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Transcript
Global Competitiveness in Fuel Economy and Greenhouse Gas Emission Standards for Vehicles February 10th, 2005 Amanda Sauer World Resources Institute World Resources Institute Overview of Presentation 1. Climate change and automobiles 2. Comparison of fuel economy and GHG emissions regulations around the world 3. Impacts of these regulations on competitiveness and value creation in the auto industry World Resources Institute 3 Climate Change and Automobiles • Auto industry in policymakers’ crosshairs because of CO2 emissions released from burning of fuel: – Transport accounts for 30% of OECD CO2 emissions – Cars and light trucks account for 20% of U.S. emissions. • Industry is part of the problem… – Light trucks, “SUV phenomenon” – Disregard for fuel economy • …but also part of the solution: – New hybrid and diesel technologies, and ultimately fuel cells World Resources Institute Climate Change and Automobiles • Pressure to reduce vehicle CO2 emissions – Direct vehicle use emissions make up 75% of CO2 releases Source of CO2 Emissions across Vehicle Life-cycle Materials Fuel production Assembly – Related fuel production emissions make up a further 14% • EU, Japan, California, Canada all focused on vehicle use emissions Vehicle Use World Resources Institute 5 Fuel Economy and GHG Emissions Regulations in the World’s Major Auto Markets • European Union: “ACEA agreement” seeks 25% reduction in vehicle CO2 emissions levels by 2008 (from 1995 levels). Agreement may be extended an additional 10% by 2012. • Japan: requires 23% reduction in vehicle CO2 emissions by 2010 (from 1995 levels). • Australia: voluntary commitment to improve fuel economy by 18% by 2010. • Canada: has proposed a 25% improvement in fuel economy by 2010. • China: Introduced new fuel economy standards in 2004; weight-based standards to be introduced in 2 phases (2005 and 2008). • California: CARB approved GHG emissions reductions for automobiles, currently under legislative review. • New York: Clean Cars Bill proposing to follow California standards is currently in committee. Several other NE states have indicated they will follow CA’s lead. World An and Sauer, 2004 for the Pew Center on Global Climate Change Resources Institute Overview of Vehicle Fuel Efficiency and GHG Standards Around the World Country/region Type Measure United States Fuel mpg California GHG g/mile Canada Fuel L/100-km European Union CO2 g/km Australia Fuel L/100-km Japan China Taiwan, South Korea Fuel Fuel Fuel km/L L/100-km km/L Structure Cars and light trucks Car/LDT1 and LDT2 Cars and light trucks Overall light duty fleet Overall lightduty fleet Weight-based Weight-based Engine size An and Sauer, 2004 for the Pew Center on Global Climate Change Test method Implementation U.S. CAFE Mandatory U.S. CAFE Mandatory U.S. CAFE Mandatory EU NEDC Voluntary EU NEDC Voluntary Japan 10-15 EU NEDC U.S. CAFE Mandatory Mandatory Mandatory World Resources Institute Issues of Comparing Vehicle Standards around the World • Differences in test driving cycles • Fuel economy vs. fuel consumption vs. CO2 emissions • Regulatory vs. voluntary • Differences in vehicle categories and weight-classes • Corporate fleet averages vs. minimum requirements An and Sauer, 2004 for the Pew Center on Global Climate Change World Resources Institute Conversion factors to CAFE-equivalent MPG and EU-equivalent CO2 emission rate of g/km Countries Cycle Type Measures (Y) US Taiwan, Korea Canada California EU (gasoline) EU (diesel) Japan China, Australia US CAFE US CAFE US CAFE US CAFE NEDC NEDC Japan NEDC Fuel Fuel Fuel CO2 CO2 CO2 Fuel Fuel MPG Km/L L/100-km g/mile g/km g/km km/L L/100-km Converted to CAFEequivalent MPG Y* 1.00 Y* 2.35 1/(Y) * 235.8 1/(Y) * 8,900 1/(Y) * 6,180 1/(Y) * 7,259 Y* 3.18 1/(Y) * 266.5 An and Sauer, 2004 for the Pew Center on Global Climate Change Converted to EU-equivalent CO2 (g/km) 1/(Y) * 6,180 1/(Y) * 2,627 Y* 26.2 Y* 0.69 Y* 1.00 Y* 0.85 1/(Y) * 1,946 Y* 23.2 Converted to CA-equivalent CO2 (g/mi) 1/(Y) * 8,900 1/(Y) * 3,783 Y* 37.7 Y* 1.00 Y* 1.44 Y* 1.23 1/(Y) * 2,803 Y* 33.4 World Resources Institute Methodology to Compare Fuel Economy Standards Worldwide 1. Research country/region-specific fuel economy/GHG standards and future targets 2. Convert fuel economy/GHG standards into fleet averages (assume that fleet composition remains constant for weight/size or vehicle type targets and that all voluntary targets will be met) 3. Choose reference standards (in this example, US CAFE) 4. Apply conversion factors (from table on preceding slide) 5. Countries/regions now converted to reference standards and are comparable