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The Road to 100% Zero-Emission Cars

California is dreaming of a fossil-free transportation future. Smart choices and economic analysis are needed to bring it within reach.

Frustrated by the setbacks, plagues, and stresses of 2020, I recently decided to lift my spirits by setting a few goals for self improvement. I declared that I will soon complete an Ironman, master French cooking, and, regardless of their behavior, I will only speak to my children in calm, rational tones that foster their long-term development and sense of worth. That felt good, so I also declared that I’d finally read Ulysses.

Gavin Newsom also set some lofty goals late last month, which aim to lift the Golden State from its orange-sky pandemic doldrums. Specifically, Newsom penned an executive order declaring that 100% of new passenger cars will be zero emissions by 2035, and new medium- and heavy-duty trucks will be 100% zero emissions by 2045. He threw in 100% of off-road vehicles for good measure. Like a phoenix, California has been told to rise from the ashes of 2020, reborn with a fossil-free transportation sector. Or, so goes the plan.

Like my hypothetical, perfectly executed Coq Au Vin, a fossil-free transportation sector sounds great. But, can we really get there? And, if so, how might economics help us along?

 

nikola-ab-semiSymbolic of the normalization of electrification, a Nikola electric semitruck delivers domestic beer in Middle America. (Photo: CNET)

How radical is the goal? 

For a 40-year old economist, I’m in reasonably good shape. But the truth is I’ve never run more than about 11 miles; I don’t distance swim; and I don’t own a road bike. So, I could conceivably complete an Ironman, but I’ve got a long way to go.

Unfortunately, California is just as far from its fossil-free transportation goals as I am from mine. The electric share of the new vehicle market in California sits under 6%, a third of which are plug-in hybrids that don’t qualify as zero emissions. Nationally, the EV market share is 2%, and this metric actually fell in 2019. Globally, growth in the EV market leveled off in 2019, weighed down by stagnation in the US and China. Meanwhile, the market share of zero emission medium- and heavy-duty trucks rounds off to a clean 0%. Viewed this way, the goals are radical, and the road is long.

California, however, is not alone in its ambitions. More than a dozen countries, including France, Germany and the UK, as well as a number of cities and provinces have similar plans to phase out new fossil passenger vehicles. California’s plan is a bit faster, but not out of line. California does stand out in its inclusion of medium- and heavy-duty trucks. Here though the executive order hedges; the 100% zero emissions goals are to be met “where feasible.” (We should probably take the idea of 100% zero emissions trucking seriously, but not literally.)

McKinsey(Source: McKinsey & Company)

There is reason for optimism about rapid change. The variety of vehicles on offer is exploding. Automakers are making bold statements about a near-term transition. Many market watchers predict price parity for electric passenger cars within the next few years. And a few smaller countries have achieved large EV market shares already. But these examples, which are almost entirely in Europe, were achieved via large tax incentives and public investments. This brings us to the essential topic of the policies we need to obtain this goal. How might we ascend to such lofty heights?

AutoweekTrucksIn a sign of expanding consumer choice, a bevy of new, made in the USA electric pickups should be available within the next two years. (Photo: Autoweek)

 

We will need many smart choices along the way

If I’m going to run my triathlon, I’ll need an intelligent training regimen, and a little luck. Likewise, California is going to need a good plan to pursue its goals, and I think economics can help us avoid some costly detours. Here are a few quick thoughts along those lines. 

First, a primarily electric transportation sector needs to be coupled with smart choices in California’s electricity sector. Naysayers reacted to Newsom’s announcement by pointing to the state’s rolling blackouts in August, reasoning that we can’t accommodate big increases in demand. On the other hand, EV advocates point to the potential for EVs to act as storage in a smarter grid.

As a member of the Energy Institute, I’m contractually obligated to point out that smart rate design will be critical here. We’ll need time varying rates to ensure that transportation doesn’t put pressure on peak hours, and we’ll need a smart overall design in order to make sure that high electricity prices don’t stall progress in decarbonizing transportation. 

Second, transforming our transportation sector into a beacon of light for the world just might require some money. California, however, is staring at a massive deficit today and a tight budget in the near term. If the state simply ratchets up its current Zero-Emissions Vehicle (ZEV) mandate to push the transition, that won’t require direct funding. But it won’t raise any money either, and the executive order calls for large investments in charging infrastructure, policies to ensure that zero emissions transportation is affordable for low-income communities, and funds to facilitate the retirement and repurposing of capital in the state’s oil sector.

