ENVIRONMENTAL DEFENSE

Toward New Frameworks for Toward New Frameworks for Transportation Climate PolicyTransportation Climate Policy

John M. DeCiccoJohn M. DeCicco

Asilomar Conference on Asilomar Conference on Transportation and Climate PolicyTransportation and Climate Policy

August 2007August 2007

22

State of the DebateState of the Debate

• Conventional wisdom: technology and fuels Conventional wisdom: technology and fuels focus, but poor consensus and worse focus, but poor consensus and worse resultsresults

• Econ 101 says it all: just get the prices Econ 101 says it all: just get the prices right ("without a stiff gas tax, you can't …")right ("without a stiff gas tax, you can't …")

• Cap & trade theorists: still trying to turn the Cap & trade theorists: still trying to turn the screw with a hammer?screw with a hammer?

• California: based on conventional California: based on conventional approach, but realizing a need for new approach, but realizing a need for new toolstools

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At the broadest level At the broadest level of policy design, of policy design, what do we know what do we know about what works?about what works?

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Trends in Design-Related Impacts of U.S. Trends in Design-Related Impacts of U.S. AutomobilesAutomobiles

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1970 1980 1990 2000 2010

IND

EX

(19

70=1

)

VMTVMT

Oil & Oil & CarbonCarbon

FatalitiesFatalities

Air PollutionAir Pollution

Source: Derived from DOT, DOE, and EPA statistics. Each index is based on national totals, i.e., total tons of carbon or pollution and total fatalities, not per-mile rates. The air pollution index represents a health damage-weighted composite of light duty vehicle criteria-related emissions.

Relative nationwide TOTAL (not per-mile) impacts

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The "control system" The "control system" mattersmatters

PROCESSPROCESSINPUTINPUT OUTPUTOUTPUT

PROCESSPROCESSINPUTINPUT OUTPUTOUTPUT

FEEDBACKFEEDBACK

OPEN OPEN LOOPLOOP

CLOSED CLOSED LOOPLOOP

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Control models for existing Control models for existing policiespolicies

• Road safety:Road safety: open loop; performance goals are only open loop; performance goals are only weakly stated and not enforceable.* weakly stated and not enforceable.*

• Air quality:Air quality: closed loop; Clean Air Act requires closed loop; Clean Air Act requires legally enforceable attainment of health-based legally enforceable attainment of health-based standards.standards.

• Energy:Energy: open loop at best; well-defined open loop at best; well-defined performance objectives are not specified in law. performance objectives are not specified in law.

Traditional energy policy approaches -- based Traditional energy policy approaches -- based on rhetorical goals plus considerations of on rhetorical goals plus considerations of technological feasibility, cost-effectiveness, technological feasibility, cost-effectiveness, etc. -- will not suffice for climate policy. etc. -- will not suffice for climate policy.

*Here, *Here, enforceableenforceable pertains to the social goal, not the technical pertains to the social goal, not the technical regulations. regulations.

77 Climate Bills vs. Stabilization Needs

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Climate Protective Targets for the U.S. Climate Protective Targets for the U.S. Auto SectorAuto Sector

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700

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900

2000 2010 2020 2030 2040 2050

0%20%40%60%80%100%120%140%160%180%200%

Auto sector GHG emissions MMTc/yr (full fuel cycle)

As percentage of 2005 level

Trend, extrapolated from EIA AEO 2007

Sector targets of lesser and greater stringency, assuming proportionality to USCAP economy-wide targets

And, remember that carbon budgets are And, remember that carbon budgets are cumulativecumulative. .

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Impact of Auto Proposals Now Under Impact of Auto Proposals Now Under ConsiderationConsideration

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500

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2000 2010 2020 2030 2040 2050

0%20%40%60%80%100%120%140%160%180%200%

Hill-Terry proposal

Senate bill, CAFE onlySenate CAFE+RFS

Auto sector GHG emissions MMTc/yr (full fuel cycle)

As percentage of 2005 level

Trend

ClimateProtective Targets

1010

GHG EmissionsGHG Emissions

Travel Travel ActivityActivity Vehicle Vehicle

EfficiencyEfficiency

Fuel GHG Fuel GHG IntensityIntensity

Traditional Factors for AnalyzingTraditional Factors for AnalyzingTransportation GHG EmissionsTransportation GHG Emissions

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Factor-Based Approach to PolicyFactor-Based Approach to Policy

• Factor analysis offers many insights, but:Factor analysis offers many insights, but:▸ Makes it difficult to assign responsibilitiesMakes it difficult to assign responsibilities▸ It obscures the nature of decision makingIt obscures the nature of decision making▸ It invites technological determinism It invites technological determinism

(and in the worst case, "winner picking")(and in the worst case, "winner picking")

• A more sophisticated approach is needed, A more sophisticated approach is needed, to:to:▸ Reflect integrated, systems-based thinkingReflect integrated, systems-based thinking▸ Harness true market-based decision makingHarness true market-based decision making▸ Create an empirical framework for progressCreate an empirical framework for progress

("what gets measured gets managed")("what gets measured gets managed")

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Shifting the FocusShifting the Focus

• from from FactorsFactors

▸ which no single actor can fully which no single actor can fully influenceinfluence