An and Sauer, 2004 for the Pew Center on Global Climate Change World Resources Institute Comparison of Fuel Economy and GHG Emission Standards 55 EU MPG - Converted to CAFE Test Cycle 50 Japan 45 40 California China 35 Australia Canada 30 25 20 2002 US 2004 2006 2008 An and Sauer, 2004 for the Pew Center on Global Climate Change 2010 2012 2014 2016 World Resources Institute Impacts on the Automobile Industry: Risks and Opportunities Financial Driver Risk Opportunity Cost structure Carbon constraints could raise costs, from R&D to design to production. More efficient OEMs could have a relative cost advantage. Brand Lagging behind in development of cleaner technologies could harm brand. Being viewed as a leader on climate change could enhance brand equity. Innovation Carbon constraints puts pressure on innovation capacity. Leadership in low carbon technologies could translate into first-mover advantages. Product segmentation OEMs that depend on carbonintensive segments could see sales and profits fall. OEMs producing lower-carbon vehicles could see sales and profits grow. World Resources Institute Lower-carbon Technology Options • Carbon constraints will force OEMs to add new technologies, some of which may lead to competitive gains • Key technologies: – Incremental Technologies (fuel injection, continuously variable transmission etc.) – Diesel Technology (compression-ignition) – Hybrid Technology – Fuel Cell Technology World Resources Institute 6 Carbon Reduction Potential Key engine technologies that provide mid- to long-term reductions of vehicle carbon emissions Conventional ICE Advanced Gasoline ICE Advanced Diesel Gasoline Hybrid Diesel Hybrid Fuel Cell (gasoline) Fuel Cell (hydrogen from natural gas) Fuel Cell (hydrogen from renewables) 0 20 40 60 80 100 Relative CO2 Emissions (as percentage of conventional ICE) World Resources Institute 7 Carbon-intensity of Sales Dependency of 2002 sales in US, EU and Japan on vehicles of high-, medium- and lowcarbon intensity High Medium Low Share of Global Sales 100% 80% 60% 40% 20% 0% PSA VW Honda BMW Nissan Toyota Renault GM Ford DC High: worse than 20.7 on-road mpg; Low: better than 27.5 on-road mpg; Medium: between 20.7 and 27.5 on-road mpg World Resources Institute 8 Aggregate Value Exposure Estimated cost per vehicle to meet “most likely” carbon constraint scenarios in US, EU and Japan $700 25x difference in Value Exposure across the industry Cost per vehicle $600 $500 $400 $300 $200 $100 $0 BMW DC Ford GM VW Nissan Toyota PSA Renault Honda World Resources Institute 9 Management Capacity for Low-Carbon Technologies Measure of OEMs’ capacity to develop and commercialize main low-carbon technologies: hybrids, diesels & fuel cells Management Quality Index 100 90 80 70 60 50 40 Toyota DC RenaultNissan Honda Ford GM VW BMW* PSA World Resources Institute 10 Carbon Positioning of Leading OEMs Success in a carbon-constrained market will require moving into the top-right quadrant $0 Honda Decreasing Carbon Risks (estimated cost per vehicle to meet new carbon constraints) Renault PSA $100 Nissan VW $200 Toyota $300 GM $400 Ford DaimlerChrysler $500 $600 BMW $700 40 50 60 70 80 Increasing Carbon Opportunities (management capacity score on lowcarbon technologies) 90 World Resources Institute Implications of Carbon Constraints for Future Earnings Estimated changes in forecast earnings from inclusion of carbon constraint factors; ranges reflect alternative regulatory scenarios in US, EU and Japan. 15% 10% 5% 0% -5% -10% -15% Toyota Renault Nissan Honda DC VW PSA BMW GM Ford World Resources Institute 11 16 Conclusions • The European Union (EU) and Japan have the most stringent standards in the world. • The fuel economy and greenhouse gas emission performance of the U.S. automobile fleet -- both historically and projected based on current policies -- lag behind most other nations. • These GHG and fuel economy regulations create financial risks and opportunities for automobile companies. – In our analysis, we found the financial implications of these regulations to range from +10% to -14% of operating income. • Overall, the automobile industry is becoming increasingly global in scope with these regulations are becoming increasingly stringent (with the exception on the U.S.). Therefore fuel economy will become a major driver in the financial performance of automobile companies. World Resources Institute 17 Contact Information Amanda Sauer Associate 202 729 7689 [email protected] Changing Drivers report available at: http://capitalmarkets.wri.org Comparison of Fuel Economy and GHG Emissions Standards report available at: http://www.pewclimate.org World Resources Institute