As such, instead of just leveraging the ZEV mandate, the state might want to reform the existing sales tax on automobiles into a scheme that taxes fossil vehicles and subsidizes zero-emissions cars. Such a system, sometimes called a feebate, has been widely used in other countries (often labeled a Bonus-Malus after the French) to pursue environmental objectives. It can be designed to be revenue neutral, but it can also be calibrated to raise revenue that could be funneled into infrastructure and low-income programs. (Incidentally, the EPA administrator, himself a former lobbyist for the oil and gas industry, speculated that a ban on fossil vehicles in California would be subject to federal preemption and require a waiver. A tax system might have a different legal pathway.)

Another revenue option would be to tax the used fossil fleet via registration fees tied to pollution. This is also a common strategy in other countries, where such “circulation taxes” can be substantial. Moreover, economists have recently thought through how to achieve the same effects with a quota system if the use of taxes proves politically unwise.

Such a scheme might be an important tool for overcoming unintended consequences of a ban on new fossil vehicles. The executive order mentions only the new vehicle market. It appears not to ban fossil vehicles from being purchased elsewhere and registered in the state, even after 2035. And it explicitly does not force residents to retire the cars they already have, nor does it prohibit sale of used fossil cars in the state.

This is likely to engender a host of problems. First is simple “border shopping” (it might be a good time to buy a car dealership in Reno!). Second, “grandfathering” (where the elderly are excused from present day norms) of the existing fleet might cause people to hold on to older fossil vehicles longer. Third, a looming ban can trigger a version of the “green paradox,” wherein people rush to buy extra of something before it is prohibited. (Maybe you stashed away a few incandescent bulbs at one point?)

Smartly designed registration fees have the potential to discourage fossil imports, encourage fleet turnover and avoid the green paradox, all while raising much needed revenue to facilitate the transition.

A zero emission new vehicle fleet in 2035 is certainly possible. It’s not science fiction. I’d love to have cleaner air and quiet streets, not to mention a livable planet. But just like my goals for self improvement, it won’t become a reality without a sustained commitment and a lot of smart choices along the way.

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas

Suggested citation: Sallee, James. “The Road to 100% Zero-Emission Cars” Energy Institute Blog, UC Berkeley, October 5, 2020, https://energyathaas.wordpress.com/2020/10/05/the-road-to-100-zero-emission-cars/

James Sallee View All

James M. Sallee is an Associate Professor in the Department of Agricultural and Resource Economics at UC Berkeley, a Research Associate of the Energy Institute at Haas, and a Faculty Research Fellow of the National Bureau of Economic Research. He is a public economist who studies topics related to energy, the environment and taxation. Much of his work evaluates policies aimed at mitigating greenhouse gas emissions related to the use of automobiles.

25 thoughts on “The Road to 100% Zero-Emission Cars Leave a comment

  1. Rather than trying to ban specific technologies the most cost effective incentives should be used to achieve the goal, in this case reducing CO2 production.
    Trying to reduce carbon dioxide production my banning fossil fueled cars by 2035 may not be the most cost efficient method of reducing CO2 production. A more cost effective approach would will be to adopt the carbon fee and dividend as proposed here:
    https://clcouncil.org/economists-statement/
    If well implemented with low fees carbon dividend should reduce carbon fuels use in the most cost effective and least inequitable method. If zero emission cars are the most efficient way of doing this, then they will be become market dominant. As fuel costs rise this will also discourage older and out of state internal combustion vehicles.
    Technology may change in the next ten years. If ethanol from cellulose become viable as a fuel then internal combustion cars may still be on the road as a net zero emission vehicle even though they emit carbon.
    A carbon dividend program should be superior to ban on specific technology.

  2. “As a member of the Energy Institute, I’m contractually obligated to point out that smart rate design will be critical here.”

    James, I take it by so-called “smart rate design” you mean that which avails all California drivers of electricity from renewable sources to charge their electric vehicles (otherwise, in lieu of a nuclear-powered California, they aren’t driving 100% zero-emission cars).

    Is this in jest? Such a scenario would require residents to only charge when: a) when the sun is shining b) the wind is blowing, or c) huge, yet-imaginary batteries of the future, charged only by renewable energy, can deliver at least 24 kilowatthours to each of 15 million cars, on a daily basis. Given those onerous restrictions, it seems to me electricity could be free and fail to tempt anyone to part with their gasoline-powered vehicle.

    “A zero emission new vehicle fleet in 2035 is certainly possible. It’s not science fiction.”

    I’d propose that until you provide an energy and economic accounting in support of it, your vision is indeed science fiction.

    • Thanks for this. Now wish I had made the clarification somewhere that “zero emissions” is an obvious misnomer. Electric vehicles aren’t zero emissions and won’t be by 2035. I did not mean to imply that EVs should only charge off of renewables or something, but rather that we want to ensure that EVs charge at times where prices are low as much as possible. What I meant to suggest isn’t science fiction is the goal to eliminate all *new* fossil-fueled vehicles by the target dates, recognizing that this presumably won’t be truly emissions free on the electricity side, and it doesn’t prohibit used fossil vehicles, or certain classes of exempt trucks. In short, the literal text of the executive order.

