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A benefit-cost assessment of new vehicle technologies and fuel economy in the U.S. market

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  • Simmons, Richard A.
  • Shaver, Gregory M.
  • Tyner, Wallace E.
  • Garimella, Suresh V.

Abstract

Increasingly stringent fuel economy and emissions regulations alongside efforts to reduce oil dependence have accelerated the global deployment of advanced vehicle technologies. In recent years, original equipment manufacturers (OEMs) and consumers have generally been successful in mutually deploying cleaner vehicle options with little sacrifice in cost, performance or overall utility. Projections regarding the challenges and impacts associated with compliance with mid- and long-term targets in the U.S., however, incur much greater uncertainty. The share of existing new vehicles that is expected to comply with future regulations, for example, falls below 10% by 2020. This article explores advanced technologies that result in reduced fuel consumption and emissions that are commercially available in 2014 Model Year compact and midsize passenger cars. A review of the recent research literature and publicly available cost and technical specification data addressing correlations between incremental cost and fuel economy is presented. This analysis reveals that a 10% improvement in the sales-weighted average fuel economy of passenger cars has been achieved between 2011 and 2014 at costs that are at or below levels anticipated by the regulations by means of reductions in weight, friction, and drag; advancements in internal combustion efficiency; turbocharging combined with engine downsizing; transmission upgrades; and the growth of hybrids. Benefit-cost analyses performed on best-selling models in the selected classifications reveal that consumers thus far are not substantially incentivized to purchase fuel economy. Under baseline conditions, benefit-cost ratios are above a breakeven value of unity for only 6 of 28 models employing improved fuel-economy technologies. Sales-weighted data indicate that the “average” consumer that elected to invest in greater fuel economy spent $1490 to realize a 17.3% improvement in fuel economy, equating to estimated savings of $1070. Thus savings were, on average, insufficient to cover technology costs in the baseline scenario. However, a sensitivity analysis reveals that a majority of new technologies become financially attractive to consumers when average fuel prices exceed $5.60/gallon, or when annual miles traveled exceed 16,400. The article concludes with techno-economic implications of the research on future fuel economy regulations for stakeholders. In general, the additional cost consumers incur in exchange for a given level of fuel economy improvement in the coming years will need to be steadily reduced compared to current levels to ensure that the expected benefits of fuel savings are financially warranted.

Suggested Citation

  • Simmons, Richard A. & Shaver, Gregory M. & Tyner, Wallace E. & Garimella, Suresh V., 2015. "A benefit-cost assessment of new vehicle technologies and fuel economy in the U.S. market," Applied Energy, Elsevier, pages 940-952.
  • Handle: RePEc:eee:appene:v:157:y:2015:i:c:p:940-952 DOI: 10.1016/j.apenergy.2015.01.068
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    References listed on IDEAS

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    Cited by:

    1. Krause, Jette & Small, Mitchell J. & Haas, Armin & Jaeger, Carlo C., 2016. "An expert-based bayesian assessment of 2030 German new vehicle CO2 emissions and related costs," Transport Policy, Elsevier, vol. 52(C), pages 197-208.
    2. Diao, Qinghua & Sun, Wei & Yuan, Xinmei & Li, Lili & Zheng, Zhi, 2016. "Life-cycle private-cost-based competitiveness analysis of electric vehicles in China considering the intangible cost of traffic policies," Applied Energy, Elsevier, vol. 178(C), pages 567-578.
    3. repec:eee:appene:v:203:y:2017:i:c:p:506-521 is not listed on IDEAS
    4. Galvin, Ray, 2016. "Rebound effects from speed and acceleration in electric and internal combustion engine cars: An empirical and conceptual investigation," Applied Energy, Elsevier, vol. 172(C), pages 207-216.
    5. repec:eee:appene:v:204:y:2017:i:c:p:544-559 is not listed on IDEAS
    6. Huebner, Gesche M. & Shipworth, David, 2017. "All about size? – The potential of downsizing in reducing energy demand," Applied Energy, Elsevier, vol. 186(P2), pages 226-233.
    7. Ruan, Jiageng & Walker, Paul & Zhang, Nong, 2016. "A comparative study energy consumption and costs of battery electric vehicle transmissions," Applied Energy, Elsevier, vol. 165(C), pages 119-134.

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