 km, 0.85 annual degradation factor

As shown, it appears the improvement in fuel economy gains cease to present the consumer with added value prior to the application of the HT bundle. The Argonne study includes an estimate of the average fuel economy level that maximizes the consumer’s “net value” (the present value of the fuel savings minus the cost of added technology) for a target period of 2012 to 2015, and assuming: • a gasoline price of $1.35/gallon, • no valuation of market externalities (health impacts due to global warming, pollution, etc.), • a 12 per cent discount rate over the full life of the vehicle (14 years), • an average vehicle weight gain of 5 per cent for safety and comfort features, and • holding other performance attributes constant.

Based on this, the maximum net value is reached at about a 22–23 per cent fuel economy increase for passenger cars and a 24–26 per cent increase for light trucks. However, if the gas price is set at $2.00/gallon (a more realistic representation of late-2004 prices), the net value peaks at about 30 per cent for the entire light-duty vehicle fleet. It is important to note that the Argonne study does not precisely identify or recommend a specific level of maximum fuel economy that is cost-effective, but rather that level which maximizes consumer net value. The following figure illustrates this point.

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Price and Value of Increased Fuel Economy

Data for passenger car. source: “Examining the Potential for Voluntary Fuel Economy Standards in the United States and Canada”, Transportation Technology R&D Center, Argonne National Laboratory, 2002.

As illustrated, maximum fuel savings are returned at around 33 mpg, but relative cost- effectiveness is maintained up to almost 40 mpg for the average passenger. If one wished to maximize net fuel savings, one would pay for technologies that raised fuel economy to 33 mpg. If one wished to maximize fuel economy at no net cost increase, one would pay for technologies that raised fuel economy to 40 mpg.

The Argonne study was primarily focused on determining what form of standard would be most effective in achieving a voluntary fuel economy target, rather than recommending a specific target. The study selected two targeted increases that appeared fully achievable by all major auto manufacturers: a 20 per cent increase over a 2000 MY baseline and a 33 per cent increase (both included a 5 per cent fuel economy penalty for weight, thus the actual targets are 25 per cent and 37 per cent). The 20 per cent target was considered “non-binding” as it fell below the level at which the fuel savings represented a positive net value to the consumer, holding all other vehicle attributes constant. The 33 per cent target was “binding”, as the fuel savings did not outweigh the increase in incremental vehicle cost.

These two targets were then modeled under several variations of how they may be applied: CAFE-style, a weight-based standard, or a uniform percentage increase (discussed later in section 8.1). The analysis concluded that while different manufacturers may perceive different forms of a standard to be more or less advantageous, no one format emerged as clearly superior. The study concluded that the economic efficiency of a given fuel economy standard can be influenced by the form in which that standard is applied.

Observations: While co-sponsored by the DOE and NRCan, the Argonne study does not utilize Canadian vehicle fleet data and thus the impact of a Canadian fuel efficiency standard is not considered. However, the study definitely supports the cost-effectiveness conclusions of the National Academy of Sciences Study released before it. In fact, the Argonne study demonstrates that much higher levels of fuel economy are achievable for relatively modest retail price increases. The summary table shows that a fleet-average fuel economy increase of 80–90 per cent is achievable in 2015 with a net value decrease to the consumer of less than $2,000 (albeit unadjusted for present worth). Moreover, this calculation was made assuming a $1.35/gallon, and

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assuming that consumers would not value the reduced oil consumption and GHG emissions beyond the price of gasoline. With gasoline prices approaching $2/gallon in late-2004 and sales of hybrid vehicles rapidly increasing, it seems both of these assumptions may have been overly conservative estimates.

“Examining the Potential for Voluntary Fuel Economy Standards in the United States and Canada” can be viewed at the Argonne National Laboratory website: http://www.ipd.anl.gov/anlpubs/2003/03/45940.pdf

The NESCCAF Report — Reducing GHGs from Light-Duty Motor Vehicles, 2004

Governed by its mandate to develop solutions for environmental issues impacting on public health, the North East Centre for a Clean Air Future (NESCCAF) has conducted a very detailed analysis of the technical potential to reduce CO2e emissions from light-duty vehicles. Compared to earlier studies, the difference in the NESCCAF report is its shift in focus from fuel efficiency to CO2e emissions. This is significant because it places the stress on air quality, global warming and public health. In this way, the social cost of automobile emissions (GHG emissions in this case) can be varied against the cost of improved technology, with the price of gasoline determining the net value to consumers. Furthermore, it allows emissions not directly associated with fuel consumption to be considered (such as those from air conditioner refrigerant), as well as consideration of combustion technologies to reduce GHGs other than CO2 from the exhaust (notably CH4 and N2O).

NESCCAF contracted the services of the following engineering consulting firms: AVL Powertrain Engineering, Inc. — automotive performance and emissions simulations, Martec Group, Inc. — cost estimates, retail price-equivalent calculations, Meszler Engineering Services — air conditioning and non-drivetrain emissions modeling (air conditioner load on engine, refrigerant leakage, methane and N2O emissions).

Detailed models were prepared to simulate CO2e emissions based on vehicle characteristics and these models were tested for accuracy against existing models. Various technology packages were applied to the 2002 baseline characteristics to determine the impact on CO2e emissions in five vehicle categories: small cars, large cars, minivans, small trucks and large trucks. Given detailed cost estimates of the various technology packages, the price of CO2e reductions could be calculated.

NESCCAF chose to consider the level of CO2e reductions that would be cost-effective to the consumer in terms of fuel savings over the life of cars produced in the 2009–2015 period, and based on the following assumptions: • 12 year vehicle life, • VMT of 15,600 miles in the first year, declining 4.5 per cent each year afterwards, • 5 per cent discount rate for net present value fuel savings calculation.

Once these calculations were determined, emissions reductions were plotted against incremental costs. By interpolating the data points (referred to as a “supply curve” in the report), the theoretical point of maximum GHG emissions reduction achievable, given no net loss in value to the consumer, was identified. The results are summarized in the table below:

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Cost-Effective GHG Reductions through Technology Improvements

Projected Average CO e Emissions Net Value to Consumer in Fuel Savings Vehicle 2 baseline new % Category @ $1.58/gallon @ $2.00/gallon g/mi g/mi reduction Small Car 300 210 30% $0 - $250 $300 - $500 Large Car 355 190 45% $0 - $600 $400 - $1,100 Minivan 410 285 47% $0 - $1,000 $800 - $1,500 Small Truck 460 250 46% $700 - $1,700 $1,600 - $2,200 Large Truck 525 285 45% $0 - $1,000 $900 - $1,700

These data do not represent a precise forecast of the maximum cost-effective level of CO2e reduction. Rather, is the table summarizes the linkage between decreased CO2e emissions and increased technology costs. The reader is directed to the NESCCAF report for a detailed description of the specific technology bundles used to generate the trend lines for each vehicle category.

It is important to understand that the reductions identified in the NESCCAF report also include improvements to air conditioning systems (A/C). Efficiency improvements to A/C compressors can reduce engine load and reduce CO2e emissions, but the refrigerant itself, which leaks as the vehicle ages, is a powerful GHG as well (previously discussed in Section 3.1). Shifting to refrigerants with lower global warming potential (gwp) will, therefore, also have a beneficial effect on CO2e emission reductions. In addition, the NESCCAF report also addresses the impact that methane (CH4) and nitrous oxide (N2O) have on the CO2e level at the tailpipe. Combustion technologies exist that can reduce the amount of CH4 and N2O in the exhaust, thereby reducing the overall CO2e emissions. While this GHG reduction may not be fully matched by a proportionate reduction in fuel consumption, the overall global warming potential of the emissions are lower.

The NESCCAF Report makes the general conclusion that light-duty motor vehicle GHG emission reductions of 14-55 per cent are achievable in the 2009–2015 time period. Most of the technologies required to meet these reductions will save the consumer about $500 in fuel costs over the life of the vehicle.

Observations: With this study, NESCCAF has fundamentally shifted the approach to addressing the climate change impact of the automobile. By considering all vehicle GHG emissions — those both directly and indirectly related to fuel consumption levels — the study identifies several options to achieve CO2e reductions in addition to those that simply minimize fuel consumption. This approach places the issue squarely in the realm of public health, as it follows the familiar format of emissions regulations for air quality. The California Air Resources Board (CARB), as discussed next, believes the NESCCAF report, “is the most advanced and accurate evaluation of vehicle technologies that reduce greenhouse gas emissions yet performed.” It should also be noted that an attempt to convert these emission reduction factors into, say, fuel consumption or fuel economy factors would be in technical error, as the full extent of the emissions reductions are not governed solely by fuel efficiency. However, the study confirms that reductions in fuel consumption of at least 30 per cent can be cost-effective across the light-duty vehicle fleet within the next round or two of new model design.

“Reducing Greenhouse Gas Emissions from Light-Duty Motor Vehicles” can be viewed at the Northeast States Center for a Clean Air Future website: www.nesccaf.org

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California’s Proposed Standards to Reduce Global Warming Pollution, 2004

As explained in section 6.2, the California Air Resources Board (CARB) was directed by the Legislature to consider all GHG emissions from California’s fleet of motor vehicles and propose an enforceable standard that represents the maximum cost-effective level of CO2e emissions reductions. Using the approach developed by NESCCAF, CARB staff considered California’s particular mix of automobiles, the GHG emissions from vehicle operation, A/C operation and refrigerant leakage and upstream emissions associated with fuel production. The upstream element was meant to accommodate the use of alternative fuels that can be factored in based on their net global warming impact.

The CARB staff proposed a phased standard beginning in 2009, with increasingly stringent fleet average emission targets set for each year thereafter. Thus far, the scheduled targets have been determined for each year until 2016.

The proposed standards were devised using the same approach as described above in the NESCCAF report. The real work of the CARB staff was to ensure that the CO2e emission targets were achievable by the major manufacturers operating in the California market, and that the cost- effective nature of the standards was preserved even for consumers in low-income and minority communities (as mandated by California’s social and environmental justice policies). CARB assumed gasoline and diesel prices at $1.74 and $1.73 per gallon, respectively. Sufficient flexibility is built into the standard, allowing manufacturers a variety of alternate strategies to meet the targets. For example, emissions credits can be accumulated for early compliance and alternative compliance. Certain criteria must be met for these alternative credit proposals to be approved. For more details on the proposed standard, please refer to Section 6.2.

Observations: The CARB approach does not constitute a new study into light-duty vehicle GHG emission reductions, as is the case with the previous four studies reviewed in this chapter. Rather, it reveals how a jurisdiction acted upon the available engineering and economic analyses of the issue to develop a standard that will accelerate technology development and applications in automobiles. The authorizing legislation specifically prohibits new bans or regulations on speed limits, vehicle use, vehicle sales mix, or vehicle attributes, such as weight, power and style. Therefore, this study should not be considered a current analysis of the extent to which GHG emission levels can be reduced in the North American light-duty vehicle fleet. For this, the NESCCAF methodology provides one way to estimate the cost-effective level of GHG reductions for a given fleet of vehicles. In particular, the level of cost-effectiveness is predominantly governed by the expected fuel price. For example, if one were to conduct a “NESCCAF-style” analysis on Canada’s fleet, as was conducted for California, the results would probably appear different than the CARB targets, given the differences in baseline fleet characteristics and fuel price.

“Staff Proposal Regarding the Maximum Feasible and Cost-Effective Reduction of Greenhouse Gas Emissions from Motor Vehicles” can be viewed at the California Air Resources Board website: www.arb.ca.gov/cc/cc.htm

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7.2 Alternative Vehicle Fuels

The following discussion of alternative fuels diverts somewhat from the focus of this document — motor vehicle fuel efficiency. However, the subject often arises in discussions surrounding fuel efficiency initiatives, so it is appropriate to give the issue some recognition. This is particularly so, since alternative fuels, in many cases, are more expensive and less abundant than gasoline or diesel and require significant technical adaptation within the existing fleet to maximize the social and environmental benefits of alternative fuel initiatives. As such, alt-fuels (and alternative technologies such as hydrogen fuel cells) often divert attention from the many benefits of conventional fuel efficiency programs. In the final analysis, the success of future alternative fuel programs and targets will largely depend on parallel programs to reduce fleet-wide consumption levels through increased vehicle fuel efficiency.

By definition, alternative fuels usually exist in the following formats:

• byproducts of petrochemical refining processes, usually marginal in supply (since the majority of a barrel of crude oil is used to produce gasoline, diesel and jet fuel) and not considered of prime value, • prime petrochemical products that are locally abundant, but not easily transported globally, such as natural gas, • alcohols and oils derived from the processing of biological matter (vegetation or animal fats), known as biofuels.

The following provides a brief description of some of the more widely-used alternative fuels in North America.

Compressed Natural Gas (CNG)

Natural gas is mainly composed of methane (CH4), combined with small, varying proportions of ethane, propane, butane, pentane and other trace compounds. Usually located in underground reserves, it is often mixed with oil in porous rock or found with oil deposits under impermeable rock. Drilling relieves the pressure and the gas is collected at the surface.

Existing as a gas under normal pressure, methane must be compressed or liquefied in order to achieve a practical level of energy content per unit volume. In automotive applications, special fuel tanks ranging in size from 11 to 44 litres232 are used, into which natural gas can be compressed up to 3,500 psi. This results a per-volume energy content that is only about 25 per cent that of gasoline233. However, CNG also has a very high octane number, meaning it can operate under higher compression ratios, improving thermal efficiency.

The result is that a typical CNG vehicle can travel between 200 and 300 km on a full tank234. If a greater range is required between fill ups, bi-fuel vehicles are normally used. These are vehicles that have been slightly modified to run smoothly on both gasoline and natural gas, although not as efficiently as dedicated CNG vehicles. Bi-fuel vehicles have a typical gasoline or diesel fuel tank, plus one or more pressure tanks for the CNG.

CNG currently fuels about 100,000 light and heavy-duty vehicles in the U.S. and about 25,000 in Canada. The main advantage for CNG users has been price and the ability to negotiate fixed- price supply contracts. On a cost per unit energy basis, natural gas has historically ranged between 15 per cent and 40 per cent less than the cost of gasoline235. For this reason CNG is most popular in commercial fleets (taxi cabs, delivery trucks and industrial vehicles).

232 http://oee.nrcan.gc.ca/vehiclefuels/naturalGas/naturalGas_faq.cfm 233 http://www.eere.energy.gov/cleancities/afdc/ 234 http://www.motortrend.com/roadtests/alternative/112_0311_hybrid/ 235 http://www.epa.gov/otaq/consumer/fuels/altfuels/altfuels.htm#emissionmodels

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Although CNG currently enjoys advantages in price and in the reduction of some emissions, the main problem with its widespread use is one of supply. There are concerns that North American natural gas production may have already peaked and discoveries of new reserves have been in decline since the mid-1970s. In gaseous form, there is no practical way to ship natural gas from other oil and gas-rich regions in the world, such as the Middle East and Russia. Natural gas can be liquefied (LNG) and shipped via LNG tankers, but this requires the fuel to be maintained at about -160oC — an added expense. Perhaps more worrisome is the dangerously explosive potential of LNG. Some ports have refused to accept LNG tankers due to the risk they represent.

Liquefied Petroleum Gas (LPG, Propane)

LPG, more popularly known as propane, is even more widely used than CNG for powering vehicles in North America, with more than 350,000 light and heavy-duty vehicles in the U.S. In Canada and the U.S., it is the third most widely used transportation fuel after gasoline and 236 diesel . LPG (C3H8) is one of the byproducts of natural gas and petroleum refining processes. A gas at normal pressure, it liquefies when moderately compressed, increasing the energy content per unit volume to about 25 MJ/l — almost three-quarters of the per-volume energy content of gasoline. It cannot be compressed as much as CNG or even diesel, limiting the thermal efficiency potential.

It is possible to modify normal gasoline engines to be bi-fuel compatible, running on LPG as well as gasoline. This requires a second tank for the propane and a dashboard switch with which the driver can select between the two fuel sources. On a per unit energy basis, the price of propane has historically varied between 25 per cent and 30 per cent less than gasoline237. As with CNG, LPG vehicles are normally used in commercial fleets due to their higher initial purchase cost, but lower long-term fueling and maintenance expense. As a byproduct of the petrochemical refining process, the price of LPG is linked to that of oil and natural gas.

Ethanol (Alcohol-Based Fuels)

Alcohol-based fuels, such as ethanol, are 100 per cent pure alcohol primarily derived from fermented grains or plant sugars and are therefore named biofuels. In the U.S. and eastern Canada, corn is the most popular source material for the production of ethanol, whereas wheat is the choice in western Canada. While pure ethanol can be used as a transportation fuel, it is almost exclusively used in gasoline-ethanol blends. Most new vehicles in Canada and the U.S. can operate with a blend of up to 10 per cent ethanol in gasoline, known as E10, while specially- designed vehicles can operate on E85 or higher.

Ethanol (C2H5OH) has been used for more than a hundred years to power ICEs, but owes its recent popularity to its use as an octane number-booster and oxygenate in gasoline (supplying additional oxygen to the reaction as it combusts). A liquid at normal pressure, pure ethanol has an energy content of about 23 MJ/l, about 65 per cent that of gasoline. However, due to its higher compressibility, a pure ethanol engine can operate at higher thermal efficiencies, somewhat offsetting the lower energy content.

The price of ethanol will naturally fluctuate with the price of the feedstock, be it corn, wheat or agricultural waste and wood cellulose.

A new process under development uses wood and agricultural waste as the feedstock instead of food crops. Known as cellulosic ethanol, the plant cellulose is first separated into fiber and sugar. Less sugar is yielded from the cellulose compare to sugar-rich grains, such as corn, but the fiber can be burned to provide the energy needed to power the sugar fermenting process.

236 http://www.epa.gov/otaq/consumer/fuels/altfuels/altfuels.htm#fact 237 http://oee.nrcan.gc.ca/vehiclefuels/propane/propane_faq.cfm?PrintView=N&Text=N

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Theoretically, although less ethanol is extracted from this process compared to traditional grain and sugar fermenting, no external energy is required to drive the process. The technical and commercial viability of this process, however, is still being researched at the prototype phase. According to one study by Carnegie Mellon researchers in the U.S.:

“Producing cellulosic ethanol costs about $1.20/gallon ($1.80/gallon equivalent, since ethanol has two-thirds of the energy of a gallon of gasoline). Assuming that the per-gallon distribution costs are the same for ethanol and holding total tax revenue constant, ethanol would sell for $1.80/gallon at the pump. However, this is equivalent to $2.70/gallon in order to get as much energy as in a gallon of gasoline.”238

In addition, even though ethanol is a liquid, it is not possible to use the existing pipeline infrastructure to distribute ethanol. Unlike gasoline, ethanol mixes freely with water and therefore must be kept completely dry during transport. Unfortunately, the existing oil and gas pipelines are not water tight, requiring significant new infrastructure investment if ethanol is to be widely used as a primary fuel for the personal vehicle fleet.

