The European Union could meet its climate goals and save billions of Euro by extending its emissions trading system to include the private transportation sector.
The Science
Fuel economy standards and emissions trading systems are two strategies by which nations and regions can reduce greenhouse gas emissions in pursuit of stabilizing the climate. Using a global economic model that simulates all interacting sectors of the economy, researchers found that if the EU extends its emissions trading system (ETS) to cover the private transportation sector, it could achieve the same reduction in economy-wide carbon dioxide emissions as it would with its current ETS and fuel economy standard while saving up to 63 billion Euro in 2025.
The Impact
Extending the EU’s emissions trading system to include the private transportation sector presents a great opportunity to significantly reduce greenhouse gas emissions and costs to the economy.
Summary
To fulfill its commitment to reduce greenhouse gas emissions by 40 percent (relative to 1990 levels) by 2030, as specified in the Paris Agreement on climate change, the European Union is considering different strategies. One option is to continue to implement its automotive fuel economy standard (the EU recently adopted carbon dioxide (CO2) emissions mandates for new passenger cars that target 95 grams of CO2 per kilometer in 2021), following the lead of the United States, which for several years has imposed CAFE (corporate average fuel economy) standards. But a new, DOE-supported study in the journal Transportation by researchers at the MIT Joint Program on the Science and Policy of Global Change and collaborators in Germany, China and the United Kingdom indicates that another strategy would allow the EU to cut the same amount of CO2 emissions for far less cost to the economy. Under that strategy, the EU would extend its existing emissions-trading system to include transportation along with electricity generation and energy-intensive industry. Using the DOE-funded Economic Projection and Policy Analysis (EPPA) model that simulates all sectors of the economy, including the private transportation sector, the study found that by switching from its fuel economy standards to this approach, the EU could save up to 63 billion Euros in 2025. Comparing the impact of the EU’s fuel economy mandates on economic growth with an emissions-trading scenario that achieves the same exact emissions reductions, the Joint Program researchers concluded that the latter approach was far more cost effective. They maintain that adding the private transportation sector to the EU’s emissions trading system could significantly improve its efficiency in reducing greenhouse gases while cutting costs to the EU economy.
BER PM Contact
Bob Vallario
PI Contact
Sergey Paltsev
MIT Joint Program on the Science and Policy of Global Change
Funding
This work was funded by the U.S. Department of Energy (DOE) Office of Science, under the grant DE-FG02-94ER61937, the U.S. Environmental Protection Agency (EPA) and other federal, foundation and industrial sponsors of the MIT Joint Program.
Publication
S. Paltsev, Y.H.-H. Chen, V. Karplus et al., 2016: “Reducing CO2 from Cars in the European Union,” Transportation, doi: 10.1007/s11116-016-9741-3.
Related Links
http://news.mit.edu/2016/best-way-europe-curb-greenhouse-emissions-cars-1108
Image: A new study by researchers at MIT and elsewhere has found that, rather than adopting a standard for automotive gas-mileage ratings, the EU could achieve the same results at far lower cost to the economy by simply extending their existing emissions-trading system to encompass transportation rather than just electricity generation and energy intensive industry. (Source: MIT)
