Marginal Abatement Costs of LEVs: Is it an open and closed case?

It seemed to me that, leading up to the worldwide economic recession, climate change was building up to a critical mass of public exposure and concern. A large and increasing quantity of airtime and newspaper coverage was helping propel this topic into the mainstream of public attention. Perhaps, when the good times were rolling, we had the luxury of caring about things above and beyond the basic human needs of providing food and shelter for our families. It has been proven empirically that as a Nations Gross Domestic Product increases past a certain point, so too does a desire to live in a clean and unpolluted environment (see Environmental Kuznets Curve).

Since 2008, with the recession in full swing, the debate regarding Climate Change took a back seat to “more important”(read more short term) fundamental issues. Public concern about the environment fell off dramatically leading to lower levels of media and political attention. Politicians in developed nations were all for installing ambitious targets and legislation to reduce greenhouse gas emissions when the times were good and capital was plentiful. Now that Sovereign Debt is a major issue in most Western economies, politicians are being asked to quickly reduce their nation’s budget deficits leading to some tough decisions that are needed. In the UK, some departments are facing 40% funding decreases and are being asked to do more with less. Added to this, the developed economies have not nearly recovered as fast as those in emerging markets leading to a very weak and fragile recovery. Asking companies to invest more money into cleaner technologies and reduce their carbon footprints may have seemed like a good idea before the recession but now are being perceived as potential recovery busters. The last thing the UK Government will want to do is damage the economy’s chances of a speedy recovery so some of these potential climate change orientated measures are coming under greater scrutiny.

What is causing the Recent Vehicle Emission Reductions?

The SMMT (Society for Motor Manufactures and Traders) recently published their first half year figures relating to sustainability indicators. There has been a significant drop in the CO2 emissions figures of new vehicles registered in the last six months, decreasing by 4.5% to 145.2 gCO2/km. This is great news for those of us who want to see a move towards a more sustainable personal transport system. What we must find out now is what the reasons behind this decrease are so that we can ensure that they continue and prosper.

The background environment that motorists have found themselves in over the past few years has undergone some considerable changes. Firstly and perhaps most importantly the worldwide economic recession has put a brake on people’s finances encouraging them to consider large purchasing decisions in greater detail and look to save money wherever possible. The previous trend of the last decade of upsizing vehicles has been somewhat reversed with motorists now thinking about downsizing to enjoy greater levels of fuel efficiency.

New vehicle sales fell off rather dramatically during the start of the recession as households put off large purchases due to the increased uncertainty in the economy. The UK Government introduced a stimulus plan that encouraged households to part ways with old vehicles (over 10 years old since first registration) in exchange for a £2000 reduction in the costs of a new car. This incentive was widely subscribed to generating a substantial decrease in the average emissions level of the UK vehicle car fleet (under the principle that a new car will be significantly more efficient than a 10 year old vehicle). This incentive did not have any vehicle requirements attached allowing households to trade in their old cars for any new vehicle they desired. It was observed that households subscribing to this incentive generally tended to purchase new vehicles that were below the average new vehicle emissions vehicle. This was a unplanned for additional benefit of the UK Car Scrappage Scheme which not only helped prop up the UK’s large automotive manufacturing sector but also moved the new vehicle market in the right direction of lowering CO2 emissions.

Is Peak Oil the End of Liquid Fuels?

Across the world around 90 million barrels of oil are consumed in any one day. The vast majority of this consumption is in the transportation sector powering our planes, trains and cars. World oil reserves have stayed somewhat steady over the last decade however relatively few new “mega fields” have been discovered. The official statistics concerning these reserves are hotly debated with many analysts arguing the figure is actually much lower than what is officially stated. Petroleum politics between OPEC, other major oil producing countries and the world’s largest oil consumers make the picture of current world oil a murky one with a large degree of subterfuge and asymmetrical information.

Peak Oil is a phrase that has recently come into fashion to discuss the situation where oil extraction reaches its absolute limits and potentially starts to decline. What was initially a taboo subject in oil circles has become one of serious debate and concern. The oil industry has progressed from arguing against the entire principle of Peak Oil to stating that it is likely not going to occur for the foreseeable future. Other commentators disagree believing Peak Oil will be upon us imminently. Whatever the case may be, it is important to look into the likely effects of this situation for the automotive industry and discuss likely implications and possible strategies to minimise disruption and exposure.