Sustainable Mobility STRATEGIES International Transportation (68) 1 | 2016 9 Green vehicles The trade-of between environmental and climate policies Climate policy, environmental policy, regulation, alternative fuel vehicles The transport sector faces regulation by environmental and climate policies that aim to reduce the external costs of the sector that have to be acknowledged by all of the market players. Whereas environmental policies aim to reduce local air pollution, the goal of climate policies is to reduce global climate change. In practice, implementation of these policies involves some trade-ofs. As a consequence, environmental and climate policies must coexist and innovations in the transport sector have to be assessed within the context of the broad technological change occurring in the energy system. Author: Antje-Mareike Dietrich D ue to the historical manipulation of diesel engines by at least one German car manufacturer, namely Volkswagen (VW), regulations in the automobile market have attracted public attention. The VW afair shows that the political objections to these regulations are diverse and that they can difer among regions and policy ields, speciically in environmental and climate policy. It is necessary for all of the players in the market to understand the diferent objections and consequences of action in both policy ields. A brief analysis shows that trade-ofs exist between environmental and climate policies. Both environmental and climate policies equally address the issue that automobile usage afects environmental resources. At the local level, pollutant emissions include nitrogen and sulphur oxides, hydrocarbons and particulate matter. The consequences are negative impacts on human health and ecosystems. A high concentration of pollutants in the air causes respiratory ailments, mucosal irritations and raises the risk of cancer for humans. Additional negative efects are over-fertilisation, acidiication of the soil and water, or damage to plants. Areas of high population density, especially areas that surround busy roads, sufer the most [1]. On a global level, carbon emissions from the transport sector contribute to the growing concentration of greenhouse gases in the atmosphere. This so-called manmade greenhouse efect is linked to droughts, looding, species extinctions and other natural disasters [2]. In general, from an economic point of view, a clean environment and a stable climate are public goods with characteristics of non-excludability and non-rivalry in consumption. This means that no one has to pay a price for consuming a public good and can therefore use it as much as he or she likes. Because of the non-rivalry, the consumers do not afect each other by consuming the same good. However, in case of the air, atmospheric non-rivalry only exists to a certain emissions concentration limit corresponding to a certain number of kilometres travelled by car. Once the concentration exceeds the limit, further car usage causes the above stated negative efects for local residents and the global population. Usually, the individual car user does not take these efects into account because he or she does not have to compensate the people afected by these negative efects. In other words, the combination of non-excludability and rivalry leads to external costs that are borne by society. Figure 1 shows that 42 % of the external costs of transportation in the European Union (EU) relate to carbon (CO 2 ) and pollutant emissions. Climate change has the largest share, with 29 %. Together, air pollution, nature and landscape, biodiversity losses, and soil and water pollution have a 13 % share. As shown in igure 2, 93 % of total external costs arise from road transport. Passenger cars are responsible for twothirds of the total external costs [3]. Economists suggest diferent methods for addressing external costs. The aim of all 43% 10% 29% 4% 10% 1% 1% 1% 1% Accidents Air pollution Climate change Noise Up- & downstream processes Nature & landscape Biodiversity losses Soil & water pollution Urban effects Figure 1: Share of external costs of the transport sector Source: [3], p.11 61,1 3,6 5,6 9,4 12,7 1,9 5,2 0,3 Car Bus Motorcycles Light duty vehicles Heavy duty vehicles Rail Air Inland water ways Figure 2: External costs per transport mode Source: [3], p.12 STRATEGIES Sustainable Mobility International Transportation (68) 1 | 2016 10 measures is to internalise these social costs, which means that the involved parties pay the costs. Generally, thresholds, Pigou taxes and tradeable emission permits are recommended. Several factors have to be considered in deciding what method should be used. Thresholds are superior in cases of overall limitation of pollutants over a certain region and when the marginal costs of avoiding the emission are equal for all producers. Taxes are a good method to avoid cost diferences and in cases where avoiding emissions is not critical. Tradeable emission permits combine both approaches by limiting the emissions to a certain amount and allowing for avoidance of the emissions where the avoidance costs are low. All of the approaches consider the external costs of emissions and the costs of avoiding them. Thereby, zero emission is only an option if external costs are ininitely high. With regard to car usage, it is reasonable for regulatory agents to choose diferent instruments for diferent emissions. At this stage, the diferences between environmental and climate policies are crucial. While environmental policies address