Biodiesel

Biodiesel is a type of fuel having properties similar to diesel but derived from fats and oils, such as vegetable oil or animal fats. It can be blended with diesel in any proportion from zero to 100 per cent with little or no engine modifications. It has a higher cetane number than petrochemical diesel, guaranteeing its compression-ignition performance in a diesel engine. Biodiesel is also biodegradable, non-toxic and sulphur-free.

Biodiesel is generally more expensive than petrochemical diesel and can even exceed gasoline prices on a per-volume basis239. However, waste grease and oil often provide a cheap source of raw material. Stories abound of diesel vehicle owners who freely acquire waste oil from local restaurants and process it into biodiesel in the garage. This does not provide a fleet-wide solution to the supply barrier, however.

The majority of biodiesel will likely be derived from vegetable fats (corn, soybean and hempseed oils, for example). Vegetable oil production is a well-established process in the food industry and certainly less energy-intensive than ethanol fermentation. This makes biodiesel a particularly attractive alternative fuel.

Selecting an Alternative Fuel

Selecting an alternative fuel requires not only an understanding of the potential benefits of its use in the automobile fleet, but also the various limitations inherent in its supply and manufacture. To help frame this discussion, the following figure is provided, illustrating the source pathways of some conventional and alternative fuels.

238 Joseph Romm, The Car and Fuel of the Future: A Technology and Policy Overview, Prepared for the National Commission on Energy Policy by The Center for Energy and Climate Solutions, June 2004. Lester Lave et al., 2001, www.nap.edu/issues/18.2lave.html 239 http://www.epa.gov/otaq/consumer/fuels/altfuels/biodiesel.pdf

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Petroleum Conventional & Reformulated Gasoline source: Air (crude oil) Pollution from Ground Conventional & Reformulated Diesel Transportation, Natural Gas Annex IV, (direct from Roger Gorham, wells, or as Liquefied Petroleum Gas (LPG, propane) United Nations, flared gas, or 2002. from landfill gas) Compressed Natural Gas (CNG)

Biomass Dimethyl Ether (DME) (from corn, sugar cane, soybean, Methanol hempseed, plant lignin, waste animal Ethanol fat, etc.)

Biodiesel Electricity (from coal, oil, natural Hydrogen gas, hydro, wind, solar, etc.) For Pure & Hybrid-Electric Vehicles

In his report for the U.N. and the World Bank, Roger Gorham of UNEP identified eight factors that must be considered in the design of alternative fuel strategies and programs:

Objective of the Alternative Fuel Strategy — Jumping on an alternative fuel bandwagon can lead to disastrous results. First, the objective of the program must be set, then the correct options can be selected. Possible program objectives might include: • reduced dependency on foreign-imported fuels, • increased use of a domestic resource (a surplus of a specific fuel, for example), • incubating a new fuel industry, • improved air quality through reduced emissions, or • greenhouse gas emission reduction targets.

Availability and Reliability of Feedstock — Stable supply and pricing is required for program success. The primary source of an alt-fuel may be in demand in other markets — perhaps world markets — which could create long-term price volatility that destabilizes the program. For example, natural gas and propane are excellent home heating and cooking fuels, and are required for many industrial processes. Diverting natural gas from these uses and into alternative fuel production (e.g., CNG, LNG, DME, methanol, hydrogen) can lead to unintended economic damage.

The Long-Term Alternative Fuel Penetration of Market — Widespread use of alternative fuels in a given market will depend on the capacity of the vehicles built and sold in that market to make effective use of those fuels. This also requires the fuel supply infrastructure challenges to be addressed.

Perfect Substitution of Conventional Fuel with Alternative Fuel — It is assumed in most alternative fuel strategies that a kilometer driven with conventional fuel equals a kilometer driven with the alternative fuel. This is called perfect substitution, and it is often a mistaken assumption as some fuels are better suited to a given set of driving conditions than others.

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Speed and Nature of Alternative Fuel Adoption — If alternative fuels require specially modified vehicles for ideal operation, the rate at which the existing fleet can be “turned-over” or properly converted must be addressed.

Under Brazil’s Proalcohol Progamme Dynamic Assessment of Fuel Options — The timeframe (1975–1998), farmers received under which an alternative fuel program can be fully subsidized premiums for sugar implemented must be measured against the rate of production, which was used to technical improvements among conventional fuels and produce ethanol. About 2/3 of Brazil’s vehicles. For example, gasoline and diesel can be total sugar cane output was used for developed to have higher oxygen and lower sulfur ethanol feedstock. At one point, 95 content, allowing the use of improved catalytic converters per cent of all new vehicles were which will lower emissions. If the objective is to reduce running on pure ethanol. Under pollutant emissions, it may happen that developments in financial pressure, the Brazilian government began reducing the conventional technology may achieve the original aims of subsidies in 1990, and eased the the alternative fuel program just as well. restrictions on ethanol-gasoline blends in order to meet growing The Role of Government — Governments may seek to demand for fuel. Later, world sugar accelerate the introduction of an alternative fuel in order prices increased significantly, and to address the failure to the market to adequately farmers began selling their crops on respond to the social demand for better air quality, or the raw sugar market, which led to GHG emissions reductions. Experience has shown that sharp shortages of ethanol in the government and large monopolies are often poor country, leaving owners of vehicles designed for pure ethanol without fuel. performers when it comes to selecting a specific Among the public, proponents of the technology from among many options. It may better suit Programme have lost credibility. the government’s role, therefore, to set performance expectations instead, and let the market compete to produce the most cost-effective solutions. California, for example, has set strict emission standards for vehicles, but has not mandated specific fuel formulations or technology solutions.

Full Life Cycle Analysis and Comparison — The production of air pollutants and GHG emissions are not only developed for the vehicle. There are also emissions associated with drilling, harvesting and processing fuel. In order to properly compare the impacts of one fuel option versus another, a full life-cycle analysis of the various emissions must be conducted. This is the focus of the next section.

Life-Cycle Analysis — Comparing Alternative Fuels

Life-cycle analysis takes into account the resource consumption and waste output of a system over its full product life. In terms of energy consumption and GHG emissions, life-cycle analysis allows automotive fuels and vehicle technologies (and combinations thereof) to be accurately compared according to their net impact.

For example, delivering gasoline to a vehicle requires significant amounts of energy. First the crude oil must be extracted from the earth, then refined into gasoline (heated & distilled) and finally transported to the pumping station where it enters the fuel tank of a vehicle. These are called the “upstream“ elements of the process, and energy consumed or GHG emissions generated along the way are grouped under the heading “Well-to-Tank”. As the vehicle operates, it converts the fuel energy in the tank into the motion of the wheels. Energy consumed and GHG emissions produced by the vehicle are grouped under the heading “Tank-to-Wheels”. Adding the GHG emissions from both stages would yield the fuel’s full life-cycle emissions, or the “Well-to- Wheels” analysis.

The following chart uses data from a recent “Well-to-Wheels” GHG emissions analysis of various alternative fuel and vehicle technology options. It is assumed that the fuels are used in a vehicle powered by a typical internal combustion engine, designed for the specific fuel option.

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Well-to-Wheels GHG Emissions

250

200

150 Tank-to-Wheel Well-to-Tank 100 g GHG / km

0 CNG 5% 5% Diesel 100% CNG + 100% Ethanol Ethanol pipeline Gasoline Biodiesel Biodiesel

Notes: CNG + pipeline: Assumes the gas is delivered through a 4,000 km long pipeline from the well, accounting for additional pumping energy. 5 per cent Ethanol: Standard gasoline-ethanol blend. Ethanol derived from fermented sugar beets, with pulp discarded as fodder. 100 per cent Ethanol: Pure ethanol derived from fermented sugar beets, with pulp discarded as fodder. 5 per centBiodiesel: Standard biodiesel-petrochemical diesel blend. Biodiesel derived from rapeseed.

source: Well-to-Wheels Analysis of Future Automotive Fuels and Powertrains in the European Context, Edwards (JRC/IES), Griesemann (Renault), Larivé (Concawe), Mahieu (JRC/IES), 2004.

Note that the 100 per cent ethanol fuel option shows no net GHG emissions upstream of the vehicle. This follows from the assumption that some of the CO2 generated by the vehicle is absorbed in the growth of new feedstock crops (in this case sugar beets). The cellulosic ethanol process described in the first section requires no external energy and may actually be considered a net-zero emitter of GHGs over the full life-cycle of the fuel. As with ethanol, bodiesel is also shown to reduce CO2 emissions through the growth of new seed oil crops.

Each geographic location will yield its own unique well-to-wheels analysis, depending on the fuels and the proximity of various feedstocks. Moreover, life-cycle analyses are not restricted to energy consumption and GHG emissions. Conducting this type of analysis is the best first step in determining the appropriate mix of alternative fuels and vehicle technologies in a program to reduce emissions.

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7.3 Alternative Vehicle Drive Technologies

This section will briefly review the three main drive technologies that are often considered as alternatives to the standard internal combustion engine (ICE) for powering automobiles:

• pure electric drive, • hybrid-electric drive, and • hydrogen fuel-cell electric drive.

Naming these technologies as “alternative” can be deceptive, as they actually pre-date modern gasoline and diesel engines. However, as ICEs have become wholly ubiquitous in automobiles, any move to another source of drive power can be considered an alternative.

Pure Electric Drive

While internal combustion engines convert the chemical energy in fuel into mechanical rotation, electric motors utilize a stored electric charge, usually in a battery. Long before gasoline and diesel engines were developed in the late 1800s, electric motors powered virtually all “horseless carriage” vehicles. Pure electric (and also hybrid-electric) vehicles operate on the same principle today. Supplied with electric potential (voltage) energy from an on-board battery pack, electric current is passed through coils of wire to produce a magnetic field that turns a rotor. The rotor performs the same function as the crankshaft in internal combustion engines, supplying mechanical, rotating energy to power the automobile.

From one perspective, electric motors are a far more effective means of powering a vehicle, as they can typically convert more than 80 per cent of the electrical energy supplied into mechanical work, can generate consistent torque across a wide range of speeds, are safer, require less maintenance, lubrication and cooling treatment and generate no tailpipe emissions. Most internal combustion engines are only about 25–35 per cent efficient at converting fuel energy, their torque output varies with speed, they are maintenance- intensive, and they run on fuels that are often toxic, Ford’s TH!NK Electric Vehicle (no longer in production). explosive and negatively impact air quality. On the other source: hand, the amount of energy available in a typical tank of fuel http://www.usatoday.com/money/autos is far greater than that which could be stored in an electric /2002/01/03/electric-ford.htm battery of equal size and weight. Therefore, unless battery technology advances to the point at which the “energy density” approximates that of typical transportation fuels, pure electric vehicles will be limited to short-range applications and those in which relatively long battery recharge times are tolerable.

With conventional technology, about 75 per cent of the energy drawn from the battery is converted into useful work in turning the wheels240 (battery efficiency ~ 90 per cent, motor efficiency ~ 80 per cent241), compared to about 12 per cent with an ICE in urban driving cycles. Charging a battery, however, is not in itself a 100 per cent efficient process; and a battery can also lose its charge over time. Given this, the actual overall vehicle efficiency of a typical electric drive vehicle is probably between 50 and 60 per cent — still far better than the best ICEs.

The torque-speed and power characteristics of an electric motor are also superior to an ICE, with nearly peak power delivered over the full range of speeds. This means that maximum torque can be delivered when it is most required — accelerating from rest. For equivalent power ratings, an electric motor will outperform an ICE in terms of efficient acceleration every time. Moreover, since

240 http://www.fueleconomy.gov/feg/evtech.shtml#additional 241 http://science.howstuffworks.com/fuel-cell.htm/printable

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peak power is transmitted to the driveshaft over a broad range of speeds, there is no need for a conventional automobile transmission.

Also, since no fuel is combusted in an electric drive vehicle, no exhaust system is required and no emissions are produced. Energy lost to idling is eliminated, as the electric motor only consumes energy when the vehicle is moving. In addition, electric drive vehicles are every bit as capable of traveling at high speeds as ICE vehicles and can even recoup lost braking energy. Called “regenerative braking” this feature works by running the electric motor in reverse (as a generator) to charge the battery. To turn the wheels, the motor converts electric energy stored in the battery into rotational energy. When braking, this process works in reverse, with the wheels turning the motor, generating a current of electricity back into the battery. Essentially, the rotational energy of the wheels and driveshaft is converted back into electric energy stored in the battery. To get a first-hand sense of how this works, pick up a cordless power drill and turn the bit. You’ll find the drill resists this motion. This resistance is the effect of you generating a current that runs backward though the drill’s motor and into the battery. Using this same principle, up to 30 per cent of an electric vehicle’s braking energy can be captured and stored in the battery242. With a conventional ICE, all this energy is lost.

Given these advantages, one must ask why electric vehicles aren’t more popular? The answer is the battery — the one weak link in electric drive vehicle design. Currently, there are no batteries capable of storing the amount of on-board energy required to travel the distance a typical car can travel on a tank of gasoline. Essentially, the energy-to-weight (or energy-to-volume) ratio of a battery is much less than that of a typical hydrocarbon fuel.

In today’s electric vehicles, the single heaviest component is the battery pack and it occupies a much larger volume than a typical fuel tank. Even so, the range of an electric vehicle is limited to between 100 and 200 km on a single charge243. Moreover, charging a typical battery pack can take up to eight hours at a time, and cold weather can also impair performance. These considerations have generally led consumers to choose the more versatile ICE option.

Further development in battery technology will be required if the electric drive vehicle is to compete with its ICE counterpart. A quick review of the primary battery technologies is presented here: Lead-Acid batteries (as found under the hood of all conventional vehicles to power the starter motor) have been the traditional choice for pure electric drive vehicles because they are cheap, but offer limited driving range and must be replaced about every three years. Nickel-Metal Hydride batteries are lighter, offer greater range and last longer, but are currently more expensive than lead-acid batteries. Lithium-Ion batteries could provide the ideal combination of long driving range, long life cycle and low weight, but are currently the most expensive variety of battery technology.

Battery technology and other electric charge storage devices, such as super-capacitors, are constantly under development, and if a device is produced that can match the energy-to-weight qualities of gasoline, electric drive vehicles could become a popular choice in personal vehicles.

Regardless of battery technology utilized, an important issue remains: How was the electricity stored in the battery generated? If grid electricity was used for the charge, the mix of source power on the grid must be considered. For example, if the electricity used is generated by coal, there would be significant GHG emissions associated with the charging the battery. In contrast, if the electricity were generated by hydro or wind, the GHG emissions would be minimal. These factors, and others, determine whether or not an electric drive vehicle contributes to full life-cycle emissions reductions.

242 http://oee.nrcan.gc.ca/vehiclefuels/hybrid/HybridFAQ.cfm?PrintView=N&Text=N#Gen 243 http://oee.nrcan.gc.ca/vehiclefuels/hybrid/WhatBattery.cfm?PrintView=N&Text=N

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Hybrid-Electric Drive

Hybrid-electric vehicles combine a conventional ICE and an electric drive motor. In an ideal hybrid-electric drive system, the electric motor assists or even replaces the work of the ICE in its least efficient operating modes, namely accelerating, braking, low-speed driving and idling. The electric motor shuts down and the ICE takes over during the most fuel-efficient operating mode — namely moderate cruising or highway travel.

While cruising, the ICE spares some of its surplus power output to charge the battery pack. This “charge-while-you-drive” feature allows for fewer batteries than would be required in a pure electric drive system, saving weight and interior vehicle space. It also means that hybrid-electric drive vehicles need not be charged with grid power, although this feature can yield additional benefits, as a full, overnight charge can reduce the load on the ICE even more (this concept is called a “plug-in hybrid”). As with a pure electric drive, hybrids also make use of regenerative braking and “idle-off” at stops, saving significant energy — particularly in the “stop-and-go” urban driving cycle. For today’s hybrid vehicles, regenerative braking supplies most of the battery’s charge.

Furthermore, any fuel source — conventional or alternative — can be utilized in a hybrid-electric configuration. The U.S.-based Center for Energy and Climate Solutions prepared a study for the National Commission on Energy Policy in June 2004, in which they claimed244:

“We believe that the most plausible vehicle of the future is a plug-in hybrid running on a combination of low-carbon intensity electricity and a low-carbon liquid fuel.”

Hybrids can come in various configurations, in which the electric motor and the ICE are linked in different ways, to achieve maximum fuel efficiency, given the vehicle’s expected operating conditions. These configurations are technically grouped under the headings: series, parallel, or series- parallel245. In marketing parlance, however, hybrid systems are often advertised as either “mild” or “full”. Generally, mild hybrid systems only use the electric motor and battery pack to support the idle-off and regenerative braking features, while full hybrid systems provide pure electric drive capability as source: A New Road – The Technology & Potential of Hybrid Vehicles, UCS, well. The inset figure shows 2003. one study’s level of

244 Joseph Romm, The Car and Fuel of the Future: A Technology and Policy Overview, Prepared for the National Commission on Energy Policy by The Center for Energy and Climate Solutions, June 2004. 245 These configurations are not detailed in this document, but the reader is referred to A New Road – The Technology & Potential of Hybrid Vehicles, UCS, 2003 for a full explanation.

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increased fuel efficiency realized as successive hybrid features are added to a hypothetical ICE vehicle.

It should be noted that there is no consensus within industry on what constitutes a “mild“ or “full” hybrid. Based on the above descriptions, there are some hybrids that would be considered “mild” and yet achieve higher fuel efficiency ratings than some “full” hybrids. Basically, all hybrids deliver extremely good fuel efficiency ratings in their respective classes, because they feature idle-off, regenerative braking and receive a power boost from their electric motors during acceleration, which allows the engine to be downsized and thus save fuel. The degree to which one hybrid delivers better fuel efficiency over another is largely based on its overall design, not whether it can necessarily run on pure electric power.

The 1903 Krieger It may surprise some readers to was a front-wheel discover that hybrid-electric drives drive electric- were first used in mass produced gasoline hybrid vehicles over a hundred years car. A gasoline engine ago. The combustion engines of supplements the the day were loud, dirty, vibrated battery pack. the carriage and made personal source: vehicle use uncomfortable. http://www.didik.c om/ev_hist.htm Battery-electric vehicles, on the other hand, were quiet, elegant and drove smoothly. Their downside was a limited driving range. To increase this range, many electric vehicles were fitted with small internal combustion engines that functioned as a supplemental power source, engaged by the driver when required. By the 1920s, however, advances in combustion engine technology improved to the point that ICEs replaced battery-electric as the preferred power source and hybrids largely disappeared from the market.

