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Reducing Transport GHG Emissions: Opportunities And Costs, Preliminary Findings

Discusses challenges for transport sector in reducing GHG emissions and proposes an evaluation framework

Overview

Climate change poses two fundamental challenges for the transport sector: transport will have to significantly reduce greenhouse gas (GHG) emissions and it will require investment in order to adapt to impacts of climate change.

The scale and scope of emission reductions sought by policy makers are daunting but there is much that can still be achieved within the transport sector at low cost – especially against a background of high energy prices. Governments will deploy many policies simultaneously and can avoid unnecessary costs if transport sector GHG mitigation is planned on the basis of marginal abatement costs and focuses on the most cost-effective actions. Success will depend on action across several fronts encompassing technology, fuels, and travel behaviour – regional circumstances will play an important role in determining the allocation of effort.

Industry will require clear, consistent and durable signals to guide low-carbon innovation and households will require similar guidance regarding purchase decisions, travel and settlement patterns. Technological innovation has the potential to deliver larger emission reductions on a much faster track than changes in travel and settlement patterns.

Key Messages

 

  1. Quantifying the benefits of GHG abatement is extremely difficult, given the uncertainty on the consequences of climate change, in particular where low-probability catastrophic outcomes are concerned.
  2. This makes setting the test for selecting options, in terms of a rate of return or a shadow price for carbon, problematic. There may be no better guide than contribution to a political economy-wide mitigation target (e.g. a trajectory leading to 450 ppm CO2 in the atmosphere by 2100) but ranking mitigation measures according to cost-effectiveness remains essential if resources are not to be wasted.
  3. Although the largest overall cuts in GHG emissions are to be expected in the energy, residential and commercial buildings sectors, many mitigation measures in the transport sector are relatively low cost. Some of these save money in the long run, through fuel savings. Nevertheless the capital costs of many transport sector technological innovations are likely to be high and this is a barrier to commercialisation given the evidence that upfront costs have a disproportional impact on decisions regarding energy-efficiency.
  4. Fuel efficiency standards accompanied by appropriate fuel taxes are a key instrument for addressing this barrier. Long-term targets can create the certainty that vehicle manufacturers need to make investments in new technologies, compensating for consumer risk aversion to paying for improved fuel economy as well as producer uncertainty on drivers’ willingness to pay for energy efficiency. The resulting changes in vehicle production and purchases have the potential to deliver the largest share of CO2 mitigation in the transport sector.
  5. Fuel taxes have a fundamental impact on CO2 emissions, affecting both travel demand and the technologies deployed by vehicle manufacturers. Fuel excise duty rates therefore need to be consistent with climate change policy and coherent with measures introduced to mitigate emissions. This applies in particular to fuel economy standards, e.g. the shadow price for carbon implied by fuel taxes and standards should be broadly similar. Inconsistency makes it more difficult for manufacturers to meet standards and distorts their response.
  6. Differentiated vehicle registration or purchase taxes and feebate schemes can further guide consumer demand for fuel efficient vehicles. Care must be taken to ensure that these schemes evolve as the composition of the vehicle fleet changes and that they are applied in such a way as to avoid fragmentation of vehicle markets, which would increase costs and weaken their impact. They also need to be coherent with other incentives differentiated according to vehicle emissions, such as consumer labelling schemes.
  7. Low carbon fuels will make a contribution to GHG emissions mitigation, albeit modest. Volumetric biofuel production quotas are an inefficient way to promote low-carbon-fuel switching and may not even deliver CO2 savings unless they are linked to effective sustainability criteria and fuel carbon standards. The use of fuel carbon standards can also help ensure that oil substitutes result in less, not more, lifecycle CO2emissions.
  8. Improvements in traditional and hybridised internal combustion engine technology will continue to deliver the greatest source of GHG reduction from vehicles in the short-to medium-term. Electrification of mobility will play a growing role over the longer term though hurdles relating to battery costs, vehicle range and energy distribution will need to be overcome. Ultimately, the GHG impact of electric mobility will depend on the carbon intensity of electricity generation. Where coal intensive electricity production dominates, electric mobility will not reduce overall GHG emissions without commercial-scale carbon capture and storage technology.
  9. Better traffic management has the potential to deliver significant CO2 reductions, reducing the incidence of stop-go traffic and discouraging excessive speed. Freeing capacity through traffic management will induce additional traffic in many circumstances but even when overall travel increases emissions may still be less than before if operating speeds are more efficient. A key point is to manage newly available capacity to lock-in benefits from reduced congestion, through congestion pricing for example.
  10. Mobility management initiatives, land-use planning and promotion of high quality public transport can all help to reduce GHG emissions. These measures will deliver relatively less CO2 reduction over time as per-kilometre CO2 emission rates decrease due to technical efficiency improvements. Nonetheless, many of these measures deliver important co-benefits (e.g. air quality, noise, congestion) that should not be overlooked by transport authorities.
  11. Fuels for international air and maritime transport are not taxed and international conventions have so far been seen as an obstacle to making carbon taxes or trading part of the approach to mitigating GHG emissions from these modes. ICAO and IMO were allocated responsibility for policies to reduce emissions from international aviation and shipping under the Kyoto Protocol. Action is still required but it is not clear that measures currently being proposed will deliver rapid or significant emission reductions – market-based instruments such as a fuel levy or emissions trading are likely to be required though there is no consensus on this within either international body. Research indicates that emissions trading systems (or a fuel tax) are more cost effective than departure or ticket taxes so long as they are integrated with trading in other sectors.
  12. In order to effectively tackle transport GHG emissions, governments need a robust evaluation and monitoring framework to guide their action. Evaluation and monitoring relies on adequate data: data collection and analysis merits additional resources in many administrations.

