Most cars last for years. This means that a failure to reduce the average emissions of new cars now will damage the environment for many years to come. This post looks at the use of offset credit trading to drive down the average emissions of new cars as well as a few other actions that would help.
Reducing emissions from cars makes both good economic and environmental sense. In 2013 there were 13 million registered passenger vehicles in Australia (568 vehicles per 1000 people.) with passenger vehicles consuming 18,510 million litres of fuel in 2012. (Tailpipe emissions of approx, 45 million tonnes CO2/yr) At $1.60 per litre the cost of this fuel to consumers works out at about $30 billion per yr ($1300/yr per capita or $655/tonne CO2 tailpipe emissions.)
There are a number of strategies that might be used to reduce car related emissions and fuel costs. These include:
- Reducing the need, (Ex: Spend more days working at or close to home instead of commuting or planning the shopping to reduce the number/length of trips.)
- Switching to less emission intensive modes of transport. (Ex: Switch from cars to public or active transport.)
- Reduce emissions per passenger km by:
- Making better use of vehicles. (Ex: Increase the average number of people carried in a car.)
- Reducing average emissions per car km.
The main aim of this post is to argue the case for using offset credit trading to drive down the average emissions of new cars.
Example: Base Offset credit Trading System for light passenger vehicles:
A base system might involve the following:
- The emissions per km for each vehicle model covered by the scheme are measured using standard tests and calculations.
- The government:
- Decides what vehicles will be covered by the scheme.
- Sets the average emissions target. The target must be high enough that at least some commercially available vehicles do have below target emissions. (The target should be reduced periodically.)
- Awards credits when vehicles that have emissions below target are first registered. The number of credits awarded will depend on the extent to which these emissions are below target. (Ex: 10 credits might be awarded for every percent emissions are below target.) These credits can be sold or kept to be used when vehicles with above target emissions need to be registered for the first time.
- Receives credits before vehicles with above target emissions can be registered for the first time. (Same number of credits surrendered for x% above target as awarded for x% below target.)
NOTES for base system:
- There is no upper limit on the emissions from an individual new car as long as the credits required to register the vehicle are available.
- For the base system, the only source of credits are those awarded when a below target emissions vehicle is registered. Because of this, the actual average emissions must always be at, or below target.)
- The relative performance of vehicles will depend on the test used. (Ex: Some of the things used to reduce urban emissions may have little effect on the Western plains.) For this reason it may make sense to have a number of alternative tests/calculations/targets with the person registering the vehicle being able to chose what applies.)
- A decision will meed to be made about emissions per kWh for plug in hybrids and pure electric vehicles.
- At some point special arrangements may be needed for large families,farmers etc.
What about retrofits?
Googling “electric car retrofits” or “hybrid car retrofits” will produce a raft of options for converting a conventional car to a pure electric or hybrid car. Including retrofits in the offset credit trading scheme would make sense because, by reducing the emissions of older cars, average fleet emissions can be brought down faster.
- Simple caps: Simple caps work by imposing an upper limit on the acceptable emissions of new cars. One of the key problems here is that the lobbying and special pleading will be more intense when the cap is excluding a key manufacturers product and/or makes it impossible to buy your favorite new car no matter what.
- Increasing the price of fuel: The evidence suggests that fuel consumption is “price inelastic”. In other words,, changing the price of fuel has little effect on neither use and purchasing decisions made by drivers. For example, Anna Mortimore in The Conversation commented that:
Petrol prices in Australia have doubled since 2000 and there has been no significant shift to fuel-efficient vehicles. In March 2000 the average retail price of regular unleaded petrol prices was around Aus$0.72 per litre compared to around Aus$1.42 per litre in 2011-12. This means that petrol prices will need to rise significantly to induce drivers to switch to fuel-efficient vehicles.
In addition, the results of two large overseas studies in the UK and US both suggest that a $30/tonne CO2 tax on tailpipe emissions would reduce total car fleet fuel consumption by only 1.4% initially rising to 3.4% after a number of years. (For a base fuel price $1.50/litre – These reductions correspond to price increases per tonne CO2 abatement of about $2100 and $900 respectively.)
What about large commercial vehicles?
Offset credit trading may not be the best way of driving down the emissions emissions of large commercial vehicles. The wide variety of commercial vehicles, the roads they use and the cargoes they carry would make it difficult to devise a sensible offset credit trading system. I would need a better understanding of the commercial vehicle business before making suggestions.
What about light commercial vehicles?
Similar comments to those for large vehicles apply. In addition, there will sometimes be a problem when people use specially fitted light commercial vehicles as a way of getting around the light passenger vehicle offset credit trading system. (Think luxury crew cabs or….)
At the moment the lack of appropriate standards or road rules limits the scope for getting innovative cars on the road that will reduce congestion and emissions. Think narrow track vehicles that are narrow enough to safely travel two abreast in a single lane. Or lightweight vehicles that depend more on accident avoidance rather than weighty crash survival protection to make a safe vehicle.