Hydrogen Fuel Cell-Electric Drive

As with the hybrid-electric drive, hydrogen fuel cells are a technology that goes back almost 200 years. Essentially, a fuel cell combines hydrogen with oxygen to create water, while generating heat and an electric current in the process. The electric current can be used to drive an electric motor, as in a pure electric drive vehicle. The difference is that the energy for a pure electric car is supplied from the battery, which was charged by some external source of power generation on the electricity grid. The fuel cell-electric drive vehicle derives its power from hydrogen stored on- board. But, beyond the hydrogen storage tank and the fuel cell, both vehicles operate on a pure electric drive.

In this respect, the advantage of the fuel cell is that it generates the power more cleanly and efficiently than most grid energy used to charge a battery. Fuel cells are about 80 per cent efficient in generating electrical energy from hydrogen, unlike grid energy, which includes losses at the power plant and along the transmission lines.

The problem with hydrogen is that it doesn’t exist in a free and easily accessible state, such as with oil, natural gas, hydroelectric or wind power. Energy must be added to a substance containing hydrogen atoms, such as water or gasoline, in order to separate the chemical bonds that bind the hydrogen to other atoms. The free hydrogen must then be collected and compressed or liquefied for storage and transport. This requires significant amounts of energy — more than is retrieved from the fuel cell itself, thus representing a net energy loss across the fuel life cycle.

It is important to note that hydrogen is not a source of energy, but is a method for storing energy. Essentially, a tank of compressed hydrogen is simply a high-density battery, with

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the potential to liberate a portion of the original energy required to charge that battery (i.e., create the hydrogen) in the first place.

Claims that fuel cells have the potential to be more than 80 per cent efficient in generating electricity often distract from their apparent effectiveness in powering an automobile. Setting aside the thermal efficiency of the fuel cell itself, one must consider the efficiency of the various components powered by the fuel cell — the pumps, compressors, electronics and, of course, the electric motor — as was done for conventional automobiles in section 3.1.

The first issue is with how the hydrogen is created. Electrolysis of water is one way to produce hydrogen, and many proponents of a hydrogen-based energy supply infrastructures describe how this can be achieved with electricity generated from emission-free sources, such as wind turbines and solar panels. Until there is an excess of “green” power on our electricity grids, however, it would not make sense to store this energy as hydrogen, and then lose much of it by converting it back to electricity to power a car.

Unless low-impact renewable power is used to harvest hydrogen, as in the electrolysis of water, for example, it cannot be considered a zero-emitter of GHGs over its full life cycle. Even if surplus green power was available and hydrogen could be produced though electrolysis in great quantities, the problem of storage and distribution remains. A hydrogen storage tank sized to fit into the trunk of a car, in which the hydrogen gas was pressurized to 10,000 psi, would provide little more than half the driving range of a comparable gasoline fuel tank246. Other methods of storing pure hydrogen are available, such as absorbing it into a metal hydride material. These can store more hydrogen in less volume than a compressed gas tank, but the weight of the material is much greater. Liquefying the hydrogen is another way to increase its energy density, but the hydrogen must be kept at -253oC, requiring about one-third of the stored energy content247. Liquefying hydrogen also requires special insulation, which is very costly.

One way around the hydrogen storage issue is to generate the hydrogen by way of a reformer situated on the vehicle itself. A conventional hydrocarbon fuel, such as gasoline or natural gas, is drawn from the vehicle’s fuel tank into the reformer where a reaction is catalyzed that liberates the hydrogen from the fuel. This hydrogen can then be fed to the fuel cell to generate electricity and power both the vehicle and the reforming process. The downside is that extracting the hydrogen produces CO and CO2, and requires significant power from the fuel cell The GM Hywire Fuel Cell Concept Car. source: to operate, thereby reducing overall vehicle fuel http://www.cardesignnews.com/autoshows/2002/paris efficiency. /preview/gm-hywire/

When fully accounting for the losses throughout its system, a fuel cell electric drive vehicle would not likely achieve more than 40 per centoverall efficiency (chemical potential energy-to-electric energy-to-mechanical work), and probably more in the range of 25–35 per cent248. While this may be more efficient than a conventional gasoline-powered engine, the efficiency gains must be weighed against the cost of developing the fuel cell technology and supporting fuel infrastructures.

246 Piccioni, Di Pede, BMO Nesbitt Burns, The Hydrogen Economy, 2004. 247 Piccioni, Di Pede, BMO Nesbitt Burns, The Hydrogen Economy, 2004. 248 http://www.evworld.com/

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Life-Cycle Analysis — Comparing Alternative Vehicle Technologies

As with comparing alternative fuels, life-cycle analysis can help to compare alternative vehicle options against a common baseline, such as energy use or GHG emissions. The Institute for Life- cycle Environmental Assessment (ILEA) in Seattle, Washington, has analyzed the net energy that has been invested in each stage of an automobile’s life cycle. ILEA separated the life cycle of the average light-duty motor vehicle into the following stages:

Manufacture – Energy consumed in the extraction and manufacture of the raw materials, plus the assembly of the vehicle (steel production, glass & plastic manufacture, assembly plant operating energy). Fuel – This refers to the total energy consumed by the vehicle in actual operation over its useful life (well-to-tank). Fuel Cycle – Energy expended to extract and refine the fuel used by the automobile for operation (tank-to-wheel). Service – This is the energy consumed by the service stations, parts suppliers and labour required to maintain the vehicle over its useful life. Insurance – The energy consumed by office staff and equipment in servicing the automobile’s owner(s).

The inset pie chart represents ILEA’s vehicle life-cycle energy analysis249. As one would intuitively expect, fuel for vehicle operation represents by far the largest share of total life-cycle energy consumption. These estimates are supported by another report recently issued by MIT’s Laboratory for Energy and the Environment250.

Fuel Cycle 9.1% Service 3.4% Insurance Fuel 1.3% 75.9% Manufacture 10.3%

Energy consumed over the life-cycle of a typcial car. The total amount of energy represented by the pie is 1.2 million MJ.

Heather L. MacLean, Lester B. Lave (Carnegie Mellon University, 1998). www.ilea.org/lcas/macleanlave1998.html

249 Heather L. MacLean, Lester B. Lave (Carnegie Mellon University, 1998). www.ilea.org/lcas/macleanlave1998.html 250 Heywood, Weiss, Schafer, Bassene, Natarajan, The Performance of Future ICE and Fuel Cell Powered Vehicles and Their Potential Fleet Impact, MIT LFEE 2003-004 RP. December 2003. Table A1.

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As an example, a Siekei University report251 compares the full life-cycle GHG emissions for typical gasoline, electric and gasoline-electric hybrid vehicles, illustrating the emission component of vehicle manufacture, as given in the following figure.

Total carbon dioxide emissions over the lifetimes of gasoline, hybrid, and electric cars. The electric car is shown three times, with differing use energies depending on the method of generating electricity: coal, liquefied natural gas, or hydroelectric. source: Kiyotaka Tahara (Seikei University), 2001; http://www.ilea.org/lcas/taharaetal2001.html

As shown, the pure electric drive vehicle produces more upstream GHG emissions, primarily due to the added manufacturing energy consumed in battery pack production. Moreover, the electric vehicle powered with coal-fired electricity represents full life-cycle GHG emissions comparable to that of a typical gasoline vehicle. This illustrates the potential danger in pursuing a specific alternative vehicle program without accounting for life-cycle impacts — particularly if the strategy is to address energy consumption, air quality or global warming.

The study by the MIT Laboratory for Energy and the Environment, mentioned earlier, conducted a full vehicle and fuel life-cycle analysis of energy consumption and GHG emissions252. The study compared these factors as they would likely exist in the year 2020, allowing for general efficiency improvements in conventional ICE and hybrid-electric technology. This forward-looking approach was made on the basis that the hydrogen technologies under consideration today are not expected to be market-ready until that time. The comparison was made among the following vehicle types:

Propulsion System Description 2001 Reference Typical model ICE car with standard 2001 technology. 2020 Baseline Typical model ICE car with evolutionary improvements in engine, transmission, weight and drag assumed to be standard in 2020. Assigned a baseline value of 100. Other vehicle types were compared and indexed accordingly. Gasoline ICE Advanced spark-ignition and auto-clutch transmission. Gasoline ICE Hybrid Gasoline ICE engine with continuously variable transmission plus battery and electric motor in parallel. Diesel ICE Advanced compression ignition engine and auto-clutch transmission. Diesel ICE Hybrid Diesel ICE engine with continuously variable transmission plus battery and electric motor in parallel Hydrogen FC Fuel cell operating on 100 per centcompressed hydrogen with electric drivetrain. Hydrogen FC Hybrid Hydrogen FC with addition of a battery. Gasoline FC Like the Hydrogen FC, but fueled by hydrogen produced by processing gasoline on board (reformer). Gasoline FC Hybrid Gasoline FC with addition of a battery.

251 Kiyotaka Tahara (Seikei University), 2001 http://www.ilea.org/lcas/taharaetal2001.html 252 Heywood, Weiss, Schafer, Bassene, Natarajan, The Performance of Future ICE and Fuel Cell Powered Vehicles and Their Potential Fleet Impact, MIT LFEE 2003-004 RP. December 2003.

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The results of the GHG emissions analysis are given below:

Relative Emissions of Life 2001 REFERENCE 137 Cycle Greenhouse Gases

2020 BASELINE 100 Total GHG emissions GASOLINE ICE 88 reductions are highest with gasoline-electric and diesel- 64 GASOLINE ICE HYBRID electric hybrid drive DIESEL ICE 75 technology.

DIESEL ICE HYBRID 56 The compressed hydrogen HYDROGEN FC 66 used in the FC and FC hybrid

HYDROGEN FC HYBRID 56 options is assumed to be produced by reforming natural GASOLINE FC 81 gas.

GASOLINE FC HYBRID 65

The analysis demonstrates that advanced hybrid-electric vehicles fueled by gasoline and diesel generate fewer GHG emissions than hydrogen fuel-cell vehicles over their full life cycle. These findings are repeated in many studies and they are of major significance considering the level of faith that the public and some policy makers have placed in hydrogen as a technical solution to future energy supply crises and global warming.

Consider the financial savings of a strategy to improve the fuel efficiency of existing technology, versus the expense of establishing an entirely new technology platform, with a supporting infrastructure requiring significant government expense. Also consider that both strategies yield relatively similar results. It seems more advantageous to pursue the easier, low-cost benefits first and invest the savings in more expensive, long-term goals that require new technology development.

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Chapter 8: Picking the Best Route — Considerations for GHG Reductions Through Vehicle Fuel Efficiency and Complimentary Actions

This chapter presents an overview of issues to consider in designing a standard to achieve targeted reductions in greenhouse gas emissions from the light-duty motor vehicle fleet in Canada.

• Section 8.1 discusses different approaches to structuring a standard, with a focus on the selection of a target, how the target is measured, the rules by which a target is achieved and the different aspects of voluntary and regulatory conditions.

• Section 8.2 considers the role of related programs that contribute to the achievement of a target by increasing the use of fuel-efficient vehicles and GHG emissions-reducing technologies and materials.

Review of the Issues

The content of this report has been organized by chapters, each focused on a particular set of issues relating to light-duty vehicles and the standards and programs that have an impact on fuel efficiency and GHG emissions. A summary of some of the report’s main points is listed below:

Chapter 1: Motor vehicle use is a major source of air pollutants and greenhouse gas emissions (contributing to climate change and its projected impacts on human health, air quality, water quality and supply, agriculture, forests and wildlife). Canada’s Kyoto commitment requires action on light-duty vehicle fuel efficiency to reduce GHG emissions.

Chapter 2: CAFE and CAFC standards were introduced in the mid-1970s to improve motor vehicle fuel efficiency. Under CAFE, fleet-average fuel economy was required to be double its pre-CAFE value. While this target was met, the current structure of the standards does not necessarily guarantee increasing levels of fleet-wide fuel efficiency. Manufacturers in Canada and the U.S. can continue to comply with existing standards while overall fuel efficiency declines. This occurs primarily through increasing the market share of light trucks, which are assigned a lower fuel efficiency target.

Chapter 3: Fleet-average vehicle fuel efficiency levels have been on a downward trend for almost 20 years, despite major improvements in engine and drivetrain efficiency during that time. The potential reductions in fuel consumption and GHG emissions from these technical improvements have been traded-off for significant increases in power and weight of the average vehicle.

Chapter 4: If properly designed and implemented, fuel efficiency standards could have the potential to serve as a cost-effective means of encouraging the development of innovative fuel- efficient automobile technologies and improving fleet-wide fuel efficiency and greenhouse gas emissions levels. Historically, such measures have had little negative impact on consumers, the economy, jobs, free market competition and traffic safety.

Chapter 5: Other nations around the world have already taken action by setting near-term vehicle fuel efficiency and GHG emissions reduction standards in their respective automobile markets. These include some of the largest auto-producing jurisdictions in the world, such as Europe and Japan, whose standards will motivate manufacturers to produce the most fuel-efficient fleets in the world, and China, whose market growth is currently the most rapid in the world. Many are

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developing a follow-up round of even stricter standards to meet mid- and long-term goals for targeted reductions of GHG emissions.

Chapter 6: The State of California has set standards that will require manufacturers to implement GHG emissions reducing technologies that are economical to the consumer over a vehicle’s life- cycle. Six states in the northeast U.S. have passed legislation to follow California’s standards, once official, with several more states considering similar actions at the time this report was prepared. This would result in the most advanced automotive technology jurisdictions in North America, and represent approximately 30 per cent of the U.S. market.

Chapter 7: Since the late-1990s, most major studies on the potential for reducing GHG emissions from the North American light-duty vehicle fleet have concluded that near-term gains in fuel efficiency can be cost-effective to consumers and technically manageable for the auto industry. Moreover, these improvements can be achieved using automotive technology that is currently available or is near-market ready and will not require reductions in vehicle weight or performance (although such measures would also contribute to further GHG emission reductions).

Workshop on Structuring an Effective Fuel Efficiency/Greenhouse Gas Emissions Standard for Light-Duty Motor Vehicles in Canada

On January 25, 2005, Pollution Probe hosted a workshop in Toronto, bringing together representatives of government, the auto industry, an auto union, international experts and non- governmental organizations, to delineate and assess the options for structuring a fuel efficiency/ GHG emissions standard for light-duty vehicles in Canada.

Information and ideas were shared at the workshop, during facilitated discussions, regarding the relative merits of different forms of standards. The outcome of the workshop has helped to shape the content and format of this chapter. The intent is to present the various options for structuring a standard and to evaluate them in a way that provides a balanced representation of the views of stakeholders.

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8.1 Developing New Standards

This section presents an overview of the issues to be addressed when developing a vehicle fuel efficiency or GHG emissions standard. Options for structuring a standard are also discussed.

Evaluating a Standard

To evaluate the overall performance of a given standard, there are several aspects to consider253:

Effectiveness

The effectiveness of the standard (and its structure) is primarily measured by its capacity to deliver the intended effect — in this case, reduced GHG emissions from light-duty vehicles.

Efficiency

This can be broken down into two related elements: economic efficiency and administrative efficiency. • Economic efficiency is assessed by considering how closely the cost imposed on society equates to the marginal benefits enjoyed by society as a result of the standard. For example, a standard that improves fuel efficiency may increase manufacturers’ costs and hence the average price of a given vehicle, but this cost may be offset in direct fuel savings for the consumer and in reduced external social costs due to improved air quality and mitigated climate change impacts254. If the offsetting (or marginal) benefits to society are equal to (or greater than) the incremental costs imposed on the use and purchase of more fuel-efficient vehicles, then the standard can generally be considered as economically efficient. • Administrative efficiency is measured according to the level of administrative costs imposed on manufacturers, governments, and possibly consumers, operating under an implemented standard. For the manufacturers, such requirements may affect the costs for reporting, product planning, distribution and marketing. For the government, the standard may require additional funding to run programs of testing, monitoring, reporting and compliance-related activities. For consumers, there may be various program-related requirements (e.g., emissions testing), but this is largely dependent on driver-focused, complimentary aspects of a specific program, separate from the technology focus.

Fair Distribution of Impacts

It is generally agreed that the impact of a standard should be fairly distributed among the manufacturers that supply a given market. Within the context of efficiency or emissions standards, a fair distribution of impacts is defined as one that does not place some existing manufacturers at a significant market disadvantage, while placing others in a significantly advantaged position. Normally, the intent of such standards would be to encourage compliance innovations throughout the market, but not to reward or punish particular manufacturers for their inherent vehicle characteristics or production profiles at the time the standards were implemented. Needless to say, determining a standard that will produce a perfectly “fair”

253 This approach to evaluating standards was presented by David Greene in a presentation at the Pollution Probe Workshop, Structuring an Effective Fuel Efficiency / Greenhouse Gas Emissions Standard for Light-Duty Motor Vehicle Emissions in Canada, in Toronto on January 25, 2005. 254 Recall in section 4.1, where the summarized reports of Greene, Gerard and Lave noted that society may place a greater value on reducing fuel consumption for its external-market benefits, such as cleaner air and climate change impact mitigation, even though an individual vehicle owner would not likely value those reductions beyond the immediate fuel cost savings. Despite this, economic models that estimate the “cost-effective” level of fuel efficiency (see section 7.1) are often based on the value of fuel savings from the perspective of the driver, instead of society.

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distribution of impacts may be difficult, if not impossible. A more realistic approach, therefore, would be to seek to minimize the disproportionate impacts, or to compensate for them.

Side Effects

A standard may produce a range of effects that are ancillary to the primary aim of improving fuel efficiency and GHG emissions levels. These “side effects” may represent positive or negative impacts overall, and could be intentional or unintended based on the structure of the standard. A potential negative effect, for example, could be an increase in toxic emissions following a switch from gasoline to diesel in the pursuit of higher fuel efficiency (a quality inherent to diesel engines). In the case of Canada, of course, fleet-average emissions of toxic pollutants are regulated by other environmental standards, so this side effect is adequately addressed. On the other hand, a standard may have positive side effects, such as overall new job creation due to increased technology content in automobiles.

Political Acceptability

To be successful, a standard must ultimately incorporate a degree of political acceptability. That is, it must be generally accepted that the standard, while not necessarily supported by all stakeholders, is nevertheless realistically achievable. This includes issues of harmonization with other jurisdictions, which may have the potential to expand the size of the market affected by the standard.

Harmony with Societal Norms

A standard that requires actions in opposition to social values and conventions is likely to be rejected by society.

The above six aspects of a standard were presented to the participants at Pollution Probe’s Workshop as a framework to discuss the relative merits of various potential standards, and they will be utilized in this section for the same purpose.

