The mobility system of the United States, and of many other markets within the developed world, is going through a period of significant change, but whether we should prepare for a revolution or evolution remains a point of debate. The shots of innovation are being heard around the world, but I suggest that their echoes are likely to fade before any real, tangible changes are enacted on a widespread scale.
The Seeds of Change
Throughout the world, the pressure to transition our transportation sector is strong. Consider the underlying pressures being exerted on the market to enact change:
- Reduce lifecycle carbon emissions
- Improve local air quality by reducing criteria air pollutant emissions
- Mitigate traffic congestion
- Reduce injuries and fatalities associated with vehicle accidents
- Improve commuting efficiencies
None of these priorities necessarily contradict the others, but the strategies being deployed and considered to address them can lead to very different ultimate outcomes. A recent publication by the Fuels Institute, “Global Initiatives: Assessing Current & Future Global Initiatives on Fuels & Vehicles,” summarizes the global state of regulatory initiatives seeking to resolve these priorities:
- Almost 60 countries have developed or will be developing biofuels programs such as blend mandates and fiscal incentives.
- More than 40 countries have implemented or plan to implement mandatory GHG emission/fuel economy standards.
- More than 20 cities and/or countries have taken actions to ban or limit the use of internal combustion engines.
- At least 13 countries have programs to support zero emission vehicle markets.
- The vast majority of countries have mandated a reduction the sulfur content of diesel fuels and implemented light duty vehicle emissions reduction programs.
These policies directly affect the use of vehicle technologies and influence the composition of fuels and energy used to power them. But what outcome will they derive and how might that affect consumers?
Biofuel programs seek to reduce carbon emissions and certain criteria air pollutants, but they also serve to support the continued use of internal combustion engines. Greenhouse gas reduction and fuel economy programs similarly target overall reduced emissions, but do not in themselves change how consumers move from point A to point B. Bans and limitations on internal combustion engines and zero emissions vehicles programs do much more to change the nature of transportation, but do not supplant the number of vehicles on the road.
Each holds forth the promise of cleaner air from reduced emissions, but when might they actually have a realistic and measurable impact and what other changes might be required to achieve the other global objectives?
Market Conversion Will Likely Be Slow
Currently, there are no draconian proposals that would require the immediate and complete transition from internal combustion engines to electric vehicles, which means the eventual impact on the market remains to be realized at an undetermined future point in time. Announcements by the United Kingdom, France, and China have set 2040 as the target year for transitioning away from the sale of internal combustion engines – this means that this technology will continue to be manufactured and sold for the next 23 years. In the United States, there is no policy to mandate the transition. In fact, the United States Congress in December 2017 is charting the opposite course by considering a tax reform bill that would eliminate the federal tax credit of $7,500 for consumers to purchase an electric vehicle. What impact might this have?
According to Fuels Institute consumer research, 81 percent of consumers who say they would not consider an electric vehicle for their next car cited the high cost of vehicles as a key factor. Without a tax credit, this factor will become a much more significant detractor. For example, Georgia at one time offered an additional $5,000 tax credit on top of the federal credit for the purchase of an electric vehicle and became one of the most successful markets for EV sales. The year after the state repealed that credit and imposed a $200 vehicle registration fee on electric vehicles sales dropped percent.
Although 44 percent of the electric vehicles sold through November 2017 were luxury models offered by Tesla, the buyers of which may not be heavily influenced by the tax credit, it can logically be assumed that loss of this credit could significantly compromise sales of other more budget-friendly electric vehicles.
But even if the U.S. government were to enact a more dramatic policy to encourage EV adoption, the rate of change in the market will continue to be slow. The following chart demonstrates the rate of fleet turnover if every single vehicle sold in the U.S. beginning January 1, 2017, were equipped with something new, such as a blinking orange light on the dash. Even with ubiquitous adoption, it would take about seven years before half of the fleet was so equipped. The U.S. is nowhere close to mandating a 100 percent EV conversion, which means that the time line for fleet conversion is much longer.