8 thoughts on “Driving down new car emissions using offset credit trading”
Anna Mortimore: “Petrol prices in Australia have doubled since 2000 and there has been no significant shift to fuel-efficient vehicles.”
Not sure about that. In 2005, 60% of new cars purchased in Australia emitted more than 200g/km. As of 2013, that’s down to 25%.
Note that a 2013 6cyl Holden VF Commodore is still about 220-240g/km.
Nick: Have you got a reference to those figures?
I hadn’t read the Anna M article in full and hadn’t realised that the article was an anti fuel tax article.
This link provides ABS data on annual fuel efficiencies 1963 (11.4 litres/km) and 2010 (11.3). I suspect the figures depend on what vehicles are included in the calculation. For example, in 1963 4WD vehicles were relatively rare and certainly not particularly suitable for use as family vehicles. By 2010, 4WD vehicles and people carriers were much higher.
The article commented that
A car with a fuel consumption of 10 litres/100km that travels 15,000km/yr will have an average daily fuel bill of about $6.60 assuming fuel costs $1.60/litre.
In cities like Brisbane the cost of using public transport is much higher than the cost of using an already owned car even when carrying the driver only.
Increasing fuel costs have little effect because the cost of driving a few extra km is so low.
Hi John. Yep, sorry should have linked the first time:
It’s an interesting read. Figure 32 is the one I was referencing.
Table 7 is a comparison of government regulations between the UK and Australia. For some reason, it doesn’t note that Qld rego charges are based on cylinder count?
Yeah, I’m aware of Jevons paradox type arguments. Cars have certainly got heavier over the years.
But worth noting ‘SUV’ as a category includes all the small and medium size models too.
Something like a Subaru Forrester emits less than 70% as much CO2 as a Holden Commodore station wagon.
Even a Prado only emits 90% as much CO2 as a Holden Commodore – and it’s a much heavier vehicle.
Nick : The Wikipedia link to Jevon’s paradox finished with:
This is why we need to use schemes like the offset credit trading scheme to give positive control.
It is also worth noting that new cars are not bought by the poor. I would suggest that most new cars are bought by people who could easily afford the fuel bill.
John, re Jevon, I think I meant more that a lot of those arguments ceased to apply after the GFC. Afaik, oil consumption has been decreasing across the globe since then, not increasing.
(Harder to tell whether that holds true for Australia, because the ABS motor vehicle survey methodology changed in 2008, but I think it’s safe to say it’s at least levelled off…would need to read up in more detail to confirm though)
But generally – I think a lot of that PTEU article is really out of date, as many of it’s stats and figures are from 2007 and earlier…
(Fwiw, you mentioned something similar a while ago about Australia’s increasing ‘average house build size’. That’s actually not true either. It also stopped increasing some time after the GFC, and has been shrinking ever since. There are also many more people than ever building and purchasing apartments, which has caused a huge decrease in ‘average dwelling build size’. It’s almost back to pre-2000 levels if I remember correctly…)
I haven’t had much time to think about what you’re proposing here, but my instinct is it sounds too confusing and difficult to implement.
It’s one thing for large companies to trade offset credits, but quite another for ordinary citizens I would have thought. How would I sell the credits I’ve earned – on eBay or Gumtree? Or, do I have that all wrong, and you’re proposing something quite different to what I’m thinking you mean?
To my mind, straight off, it’d be far easier for the states just to switch to charging rego and stamp duty on a sliding scale based on CO2/km.
Pretty much an extension of the Qld system, except this way you capture things like curb-weight as well – ie. big crappy oversized 4-cylinder utes that still end up using a lot of fuel…
The reason a $30/tonne CO2 tax on tailpipe emissions has a relatively small effect is because you’re dribbling the cost to motorists a couple of bucks at a time each time they fill-up. It’s barely noticeable – and like network upgrade costs on electricity prices – it get swamped anyway by much greater rises and falls in petrol prices.
It sends a much better and stronger price signal to charge a significant amount in one chunk – people are going to notice a $3-400 difference in their annual rego cost.
And I’d like to see the scale constantly sliding, so even a 10g/km difference has a noticeable effect on annual rego cost. That way people are encouraged to really weigh things up, and sort through the differences between manufacturers/models – and be rewarded for making sensible choices.
There are other initiatives I like too, which I don’t think would be received negatively by the public.
But yeah – not sure about offset credit trading at this stage…
Nick: We are talking about first registrations. My assumption is that car companies would be awarded or surrendering credits, not individuals. Administering such as scheme should not be all that difficult.
Even if you go to a market automatic bidding provides a practical way of doing it.
I am happy to accept that emissions per car are going down at the moment but it is anyones guess whether this is going to continue,
Offset credit trading provides a positive method of driving down new car emissions.
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