Designing a Standard

At a minimum, three elements are required to design a standard for motor vehicle fuel efficiency and GHG emissions:

1) Baseline — Establishing a baseline is a necessary first step in designing a standard. Without it, targets are meaningless. The better a baseline is defined and understood, the more effective the standard will be. If a baseline is to be selected from a range of vehicle design model years, for example, it would be most ideal to choose a model year for which verified and comprehensive data exist. The choice of baseline may, therefore, be restricted by the information available. A baseline should also be representative of the focus of the standard. If the goal of the standard is to raise the fuel efficiency of passenger cars from their current level, then it is sensible for the target to be based on passenger car fuel efficiency data, rather than data for pickup trucks.

2) Target — Once a baseline is established, a target can be considered. The target must represent the goal to be achieved and the timeframe in which to achieve it. A target that identifies a goal, but makes no reference to the timeframe for achieving the goal, provides little incentive and no way to measure progress towards the goal.

3) Rules for Achieving the Target — This refers to the defining boundaries of activity within which the contributions made towards a target are considered valid. It also refers to how the targets are applied. For example, under a given set of rules, a targeted improvement in fuel

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efficiency may be required of each manufacturer or of the industry as a whole (with no distinction made between manufacturers).

Collectively, these elements comprise the structure of the standard.

Canada’s 25 Per Cent Fuel Efficiency Improvement Target

In the Climate Change Plan for Canada (2002), a 25 per cent improvement in new vehicle fuel efficiency to generate 5.2 Mt of greenhouse gas emissions by 2010 was proposed. The Plan does not specify a baseline, or the rules for achieving the 25 per cent improvement target.

Some possibilities for a baseline include: • The current voluntary CAFC targets for passenger cars and light trucks, • Current levels of fleet-average fuel consumption in the new model year fleets in Canada, • Actual 1990 model year levels of fleet-average fuel consumption (this would be in accordance with the baseline used for the Kyoto Protocol targets; fleet data from that year also show that actual fuel consumption levels are very closely aligned with the CAFC targets), or • Any subsequent model year in which there is sufficient data to establish a baseline for comparisons with future fleet data.

The target is also not clearly defined. “25 per cent by 2010” requires some additional clarification. For example: • Will the targeted improvement be measured according to fuel efficiency (fuel consumption, as with CAFC rules) or by actual GHG emissions reductions (this may require the target to be defined in terms of GHG emissions)? • Should the averages of the year-to-year fuel efficiencies over a given timeframe be measured against the target? • Should a series of progressive targets be phased in over a given timeframe (near-term, mid- term, long-term), or should a single deadline be set for a given model year?

The rules for achieving the target would ideally be defined to most effectively deliver the goals of the standard. Some of the issues to be addressed include: • Should each manufacturer be required to improve its particular fleet by 25 per cent from individually specified baselines, or is an absolute, common target for the entire industry more effective? • How should “new vehicles” be defined under this standard? Should the distinction between passenger cars and light trucks be removed? Should targets be differently defined according to vehicle types or attributes? • What provision exists for updating the targets, as required, to meet new challenges?

Depending on how the 25 per cent target is structured, a variety of different impacts can result. For example, if the baseline selected were the 1990 CAFC targets, then the actual proposed targets for 2010 would be 6.45 L/100 km for passenger cars and 8.55 L/100 km for light trucks, as illustrated below.

1990 Proposed 2010

CAFC Baseline Targets

Passenger Cars: 8.6 L/100 km 6.45 L/100 km Æ 25% reduction Æ Light Trucks: 11.4 L/100 km 8.55 L/100 km

If the baseline selected were 2003 levels instead, using estimated CAFC levels from Transport Canada, the same 25 target would offer greater reductions in fuel consumption, as illustrated below.

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2003 Proposed 2010

CAFC Baseline Targets

Passenger Cars: 7.4 L/100 km 5.55 L/100 km Æ 25% reduction Æ Light Trucks: 10.6 L/100 km 7.95 L/100 km

As shown, different baselines can alter the final target in absolute terms.

The structure of the standard can also alter the final results. The above charts illustrate the target based on the two-tier system (i.e., separate targets for passenger cars and light trucks). However, this approach makes no provision for the possibility that the light truck market share may increase by 2010. In such a situation, while both the car and truck fleets may both achieve the 25% target, there is no guarantee that the combined fleet of cars and trucks would show an equivalent improvement. If, for example, all sales in 2010 consisted of vehicles classified as light trucks, there might be net-zero reductions in fuel consumption and GHG emissions for the Canadian fleet as a whole. However, if the same 25% target were applied to a one-tier system then the average fuel efficiency of the fleet as a whole should be improved by 25 by 2010.

From this discussion, it is clear that a proposed standard must clearly define the baseline, the target and the rules for achieving the target. Moreover, the magnitude of the improvement actually delivered by the target may be dependent on additional variables, such as an increasing portion of new vehicle models classified as light trucks, and increasing sales thereof.

Next, a more in-depth discussion is presented on possible options for the structure of a standard.

Options for Structuring a Standard

There are numerous options for structuring vehicle fuel efficiency or GHG emissions standards. As explained earlier, the structure of the standard is composed of baselines, targets and rules for achieving the target. The following options present some basic approaches to structuring a standard:

1. Sales-Weighted Harmonic Average with a Common Target (CAFE/CAFC-Style), 2. Uniform Percentage Improvement (UPI), and 3. Attribute-Based (weight, size, other).

By no means do these comprise the complete range of possible options, but they serve to illustrate the important role of the structure of a standard in determining its impact and effects255. Each of these options is presented below in the context of a hypothetical marketplace supplied by three manufacturers with distinct characteristics.

It should be noted that without real vehicle fleet data, it is impossible to conduct an accurate quantitative analysis on the effectiveness, efficiency, distribution of impacts, or side effects of a standard, as defined at the beginning of this section under Evaluating a Standard. This would require comprehensive fleet data, the establishment of technology cost curves and the modeling of various economic factors to estimate the impacts of a standard on the fleet and the manufacturers.

It is possible, however, to conduct a general, qualitative review of each of these standards for their relative effectiveness (how well the intended improvements are delivered) and the fairness with which the impacts are distributed, given the hypothetical conditions described. These discussions should not be considered as definitive conclusions or recommendations for different

255 These were the options discussed at Pollution Probe’s Workshop; see appendix E.

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structures of a standard — their relative merits will be highly dependent on actual fleet characteristics and real marketplace dynamics.

Before analyzing these options, it is helpful to review how manufacturers can improve the average fuel efficiency of their fleets. They can improve the technology and design of the vehicles in their fleets, or they can shift their sales mix towards more fuel-efficient vehicles that already exist in their fleets. Consider also, that a standard can be designed to allow manufacturers to pursue a multitude of options to improve their fleet-wide efficiency and GHG emissions levels. In this way, each manufacturer is free to choose the technology pathways and vehicle design characteristics that best fit its respective marketing strategies and competitive strengths. As said earlier, a perfectly equitable distribution of impacts may be ideal, but given the extent of product diversity among various manufacturers’ products, a more realistic goal may be to minimize the potential for disproportionate impacts.

With these issues in mind, the above-listed three options for structuring a standard are presented below.

1. Sales-Weighted Harmonic Average with a Common Target (CAFE/CAFC-Style)

As described in detail in chapter 2, CAFE and CAFC standards base compliance with targets on the sales-weighted harmonic average256 of all vehicles for a given model year sold by a manufacturer in each of its distinct fleets (i.e., passenger car, light-duty truck). Technically, a fleet-average calculation can be used to measure a manufacturer’s compliance with a given target under many different standards. Thus, the defining quality of the existing CAFE and CAFC standard is the fact that all manufacturers are subject to a single, common target.

One of the persisting criticisms of CAFE and CAFC is that the structure of the standards fails to recognize inherent differences among manufacturers’ fleets. At the time CAFE standards were implemented, for example, the Japanese manufacturers were primarily marketing economy- priced automobiles that were small, light and very fuel efficient. Conversely, North American manufacturers were focused on sales of larger and more luxurious passenger cars, which were also less fuel efficient. The result: North American manufacturers had to improve their fleet- average fuel efficiency levels by a greater degree than the Japanese. In fact, since Honda’s fleet was more efficient in 1975 than the 1985 targets required, its fleet-average was permitted to decline in a period when its North American competitors were busy increasing their efficiency levels257. Contrary to this criticism, others perceive it as rewarding the manufacturers that are producing the most fuel-efficient vehicles in the first place.

Consider the following chart, representing fleet-average fuel consumption levels for three hypothetical manufacturers (lower L/100 km value is more efficient). Each manufacturer begins from a different level of fleet-average fuel consumption, with manufacturer A’s fleet consuming the most fuel and manufacturer C’s fleet consuming the least. The upper horizontal line represents the fuel consumption level of all three manufacturers averaged together. Using this value as an arbitrary baseline, a 25 per cent reduction in fuel consumption is applied to give a new fleet-average fuel consumption target, which is identified by the lower horizontal line. As currently structured under CAFC, each manufacturer is responsible for meeting this target.

256 Harmonic average is the mean of a set of positive variables, calculated by dividing the number of observations by the reciprocal of each number in a series. To illustrate, consider a series of two numbers, 10 and 20. The arithmetic mean is calculated as follows: (10 + 20) / 2 = 15. The harmonic mean (average) is calculated as follows: 2 / (1/10 + 1/20) = 13.3. Useful in expressing ratios of occurrences of specific values in a series of data. For example, If a car travels at the rate of x miles per hour from point A to point B, and then returns at the rate of y miles per hour, the average rate for the trip is the harmonic mean (average) of x and y. 257 See Company-Specific Fuel Economy Trends (charts) at the end of section 3.2

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Reductions Under a Common Target Approach (CAFE/CAFC-Style)

Fleet-Average Fuel Consumption

9.0 Current fleet- 8.0 average fuel consumption level 7.0 25% 6.0 reduction

5.0 Target fleet- averagefuel consumption fuel 4.0 consumption level L/100 km

3.0

Increasing Difficulty / Cost 2.0

1.0

0.0 ABC Manufacturers

Analysis

Effectiveness: This structure can effectively deliver the intended reductions in fuel consumption, given that the common target is set at 25 per cent below the current overall fleet-average, and assuming that all manufacturers meet or exceed the common target. Even if one were to remove a manufacturer from this example, with the market serviced by the remaining two, the target would still apply and deliver the intended reductions.

Fairness of Impact: The impacts may not be equal for each manufacturer under this structure. The target appears to require a greater change in the overall design of the fleets of manufacturers A and B, possibly at more significant cost since their baseline fuel consumption levels are higher. It appears that less is required of manufacturer C to comply with the standards since its baseline is closer to the target.

However, the standard may still generate as much of a challenge for manufacturer C as for A and B. Assume that competitive market forces have led the manufacturers to strategically occupy the positions shown in the chart. It may, therefore, be part of manufacturer C’s competitive strategy to market products that are more fuel efficient than those of A or B. If so, manufacturer C may feel compelled to reduce fleet-average fuel consumption beyond the required target to maintain product differentiation with its competitors.

There may also be various reasons why the fuel consumption averages of the manufacturers’ fleets are so different. For example, manufacturer A’s high fuel consumption level could be due to a fleet-mix that is dominated by larger and heavier vehicles, or it could be due to less sophisticated technology content and vehicle design (or a combination of both). If manufacturer A already utilizes leading-edge technology that delivers high drivetrain efficiency, but its fleet is heavy, then its compliance options may narrow, requiring a shift to a smaller, lighter fleet to achieve the target. Alternatively, if manufacturer A’s fleet could be upgraded to include more fuel- efficient technology, then compliance may result in increased technology costs.

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Though the distribution of impacts may appear unfair, it could also be argued that under this structure the leaders in fuel consumption levels are “fairly” rewarded by requiring of them only moderate improvements, while those lagging in fuel consumption levels are “fairly” punished for failing to observe the need to reduce fuel consumption levels in their fleets.

2. Uniform Percentage Improvement (UPI)

Under a Uniform Percentage Improvement (UPI) structure, a proportional improvement in fuel consumption level (i.e., reduction) is required of each manufacturer, measured as a percentage reduction from a chosen baseline. To illustrate one form of a UPI structure, the three manufacturers are subjected to a 25 per cent reduction from their existing fleet-average fuel consumption levels. As with the Common Target approach described previously, the magnitude of the fuel consumption reductions are different for each manufacturer, but less so under UPI. The following chart, demonstrates how the targets would be applied.

Reductions Under a UPI Approach

Fleet-Average Fuel Consumption

9.0 Current fleet- 8.0 average fuel 2.1 consumption level 7.0 1.9 25% 6.0 reduction 1.5 5.0 Targetfuel consumption fleet- 4.0 averagetarget fuel L/100 km consumption level 3.0

Increasing Difficulty / Cost 2.0

1.0

0.0 ABC Manufacturers

Analysis

Effectiveness: The intended reductions in overall fuel consumption cannot necessarily be guaranteed under a simple UPI structure, even if all of the manufacturers achieve their individual targets. If it were certain that each manufacturer would retain its respective market share, while meeting the targeted reduction, the standard would have the intended effect. Assume, for example, that manufacture A, B and C all achieve their 25 per cent target for average fuel consumption reductions. Also assume that manufacturer A’s market share rises, while manufacture C’s market share drops. In this situation, the overall fleet average (the combination of manufacturers A, B and C) could increase, even though each manufacturer has achieved its target. In other words, manufacturer C’s influence over the market-wide fuel consumption levels is marginalized as its marketshare declines.

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Conversely, it might be just as possible that manufacture A’s market influence may shrink, resulting in market-wide fuel consumption improvements that are much greater than expected. Unlike the CAFE-style common target, the actual reductions in fuel consumption generated by the UPI standard cannot be known for certain.

Fairness of Impact: From the above chart, it appears that the UPI’s distribution of impacts could be inherently more fair than the previously analyzed common-target approach in at least one regard: the structure requires each manufacturer to improve by a proportionally similar degree. This respects the differences among the manufacturers’ fleets characteristics and their resulting fuel consumption levels.

The UPI structure could be perceived as punishing the leaders in fuel efficiency with more stringent targets, while handing the others a break. In this case, there is an assumption that the market leader in fuel-efficient vehicles (manufacturer C) has implemented all the “low-hanging fruit” options and now must implement additional technology – possibly at a higher cost – to achieve its target, while the others (manufacturers A and B) can simply apply technologies already developed (perhaps due to manufacturer C’s pioneering efforts).

To determine the validity of this claim, it would be necessary to ascertain the reasons for the differences in fuel consumption levels among the manufacturers’ fleets. It is possible, for example, if the drivetrain efficiency is similar across the market, that fuel consumption differences among the manufacturers’ fleets may be mainly due to vehicle weight. In this case, the UPI structure might appear more fair, as the targets can be met through similar technical improvements by all manufacturers. This would not necessarily require sales mix shifts, and thus would impact the competitive dispositions of the manufacturers to the least degree. In other words, the targeted reductions under a UPI structure could have the potential to be invisible to competitive activities and forces within the market

The UPI structure may also be criticized as unfair to some manufacturers, as it may lock a manufacturer’s future market share ambitions to a past model year baseline. Assume, for example, that manufacturer A’s higher fuel consumption level is due to its greater share of the larger, heavier, more luxurious and, hence, more profitable vehicle class. Suppose that manufacturer C – whose fleet is mainly composed of small, light economy-priced cars – aims to expand its marketshare into the heavier, luxury-priced vehicles. The UPI target may represent a barrier to these plans since manufacturer C is tied to a lower initial baseline than manufacturer A. This may grant manufacture A an advantage in the luxury class market.

3. Vehicle Attribute-Based

As discussed throughout this report, there are many vehicle attributes that contribute to a vehicle’s overall fuel efficiency — both directly and indirectly. Weight and power are examples of directly-contributing attributes. Vehicle size is less directly related. Plotting arbitrary measures of vehicle size, such as interior volume or wheelbase x trackwidth, against fuel consumption in the current North American fleet also shows a general trend of larger vehicles consuming more fuel — although there is greater variation than with weight-based standards.

Since these vehicle attributes are related to fuel efficiency, and often represent how consumers differentiate vehicle types, they can be used as the basis for a fuel consumption standard. Plotkin, Greene and Duleep258 described the idea of the attribute-based standard as follows:

“The general concept behind such standards is that consumers should be able to choose the type of vehicle they want, but that the vehicle should be as efficient as others in the fleet for the type of vehicle it is.”

258 Examining the Potential for Voluntary Fuel Economy Standards in the United States and Canada, Plotkin, Greene, Duleep, 2002, pp. 81.

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Defining a vehicle attribute that fairly delineates among manufacturers’ fleets in terms of impact, and delivers absolute reductions in fuel consumption within the market, could be exceedingly difficult and may generate a host of unintended and undesirable side effects.

Consider, for example, a weight-based standard. There are two basic ways to set up a weight- based standard: incremental weight-class and continuous weight-class, as depicted below.

Incremental Weight-Class Continuous Weight-Class

Increasing Fuel Increasing Fuel Consumption Consumption Baseline Baseline

Target Target

Increasing Increasing Weight Weight

The incremental structure divides the range of vehicle weight ratings into discrete categories, or weight-classes (e.g., 1,000 – 1,249 kg, 1,250 – 1,500 kg, and so on). In selecting a baseline, the fleet-average fuel consumption within a given weight-class for a given model year could be used. Each weight class is then given a target for reducing fuel consumption.

The continuous structure establishes a relationship between vehicle weight and fuel consumption in a given model year and plots this function as the baseline. The target can represent the same function, transposed downwards to represent the intended reductions in fuel consumption.

Both structures permit some variation in the stringency of the target across the entire weight- range if it is determined that some weight-classes require more improvement than others (discussed further in Combined and Adjusted Standards, below).

Analysis

Effectiveness: The intended reductions in overall fuel consumption cannot be guaranteed under the weight-based approach. Unlike the CAFE-style common target and the UPI approaches, a manufacturer’s fleet is not subject to an overall target under simple weight-based structures. This is because the structure has no inherent measure to prevent a manufacturer from scaling the weight of its entire fleet upward, which could result in higher fuel consumption levels.

The incremental weight-based structure might arguably encourage weight increases in some vehicles. If, for example, a vehicle happens to be on the high-end of a weight-class, and is impairing the ability of the manufacturer to meet the target for that weight class, it may be possible to increase the vehicle’s weight rating enough to move it into the next adjacent (heavier) weight-class, and thus be subject to a higher (less stringent) fuel consumption target. Transferring a vehicle from a lighter class to a heavier class may allow the manufacturer to meet its target in both the lighter and heavier weight-classes, but it has not contributed to an overall reduction in fuel consumption.

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The continuous weight-based structure addresses this issue by continually varying the fuel consumption target with vehicle weight. In this way, altering vehicle weight does not necessarily serve as a compliance strategy for manufacturers.

