Climate Policy Design for U.S. Light-Duty Transportation: Representing Vehicles and Consumer Response in a Macroeconomic ModelEPA Grant Number: FP917161
Title: Climate Policy Design for U.S. Light-Duty Transportation: Representing Vehicles and Consumer Response in a Macroeconomic Model
Investigators: Karplus, Valerie Jean
Institution: Massachusetts Institute of Technology
EPA Project Officer: Hahn, Intaek
Project Period: August 1, 2010 through July 31, 2013
Project Amount: $111,000
RFA: STAR Graduate Fellowships (2010) RFA Text | Recipients Lists
Research Category: Academic Fellowships , Fellowship - Science & Technology for Sustainability: Environmental Behavior & Decision Making
A detailed representation of the passenger vehicle fleet will be developed in a macroeconomic model to evaluate the impact of policies aimed at reducing greenhouse gas (GHG) emissions in the United States. There are two central research questions of this work: (1) What are the key elements of successful policies aimed at reducing GHG emissions from passenger vehicles over the next 40 years, based on explicit consideration of physical system constraints and the consumer response? (2) How are the impacts of different policies distributed across sectors, and can adverse sectoral affects be addressed without compromising cost-effectiveness?
Passenger vehicles (cars and light trucks) are a major contributor of greenhouse gas (GHG) emissions in the United States. This project focuses on two policy instruments, fuel economy standards and a price on GHG emissions, and aims to identify the sentivity of economic and environmental outcomes to assumptions about consumer vehicle purchase and usage behavior. A macroeconomic model with substantial vehicle fleet and fuel use detail will be developed to perform the analysis.
The first stage of this project will involve developing a detailed representation of the passenger vehicle fleet and fuel system in a macroeconomic (computable general equilibrium) model. Using available econometric data, key relationships between expenditures on vehicles and number of vehicles in the fleet as well as economic growth and travel demand will be represented explicitly in the model in the base year and as they evolve over time. Low carbon vehicle and fuel technologies will be represented explicitly in the model to cover a wide range of abatement opportunities available to meet policy constraints. The second phase of the project will focus on representing fuel economy standards in the model and comparing the economic and environmental impact of this vehicle-based policy approach with a price on GHG emissions, which bears primarily on the price of fuel.
The modeling work constitutes one of the first attempts to develop a general equilibrium model with comprehensive physical detail in the passenger vehicle transportation system. This work will help to develop intuition about the importance of capturing physical variables for any sector in a macroeconomic framework, and will illuminate problems associated with their omission. Policies will be evaluated in terms of their impact on new vehicle sales and vehicle fleet composition in each five-year time step, type and amount of fuel used, GHG emissions, welfare loss under policy, and carbon price. The sensitivity of policy outcomes to underlying assumptions about the cost and availability of different vehicle and fuel technologies, as well as consumer usage choices, will be assessed.
Potential to Further Environmental/Human Health Protection
The outcomes of this work will be directly relevant to the design of policies aimed at reducing greenhouse gas emissions from passenger vehicles as part of national and international efforts to address global climate change.