local pollution, climate policies aim to solve global climate change. Consequently, environmental policies should follow a local approach and climate policies should follow a global one. In theory, environmental and climate policies complement each other. In the EU, environmental and climate policies work with diferent instruments in the car market. Addressing air pollution, the EU Directive on Ambient Air Quality and Cleaner Air for Europe [4], pursuant to article 1, aims at avoiding, preventing or reducing harmful efects on human health and the environment as a whole. Therefore, emission limits for particulate matter, lead, sulphur dioxide and ozone are mandatory. As a consequence, the Fuel Quality Directive [5] and type approval of motor vehicles [6] have obligated the transport sector to contribute to these environmental aims. Since 2000, only fuel without lead is allowed in the EU and, since 2011, the sulphur content is limited to 10 mg/ kg. The type approval is carried out for each model sold in the EU. In 2015, the Euro 6 standard was implemented and the vehicle manufacturers have since had to meet the emission limits for carbon monoxide, nitrogen oxide, hydrocarbons and particulate matter listed in table 1. The test procedure for the type approval is standardised. Because it does not- allow testing real-life emissions, it is going to be replaced by a new procedure in 2017. [7] The EU regulations also address the carbon emissions of the transport sector. Since 2012, car producers must consider the carbon emission performance standards when selling their vehicles in the EU. Pursuant to article 4 of Regulation (EC) No. 443/ 2009, the average speciic emissions of carbon dioxide must not exceed the speciic emissions target of 130 g of CO 2 per kilometre (g-CO 2 / km). By 2020, the target will drop to 95-g of CO 2 / km. Furthermore, according to the Fuel Quality Directive, the lifecycle greenhouse gas emissions per energy unit have to be reduced by 10 % until 2020. Fuel sellers have to plan for this. In addition to the EU regulations, national governments have implemented some of their own regulations. In Germany, for example, car users have to pay an energy tax on motor fuel [8] and an annual tax on motor vehicles [9]. The implementation of energy taxes is attributed to the negative environmental efects of vehicle usage. The German motor vehicle tax has a component addressing climate matters because its rate depends on the quantity of CO 2 emitted per kilometre. Especially when taking the national level into account, the mixture of political instruments becomes apparent. First, there are measures that are clearly motivated by environmental policies, such as the Fuel Quality Directive and type approval, with the aim of reducing air pollution. Moreover, the carbon emissions target aims to contribute to European climate policies. Finally, national governments try to address both policy ields. All of these instruments simultaneously afect the car market. A closer look at the technical implications of such a policy mix shows that there are limitations to satisfying both policy ields simultaneously. Most vehicles are powered by an internal combustion engine. For those engines, reducing air pollution requires cleaner fuel combustion. In contrast, reducing CO 2 emissions implies a decrease in fuel consumption. Cleaner fuel combustion is achieved by installing a catalytic converter and particle ilters. Alternatively, running the engine on petroleum or natural gas, synthetic fuels or bio fuels instead of gasoline or diesel could also reduce air pollutants. Nearly zero local pollutant emissions are possible when electric motors are used. Currently, catalytic converters and particle ilters are a common method for meeting the EU emission standard. Nevertheless, the emission standards for particulate matter and ozone are exceeded too often, especially in urban centres. This is mainly caused by high traic volumes. [10] A decrease in fuel consumption is possible by reducing the vehicle’s driving resistance or enhancing its combustion eiciency. Tires with a low rolling resistance, improved aerodynamics and light-weight components all afect the driving resistance of vehicles, regardless of the propulsion technology. There are also options for enhancing the combustion eiciency of gasoline and diesel motors such as motor downsizing, direct fuel injection, variable valve timing or cylinder shut-of. Unfortunately, some of these measures such as direct fuel injection entail more air pollutant emissions. Therefore, converters and ilters are necessary, in turn reducing the motor’s combustion eiciency. [11] Direct fuel injection is widely used for diesel engines; here, the dilemma of environmental and climate protection becomes obvious. By manipulating diesel engines within the test procedures, the car manufacturer VW wanted to meet the emissions standards for type approval with a relatively fuel-eicient propulsion technology. The testing procedures in the US market revealed that it is diicult to satisfy both standards simultaneously in real life conditions, at least when conventional propulsion technology is used. Promising technical options for solving the dilemma are bio fuels or gases, synthetic fuels or gases, and the shift to electric-powered engines. Crucial for all fuel options is the amount of life-cycle greenhouse gas emissions and the total pollutant emissions of the energy source used to power any type of engine. Due to this, it is not reasonable in most countries