Of course, such considerations are only hypothetical. There is no way to determine the likelihood that a manufacturer might increase a vehicle’s weight rating from its optimal range simply to comply with efficiency standards. Certainly, it would not seem an ideal route from an engineering standpoint.

Fairness of Impact: This approach recognizes that vehicle weight is a direct factor in fuel consumption, and that some manufacturers are heavily invested in producing heavier vehicles. In order to avoid unfair impacts on the sales mix of such manufacturers, this approach assigns a fuel consumption target based on vehicle weight.

The main issue is that the above weight-based structures remove any incentive for reducing vehicle weight as a compliance strategy259. Furthermore, the structure removes the need to meet fuel consumption targets through a fleet-averaging of lighter, more fuel-efficient vehicles and heavier, less fuel-efficient vehicles.

Consider, however, the market implications if some manufacturers were to retreat from the smaller, lighter vehicle market, as permitted under the weight-based structure. The companies that remain would effectively capture the small vehicle market – which is dominated by first-time buyers. Assuming a degree of customer loyalty and some favourable trade-up incentives, the small vehicle manufacturers could use their advantaged position to capture more of the large vehicle market.

Regardless of these speculations, the remaining appeal of the weight-based structure is that it forces all fuel efficiency improvements to be achieved solely through vehicle technology. Sales mix-shifting does not play a significant role.

Other Vehicle Attribute Issues to Consider

Weight is just one of many vehicle attributes around which to structure a standard. As explained in section 5.2 of this report, the NHTSA has considered many such vehicle variables, including “vehicle shadow” (the total area of the vehicle projected onto the ground), wheelbase x trackwidth, and interior volume. Standards based on these attributes will also vary in effectiveness and generate side effects that must be thoroughly considered.

The inherent problem with many attribute-based standards is that the attributes are selected for their strong correlation with fuel efficiency. By basing a fuel efficiency target on a given attribute, varying that attribute is effectively eliminated as a way to improve fuel efficiency. This limits the options available to the manufacturer for compliance, instead of providing added flexibility.

A vehicle may be defined according to its use. Most passenger cars are primarily used to transport people to and from a place of work on a daily basis. Many pickup trucks are primarily used to haul heavy loads. Under existing CAFE/CAFC standards, the pickup truck fleet is assigned a higher fuel consumption target (in recognition of most trucks’ heavier construction) than the target assigned to the passenger car fleet.

Given this, it could be argued that a lower target should be assigned to any vehicle primarily used to transport one person on daily commutes, and a higher target assigned to any vehicle hauling heavy loads. The problem is that many pickup trucks, and those vehicles grouped with pickup

259 For more discussion on weight-class standards, see section 5.1 (Japanese and Chinese standards) and Appendix D.

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trucks (minivans, SUVs, XUVs), are primarily used for commuting and not for hauling heavy loads.

However difficult, it may be worthy of determining some measure, or combination of measures, that would clearly define the primary use of the vehicle as an attribute on which to base a standard260.

Combined and Adjusted Standards

As explained earlier, the options discussed above are only a sample of the many possibilities available for structuring a standard. Moreover, elements of different standards can be combined to maximize their effectiveness. For example, weight-based standards may have a certain appeal for some manufacturers, but they provide no inherent guarantee against increasing sales of heavier, less efficient vehicles. One possible solution is to combine a CAFE-style common target applied to the whole industry, which guarantees the required fleet-wide reductions in fuel consumption, with a weight-based standard for each manufacturer, providing them with added flexibility.

Standards could also be subject to certain “adjustments” to improve their overall performance. For example, a weight-based fuel consumption standard, such as the one described above, could be designed with a built-in adjustment factor that increases the stringency of the target at the heavier end of the scale. This adjustment factor could be increased from time to time to ensure that the heaviest vehicles are subject to more stringent fuel consumption targets, thereby encouraging use of the most fuel-efficient technologies in the heaviest vehicles.

The point is that in designing a standard, the choices are not limited to simply one structure or another — various combinations and adjustments to the basic approaches are possible.

Metrics and Constraints

Three options for structuring a standard have been discussed: Sales-Weighted Harmonic Average — A Common Target (CAFE / CAFC-Style), Uniform Percentage Improvement (UPI) and Vehicle Attribute-Based Standards. These approaches comprise one part of a structure, and in this report are referred to as metrics. Metrics describe the nature of the targeted fuel efficiency improvement and how it is measured (i.e., an absolute target, a percentage improvement from a baseline, etc.). To complete a structure’s description, the constraints must be identified. Constraints determine how the metric is applied to a manufacturer’s fleet.

For example, under the CAFC standard, the metric is the sales-weighted harmonic average fuel consumption level of vehicles in a manufacturer’s fleet. The constraint dictates that the manufacturer’s sales of passenger cars comprise one fleet, sales of light trucks comprise a second fleet and each are measured according to the metric.

In a study conducted by Argonne National Laboratories [Examining the Potential for Voluntary Fuel Economy Standards in the United States and Canada, Plotkin, Greene, Duleep, 2002], the impact of metrics and constraints (e.g., structure) on a target was notionally evaluated. The study considered a hypothetical fuel economy target measured according to the following three metrics:

260 See section 5.1, under NHTSA – CAFE Program Reform, in which the ratio of passenger compartment space to cargo carrying space is suggested as a means to evaluate a vehicle’s primary use.

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Metrics • Sales-weighted Harmonic Mean MPG (miles per gallon) Standard • Uniform Percentage Increase (UPI) Level • Weight-Based Fuel Consumption Formula — Fuel consumption adjusted for vehicle weight and drivetrain efficiency (a modified continuous weight-based standard).

To each metric, four constraints261 were applied, as follows:

Constraints • Industry-Wide Constraint — A single target applied to the industry as a single fleet. • Industry-Wide Vehicle Type Constraints — Separate targets for cars and trucks. • Manufacturer-Specific Constraints — Target applied to each manufacturer’s fleet. • Manufacturer-Vehicle Type Constraints — Combination of the previous two; equivalent targets applied to manufacturers’ fleets of cars and trucks, separately.

Two targets — 20 per cent and 33 per cent increases in fuel economy — were modeled under the three metrics, each subject to the four constraints. Interestingly, no one metric or system of constraints emerged as significantly more effective in achieving the targeted fuel economy increase, or more economically fair among the manufacturers. However, some slight variations were evident:

• Sales-weighted Harmonic Mean MPG — For this metric, Industry Wide Constraints were least efficient. • Uniform Percentage Increase (UPI) Level — This approach was as effective, or more effective, than MPG Standards. • Weight-Based Fuel Consumption Formula — Under limited analysis, it appeared that Weight-Based Standards were the most costly approach, with non-equalized impacts on manufacturers.

The model also indicated that manufacturers disadvantaged under the UPI metrics benefited under the MPG metric (and vice versa). These were evident, albeit slight, variations in the effectiveness of the standards.

Overall, the researchers cautioned against using their study as a definitive evaluation of different structures for fuel economy standards. It is presented here mainly to illustrate that tools exist to help develop and evaluate different policy options for vehicle fuel efficiency and GHG emissions standards.

The metrics and constraints of a standard can have a significant impact on its effectiveness in achieving the targets. Under CAFE and CAFC’s two-tiered system, separating the car and truck fleets has contributed to an overall decline in the average fuel efficiency of the combined fleet. In Europe, the GHG emissions reduction metric as negotiated with industry is not applied to each manufacturer individually, but constrains entire sector groups to the metric as common fleets (specifically ACEA, JAMA and KAMA — see section 5.1). The extent to which this standard effectively, efficiently and fairly delivers the intended emissions reductions remains to be seen. The following chart illustrates how standards from different jurisdictions around the world fit under the above descriptions of metrics and constraints.

261 In fact, five constraints were modeled in the Argonne study; the fifth dealing with the U.S. split between domestic and foreign vehicle fleets. Since this is not an issue in Canada, it is disregarded in this report.

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Metric Constraint Common Target UPI Attribute-based Industry-Wide European Union Industry-Wide by Vehicle Type Japan Manufacturer-Specific Australia Manufacturer-Specific by Vehicle Type U.S., Canada, California Japan, China

Mandatory and Voluntary Standards

The choice between mandatory and voluntary standards may have broad implications for both government and industry. In developing a standard through legislation, the government may take upon itself a certain amount of responsibility for ensuring the targets are met. In the U.S., running the CAFE program requires a staff and budget to test vehicles, collect and analyze data, consult with industry, prepare recommendations for the Secretary of Transportation, and assign and collect fines. In Canada, where CAFC target are met voluntarily, the administrative overhead for government is minimal.

Furthermore, fines don’t necessarily guarantee compliance. Many foreign automakers routinely pay the U.S. government fines for failing CAFE standards, considering the fines a cost of doing business in the U.S. At the same time, if a voluntary commitment is not met, the government is left with few options to impose corrective actions on industry.

Several options can be considered that don’t constitute industry regulation, but may lend added seriousness to a voluntary commitment, including:

Backstop legislation — Have a pre-set legislation option to proclaim if voluntary measures fail. The threat of legislated actions may ensure that industry maintains rigorous compliance with voluntary targets. Enabling legislation — In the U.S., the Energy Policy and Conservation Act set a CAFE target for passenger cars of 27.5 mpg in writing, and was thus a very direct piece of legislation. A less direct piece of legislation was California Assembly Bill 1493 (Pavley), which compelled state agencies to engage in a process to determine an appropriate target for vehicle GHG emissions, given certain constraints outlined in the Bill. This provides an opportunity for all stakeholders to engage in the process of developing a standard. Complimentary legislation — Should government wish to develop a standard in the future, having access to a sufficiently comprehensive set of historic industry data with respect to vehicle attributes, emissions and fuel efficiency, would be of great value. Such information could help the government devise an effective set of policy options. Legislation that provides for the submission of comprehensive vehicle and fleet attribute data could facilitate future analysis and policy development.

There is a concern, particularly on the part of the auto industry, that if government regulates a vehicle performance characteristic, such as fuel efficiency or GHG emissions, targets may be set that are unrealistic, creating market distortions and undermining the good faith efforts of industry. Generally, this has not been the case in the past. When regulating emissions standards for vehicles, for example, U.S. regulators have usually overestimated the cost of implementing technologies required to meet their targets262.

262 The following studies provide some background on this issue, and are suggested for further reading. Falling Prices – Cost of Complying with Environmental Regulations Almost Always Less than Advertised, Hodges, Economic Policy Institute. Comparison of EPA and Other Estimates of Mobile Source Rule Costs to Actual Price Changes, Anderson, Sherwood, Office of Transportation and Air Quality, U.S. EPA The Price of Regulation, Sperling, Institute of Transportation Studies, University of California

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With respect to fuel efficiency standards, recall from section 4.1 that the National Academy of Sciences Committee concluded that CAFE had not significantly impacted the auto industry in terms of competitiveness and financial health.

Monitoring and Reporting

Comprehensive data on individual vehicle attributes and fleet characteristics that relate to fuel efficiency and GHG emissions are necessary to monitor the progress of industry towards a target — be it a voluntary or legislated target. Such data can also help to model different standards and to determine the most promising options for reducing fuel consumption and GHG emissions effectively and efficiently. In addition, now that the Kyoto Protocol is in force, Canada will require additional data in order to meet its international requirements for reporting GHG emissions.

A new standard will need to be specific about reporting requirements. Due consideration should be given to the types of data required for analysis when developing options for a standard.

Harmonization of Standards

Generally speaking, harmonizing standards implies that two or more jurisdictions observe the same set of rules and restrictions that govern a particular product or activity. Ideally, this spreads the cost impact of compliance across a larger base, such that fewer economic and market distortions occur across jurisdictional boundaries.

CAFE and CAFC standards are said to be “harmonized”, because they represent the same targets for fleet-average fuel efficiency. But this refers only to the target values. This does not translate into the same level of stringency for Canadian and U.S. fleets. As discussed in section 3.2, fleet-average fuel consumption in Canada is significantly lower than the standards currently require for passenger cars and light trucks. Therefore, it can be said that CAFC is not binding on the Canadian fleet. Meanwhile, the U.S. car and truck fleets track very closely with the required standards, suggesting that CAFE is binding on manufacturers in that jurisdiction.

If the effect of CAFC in Canada is different from the effect of CAFE in the U.S., it could be argued that true harmonization does not exist. The Canadian fleet mix is different from that in the U.S., due to a variety of reasons. Were CAFC to have a similar binding effect on the fleet in Canada as that of CAFE in the U.S., the targets would technically need to be altered to generate the equivalent effect on the fleet.

From the automobile industry’s perspective, the ideal effect of harmonizing jurisdictional standards is to broaden the market for their products and technology. This would require that standards be set in each jurisdiction such that, given the relative differences in consumer preferences and fleet mix distinct to each jurisdiction, the entire market makes purchases from the same vehicle technology platforms. In other words, manufacturers need not develop different vehicle technologies and designs for each jurisdiction.

Consider the hypothetical case of “harmonizing” CAFC standards with the proposed vehicle GHG emissions regulations in California. There are two interpretations of what harmonization might mean.

1. Apply the California Targets to Canada’s Fleet. Canada’s fleet-average emissions are lower than those of California. Since the fleet baselines for California and Canada are not equivalent, the target would not require the same degree of improvement in Canada as it will in California. As such, the penetration of advanced automotive technology may not be as complete in Canada as in California when the targets are achieved. From the perspective of

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the automaker, this could represent two distinct vehicle markets — with one requiring more advanced technology than the other.

2. Apply the California Method for Determining Standards. CARB applied a complex model to determine the maximum feasible and cost-effective level of GHG emissions reductions for its unique fleet. Applying the same model to the Canadian fleet, with its distinct fleet baseline characteristics and fuel prices would result in a different GHG emissions reduction target (probably lower in Canada), but it would require similar vehicle technology. Though Canada and California may continue to purchase a different mix of vehicles, the technology required to meet their respective targets would be the same. In this sense, applying the California approach to both fleets presents manufacturers with a more contiguous market for automotive technology. Hence the jurisdictions can be considered more “harmonized”, in terms of the market conditions generated by the standards.

Effectiveness of Standards Over Time

The duration of the effectiveness of a standard may be limited. CAFE and CAFC standards appeared to deliver terrific improvement in fleet-average fuel efficiency for the first ten years, after which fuel efficiency began to decline. As explained earlier, this was due to the increased sales of vehicles classified as light trucks, where fleet-average fuel efficiency targets were not as high as for passenger cars. It could be argued that the market adapted to CAFE and CAFC standards in such a way as to circumvent the implicit restrictions on sales of gas guzzling vehicles.

If true, this could indicate that there is a need to review the effectiveness of standards periodically and make the required adjustments to continue to ensure that technology and vehicle innovations deliver better fuel efficiency and reduced GHG emissions, as well as consumer satisfaction.

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8.2 Programs to Support Motor Vehicle Fuel Efficiency/GHG Emissions Standards

This section presents some options that may be considered as part of, or in support of, vehicle fuel efficiency or greenhouse gas emissions standards. Often referred to as “complimentary measures”, they aim to create conditions that align consumer awareness and expectations with the goals of the standard.

Creating a Receptive Market for Fuel-Efficient Vehicles

Manufacturers may build fuel-efficient vehicles, but if they are not sold and used, fuel efficiency or GHG emissions targets will not be achieved. Hence, supportive programs that promote understanding and encourage the use of fuel-efficient and low-GHG emitting vehicles are key to a successful standard. Programs will also be required to take advantage of the opportunities that early action on fuel efficiency measures offers Canadian industry. • What is the best approach to public education and outreach to encourage the purchase and use of the most fuel-efficient vehicles that will serve their primary needs? • What incentives can be used to support the purchase of the most fuel-efficient vehicles? • What is the most effective and fair way to discourage the use of gas-guzzlers?

Vehicle Usage Measures to Compliment Fuel-Efficiency Standards

Fuel efficiency and emission standards are very important to reducing GHG emissions, but personal driving and maintenance habits also play a large role.

• Initiatives to support the greater use of public transit would ease traffic congestion and reduce the emissions associated with thousands of cars idling each day on the nation’s highways. • Speed limits also have a tremendous impact on fuel consumption and emissions. In 1974, the U.S. imposed the national 55 mph speed limit as a fuel conservation measure (55 mph is a fairly efficient cruising speed). • Driver education programs can be designed with a heavy emphasis on fuel-efficient driving and vehicle maintenance techniques (as in some European countries). • Driver information devices could be required on new vehicles, indicating real-time fuel economy levels and reminding the driver when to shift gears for maximum efficiency. • Integrated starter-generator technology could be required on new vehicles to eliminate idling emissions. • Gas-guzzler taxes could be overhauled, at the federal and provincial levels, with a focus on higher penalties for inefficient vehicles and tax rebates for purchasing highly efficient vehicles. • Purchase assistance/incentives can help increase the rate of market penetration of efficient vehicle technology — particularly technologies that represent a high incremental cost, such as hybrid-electric drivetrains. There is a host of complimentary measures that will be required to reinforce and build upon the gains made by fuel economy standards alone.

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Building Domestic Capacity to Serve Global Demand for Fuel-Efficient and Low GHG-Emitting Vehicles

Motor vehicle fuel efficiency and GHG emissions standards could be designed to help establish Canadian industry as an exporter of advanced automotive materials and technologies. The global market for fuel-efficient vehicle technology will continue to grow over the next few decades as the imperative to reduce GHG emissions becomes more binding on society and as countries increase their efforts to deal with air pollution. In a world in which most major economic regions are either considering motor vehicle fuel efficiency standards or have already implemented them, Canada should consider ways to link with (and supply to) these markets. In short, vehicle fuel efficiency standards not only serve social, economic and environmental interests, but also help build Canada’s international competitiveness.

If Canada chooses to participate in the growing market for fuel-efficient vehicles, of which it will itself be a part, the questions become:

• How can it maximize its role and value to supply that market? • Are there policies or strategies that can help Canada build upon its capacity to serve the global demand for a new generation of vehicles? • How can Canada optimize its net environmental and economic gains under this scenario?

These questions should be considered as part the implementation of new vehicle fuel efficiency standards. In supporting the development of the auto industry’s capacity to thrive in such a market, government may have a part to play.

• What financial instruments could be designed to reward industry investment in Canada that builds domestic expertise in the design and manufacture of a fuel-efficient generation of vehicles and vehicle components? • How could these technologies be “spun-off” into similar improvements in the heavy transport industry, and perhaps even the residential and commercial energy generation and equipment sectors? • How could off-road and recreational vehicles benefit from advancements in energy-efficient automotive technology?

Any move that helps to build Canada’s capacity to design, build and export energy-efficient technology, whether it applies to vehicles, power conversion systems, structural and mechanical materials or expert knowledge, will pay dividends in increasing Canada’s competitiveness on the international stage.

