Insights from Adding Transportation Sector Detail into an Economy-Wide Model: The Case of the ADAGE CGE Model

The transportation sector is expected to undergo major structural changes in the coming decades, particularly with the emergence of new vehicle technologies. There is a need to understand the economy-wide impacts of evolving conditions in the transportation sector and computable general equilibrium (CGE) models can provide valuable insights in this area. However, to date, few CGE models have established detailed representations of the transportation sector. The major contribution of this work is to demonstrate, and provide insight into, how transportation subsector and technological detail influences modelled economic and environmental outcomes in the ADAGE model. The results presented in this paper indicate projected outcomes based on cost assumptions and model structure, not specific forecasts of future outcomes. They provide a useful diagnostic tool for gaining insight on likely directions and relative magnitude of market and environmental outcomes under different technology and cost assumptions. EV technologies, both hybrid and battery, see significant penetration in the U.S vehicle fleet from 2020 to 2050 whereas natural gas and fuel cell electric vehicles do not. Since the ADAGE model represents the whole economy, and both the transportation and electricity sector are integrated and linked together in ADAGE, the model is well-suited to estimate the sectoral, as well as the overall GHG impacts, of the wider use of electric vehicles. Increased penetration of EVs results in significant reductions in U.S. transportation sector GHG emissions, increases in U.S. electricity sector GHG emissions, and reduced overall, economy-wide, U.S. GHG emissions. As expected, higher oil prices lead to more rapid penetration of AFVs, and lower oil prices lead to slower penetration of AFVs.