Transport And Climate Change

Man-made emissions of greenhouse gases – principally carbon dioxide (CO2) – have risen 70% from 29 Gt CO2eq in 1970 to 49 Gt CO2eq in 2004 – 25.8 Gt of which came from CO2 emissions from fossil fuel combustion. Atmospheric CO2 concentrations have increased from a pre-industrial value of 280 parts per million (ppm) to 385 ppm in 2008 and are growing at an accelerated pace. The current level of CO2 concentration in the atmosphere significantly exceeds the natural range for the past 650 000 years (180­300 ppm). The IPCC in its 4th Assessment Report finds that the accelerating warming trend observed since the mid-20th century is very likely due to the increase in man-made greenhouse gas concentrations.

Emissions are on track to double the concentration of GHG in the atmosphere by the end of the century (~660-790 ppm CO2). The IPCC expects this to lead to a rise in average temperature of up to 6°C resulting in significantly adverse impacts on water supply, eco-systems, food production, land use in coastal areas and human health. Additionally, there is a possibility that such a change in GHG concentrations could trigger irreversible tipping points that would magnify the impact. Acting earlier to reduce emissions, rather than later, is expected to reduce the overall costs associated with climate change.

The IPCC recommends stabilisation of CO2 concentrations at ~450 ppm on the basis that this would have a good chance of limiting temperature rise to 2°C, which would greatly limit impacts and damage. Current trends are far from this trajectory. In order to meet such an objective, the IPCC has suggested that a 50% reduction of GHG emissions from present levels by 2050 will be necessary.

Current pledges and actions proposed by both developed and developing countries are not sufficient to lead GHG emissions onto a 450 ppm stabilisation trajectory. Considering low and high estimates of the impact of these pledges as of August 2009, total emission reductions will fall 62% to 35% short of reaching a 450 ppm trajectory by 2020.

The cumulative impacts of the 2008 oil price spike and the 2008-2009 recession have led to decreased GHG emissions as is illustrated in the by the figure below for the United States. Overall, global GHG emissions are forecast to drop by up to 10% year-on-year in 2010. If economic growth rates converge towards their previous levels and economic patterns of activity remain unchanged, this would translate into an 5%-8% drop from business-as-usual emissions in 2020. However, there is speculation that long term structural patterns of trade may be impacted leading to a slightly lower GHG growth trajectory, especially for international maritime and air freight.