Concluding Comments

Pollution Probe is pleased to have prepared this review of fuel efficiency options for reducing vehicle GHG emissions. We believe that Canada can design an effective fuel efficiency standard. This report has focused on technological feasibility and on various options for structuring a standard. Future work will focus on a more detailed analysis of the options and on the types of complimentary measures that should accompany various options.

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Appendix A: Motor Vehicle Emissions — Air Pollution and Climate Change

Carbon dioxide, CO2, is the predominant emission from gasoline and diesel-powered vehicles and is the main greenhouse gas generated by the light-duty vehicle fleet. However, additional chemical compounds are produced by vehicles that also affect human health. These emissions are either toxic, contribute to the formation of smog, or both, and are thus referred to as air pollutants. Before scientists began studying the relationship between increased CO2 levels in the atmosphere and the global warming trend, air pollution was the primary focus of vehicle emission standards.

In section 3.1 (under Fuel Energy and the Internal Combustion Engine), the chemistry of combustion was briefly introduced and the main families of emissions from motor vehicles were described. Recall that in all internal combustion engines, air is mixed with fuel and combusted to generate heat and pressure, which is converted to mechanical work. However, in addition to the products of combustion, other hazardous emissions are generated through the use of automobiles, including evaporative emissions from the vehicle, emissions associated with air conditioning systems, and emissions associated with fuel and automotive component production (called upstream emissions). These emission families are summarized as follows:

Primary Emissions (emitted directly from vehicle)

Carbon Dioxide (CO2) – CO2 is the most significant vehicle emission, by weight. It is the most predominant GHG and it persists in the atmosphere for about 150 years. As CO2 levels increase in the atmosphere, there is a resulting increase in global average temperatures. Over the next few decades, increases in CO2 in the atmosphere are expected to lead to dramatic changes in the global climate, including rising sea levels, warmer temperatures, increased drought, more extreme weather events and impacts on human health. The increases in temperature caused by global warming can exacerbate the formation of smog and compound poor air quality conditions. Volatile Organic Compounds (VOCs) – Unburned or partially burned fuel that can be both toxic and carcinogenic. In automotive terms, VOCs are often referred to as hydrocarbons (HC). VOC emissions can occur in a variety of HC arrangements, such as methane (CH4) and formaldehyde (HCHO), each with its own toxic or heat-trapping properties. VOCs react with NOX in the presence of sunlight and heat to form ground-level ozone (O3), which is both toxic and a major component of smog. CH4 is also a powerful GHG.

Oxides of Nitrogen (NOX) – Under the high pressure and temperature conditions of a typical engine, nitrogen and oxygen in the air combine to form NOX. This reacts with VOCs in the presence of sunlight and heat to form ground-level ozone (O3), which is both toxic and a major component of smog. NOX in the form of nitrous oxide (N2O) can also be a powerful GHG. Carbon Monoxide (CO) – Forms in the engine as a result of incomplete combustion or when the fuel-to-air mixture is too rich. CO is a toxic substance, impairing the transfer of oxygen from the lungs into the bloodstream. As it decays, CO also contributes to the formation of ozone (O3), which is both toxic and a major component of smog. Particulate Matter (PM) – Sometimes referred to as aerosols, PM is usually emitted from vehicle tailpipes. It usually takes the form of a carbon residue byproduct of fuel combustion. Some PM is visible, such as the black smoke in diesel truck exhaust, but the most hazardous is the microscopic, or “fine” PM. Fine PM can become lodged in the lungs where it inhibits proper respiratory function and acts as a carcinogen. PM is also a component of smog and is suspected to have a secondary impact on global warming trends as it reflects, absorbs and scatters solar radiation.

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Oxides of Sulfur (SOX) – As with NOX, SOX are produced in the high pressure and temperature conditions inside the engine. Sulfur is a naturally occurring element in fossil fuels. SOX contributes to the formation of PM and smog (particularly as sulfur dioxide, SO2). SOX emissions in the exhaust also limit the effectiveness of catalytic converters in reducing VOCs, NOX and CO emissions. New fuel regulations in Canada and the U.S. have dramatically lowered the allowable sulfur content in gasoline (with lower sulfur levels in diesel scheduled for 2006). This has and will improve SOX emissions from vehicles and expand the usefulness of catalytic converters.

Secondary Emissions (formed in reactions with primary emissions)

Ozone (O3) – Formed in ground-level atmospheric reactions involving VOCs, NOX and CO, ground-level O3 poses a serious health threat, especially in urban areas, as it irritates the eyes, damages the lungs, aggravates respiratory problems. It is a major component of smog. Particulate Matter (PM) – In addition to existing as a direct emission, PM can also form as a product of reactions between VOCs, NOX and SOX.

Evaporative Emissions

Volatile Organic Compounds (VOCs) – In addition to its presence in tailpipe exhaust emissions, VOCs can escape from engine crankcases and fuel tanks without proper evaporative controls. Hydrofluorocarbons (HFCs) – HFCs are used as refrigerants in automobile air conditioning systems for occupant comfort (A/C). HFCs can escape from leaking seals and hoses, during A/C servicing and when vehicles are scrapped. The current HFC of choice is HFC-134a, a very powerful GHG.

Upstream Emissions

Perfluorocarbons (PFCs) and Sulfur Hexafuoride (SF6) – PFCs and SF6 are products of upstream industrial processes related to automobile component production. Both are very powerful GHGs. Fuel Production Emissions – Many of the above primary emissions could be associated with the production, refining and distribution of fuels for motor vehicles. In particular, CO2 is the upstream emission of primary concern in evaluating alternative fuel options. For example, an electric car may produce no emissions while operating, but the electricity to charge the vehicle’s battery pack may have been generated by a coal-fired power plant with heavy CO2 emissions. Thus, upstream emissions are a very important factor to consider.

As indicated above, some vehicle emissions are considered public health threats, either through their direct toxicity and involvement in the formation of smog, or through their contribution to global warming and climate change.

In the table below, the emissions related to vehicle use are identified according to their links to air pollution and global warming.

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Vehicle Emissions by Type

Regulated Emission Vehicle Average Global Warming Emission Type in Canada Greenhouse Gas Emission Potential (CO e) (as of 2004) 2

VOC Direct Yes Yes, as CH4 21 (a) NOX Direct Yes Yes, as N2O 310 (a) CO Direct Yes No - PM Direct & Secondary Yes Probable uncertain

SOX Direct Yes No - CO2 Direct No Yes 1 HFC Direct No Yes, as HFC-134a 1,300 (b) PFC Upstream No Yes ?

SF6 Upstream No Yes ? (a) Taken from Canada’s Greenhouse Gas Inventory 1990-2001, Environment Canada, 2003. (b) IPCC, 3rd Assessment Report, 2003.

One obvious strategy in reducing emissions is to reduce fuel consumption through decreased vehicle use or increased vehicle efficiency. All else being equal, an automobile that burns half the fuel generates half the emissions (a possible exception to this rule is the upstream emissions associated with vehicle manufacture, although these are relatively minor compared to emissions from the vehicle itself).

In addition, as discussed in section 3.2, emissions control devices (catalytic converters and various exhaust after-treatment technologies) are able to reduce the amount of specific compounds, such as VOCs, NOX and CO, in vehicle exhaust by partially converting them into N2, CO2 and H2O. This can be accomplished without necessarily reducing the amount of fuel consumed.

On the other hand, there are no practical emissions control devices for reducing CO2 emissions from vehicles. Instead, CO2 emissions reductions must be achieved through automotive technology and design improvements that reduce overall fuel consumption, or through the effective use of alternative fuels with lower life-cycle CO2 emissions levels or a combination of both.

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Appendix B: The Motor Vehicle Fuel Consumption Standards Act [Canada]

As described in section 2.2, the Motor Vehicle Fuel Consumption Standards Act (MVFCSA) was passed by the Parliament of the Government of Canada in 1982, but never delivered for Royal Assent. The Act officially exists but is not in force. This act exists as an alternative to the writing of a new bill for the regulation of greenhouse gas emissions from motor vehicles, or for that same objective through the regulation of fuel consumption standards in motor vehicles.

The text of the MVFCSA is included in this appendix. This text has been copied from the Department of Justice Canada website: http://laws.justice.gc.ca/en/M-9

Motor Vehicle Fuel Consumption Standards Act [Not in force] ( R.S. 1985, c. M-9 ) Disclaimer: These documents are not the official versions Source: http://laws.justice.gc.ca/en/M-9/text.html Updated to April 30, 2004 Subject: Energy

Motor Vehicle Fuel Consumption Standards Act [Not in force] CHAPTER M-9 An Act respecting motor vehicle fuel consumption standards

SHORT TITLE

1. This Act may be cited as the Motor Vehicle Fuel Consumption Standards Act. Short title 1980-81-82-83, c. 113, s. 1.

INTERPRETATION

Definitions 2. In this Act,

"company" means a person (a) engaged in the business of manufacturing motor vehicles in Canada,

"company" (b) engaged in the business of importing motor vehicles into Canada, or (c) engaged in the business of selling to other persons, principally for the purpose of resale, motor vehicles obtained directly from a person described in paragraph (a) or his agent;

"company "company average fuel consumption" means, in relation to a given company, the average fuel average fuel consumption of all motor vehicles of a prescribed class, calculated consumption" in accordance with section 10;

"fuel" means gasoline, diesel oil or any other combustible matter and includes "fuel" any other prescribed form of energy;

"fuel "fuel consumption" means the quantity of fuel used by a motor vehicle when consumption" driven a given distance;

"fuel consumption "fuel consumption number" means a number that represents the fuel number" consumption of a motor vehicle under controlled test conditions;

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"fuel consumption standard" "fuel consumption standard" means a standard prescribed pursuant to section 3;

"inspector" means a person designated as an inspector pursuant to subsection "inspector" 23(1);

"Minister" "Minister" means the Minister of Transport;

"motor vehicle" means any vehicle designed to be driven or drawn on roads by any means other than exclusively by muscular power, and includes pedal cycles "motor vehicle" with auxiliary motors, minibikes and motorized snow vehicles, but does not include any vehicle designed for running exclusively on rails;

"prescribed” "prescribed" means prescribed by regulation;

"year" means a calendar year. "year" 1980-81-82-83, c. 113, s. 2.

FUEL CONSUMPTION STANDARDS

3. The Governor in Council may, on the recommendation of the Minister and the Minister of Natural Resources, make regulations prescribing, for the purposes of Fuel consumption section 11, a fuel consumption standard for any prescribed class of motor standards vehicle for any year. R.S., 1985, c. M-9, s. 3; 1994, c. 41, s. 37.

4. (1) Subject to subsection (2), a copy of each regulation that the Governor in Council proposes to make under section 3 or 37 shall be published in the Publication of Canada Gazette at least ninety days before the proposed effective date thereof, proposed regulations and a reasonable opportunity within those ninety days shall be afforded to companies and other interested persons to make representations to the Minister with respect thereto.

(2) Subsection (1) does not apply in respect of a proposed regulation that (a) has previously been published pursuant to that subsection, whether or not it has been changed as a result of representations made pursuant to that Exceptions subsection; or (b) makes no substantive change to an existing regulation. 1980-81-82-83, c. 113, s. 4.

5. A fuel consumption standard prescribed under section 3 for a particular year is not valid unless one of the following conditions is met: (a) the fuel consumption standard has been published in the Canada Gazette before the end of the third year preceding that year; Validity of fuel (b) the fuel consumption standard is no more stringent than the fuel consumption consumption standard standard applicable to the preceding year; or (c) no objections by a company were received by the Minister during the ninety day period following publication of the proposed fuel consumption standard under subsection 4(1). 1980-81-82-83, c. 113, s. 5.

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PROHIBITIONS

6. (1) No company shall, for the purpose of sale, (a) ship a motor vehicle of a prescribed class from the province in which it was manufactured to another province, or (b) import into Canada a motor vehicle of a prescribed class unless Interprovincial (c) a fuel consumption number in respect of that motor vehicle is registered trade and imports pursuant to section 7, (d) a label setting out the prescribed information relating to fuel consumption is affixed to the motor vehicle in the prescribed manner, and (e) the motor vehicle is, according to its manufacturer's specifications and according to the prescribed rules, substantially similar to the motor vehicle or vehicles used to establish the registered fuel consumption number.

(2) No contravention of subsection (1) shall be deemed to be committed by a company if the requirements of paragraphs (1)(c) to (e) are met before the motor Saving provision vehicle leaves the possession of that company or its consignee. 1980-81-82-83, c. 113, s. 6.

REGISTRATION OF FUEL CONSUMPTION NUMBERS

7. (1) Where a company has established a fuel consumption number in accordance with the prescribed procedure, it may submit an application to the Application for registration Minister, in prescribed form and containing the prescribed information, requesting registration of that fuel consumption number in respect of the motor vehicles described in the application.

Prescribed (2) A company shall not submit an application under subsection (1) where the procedure must fuel consumption number was not established in accordance with the prescribed be used procedure.

(3) Where the Minister receives a duly completed application under subsection Minister to register fuel (1), he shall forthwith register the fuel consumption number set out in the consumption application. number 1980-81-82-83, c. 113, s. 7.

8. (1) The Minister may, by order, prohibit the use by any company of (a) a registered fuel consumption number, and (b) fuel consumption information related to that registered fuel consumption number in advertising or other representations to the public relating to a motor vehicle if Prohibition orders the Minister has reasonable grounds to believe re advertising (c) that the motor vehicle is not, according to its manufacturer's specifications and according to the prescribed rules, substantially similar to the motor vehicle or vehicles used to establish the registered fuel consumption number, (d) that the application for registration of the fuel consumption number contained false or misleading information, or (e) that the fuel consumption number was not established in accordance with the

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prescribed procedure, and that, as a result, the registered fuel consumption number does not correctly represent the fuel consumption of that motor vehicle.

When order takes (2) An order under subsection (1) takes effect sixty days after the order is made effect or on such later date as is fixed by the order.

(3) Where the Minister has made an order under subsection (1), the company Revised fuel that had obtained that registered fuel consumption number under section 7 may consumption number apply to the Minister for registration of a revised fuel consumption number, and subsections 7(1) and (2) apply to such an application.

(4) Where a company applies under subsection (3) for registration of a revised Minister's fuel consumption number, the Minister is not required to register that number if discretion he has reasonable grounds to believe that it does not correctly represent the fuel consumption of the motor vehicle.

(5) In any prosecution under paragraph 30(1)(b) for contravention of an order made under subsection (1), a company shall be deemed not to have contravened the order if it establishes that it took all reasonable measures Where order (a) to withdraw the offending advertising or representations; and deemed not to be contravened (b) to substitute new advertising or representations, with similar distribution, using a registered revised fuel consumption number obtained pursuant to this section. 1980-81-82-83, c. 113, s. 8.

CALCULATION OF COMPANY AVERAGE FUEL CONSUMPTION

9. (1) Every company shall, before the prescribed time, submit to the Minister a report with respect to each year, in prescribed form, setting out, by registered fuel consumption number, with respect to all motor vehicles to which registered fuel consumption numbers apply, the aggregate of (a) the number of those motor vehicles that it has manufactured in Canada in Company's that year for the purpose of sale in a province other than the province of annual report to manufacture, Minister (b) the number of those motor vehicles that it has imported into Canada in that year for the purpose of sale in Canada, and (c) in accordance with subsection 19(2), the number of those motor vehicles that it has manufactured in Canada in that year for the purpose of sale in Canada, other than motor vehicles described in paragraph (a), and to which has been applied a national fuel consumption mark described in section 17.

(2) For the purposes of subsection (1), a motor vehicle shall be deemed to have Year of been manufactured or imported either in the year in which it was in fact manufacture or manufactured or imported, as the case may be, or in the following year, at the importation of motor vehicle option of the company. 1980-81-82-83, c. 113, s. 9.

10. For each prescribed class of motor vehicle, the Minister shall calculate for Calculation of each year, in litres per one hundred kilometres, according to the prescribed company average method of calculation, the company average fuel consumption for each fuel consumption company, based on (a) the information contained in the annual report submitted by the company

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pursuant to section 9; and (b) prescribed equivalence factors, in the case of motor vehicles that use fuels other than the prescribed reference gasoline. 1980-81-82-83, c. 113, s. 10.

ENFORCEMENT OF FUEL CONSUMPTION STANDARDS

11. (1) A company that (a) ships motor vehicles of a prescribed class from the province in which they were manufactured to another province, (b) imports into Canada motor vehicles of a prescribed class, Company average fuel (c) applies to motor vehicles of a prescribed class any national fuel consumption consumption not mark, or to exceed fuel consumption (d) sells, offers for sale, has in possession for sale or delivers for sale motor standard vehicles of a prescribed class to which has been applied any national fuel consumption mark shall ensure that, for that class of motor vehicle, its company average fuel consumption for any particular year does not exceed the fuel consumption standard for that year.

(2) Subject to section 16, where, for any year, for a particular prescribed class of motor vehicle, the company average fuel consumption of a company exceeds the fuel consumption standard, the Minister shall issue an assessment against that company imposing, subject to subsection (3), a penalty equal to the product obtained by multiplying Penalty where company exceeds (a) one dollar for every one-hundredth of a litre per one hundred kilometres by fuel consumption standard which the company average fuel consumption exceeds the fuel consumption standard by (b) the aggregate number of motor vehicles set out in the report submitted pursuant to section 9.

(3) The penalty calculated under subsection (2) shall be reduced by an amount equal to the product obtained by multiplying (a) one dollar for every one-hundredth of a litre per one hundred kilometres by which the company average fuel consumption for the same prescribed class of motor vehicle is lower than the fuel consumption standard by Credits will reduce penalty (b) the aggregate number of motor vehicles set out in the report submitted pursuant to section 9 in respect of (c) any or all of the three years preceding the year for which the penalty is imposed, and (d) the year immediately following the year for which the penalty is imposed.

(4) An amount used under subsection (3) to reduce a penalty is not available to A credit usable reduce a subsequent penalty. only once 1980-81-82-83, c. 113, s. 11.

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12. A penalty imposed under section 11 is payable to the Receiver General one When penalty year after the notice of assessment has been served on the company under payable subsection 13(1). 1980-81-82-83, c. 113, s. 12.

13. (1) Where the Minister issues an assessment against a company under Notice of assessment section 11, he shall forthwith serve a notice of the assessment on the company and cause notice of the assessment to be published in the Canada Gazette.

(2) A company that objects to an assessment under section 11 may, within thirty Objection to days from the day on which it is served with the notice of assessment, serve on assessment the Minister a notice of objection, in prescribed form, setting out the reasons for objecting to the assessment.

(3) On receipt of a notice of objection under subsection (2), the Minister shall forthwith Reconsideration (a) reconsider the assessment objected to; of assessment (b) confirm, cancel or vary the assessment; and (c) serve a copy of his decision on the company.

