The Benefits of Reducing Fuel Consumption and Greenhouse Gas Emissions from Light-Duty Vehicles 2008-01-0684

Concerns regarding U.S. dependence on crude oil from politically unstable regions and the impact of fuel combustion on climate change have led to new state regulations and proposed additional federal regulations requiring reductions in fossil fuel use by passenger cars and light-duty trucks. Significant reductions in fuel consumption can be achieved while maintaining the performance and size of current production vehicles; however, it does not appear that the benefits will be commensurate with the costs.

Based on the same model employed by the United Nations Intergovernmental Panel on Climate Change, nationwide reductions in light-duty motor vehicle greenhouse gas emissions of 30% will have no measurable effect on ambient temperature. This calls into question the assumption that the cost of reducing greenhouse gas emissions has corresponding economic benefits related to the moderation of climate change.

Some technologies for reducing fuel consumption, such as the use of cylinder deactivation systems and lightweight steel, provide a net present value of fuel savings over the expected service life of the vehicle that exceeds the cost of the technology. However, the cost associated with the use of hybrid-electric drive systems translates to over $200 per barrel of oil saved. Even during a time when the price of oil is substantially in excess of the marginal cost of production, hybrids do not provide an economic benefit to consumers. Given the abundance of fossil resources from which motor vehicle fuels can be produced, it does not appear that hybrids will be cost effective for the foreseeable future unless the cost of the technology can be significantly reduced.