Band 27 _ PRODUKTION UND ENERGIE Jonatan J. Gómez Vilchez THE IMPACT OF ELECTRIC CARS ON OIL DEMAND AND GREENHOUSE GAS EMISSIONS IN KEY MARKETS The Impact of Electric Cars in Key Markets J. J. GÓMEZ J. J. VILCHEZ Jonatan J. Gómez Vilchez The Impact of Electric Cars on Oil Demand and Greenhouse Gas Emissions in Key Markets PRODUKTION UND ENERGIE Karlsruher Institut für Technologie (KIT) Institut für Industriebetriebslehre und Industrielle Produktion Deutsch-Französisches Institut für Umweltforschung Band 27 Eine Übersicht aller bisher in dieser Schriftenreihe erschienenen Bände finden Sie am Ende des Buches. The Impact of Electric Cars on Oil Demand and Greenhouse Gas Emissions in Key Markets by Jonatan J. Gómez Vilchez Dissertation, Karlsruher Institut für Technologie KIT-Fakultät für Wirtschaftswissenschaften Tag der mündlichen Prüfung: 5. Juni 2018 Erster Gutachter: Prof. Dr. Wolf Fichtner Zweiter Gutachter: Prof. Dr. Werner Rothengatter Impressum Karlsruher Institut für Technologie (KIT) KIT Scientific Publishing Straße am Forum 2 D-76131 Karlsruhe KIT Scientific Publishing is a registered trademark of Karlsruhe Institute of Technology. Reprint using the book cover is not allowed. www.ksp.kit.edu This document – excluding the cover, pictures and graphs – is licensed under a Creative Commons Attribution-Share Alike 4.0 International License (CC BY-SA 4.0): https://creativecommons.org/licenses/by-sa/4.0/deed.en The cover page is licensed under a Creative Commons Attribution-No Derivatives 4.0 International License (CC BY-ND 4.0): https://creativecommons.org/licenses/by-nd/4.0/deed.en Print on Demand 2019 – Gedruckt auf FSC-zertifiziertem Papier ISSN 2194-2404 ISBN 978-3-7315-0914-1 DOI 10.5445/KSP/1000091891 The Impact of Electric Cars on Oil Demand and Greenhouse Gas Emissions in Key Markets zur Erlangung des akademischen Grades eines Doktors der Wirtschaftswissenschaften (Dr. rer. pol.) von der KIT-Fakultät für Wirtschaftswissenschaften des Karlsruher Instituts für Technologie (KIT) genehmigte Dissertation von Jonatan J. Gómez Vilchez aus Málaga, Spanien Tag der mündlichen Prüfung: 05.06.2018 Erster Gutachter: Prof. Dr. Wolf Fichtner Zweiter Gutachter: Prof. Dr. Werner Rothengatter A mi familia Abstract This thesis explores the extent to which electric cars might reduce oil demand and greenhouse gas emissions in key markets: China, France, Germany, India, Japan and the United States. To meet this objective, a dynamic model capable of simulating the market evolution of nine powertrain technologies between 2000 and 2030 is developed. The model consists of an econometric sub-model, soft-linked with a system dynamics sub-model. The purpose of the time-series econometric sub-model is to project country-specific total car stock. To this end, six single-equation regressions based on autoregressive integrated moving average or autoregres- sive distributed-lag techniques are estimated. The purpose of the system dynamics sub-model is to represent feedback processes and facilitate policy analysis. The effects of six policy measures are examined: emission stand- ards, energy taxation, electric car purchase subsidies, investment in recharg- ing stations, investment in hydrogen refuelling infrastructure and desired car occupancy. The dynamic hypothesis of the model captures feedback loops that may stimulate the market development of electric cars. The six countries are interlinked to simulate technological progress concerning the electric vehicle battery. In particular, its cost, price and capacity, together with the resulting electric range of the car, are investigated. Two scenarios are con- structed: under the Alternative Scenario, the market uptake of electric cars is faster due to a favourable policy package. This leads to a decline in oil demand and direct greenhouse gas emissions as well as to an increase in electricity demand from cars compared to the Reference Scenario. The methodological linkage of econometrics and system dynamics, together with the endogenisation of the electric vehicle battery price evolution by explicitly modelling six major car markets, is the main contribution of this study. Its major limitations prompt further research on the representation of supply-side aspects (i.e. battery and vehicle manufacturers) using alternative methods such as agent-based modelling. i Table of Contents Abstract ........................................................................................................... i List of Figures .............................................................................................. vii List of Tables............................................................................................... xiii List of Abbreviations ................................................................................... xv List of Symbols ........................................................................................... xxi Acknowledgments and accountability ..................................................... xxv 1 Introduction ............................................................................................. 1 1.1 Motivation and objective .................................................................. 1 1.2 Focus, scope and structure ................................................................ 4 2 The uncertain market evolution of electric cars ................................... 7 2.1 Fundamental ideas ............................................................................ 7 2.1.1 The car and the oil markets.................................................... 8 2.1.2 On complex systems, uncertainty and scenarios ................. 13 2.1.3 Analytical framework .......................................................... 17 2.2 Historical perspective ..................................................................... 19 2.3 Techno-economic aspects of electric cars ....................................... 23 2.4 Previous research ............................................................................ 27 2.5 Concluding remarks I: Modelling tasks .......................................... 32 3 Methodological considerations for dynamic modelling ...................... 35 3.1 Economic methodology .................................................................. 35 3.1.1 Scientific reasoning in economics ....................................... 35 3.1.2 Positive and normative economics ...................................... 39 3.1.3 Research programmes in economics ................................... 40 3.2 Economic methods.......................................................................... 49 3.2.1 Quantitative methods in applied economics ........................ 51 3.2.2 Econometrics ....................................................................... 53 3.2.3 Input-output analysis ........................................................... 56 iii Table of Contents 3.2.4 System dynamics ................................................................. 56 3.2.5 Agent-based computational economics ............................... 57 3.3 Dynamic models for decision support ............................................ 58 3.4 Data availability, collection and quality ......................................... 61 3.5 Concluding remarks II: Method assessment and selection ............. 64 4 Model development ................................................................................ 71 4.1 Overview ........................................................................................ 71 4.1.1 Model description ................................................................ 71 4.1.2 Dynamic hypothesis ............................................................ 77 4.1.3 Stages in model building ..................................................... 79 4.2 Assumptions ................................................................................... 80 4.2.1 Population ............................................................................ 80 4.2.2 Gross domestic product ....................................................... 81 4.2.3 Price level and exchange rates ............................................. 84 4.2.4 Income per capita ................................................................ 87 4.2.5 Conventional fuel prices I: crude oil prices ......................... 88 4.2.6 Conventional fuel prices II: energy taxes ............................ 90 4.2.7 Alternative fuel and electricity prices .................................. 95 4.2.8 Car ownership...................................................................... 96 4.2.9 Car stock ............................................................................ 128 4.2.10 Market segmentation ......................................................... 132 4.2.11 Technology choice ............................................................ 134 4.2.12 Travel demand by car ........................................................ 136 4.2.13 Infrastructure ..................................................................... 139 4.2.14 Fuel intensity, battery capacity and range ......................... 142 4.2.15 Production costs ................................................................ 145 4.2.16 Consumer costs.................................................................. 148 4.2.17 Powertrain attractiveness ................................................... 149 4.2.18 Electricity generation ........................................................ 154 4.2.19 Energy use ........................................................................