Regulations and carbon pricing can work together

By Aaron Wherry - Saturday, December 8, 2012 at 8:00 AM - 0 Comments

On Friday, the Harper government’s new fuel efficiency regulations were published in the Canada Gazette, including the full cost-benefit analysis.

These costs are incremental to the baseline so, for example, technology costs add $195 million (present value) to the costs of the model year 2017 fleet, and add $2.4 billion (present value) to the costs of the model year 2025 fleet.

The incremental technology costs for model year 2017 are expected to be $127 for cars and $162 for light trucks, increasing to $1,856 for cars and $2,453 for light trucks in model year 2025 in order to meet the increasingly stringent standards of the proposed Regulations. In reality, relative changes in vehicle prices and performance may affect consumer choice; however, it is not within the capacity of the analysis to model consumer choice.

PJ Partington of the Pembina Institute defends the new standards and argues that a price on carbon would complement such regulations.

None of this is to say that carbon pricing doesn’t have an important role in tackling emissions from transportation. Carbon pricing would support these regulations by creating more demand for fuel-efficient vehicles and encouraging people to reduce their vehicle use. Carbon pricing would also provide revenues that governments could re-invest in clean transportation options like transit and electric vehicle infrastructure.

We don’t see it as a choice between carbon pricing and efficiency standards: they’re complementary, not alternatives. By ensuring that efficiency continues to improve across the board, standards like these help manage the impact of higher gas prices from carbon pricing, and ensures that they will have plenty of cleaner options to choose from. The Western Climate Initiative, which features a cap-and-trade system, also sees stringent vehicle standards as a key complementary policy to carbon pricing. An economic modeling assessment of climate policy options for Canada that we published in 2009 took the same approach. 

Who’s going to pay for fuel efficient planes?

By Chris Sorensen - Tuesday, November 29, 2011 at 9:15 AM - 0 Comments

Karim Sahib/AFP/Getty Images

Aircraft makers are racking up huge sales of fuel-efficient planes. But who’s going to foot the bill?

Airlines facing turbulent economic times have historically turned on the “fasten seat belt” sign and tried to ride out the chop, cutting underperforming routes and offering seat sales to boost others. With high fixed costs, the name of the game is preserving cash flow. So why then, with the economy looking so gloomy, are some now shelling out tens of billions of dollars to scoop up the latest state-of-the-art planes? It’s all about fuel.

With the price of oil hovering just under US$100 a barrel, airline executives are gambling that newer, more fuel-efficient planes will translate into huge cost savings down the road. Boeing, for example, revealed last week that it had signed the biggest-ever order in history with Indonesia’s Lion Air, which agreed to buy 320 Boeing 737s in a deal worth US$21 billion, based on list prices. Of those, 201 will be the 737MAX, outfitted with more efficient engines that burn up to 12 per cent less fuel than a regular 737 (Boeing also sold 50 of its 777 jets to Emirates Airlines for US$18 billion a week earlier). Similarly, Airbus’s A320 NEO, which has also been outfitted with more fuel-efficient engines, has proven to be the manufacturer’s fastest-selling model ever.

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The trouble with gas sippers

By Colin Campbell - Friday, May 22, 2009 at 12:08 PM - 6 Comments

North American car executives put on a happy face when they stood side-by-side with U.S. President Barack Obama and environmentalists to unveil new fuel efficiency rules this week. Under the new standards, the cars they build will have to get 35.5 miles per gallon (up from 25 mpg) by 2016—a much shorter timeline than any had expected. Speaking to reporters after the announcement, the executives applauded the ambitious move, which will force them to make cars over 40 per cent more efficient. But what they didn’t say publicly, in front of their new boss, is that this will be a severely onerous task for an already very fragile industry.

Meeting the new rules will cost the auto companies billions of dollars as they speed up the necessary engineering work to design and build more fuel efficient cars and retool plants. And this comes at a time when car makers like G.M., Ford and even Toyota have no money to spare. “This is the equivalent to be being very sick in the hospital and then coming down with pneumonia,” says Rebecca Lindland, an auto analysts at IHS Global Insight. Just hours before the deal was announced, Ford informed the White House it might not survive under the new rules and threatened to pull its support, reported the Los Angeles Times. It was eventually convinced to play along.

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Cash for Clunkers

By Alex Shimo - Tuesday, March 10, 2009 at 8:12 PM - 12 Comments

Ford Motor Co. has asked the Canadian government to provide a $3,500 incentive to consumers who buy a new car in 2009. The initiative is supposed to stimulate the flagging auto-industry, and get older vehicles off the road. Ford CEO David Mondragon said they would be replaced by cleaner and safer vehicles.

The scheme has been sold as a win-win: good for the environment and economy. Based on the German model, it will likely stimulate the car industry – in Germany, car sales are up 22 per cent from the year before, and are at their highest level in 10 years. The scheme is so successful that many other countries are thinking of implementing something similar - Britain says a cash incentive scheme is on the horizon, and France, Italy and Spain all offer a similar cash for clunkers program. In the US, a similar proposal didn’t make it into the stimulus package, but has strong support from many in Congress.

The European experience suggests the program is good for job creation. Whether it’s good for the environment is another matter. While emissions of newer cars are lower than older cars – they aren’t that much lower. Between 1987 – 2005, fuel efficiency improved by 24 per cent. Which adds up to an approximate improvement of 1.3 per cent per year, depending on the age of your car. When you factor in the carbon cost of producing a new car, you can see that it’s only going to make a real difference to your vehicle emissions if you have a very old clunker and you buy a very clean, green car. The problem is the people who own clunkers are generally not about to buy a brand new vehicle, even with the incentive. If you have a rust bucket, it’s most likely because you are cash-constrained, and government cash will only take you so far. Considering all these factors, many greenies say this isn’t really going to help the environment much at all. One worked out the cost of the incentive, and said you’d get as much value for money by reclassifying dollar bills as biomass and burning them in power stations. Would that be green power? One can only guess.

The tree hugger in all of us, revealed at last

By Alex Shimo - Friday, November 28, 2008 at 5:42 PM - 0 Comments

James Fallows, a columnist at The Atlantic has this excellent analysis of a recent report by
American Physical Society. It’s a rare bit of good news on the environment, and it says a number of things of note:

First, that lower energy use can happen; California’s energy consumption has stayed about flat for the past thirty years through “an ambitious program of appliance standards and other innovations in building design….” (Fallows).

Second, people are changing their habits, albeit slowly. Continue…