(4) The Minister's decision under subsection (3) to confirm, cancel or vary an assessment shall be based solely on the following criteria: (a) whether the information on which the original assessment was based was Considerations correct; and (b) whether this Act and the regulations were correctly applied to that information.

(5) Documents required to be served under this section may be served Methods of personally or by registered mail, and, if served by registered mail, shall be service deemed to have been served on the day of actual receipt. 1980-81-82-83, c. 113, s. 13.

14. (1) Where the Minister confirms or varies an assessment, the company may, Right of appeal within thirty days of being served with the Minister's decision, appeal the Minister's decision to the Federal Court.

Institution of (2) An appeal to the Federal Court under subsection (1) shall be instituted in the appeal manner set forth in section 48 of the Federal Courts Act.

(3) The Federal Court shall dispose of an appeal under this section by Disposal of confirming, cancelling or varying the assessment, and shall base its decision appeal solely on the criteria set out in paragraphs 13(4)(a) and (b). R.S., 1985, c. M-9, s. 14; 2002, c. 8, ss. 182, 183.

15. A penalty payable under section 12 is a debt due to Her Majesty in right of Debt due Her Canada and is recoverable as such in the Federal Court or any other court of Majesty competent jurisdiction. 1980-81-82-83, c. 113, s. 15.

EXEMPTION FROM FUEL CONSUMPTION STANDARD

Applications for 16. (1) On application by a company in the prescribed form and containing the exemption from fuel consumption prescribed information, the Governor in Council may, by order, in respect of up

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standard to three years, (a) exempt from a fuel consumption standard up to one thousand motor vehicles per year manufactured by a manufacturer whose world production was less than ten thousand motor vehicles in the second year preceding the year in respect of which the application for exemption is made, if the Governor in Council is of the opinion that it would not be desirable to have the fuel consumption standard apply to those motor vehicles; and (b) exempt from a fuel consumption standard any or all vehicles manufactured or imported by a company, where the Governor in Council is of the opinion that compliance with the fuel consumption standard would (i) create substantial financial hardship for the company, or (ii) prevent the development of new kinds of motor vehicles.

New fuel (2) The Governor in Council may, by order, in respect of a company that has consumption been granted an exemption under subsection (1), impose a new fuel standard may be consumption standard applicable to the motor vehicles exempted under that imposed subsection.

(3) Where all the motor vehicles manufactured or imported by a company are Effect of exempted under paragraph (1)(a) or (b) and no new fuel consumption standard exemption is imposed under subsection (2), sections 11 to 15 do not apply in respect of that company.

(4) Where all the motor vehicles manufactured or imported by a company are exempted under paragraph (1)(a) or (b) and a new fuel consumption standard is imposed under subsection (2), sections 11 to 15 apply in respect of that Idem company, but a reference in subsection 11(1) or (2) to "fuel consumption standard" shall be read as a reference to the new fuel consumption standard imposed under subsection (2).

(5) Where some but not all of the motor vehicles manufactured or imported by a company are exempted under paragraph (1)(a) or (b), then (a) the Minister shall calculate, in respect of that company, in the same manner as he would calculate the company average fuel consumption, (i) a partial company average fuel consumption, based on the motor vehicles other than those exempted, and (ii) where applicable, a second partial company average fuel consumption, based on the exempted vehicles for which a new fuel consumption standard has been imposed under subsection (2); (b) a penalty under subsection 11(2) shall be calculated on the basis of the Idem partial company average fuel consumption described in subparagraph (a)(i); and (c) where a new fuel consumption standard has been imposed under subsection (2) and the partial company average fuel consumption described in subparagraph (a)(ii) exceeds that new fuel consumption standard, (i) the Minister shall issue an assessment against the company imposing a penalty, subject to subsection (6), equal to the product obtained by multiplying (A) one dollar for every one-hundredth of a litre per one hundred kilometres by which that partial company average fuel consumption exceeds the new fuel consumption standard by (B) the aggregate number of motor vehicles to which the new fuel consumption

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standard applies, and (ii) subsections 11(3) and (4) and sections 12 to 15 apply, with such modifications as the circumstances require, in respect of a penalty imposed under subparagraph (i).

(6) A penalty imposed under subparagraph (5)(c)(i) shall not exceed the penalty that would have been imposed had no exemption been granted under Maximum penalty subsection (1). 1980-81-82-83, c. 113, s. 16.

NATIONAL FUEL CONSUMPTION MARKS

17. The words "Canada Motor Vehicle Fuel Consumption Standard" and "Normes de consommation de carburant des véhicules automobiles du Canada", National fuel and any abbreviations thereof, shall be national trade-marks and, except as consumption provided in this Act, the exclusive property in and right to the use of those marks, marks referred to in sections 18, 19 and 20 as "national fuel consumption marks", is hereby declared to be vested in Her Majesty in right of Canada. 1980-81-82-83, c. 113, s. 17.

18. No person shall use any national fuel consumption mark except in Prohibition accordance with section 19 and the regulations thereunder. 1980-81-82-83, c. 113, s. 18.

19. (1) No person shall (a) apply to a motor vehicle of a prescribed class any national fuel consumption mark, or (b) sell, offer for sale, have in possession for sale or deliver for sale a motor vehicle of a prescribed class to which has been applied any national fuel consumption mark unless Conditions for use of national fuel (c) a fuel consumption number in respect of that motor vehicle is registered consumption pursuant to section 7, marks (d) a label setting out the prescribed information relating to fuel consumption is affixed to the motor vehicle in the prescribed manner, (e) the motor vehicle is, according to its manufacturer's specifications and according to the prescribed rules, substantially similar to the motor vehicle or vehicles used to establish the registered fuel consumption number, and (f) the national fuel consumption mark is in the prescribed form and is applied to the motor vehicle in the prescribed manner and at the prescribed place on the vehicle.

(2) It is a further condition of the use of any national fuel consumption mark that, where a national fuel consumption mark has been applied to a motor vehicle of a prescribed class, other than a motor vehicle exported from Canada, that motor vehicle shall be included in the aggregate set out in the report under section 9 Idem and shall be taken into account for purposes of the calculation of the company average fuel consumption under section 10 and any assessment of a penalty under section 11. 1980-81-82-83, c. 113, s. 19.

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20. No person shall use a mark or designation so closely resembling a national Use of similar fuel consumption mark as to be likely to be mistaken therefor. marks prohibited 1980-81-82-83, c. 113, s. 20.

RECORDS

21. (1) A company shall maintain records in prescribed form containing the prescribed information relating to (a) the procedure by which it established each registered fuel consumption number; (b) details of the manufacture of each motor vehicle to which a registered fuel consumption number applies; Company to keep records (c) applications made to the Minister for registration of each fuel consumption number; (d) applications made to the Governor in Council for exemptions under section 16; (e) interim statistics and forecasts of the information to be contained in the annual reports to the Minister under section 9; and (f) the company's annual reports to the Minister under section 9.

Minister may (2) When the Minister so requests, a company shall provide him forthwith with examine records any information contained in the records described in subsection (1).

(3) A company shall keep the records described in subsection (1) for a period of Records to be five years from the end of the year to which such records relate. kept five years 1980-81-82-83, c. 113, s. 21.

TEST VEHICLES

22. (1) The Minister may request a company to make available, at such place as the Minister requests, a motor vehicle or any component thereof that Minister may (a) was used in tests conducted to establish a registered fuel consumption examine test number, or vehicle or component (b) is representative of a motor vehicle or component that was used in tests conducted to establish a registered fuel consumption number, and the company shall forthwith comply with the Minister's request.

(2) Where a company makes available to the Minister a motor vehicle or a Minister may component thereof pursuant to subsection (1), the Minister may dismantle and examine motor (a) dismantle and examine the motor vehicle or the component; and vehicle or component (b) conduct all necessary tests to verify the accuracy of tests conducted by the company to establish the fuel consumption number.

(3) A motor vehicle or component made available to the Minister under this section shall not be detained by the Minister after the expiration of thirty days Minister to return after the completion of the examination and tests referred to in subsection (2) motor vehicle or unless, before that time, proceedings have been instituted in respect of an component offence under this Act, in which case the motor vehicle or component may be detained until the proceedings are finally concluded. 1980-81-82-83, c. 113, s. 22.

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ENFORCEMENT

23. (1) The Minister may designate as an inspector for the purposes of this Act Inspectors any person who, in his opinion, is qualified to be so designated.

(2) The Minister shall furnish every inspector with a certificate of his designation as an inspector and on entering any place described in subsection 24(1) an Certificate to be inspector shall, if so required, produce the certificate to the person in charge of produced that place. 1980-81-82-83, c. 113, s. 23.

24. (1) An inspector may at any reasonable time enter any place in which he believes on reasonable grounds that there is (a) a motor vehicle of a class for which a fuel consumption standard has been prescribed and that is (i) owned by, or (ii) situated on the premises of a company or a consignee of imported motor vehicles, (b) a component of a motor vehicle of a class for which a fuel consumption standard has been prescribed, or Powers of (c) any record described in section 21, inspectors and may (d) examine any motor vehicle, any component of a motor vehicle or any records found in that place, (e) open and examine any package found therein that he believes on reasonable grounds contains any component of a motor vehicle or any records, and (f) require any person to produce for inspection any books, reports, test data, control records, shipping bills, bills of lading or other documents or papers that he believes on reasonable grounds contain any information relevant to the administration or enforcement of this Act, and make copies thereof or extracts therefrom.

(2) The owner or person in charge of a place entered by an inspector pursuant to subsection (1) and every person found therein shall give the inspector all Assistance to reasonable assistance to enable the inspector to carry out his duties under this inspectors Act, and shall furnish the inspector with any information he may reasonably require with respect to the administration or enforcement of this Act. 1980-81-82-83, c. 113, s. 24.

Obstruction of 25. (1) No person shall obstruct or hinder an inspector engaged in carrying out inspectors his duties under this Act.

(2) No person shall knowingly make any false or misleading statement, either orally or in writing, to an inspector engaged in carrying out his duties under this False statements Act. 1980-81-82-83, c. 113, s. 25.

GENERAL

Disclosure is not 26. A disclosure relating to fuel consumption that is required to be made by a warranty company under this Act in respect of tests conducted in accordance with this Act

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does not create an express or implied warranty by anyone that the fuel consumption established by those tests will be achieved under conditions of actual use. 1980-81-82-83, c. 113, s. 26.

27. (1) Except as provided in this section, information obtained by the Minister under this Act or by the Minister of Natural Resources under subsection (2) is Privileged information privileged and shall not knowingly be or be permitted to be communicated, disclosed or made available without the written consent of the person from whom it was obtained.

(2) Information obtained under this Act may be communicated, disclosed or made available for the purposes of the administration or enforcement of this Act, Certain exceptions legal proceedings related thereto or criminal proceedings under an Act of Parliament, and may be communicated, disclosed or made available to the Minister of Natural Resources.

(3) The Minister may disclose (a) registered fuel consumption numbers or fuel consumption numbers derived Minister may therefrom; disclose certain information (b) descriptions of the motor vehicles to which any number referred to in paragraph (a) relates; and (c) the company average fuel consumption of any company.

(4) In addition to the right to disclose information described in subsection (3), the Disclosure of Minister may, where in his opinion it is in the public interest and will not unduly other information impair a company's competitive position, disclose any information obtained under this Act.

(5) Where the Minister proposes to disclose information pursuant to subsection (4) in a form that identifies or permits the identification of the company to which Notification and opportunity to the information relates, he shall so notify the company and afford it a reasonable make opportunity to make representations respecting the effect that the disclosure of representations the information might have on the company's competitive position. R.S., 1985, c. M-9, s. 27; 1994, c. 41, s. 37.

28. Notwithstanding any other Act or law, no person who obtains information under this Act shall be required, in connection with any legal proceedings, other than proceedings relating to the administration or enforcement of this Act or Evidentiary criminal proceedings under an Act of Parliament, to give evidence relating to any privilege information that is privileged under this Act or to produce any statement, document, writing or portion thereof containing any such information. 1980-81-82-83, c. 113, s. 28.

29. The Minister may (a) conduct such research, studies and evaluations as he deems necessary for the administration or enforcement of this Act;

Research and (b) purchase or lease such equipment as he deems necessary in order to carry equipment out tests under this Act; (c) have tests related to this Act carried out by any person; and (d) lease or loan equipment owned by Her Majesty to any person, for periods not exceeding twelve months, for testing or research related to this Act.

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R.S., 1985, c. M-9, s. 29; R.S., 1985, c. 1 (4th Supp.), s. 45(F).

OFFENCES AND PUNISHMENT

30. (1) Every person who (a) contravenes or fails to comply with any provision of this Act, other than subsection 11(1) or 27(1), or the regulations, (b) contravenes an order made by the Minister under section 8, (c) fails to comply with an order of the court under subsection 36(1), or Offences and (d) knowingly makes a false or misleading statement in any report or application punishment under this Act is guilty of an offence and liable (e) on summary conviction, to a fine not exceeding one hundred thousand dollars or to imprisonment for a term not exceeding one year or to both, or (f) on conviction on indictment, to a fine not exceeding one million dollars or to imprisonment for a term not exceeding five years or to both.

(2) Where an offence under subsection (1) is committed on more than one day Continuing or is continued for more than one day, it shall be deemed to be a separate offences offence for each day on which the offence is committed or continued. 1980-81-82-83, c. 113, s. 30.

31. In any prosecution for an offence under subsection 30(1), it is sufficient proof of the offence to establish that it was committed by an employee or agent of the Offence by accused whether or not the employee or agent is identified or has been employee or prosecuted for the offence, unless the accused establishes that the offence was agent committed without his knowledge or consent and that he exercised all due diligence to prevent its commission. 1980-81-82-83, c. 113, s. 31.

32. Where a corporation commits an offence under subsection 30(1), any officer, director or agent of the corporation who directed, authorized, assented to, Officers, etc., of acquiesced in or participated in the commission of the offence is a party to and corporations guilty of the offence and is liable on conviction to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted. 1980-81-82-83, c. 113, s. 32.

33. Every person who contravenes subsection 27(1) is guilty of an offence Contravention of punishable on summary conviction. subsection 27(1) 1980-81-82-83, c. 113, s. 33.

34. Any proceedings by way of summary conviction in respect of an offence under this Act may be instituted at any time within but not later than two years Limitation period after the time when the subject-matter of the proceedings arose. 1980-81-82-83, c. 113, s. 34.

35. A complaint or information in respect of an offence under this Act may be heard, tried or determined by a court if the accused is resident or carrying on Venue business within the territorial jurisdiction of that court, although the matter of the complaint or information did not arise in that territorial jurisdiction. 1980-81-82-83, c. 113, s. 35.

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CORRECTION OF DEFECTS

36. (1) Where a company has been convicted of an offence for contravening section 6 or subsection 19(1) on the basis of paragraph 6(1)(e) or 19(1)(e), as the case may be, and the convicting court is of the opinion that the dissimilarity was in the nature of a defect the result of which is that the registered fuel consumption number does not correctly represent the fuel consumption of that motor vehicle, the court may order the company to give notice forthwith, in the prescribed manner, containing a statement of the means to be taken to correct Company to give the defect at the company's expense, to notice of defects (a) the person who has obtained that motor vehicle from the company for the affecting fuel consumption purpose of sale or resale; (b) the current owner of that motor vehicle as determined (i) from any warranty by the manufacturer, distributor or importer of that motor vehicle with respect to the functioning of that motor vehicle that has, to the company's knowledge, been given, sold or transferred to the current owner, or (ii) from provincial motor vehicle registration records; and (c) the Minister.

(2) Where the court makes an order against a company under subsection (1), the company shall, forthwith after giving notice pursuant to that order, correct the Company to correct defects at defect at its own expense in respect of motor vehicles described in the order its own expense (a) in accordance with its usual warranty procedures; or (b) in such manner as the Minister may direct.

(3) A company's obligation under subsection (2) does not extend to a motor Two year vehicle presented to the company for correction of the defect more than two limitation years after the company gave notice in respect of that motor vehicle pursuant to the court order made under subsection (1).

(4) Where it is made to appear to the satisfaction of the Minister that the name of the current owner of a motor vehicle cannot reasonably be determined in the manner provided under paragraph (1)(b), (a) the Minister may order notice to be given by publication in the prescribed form for a period of five consecutive days in two major daily newspapers in each Notice by of the six regions of Canada, namely, the Atlantic provinces, Quebec, Ontario, publication in the Prairie provinces, British Columbia, and the three territories, or by an newspapers alternative medium for any period that the Minister deems expedient, and the notice is deemed to be notice given in the manner prescribed for the purpose of subsection (1); or (b) the Minister may, in his discretion, order that the current owner need not be notified and that the obligation to notify the current owner of any defect under subsection (1) has been discharged.

(5) Every company that gives a notice mentioned in subsection (1) to the Quarterly reports to be submitted Minister shall submit to the Minister, in the prescribed form and manner, quarterly reports containing prescribed information relating to the defect.

(6) Unless the Minister otherwise directs, the quarterly reports referred to in Idem subsection (5) shall be submitted to the Minister for a period of two years from the date of the notice mentioned in subsection (1).

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R.S., 1985, c. M-9, s. 36; 1993, c. 28, s. 78; 2002, c. 7, s. 208.

REGULATIONS

37. The Governor in Council may, on the recommendation of the Minister, make regulations (a) prescribing anything that is by this Act to be prescribed; and Regulations (b) respecting such other matters or things as are necessary to carry out the provisions of this Act. 1980-81-82-83, c. 113, s. 37.

REPORT TO PARLIAMENT

38. The Minister and the Minister of Natural Resources shall, as soon as possible after the end of each year, prepare and cause to be laid before Annual report Parliament a report on the administration and enforcement of this Act for that year. R.S., 1985, c. M-9, s. 38; 1994, c. 41, s. 37.

COMING INTO FORCE

*39. (1) This Act, except sections 3, 5 and 11 to 16, shall come into force on a Coming into force day to be fixed by proclamation.

(2) Sections 3, 5 and 11 to 16 shall come into force on a day, not earlier than the day fixed under subsection (1), to be fixed by proclamation on the Idem recommendation of the Minister and the Minister of Natural Resources. *[Note: Act not in force.] R.S., 1985, c. M-9, s. 39; 1994, c. 41, s. 37.

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Appendix C: California Assembly Bill 1493, Pavley

As discussed in section 6.2, the Governor of California signed into law Assembly Bill 1493 (AB 1493) submitted by Assembly member Pavley. The wording of the bill significantly influences the nature of the regulations made to reduce greenhouse gas emissions from motor vehicles in the State of California. For this reason the text of the AB 1493 is included in this appendix.

The text was copied from the California Air Resources Board climate change website: www.arb.ca.gov/cc/cc.htm.