• to to ActorsActors

▸ all of whom make decisions that all of whom make decisions that influence GHG emissions in some wayinfluence GHG emissions in some way

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Actors Whose Decisions Influence Actors Whose Decisions Influence Auto Sector GHG EmissionsAuto Sector GHG Emissions

AutomakersAutomakers

Land Use and InfrastructureLand Use and InfrastructurePlanners and ProvidersPlanners and Providers

Fuel ProvidersFuel Providers

$$

$$ $$

ConsumersConsumers

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Need for a Consistent ContextNeed for a Consistent Context

• Why should consumers care a lot about, say, Why should consumers care a lot about, say, low-carbon cars but not about low-carbon low-carbon cars but not about low-carbon fuels, low-carbon land use, low-carbon mode fuels, low-carbon land use, low-carbon mode choice, and so on? choice, and so on?

• It is essential to give all actors appropriate It is essential to give all actors appropriate and complementary roles to play in limiting and complementary roles to play in limiting carbon. carbon.

• An actor-based framework calls for sector-An actor-based framework calls for sector-wide decision making "as if carbon matters." wide decision making "as if carbon matters."

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Actor-Based Approach to PolicyActor-Based Approach to Policy

• What is each actor's scope of influence? What is each actor's scope of influence? (What can actors do to reduce those (What can actors do to reduce those aspects of emissions under their control?) aspects of emissions under their control?)

• How can policy best motivate each actor to How can policy best motivate each actor to exercise their ability to reduce emissions? exercise their ability to reduce emissions?

New tools will be needed to enable all actors New tools will be needed to enable all actors to see and track -- and ideally derive value to see and track -- and ideally derive value from -- their own unique opportunities for from -- their own unique opportunities for GHG reduction. GHG reduction.

1616

Economic ConsiderationsEconomic Considerations

• Cost effectiveness, efficiency, Cost effectiveness, efficiency, and …and …other important considerations, including: other important considerations, including:

• Characteristics of real (actual) marketsCharacteristics of real (actual) markets

• Relative contribution to emissionsRelative contribution to emissions

• Social equitySocial equity

• Job preservation and creationJob preservation and creation

• CompetitivenessCompetitiveness

• Economic wherewithalEconomic wherewithal

• Co-benefitsCo-benefits

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Key Policy Design QuestionKey Policy Design Question

• To what extent can sector strategy beTo what extent can sector strategy be

▸ IncentivesIncentives mediated (rely on " mediated (rely on "PP" signals), vs." signals), vs.

▸ ConstraintsConstraints mediated (rely on " mediated (rely on "QQ" signals)?" signals)?

• Analogous to "carbon cap" vs. "carbon tax" Analogous to "carbon cap" vs. "carbon tax" debate for the economy as a wholedebate for the economy as a whole

• Response to trading around a constraint may Response to trading around a constraint may not be same as response to price signal not be same as response to price signal alonealone

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"constraints breed "constraints breed creativity"creativity"

-- Jean-Rene Talopp, director of Strate College, -- Jean-Rene Talopp, director of Strate College, as quoted in "Design school chief hails as quoted in "Design school chief hails gentler cars," gentler cars," Automotive News Europe,Automotive News Europe, October 4, 2004. October 4, 2004.

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Policy SetPolicy Set

• GHG measurement and accounting toolsGHG measurement and accounting tools• Regulations based on GHG performance metricsRegulations based on GHG performance metrics

(automakers, fuel suppliers; other entities?)(automakers, fuel suppliers; other entities?)• Consumer information and educationConsumer information and education

(GHG-based, technology neutral)(GHG-based, technology neutral)• Carbon control programs for managed transport Carbon control programs for managed transport

operations (e.g., fleet carbon management)operations (e.g., fleet carbon management)• Carbon-constrained T/LU planningCarbon-constrained T/LU planning• Carbon-sensible pricing (many opportunities for Carbon-sensible pricing (many opportunities for

rationalization and reform)rationalization and reform)

To be managed within a closed-loop framework To be managed within a closed-loop framework linked (through appropriate targets) to economy-linked (through appropriate targets) to economy-wide cap:wide cap:

2020

ConclusionsConclusions

• Use closed-loop managementUse closed-loop management, both within , both within sector and coupled to the economy-wide cap. sector and coupled to the economy-wide cap.

• Focus on actorsFocus on actors, not factors. , not factors. ▸ Appropriate tools will vary by actor; Appropriate tools will vary by actor;

don't look for a "one size fits all" policy. don't look for a "one size fits all" policy.

• Establish a consistent context Establish a consistent context of carbon-of carbon-sensitive decision making. sensitive decision making. ▸ Pricing is an important part of establishing Pricing is an important part of establishing

context, but that does not imply a "uniform context, but that does not imply a "uniform price signal," and price signal," and "just get the prices right" is too simplistic. "just get the prices right" is too simplistic.

▸ Constraints and other "Q"-based (normative) Constraints and other "Q"-based (normative) policies are likely to play a critical role. policies are likely to play a critical role.

An effective transportation climate policy will: An effective transportation climate policy will:

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Thank You!Thank You!

ENVIRONMENTAL DEFENSEENVIRONMENTAL DEFENSE

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