How Stringent Should Vehicle Emission Standards Be? Simulating Impacts on Greenhouse Gas Emissions, Zero-Emissions Vehicle Sales, and Cost-Effectiveness

Vehicle emission standards (VES) regularly undergo changes and updates in various countries, including the United States and Canada. To help inform the design of VES policy, we simulate the additive impacts of various VES stringencies on greenhouse gas (GHG) emissions, zero-emissions vehicle (ZEV) sales, and cost-effectiveness ($/tonne) out to 2030, using the case of Canada. The VES policy stringencies include four stringencies: Trump era (1.5 percent annual efficiency improvements per year to 2026), California style (3.7 percent improvements to 2026), Obama era (5 percent annual improvements), Biden era (10 percent annual improvement in 2023 and 5 percent subsequently until 2026), and EU style (6.5 percent annual improvements until 2030). We apply the AUtomaker–consumer Model, which endogenously simulates consumer and automaker decisions and technological change. Results show that although the Biden-era VES is more effective than the other designs under consideration in North America, only the EU-style policy makes substantial progress toward GHG emissions reduction and ZEV sales goals. Interestingly, defining cost-effectiveness as dollar per tonne of carbon dioxide abated, we find that the EU-style VES (the most stringent version) is 13 percent more cost-effective than the other VES versions in the median case. Results support the case for further strengthening of a VES toward EU levels.