      • I admit, I hadn’t seen Gov. Newsom’s Executive Order when I posted above. He doesn’t get off to a good start:

        “California Will Phase Out Gasoline-Powered Cars & Drastically Reduce Demand for Fossil Fuel in California’s Fight Against Climate Change”

        says Newsom, implying that phasing out gasoline-powered cars will “drastically reduce demand for fossil fuel”. This marketing strategy, advanced by Sempra, PG&E, and SoCal Edison, cynically exploits public ignorance of several trends:

        1) From a GHG standpoint, leakage of natural gas makes it significantly more harmful than coal. It’s now estimated 2.5% of natural gas is leaked into the atmosphere, with a GHG footprint anywhere from 27-82 times that of CO2.
        2) Hydrogen fuel cell vehicles (FCVs), promoted as “emission-free”, are anything but. True, all that comes out of their exhaust pipes is water. But 95% of commercial hydrogen is made from natural gas, using an energy-intensive process known as steam reformation. Thus on a well-to-wheels basis, FCVs have a GHG impact worse than that of comparable gasoline-powered hybrids.
        3) The shift from carbon-free nuclear electricity to the gas-fired variety has already increased California emissions by 9 million tonnes/yr, a figure that will double if Diablo Canyon shuts down.
        4) All credible analyses show consumption of gas increasing in tandem with adoption of solar and wind.
        5) Since AB 167 (2009) California utilities have been allowed to attribute part of their electricity to “Unspecified Sources of Power” (USP), typically used for imported electricity. After the 2012 shutdown of San Onofre, Edison’s USP jumped to 37% of its total – showing San Onofre’s carbon-free generation, together with California GHG emissions, were being conveniently outsourced to other states.

        All to say: “Zero-Emission Vehicles” might be more accurately labeled “Even-More-Emission Vehicles”.

        • “3) The shift from carbon-free nuclear electricity to the gas-fired variety has already increased California emissions by 9 million tonnes/yr, a figure that will double if Diablo Canyon shuts down.
          4) All credible analyses show consumption of gas increasing in tandem with adoption of solar and wind.”

          Please provide

          1) the data source showing that GHG emissions have grown 9M tonnes since 2012. As I’ve posted mulitple times, the official CARB inventory shows the opposite by several multiples.

          2) ALL credible studies conducted since 2017 proving your point about increase gas EMISSIONS. And please provide the full criteria of a study being “credible” by a metric other than your sole judgement.

          • “Please provide the data source showing that GHG emissions have grown 9M tonnes since 2012.”

            If you’re referring to overall GHG emissions generated within California, that’s a claim I never made.

            “Please provide ALL credible studies conducted since 2017 proving your point about increase gas EMISSIONS.”

            You refuse to consider credible any source that doesn’t hype renewable energy, so I can’t. I’ll make it simple (though you tend to disparage data from EIA.gov when it doesn’t flatter renewables, that’s a chance I’ll take):

            Is the brown line trending up or down? Was it going up or down before the U.S. stopped new nuclear construction? After?

          • ““Please provide the data source showing that GHG emissions have grown 9M tonnes since 2012.”
            If you’re referring to overall GHG emissions generated within California, that’s a claim I never made.”

            You’re evading the question. You made a statement. It’s not for me to guess your context (and I assumed it was electricity sector.) You can clarify context and provide the data source that you are referencing about California since that context was clear.

            “Please provide ALL credible studies conducted since 2017 proving your point about increase gas EMISSIONS.”
            You refuse to consider credible any source that doesn’t hype renewable energy, so I can’t. I’ll make it simple (though you tend to disparage data from EIA.gov when it doesn’t flatter renewables, that’s a chance I’ll take):

            First, we can’t tell if this graphic if for California or he US. Second, the graphic is quite clear–the decline in coal emissions has been replaced by some gas generation. That’s a well know phenomenon that has no relationship to whether increased renewables increases gas generation. Apparently you have no other credible sources.

          • “You can clarify context and provide the data source that you are referencing about California since that context was clear.”

            Then I’ll make it crystal-clear. And as it turns out, I was ~300% shy on my estimate of increased CO2 emissions from the shutdown of San Onofre:

            • In 2011, SONGS generated 18.1 TWh of carbon-free electricity.
            • After Jan 28, 2012, it generated none.
            • According to EIA, each TWh of U.S. electricity emits an average of 2.4 MT of CO2 when generated by natural gas.
            • 2.4 x 18.1 = 43.44 MT added CO2, if it was replaced by natural gas. Was it? You tell me.