to widely use electric-powered vehicles as long as electricity is not produced from renewable resources. Even if this resulted in zero local emissions, it would Threshold values in mg/ km Petrol Diesel Nitrogen oxide 60 80 Particulate matter 4,5 4,5 Carbon monoxide 1000 500 Hydrocarbons 100 -- thereof non-methane hydrocarbons 68 - Hydrocarbons plus nitrogen oxides - 170 Table 1: Threshold values in mg/ km Sustainable Mobility STRATEGIES International Transportation (68) 1 | 2016 11 probably not lower carbon emissions and overall pollutant emissions because the combustion process or an equivalent still takes place elsewhere. Figure 3 gives an overview of the petrol car emissions equivalents of electric vehicles in some countries. The CO 2 emissions of electric vehicle usage are compared with the CO 2 emissions of using a petrol-driven car. For example, in Paraguay, driving an electric vehicle emits as much CO 2 emissions as a petrol-driven car with a fuel consumption of 1.1 litres per 100 kilometres. The results show that use of electric vehicles has potential to reduce the CO 2 emissions of the transport sector only in countries with low CO 2 emissions of energy supply, such as Iceland, Brazil or France. [12] There are lessons to be learned from environmental and climate policies and regulations in the car market. First, all of the players in the market have to recognise that vehicle use causes external costs for society. These costs are caused by pollutant and CO 2 emissions, among other factors. Car users, car manufacturers and politicians are requested to face this social burden. Economists argue that external costs should be internalised by appropriate regulation. Otherwise, the market players will not make eicient decisions. From this point of view, political actions aimed at the eicient utilisation of natural resources are justiied. Second, environmental and climate policies pursue diferent objectives. While air pollution afects the local environment and population, greenhouse gases afect global climate change. Even if a global harmonisation of environmental and climate standards made sense from the industrial point of view, there could be diferent regional political priorities. In the past, these diferences have led to lax inquiry into real-life pollutant emissions in the EU while US environmental authorities were already testing those emissions. Third, environmental and climate policies must go hand in hand. Therefore, the technological trade-ofs between environmental and climate regulations have to be acknowledged by all parties. Otherwise, gains in climate policies may be achieved at the expense of environmental policies. The new testing procedure of the EU type approval is a step towards enhancing transparency of real-life emissions. This is also necessary in order to stress the political priorities. Because air pollutants and CO 2 emissions have a negative efect at diferent regional levels, it is also a matter of political responsibility not to position global climate change as against local environmental protection. Fourth, climate policies require a broad global change in energy systems. The implication is that the whole energy supply has to switch from fossil to renewable energy sources, including elements of individual mobility, such as car use. Therefore, a technological change in the transport sector without consequently changing the whole energy supply is not reasonable, which means that the broad use of alternative fuels and/ or electric motors will only be eicient if CO 2 -neutral production processes are developed and/ or the share of renewables in the energy mix is extended. Otherwise, replacing a technology that causes external costs by another one causing similar external costs is not an eicient use of limited resources. ■ LITERATURE [1] Umweltbundesamt (2012). Daten zum Verkehr. Ausgabe 2012. Oktober 2012. [2] IPCC, 2014: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp [3] CE Delft, Infras, Frauenhofer ISI (2011). External Costs of Transportation in Europe. Update Study for 2008. Delft, CE Delft, November 2011. [4] Directive 2008/ 50/ EC [5] Directive 2009/ 30/ EC [6] Regulation (EC) No 715/ 2007 [7] Europäisches Parlament (2016): Kein Veto gegen Kommissionsvorschlag für großzügigere Abgastests. Pressemitteilung - Gesundheitswesen - 03.02.2016 - 17: 26. [8] EnergieStG (Energiesteuergesetz) vom 15. Juli 2006 (BGBI. I S. 1534; 2008 I S. 660, 1007). Zuletzt geändert am 3. Dezember 2015. [9] KraftStG (Kraftfahrzeugsteuergesetz) in der Fassung der Bekanntmachung vom 26. September 2002 (BGBI. I S. 3818). Zuletzt geändert am 8. Juni 2015. [10] Dietrich, Antje-Mareike (2015): Grüne Technologien in Märkten mit Netzwerkefekten - Staatliche Intervention im Automobilsektor. Beiträge und Studien des Instituts für Verkehrswissenschaft der Universität Münster Band 8. Nomos Verlag. 2015. [11] Mock, Peter (2010): Entwicklung eines Szenariomodells zur Simulation der zukünftigen Marktanteile und CO 2 -Emissionen von Kraftfahrzeugen (VECTOR21). Diss. Stuttgart: Institut für Fahrzeugkonzepte. [12] Wilson, Lindsay (2013): Shades of Green: Electric Cars’ Carbon Emissions Around the Globe. Shrinking That Footprint. February 2013. Antje-Mareike Dietrich, Dr., Dipl.-Volkswirtin, Research Assistant, Institute for Economics, Technical University of Braunschweig, Braunschweig a-m.dietrich@)tu-braunschweig.de 1,1 1,1 1,5 1,8 1,9 2,7 3,8 4,1 4,7 4,9 5,0 5,4 5,8 5,9 5,9 7,9 8,3 9,110,0 11,9 Figure 3: Petrol car emissions equivalent Source: [12], p.13