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Cost-Effectiveness of Greenhouse Gas Emission Reductions from Plug-in Hybrid Electric Vehicles

Goldman School of Public Policy Working Paper No. GSPP08-014

27 Pages Posted: 26 Nov 2008  

Daniel M. Kammen

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy

Samuel M Arons

Samuel M. Arons

Derek Lemoine

University of Arizona - Department of Economics

Holmes Hummel

affiliation not provided to SSRN

Date Written: November 1, 2008

Abstract

We find that plug-in hybrid electric vehicles (PHEVs) could significantly reduce automotive greenhouse gas (GHG) emissions and petroleum consumption, while improving energy security and urban air quality. Widespread PHEV adoption will depend upon technological and economic advances in batteries because the initial fuel savings do not rapidly compensate consumers for the capital costs of batteries today. For PHEV purchases to become economical to consumers, battery prices must decline from $1,300 per kilowatt-hour (kWh) to about or below $500/kWh, or U.S. gasoline prices must remain at about $5 per gallon-or the federal government must institute policy innovations with equivalent effects, such as policies to lower battery cost and increase battery lifetimes (e.g. a broad and sustained program of battery RD&D), or those to widen the difference between gasoline and electricity prices (e.g. changes in energy taxes). However, even before PHEVs become cost-effective consumers, their purchase can still be highly valuable to society if their significant GHG reductions can be achieved cost-effectively (using a benchmark price of about $50/t-CO2-eq). Using the GREET model, we determine that in order for PHEVs' reductions to become cost-effective, either their purchase must approach current unsubsidized prices-requiring the same policy innovations described above-or very low-GHG electricity must be used to power them. This requires policies to decrease the GHG intensity of electricity, such as renewable portfolio standards, feed-in tariffs or other measures. Importantly, we find that any carbon price would have to exceed $100/t-CO2-eq in order to render PHEVs' reductions cost-effective, and hence a carbon price alone represents an impractical short-term means of achieving this goal.

Keywords: Transport, Trade, Energy, Technology, Energy, Environment, Renewable Resources, Conservation

JEL Classification: N70, O13, Q27

Suggested Citation

Kammen, Daniel M. and Arons, Samuel M and Lemoine, Derek and Hummel, Holmes, Cost-Effectiveness of Greenhouse Gas Emission Reductions from Plug-in Hybrid Electric Vehicles (November 1, 2008). Goldman School of Public Policy Working Paper No. GSPP08-014. Available at SSRN: https://ssrn.com/abstract=1307101 or http://dx.doi.org/10.2139/ssrn.1307101

Daniel M. Kammen (Contact Author)

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

Samuel M Arons

Samuel M. Arons ( email )

United States

Derek Lemoine

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.dereklemoine.com/

Holmes Hummel

affiliation not provided to SSRN

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