            By Edison’s own 2012 Power Content Label, it was replaced by “unspecified [imported] sources of power”. Does that mean it was unspecified by Edison’s IPP? No, it could mean Edison didn’t report it to the California Energy Commission. Could it have been imported renewables? No, or Edison would have applied it to meet its renewables quota.

            SONGS was replaced by 100% imported, fossil fuel power, and if any was coal (likely) Southern California Edison, aided and abetted by CPUC President Michael Peevey, added more than 43 million tonnes of CO2 to California’s total. They did it by exporting emissions to other Western states, beyond CARB’s oversight, and reporting the power that created them as originating from “unspecified sources”.

            “First, we can’t tell if this graphic if for California or he US.”
            It’s for the entire U.S.

            “That’s a well know[-known] phenomenon that has no relationship to whether increased renewables increases gas generation.”

            Wherever / whenever:
            1) the sun doesn’t shine at night, and
            2) the wind occasionally doesn’t blow, and
            3) hospitals need electricity any time of the day or night, and
            4) emergency responders need electricity any time of the day or night, and [list of essential services here]….

            solar and wind are 100% dependent on gas to come to their rescue – that’s a fact. By increasing renewables, we are thus building in reliance on fossil fuel gas for decades to come.

  3. Another problem to consider is road taxes. Currently those are collected at the pump and are relatively fair since the amount you use the roads is somewhat proportional to the amount of gas/diesel purchased (obviously this ignores the weight and impact of the vehicle on the roads). There is no equivalent for electric vehicles except for a license fee surcharge. There either has to be a tax on electricity used for charging or a Vehicles Miles Traveled system put in place.

    In addition, there is a small possibility that industry can create a net negative GHG gasoline or diesel from converting waste biomass to fuel combined with carbon sequestration (see “Getting to Neutral” report from LLL). That would allow either a longer transition period or enable a zero or negative GHG emission combustion engine.

  4. While reducing or eliminating the use of fossil fuels and zero emissions are laudable goals, EV’s are not a solution. Based on even the most optimistic assessments the life-cycle environmental and economic costs of EV’s anywhere near the scale proposed by Newson’s latest ‘wishful thinking’ is a major diaster.

  5. You leave out an important factor: many EV drivers prefer driving electric vehicles. I upgraded from an 85 mile range Leaf to a 225 mile model and it easily meets all my needs. (I mean before the pandemic; I’ve charged it only twice since March…)

    EVs are fun to drive: they’re quiet, they accelerate quickly, and charging at home or the supermarket is vastly preferable visiting gas stations. Plus there’s satisfaction in not polluting (locally) and in CA at least, vastly reducing your transportation CO2 emissions.

    With the federal tax credit and rebates from CA and PG&E, cost is already competitive. As prices decline further, these incentives can be phased out. Increases in battery energy density means vehicles’ range will cover more people’s needs. The state already provides incentives for charging stations and the executive order calls for more. As these become more widespread, the “range anxiety” issue will wane.

    From an EV driver’s perspective, we’re already pretty close (at least for light-duty vehicles). Given the improvements between my 2015 Leaf and 2019 Leaf, 15 years seems like plenty of time to take us the rest of the way.

  6. Regarding Gavin Newsom; when you can’t lead, govern or manage the massive problems you have created in your state you must baffle the people with bullshit. Can’t stop the fires, the rolling blackouts, the crumbling of your infrastructure, the human waste in your streets and playgrounds, the rise of homelessness, 1/3 of the welfare in the country, the highest energy costs in the country (ironic you can’t keep the lights on, but propose electric vehicles), you propose solutions to problems you cannot be measured on for at least 15 to 100 years.

    • I wouldn’t use quite the same words, but I do agree that the executive order is likely partly in response to the feeling that we need to “do something” about climate change, brought about by all the proximate problems. The trouble with climate change is that not much can be done immediately on any margin. All the solutions to climate change take time, patience and persistence.

  7. Most vehicles in California get an emissions inspection every two years; assess a fee on the quality of emissions.

    Require each vehicle have an ’emissions’ black box, to track realtime emissions — like a fastrak for emissions; you emit you get charged. This ‘box’ can be used to charge a toll for miles given — NO FREEWAYS, every drive is a toll drive.

    EVs will NOT get significant until the range anxiety is resolved – better batteries, easy access to charging and fast. Maybe that, now defunct, business which would have exchanged batteries at charging stations in about the same time as getting a gasoline refill.

    Hybrids are not ZEVs – but a great transition format, until the issues with EVs are resolved.

    We know from tRump holding up his big signature with his little fingers Executive orders – they may, but usually not, have any effect.

    • Real time measurement of local emissions is extremely costly and inaccurate, so I’m not sure what we could achieve in that regard. If we want to measure carbon, we just need to measure the fuel input, not exhaust emissions.

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