Assembly Bill No. 1493

An act to amend Section 42823 of, and to add Section 43018.5 to, the Health and Safety Code, relating to air quality.

LEGISLATIVE COUNSEL’S DIGEST AB 1493, Pavley. Vehicular emissions: greenhouse gases. (1) Existing law establishes the California Climate Action Registry, and requires the registry to perform various functions relating to the provision of technical assistance for emissions reductions, including maintaining a record of certified greenhouse gas emission baselines and emission results. Existing law requires these records to be available to the public, except for any portion deemed confidential by a participant in the registry. Existing law, the California Public Records Act, provides that all public records, as defined, are open to inspection at all times during the office hours of a state or local agency and any person has a right to inspect any public record, except as specifically provided in the act. This bill would revise the exception applicable to records maintained by the registry to make those records available to the public, except that portion of the data or information exempt from disclosure pursuant to the act. The bill would require the registry, in consultation with the State Air Resources Board, to adopt procedures and protocols for the reporting and certification of reductions in greenhouse gas emissions from mobile sources for use by the state board in granting the emission reduction credits. (2) Existing law requires the state board to endeavor to achieve the maximum degree of emission reductions possible from vehicular and other mobile sources in order to accomplish the attainment of the state standards at the earliest practicable date. This bill would require the state board to develop and adopt, by January 1, 2005, regulations that achieve the maximum feasible reduction of greenhouse gases emitted by passenger vehicles and light-duty trucks and any other vehicles determined by the state board to be vehicles whose primary use is noncommercial personal transportation in the state. The bill would prohibit those regulations from taking effect prior to January 1, 2006, in order to give the Legislature time to review the regulations and determine whether further legislation should be enacted prior to the effective date of the regulations. Under the bill, the regulations would apply only to a motor vehicle manufactured in the 2009 model year, or any model year thereafter. The bill would require the regulations to provide flexibility, to the maximum extent feasible, in the means by which a person may comply with those regulations, including, but not limited to, authorization for a person to use alternative methods of compliance with the regulations. The bill would prohibit the state board from imposing a mandatory trip reduction measure or land use restriction in providing that compliance flexibility. The bill would prohibit the state board, in adopting the regulations, from requiring the imposition of additional fees and taxes on any motor vehicle, fuel, or vehicle miles traveled; a ban on the sale of any vehicle category, a reduction in vehicle weight; a limitation on, or reduction of,

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the speed limit on any street or highway in the state; or a limitation on, or reduction of, vehicle miles traveled. The bill would declare that the provisions of the bill prohibiting the state board from imposing additional fees or taxes on any motor vehicle, fuel, or vehicle miles traveled, or to limit or reduce the speed limit on any street or highway in the state to be declaratory of existing law. The bill would require the state board to ensure that any alternative methods of compliance achieve equivalent or greater reductions in emissions of greenhouse gases as the regulations. The bill would also require the state board to conduct public workshops regarding the regulations in specified communities with the most significant exposure to air contaminants. The bill would also require the state board to grant emission reduction credits for reductions of greenhouse gas emissions achieved prior to the operative date of the regulations, utilizing the 2000 model year as the baseline for calculating those reductions. The bill would require the state board to include an exemption in those regulations for vehicles subject to specified exhaust emission standards. The bill would authorize the state board to elect not to adopt a standard for a greenhouse gas, if the state board determines that the federal government has adopted a standard regulating that greenhouse gas, and the state board makes specified findings related to the similarity of the federal standard. The bill would also require the state board, by January 1, 2005, to provide a report to the Legislature on the contents of those regulations. The people of the State of California do enact as follows: SECTION 1. The Legislature hereby finds and declares all of the following: (a) Global warming is a matter of increasing concern for public health and the environment in the state. (b) California is the fifth largest economy in the world. (c) The control and reduction of emissions of greenhouse gases are critical to slow the effects of global warming. (d) Global warming would impose on California, in particular, compelling and extraordinary impacts including: (1) Potential reductions in the state’s water supply due to changes in the snowpack levels in the Sierra Nevada Mountains and the timing of spring runoff. (2) Adverse health impacts from increases in air pollution that would be caused by higher temperatures. (3) Adverse impacts upon agriculture and food production caused by projected changes in the amount and consistency of water supplies and significant increases in pestilence outbreaks. (4) Projected doubling of catastrophic wildfires due to faster and more intense burning associated with drying vegetation. (5) Potential damage to the state’s extensive coastline and ocean ecosystems due to the increase in storms and significant rise in sea level. (6) Significant impacts to consumers, businesses, and the economy of the state due to increased costs of food and water, energy, insurance, and additional environmental losses and demands upon the public health infrastructure. (e) Passenger vehicles and light-duty trucks are responsible for approximately 40 per cent of the total greenhouse gas pollution in the state. (f) California has a long history of being the first in the nation to take action to protect public health and the environment, and the federal government has permitted the state to take those actions. (g) Technological solutions to reduce greenhouse gas emissions will stimulate the California economy and provide enhanced job opportunities. This will continue the California automobile worker tradition of building cars that use cutting edge technology. (h) It is the intent of the Legislature to require the State Air Resources Board to adopt regulations that ensure reductions in emissions of greenhouse gases in furtherance of Division 26 (commencing with Section 39000) of the Health and Safety Code. It is the further intent of the Legislature that the greenhouse gas regulations take effect in accordance with any limitations that may be imposed pursuant to the federal Clean Air Act

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(42 U.S.C. Section 7401 et seq., as amended by the federal Clean Air Act Amendments of 1990 (Pub. L. 101-549)) and the waiver provisions of the federal act. SEC. 2. Section 42823 of the Health and Safety Code is amended to read: 42823. The registry shall perform all of the following functions: (a) Provide participants with referrals to approved providers for technical assistance and advice, upon the request of a participant, on any or all of the following: (1) Designing programs to establish greenhouse gas emissions baselines and to monitor, estimate, calculate, report, and certify greenhouse gas emissions. (2) Establishing emissions reduction goals based on international or federal best practices for specific industries and economic sectors. (3) Designing and implementing organization-specific plans that improve energy efficiency or utilize renewable energy, or both, and that are capable of achieving emission reduction targets. (b) In coordination with the State Energy Resources Conservation and Development Commission, the registry shall adopt and periodically update a list of organizations recognized by the state as qualified to provide the detailed technical assistance and advice in subdivision (a) and assist participants in identifying and selecting providers that have expertise applicable to each participant’s circumstances. (c) Adopt procedures and protocols for certification of reported baseline emissions and emissions results. When adopting procedures and protocols for the certification, the registry shall consider the availability and suitability of simplified techniques and tools. (d) Qualify third-party organizations that have the capability to certify reported baseline emissions and emissions results, and that are capable of certifying the participant-reported results as provided in this chapter. (e) Adopt procedures and protocols, including a uniform format for reporting emissions baselines and emissions results to facilitate their recognition in any future regulatory regime. (f) Maintain a record of all certified greenhouse gas emissions baselines and emissions results. Separate records shall be kept for direct and indirect emissions results. The public shall have access to this record, except for any portion of the data or information that is exempt from disclosure pursuant to the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). (g) Encourage organizations from various sectors of the state’s economy, and those from various geographic regions of the state, to report emissions, establish baselines and reduction targets, and implement efficiency improvement and renewable energy programs to achieve those targets. (h) Recognize, publicize, and promote participants. (i) In coordination with the State Energy Resources Conservation and Development Commission and the state board, adopt industry-specific reporting metrics at one or more public meetings. (j) In consultation with the state board, adopt procedures and protocols for the reporting and certification of reductions in emissions of greenhouse gases, to the extent permitted by state and federal law, for those reductions achieved prior to the operative date of the regulations described in subdivision (a) of Section 43018.5. SEC. 3. Section 43018.5 is added to the Health and Safety Code, to read: 43018.5. (a) No later than January 1, 2005, the state board shall develop and adopt regulations that achieve the maximum feasible and cost-effective reduction of greenhouse gas emissions from motor vehicles. (b) (1) The regulations adopted pursuant to subdivision (a) may not take effect prior to January 1, 2006, in order to give the Legislature time to review the regulations and determine whether further legislation should be enacted prior to the effective date of the regulations, and shall apply only to a motor vehicle manufactured in the 2009 model year, or any model year thereafter.

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(2) (A) Within 10 days of adopting the regulations pursuant to subdivision (a), the state board shall transmit the regulations to the appropriate policy and fiscal committees of the Legislature for review. (B) The Legislature shall hold at least one public hearing to review the regulations. If the Legislature determines that the regulations should be modified, it may adopt legislation to modify the regulations. (c) In developing the regulations described in subdivision (a), the state board shall do all of the following: (1) Consider the technological feasibility of the regulations. (2) Consider the impact the regulations may have on the economy of the state, including, but not limited to, all of the following areas: (A) The creation of jobs within the state. (B) The creation of new businesses or the elimination of existing businesses within the state. (C) The expansion of businesses currently doing business within the state. (D) The ability of businesses in the state to compete with businesses in other states. (E) The ability of the state to maintain and attract businesses in communities with the most significant exposure to air contaminants, localized air contaminants, or both, including, but not limited to, communities with minority populations or low-income populations, or both. (F) The automobile workers and affiliated businesses in the state. (3) Provide flexibility, to the maximum extent feasible consistent with this section, in the means by which a person subject to the regulations adopted pursuant to subdivision (a) may comply with the regulations. That flexibility shall include, but is not limited to, authorization for a person to use alternative methods of compliance with the regulations. In complying with this paragraph, the state board shall ensure that any alternative methods for compliance achieve the equivalent, or greater, reduction in emissions of greenhouse gases as the emission standards contained in the regulations. In providing compliance flexibility pursuant to this paragraph, the state board may not impose any mandatory trip reduction measure or land use restriction. (4) Conduct public workshops in the state, including, but not limited to, public workshops in three of the communities in the state with the most significant exposure to air contaminants or localized air contaminants, or both, including, but not limited to, communities with minority populations or low-income populations, or both. (5) (A) Grant emissions reductions credits for any reductions in greenhouse gas emissions from motor vehicles that were achieved prior to the operative date of the regulations adopted pursuant to subdivision (a), to the extent permitted by state and federal law governing emissions reductions credits, by utilizing the procedures and protocols adopted by the California Climate Action Registry pursuant to subdivision (j) of Section 42823. (B) For the purposes of this section, the state board shall utilize the 2000 model year as the baseline for calculating emission reduction credits. (6) Coordinate with the State Energy Resources Conservation and Development Commission, the California Climate Action Registry, and the interagency task force, convened pursuant to subdivision (e) of Section 25730 of the Public Resources Code, in implementing this section. (d) The regulations adopted by the state board pursuant to subdivision (a) shall not require any of the following: (1) The imposition of additional fees and taxes on any motor vehicle, fuel, or vehicle miles traveled, pursuant to this section or any other provision of law. (2) A ban on the sale of any vehicle category in the state, specifically including, but not limited to, sport utility vehicles and light-duty trucks. (3) A reduction in vehicle weight. (4) A limitation on, or reduction of, the speed limit on any street or highway in the state. (5) A limitation on, or reduction of, vehicle miles traveled.

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(e) The regulations adopted by the state board pursuant to subdivision (a) shall provide an exemption for those vehicles subject to the optional low-emission vehicle standard for oxides of nitrogen (NOx) for exhaust emission standards described in paragraph (9) of subdivision (a) of Section 1961 of Title 13 of the California Code of Regulations. (f) Not later than July 1, 2003, the California Climate Action Registry, in consultation with the state board, shall adopt procedures for the reporting of reductions in greenhouse gas emissions from mobile sources to the registry. (g) By January 1, 2005, the state board shall report to the Legislature and the Governor on the content of the regulations developed and adopted pursuant to this section, including, but not limited to, the specific actions taken by the state board to comply with paragraphs (1) to (6), inclusive, of subdivision (c), and with subdivision (f). The report shall include, but shall not be limited to, an analysis of both of the following: (1) The impact of the regulations on communities in the state with the most significant exposure to air contaminants or toxic air contaminants, or both, including, but not limited to, communities with minority populations or low-income populations, or both. (2) The economic and public health impacts of those actions on the state. (h) If the federal government adopts a standard regulating a greenhouse gas from new motor vehicles that the state board determines is in a substantially similar timeframe, and of equivalent or greater effectiveness as the regulations that would be adopted pursuant to this section, the state board may elect not to adopt a standard on any greenhouse gas included in the federal standard. (i) For the purposes of this section, the following terms have the following meanings: (1) ‘‘Greenhouse gases’’ means those gases listed in subdivision (g) of Section 42801.1. (2) ‘‘Maximum feasible and cost-effective reduction of greenhouse gas emissions’’ means the greenhouse gas emission reductions that the state board determines meet both of the following criteria: (A) Capable of being successfully accomplished within the time provided by this section, taking into account environmental, economic, social, and technological factors. (B) Economical to an owner or operator of a vehicle, taking into account the full life-cycle costs of a vehicle. (3) ‘‘Motor vehicle’’ means a passenger vehicle, light-duty truck, or any other vehicle determined by the state board to be a vehicle whose primary use is noncommercial personal transportation. SEC. 4. Paragraphs (3) and (4) of subdivision (d) of Section 43018.5 of the Health and Safety Code, as added by this act, do not constitute a change in, but are declaratory of, the existing law.

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Appendix D: Drivetrain Efficiency and the Weight-based Approach

In section 3.2, under Fleet-Average Vehicle Attribute Trends, the concept of drivetrain efficiency was introduced. Essentially, it is a way to measure fuel efficiency as a function of vehicle weight. In this document, drivetrain efficiency is defined in one of two ways:

vehicle weight x fuel economy [ton-mpg] fuel consumption / vehicle weight [gallons per 100 lb-mile]

In Japan and China, weight-based fuel efficiency standards have been implemented. This appendix will explain how weight-based standards and drivetrain efficiency related.

If fuel economy standards were set according to vehicle weight, such that vehicles of higher weight were subject to lower fuel economy targets, a chart of the standard might appear as follows.

mpg standard becomes continually less stringent as vehicle weight increases

mpg

weight

Despite the differences in their weight, the components of both small and large vehicles are often designed similarly. Hypothetically, while the scale may be different, the technology used in the engine, transmission, shaft, gear and wheel assemblies ought to operate with the same level of efficiency in both small and large vehicles for their respective sizes.

The drivetrain efficiency calculation allows fuel efficiency to be represented in terms of technology and design only, by making efficiency a “weight-specific” value263. Using the example chart shown above, if vehicle curb weight and mpg were multiplied (i.e., drivetrain efficiency), such that low weight values were multiplied with high mpg values and vice versa, the resulting standard might appear closer to the following:

263 Drvietrain efficiency is not a perfect measure of technical sophistication, as it does not address specific vehicle attributes such as towing capacity or acceleration performance, but it is a generally effective indicator nonetheless.

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ton-mpg standard remains constant regardless of vehicle weight.

drivetrain efficiency [ton-mpg]

weight [ton]

But how realistic is this hypothesis? In its report, “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards”264, the NAS Committee performed a quick test of this concept, multiplying the posted weight and mpg rating of each vehicle in the 2002 model year EPA Fuel Economy Guide. The result for each model was plotted in the chart shown below.

source: The Impact and Effectiveness of Corporate Average Fuel Economy Standards, National Academy of Sciences, 2002.

In this chart, the data are shown as gallons per 100 lb-mile (dimensionally, this it the reciprocal of ton-mpg). The point is to illustrate that vehicles of weights ranging from 2000 to 6,500-lbs all seem to congregate around a similar drivetrain efficiency rating.

In this sense, a continuous weight-based standard may not be technically different than a drivetrain efficiency standard. As discussed in section 3.2, the application of improved technology across the entire fleet caused its average drivetrain efficiency levels to improve significantly. Plotted on the chart above, this progress would appear as a vertical migration (transposition) of the data point over time.

The concern with such weight-based (or drivetrain efficiency-based) scenarios is that there is nothing to prevent manufacturers from producing only heavy vehicles. While these vehicles may

264 NAS, The Impact and Effectiveness of Corporate Average Fuel Economy Standards, 2002, p.34.

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have drivetrain efficiency ratings as high as lighter vehicles (or even higher), their actual fuel efficiency levels (actual fuel consumption levels) are still much lower due to their weight. This means that an unconstrained weight-based system provides no guarantee that fleet-average fuel consumption or GHG emission levels will be reduced.

Nevertheless, drivetrain efficiency is useful as a technology measure, as it points out which vehicle models lead the pack. Ideally, by applying the technology and design features of the leading automobiles to the rest of the vehicle line, the entire fleet-average fuel efficiency can be improved.

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Appendix E: Additional References

The following list is a compilation of reference material that some of the expert reviewers for this report have identified as sources of additional background information on the subject of light-duty vehicle design, fuel efficiency and greenhouse gas emissions.

Fitzpatrick, Reducing Greenhouse Gas Emissions with Electricity and Electrochemical Products, 1999.

DeCicco, It’s Not (just) Technology, It’s the Market (stupid!), American Council for an Energy Efficient Economy, 1999.

Kageson, Reducing CO2 Emissions from New Cars – A Progress Report on the Car Industry’s Voluntary Agreement and an Assessment of the Need for Policy Instruments, 2005.

Stanford, A Success Story: Canadian Productivity Performance in Auto Assembly, Canadian Auto Workers, 2000.

Austin, Carlson, Lyons, DiGenova, Torgerson, Review of the August 2004 Proposed CARB Regulations to Control Greenhouse Gas Emissions from Motor Vehicles: Cost Effectiveness for the Vehicle Owner or Operator, Sierra Research, Inc., 2004.

Portney, Parry, Gruenspecht, Harrington, The Economics of Fuel Economy Standards, Resources for the Future, 2003.

Parry, Fischer, Harrington, Do Market Failures Justify Tightening Corporate Average Fuel Economy (CAFE) Standards?, Resources for the Future, 2005.

Evans, Casual Influence of Car Mass and Size on Driver Fatality Risk, 2001.

Canadian Auto Workers, Getting Back in Gear: A New Policy Vision for Canada’s Auto Industry, 2002.

Joksch, Aggressivity versus Crash Test Parameters of Light Trucks and Vans, U.S. DOT, 2002.

Kleit, Impacts of Long-Range Increases in the Corporate Average Fuel Economy Standard, AEI- Brookings Joint Centre for Regulatory Studies, 2002.

Evans, How to Make a Car Lighter and Safer, 2003.

DeCicco, Final Report on the Green Vehicle Market Alliance Project, Environmental Defense, 2004.

Auken, Zellner, A Review of the Results in the 1997 Kahane, 2002 DRI, and 2003 Kahane Reports on the Effects of Passenger Car and Light Truck Weight and Size on Fatality Risk, 2004.

Wenzel, Ross, The Effects of Vehicle Model and Driver Behavior on Risk, 2005.

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