Setting effective CO2 standards for vehicles requires knowledge of the technical potential and the associated costs. Obtaining comprehensive and transparent data on vehicle technologies, their effect on CO2 emissions, and their costs is therefore crucial for any fact-based discussion with stakeholders.
In the past, the usual approach was to carry out interviews with vehicle manufacturers and suppliers or their associations and to ask about their view on future reduction potentials and costs. However, such a process will always be inherently confidential and, for a variety of reasons, there is a significant risk that the results of such an industry consultation will lead to an over-estimation of compliance costs.
For the recently adopted US regulations on light-duty vehicle CO2 emissions the US Environmental Protection Agency (EPA) and California Air Resources Board (CARB) made use of an entirely different method. They asked the UK based engineering consultancy Ricardo to carry out in-depth vehicle computer simulations of specific technology packages to determine energy consumption and CO2 emission levels of future vehicles. At the same time FEV, a spin-off of the prestigious University of Aachen in Germany, was asked to carry out a so-called tear-down cost assessment. A tear-down assessment involves taking apart a new technology until you literally have all the nuts and bolts laying on tables around you. The pieces are then compared to similar components without the new technology, and those parts that are different are then analyzed in great detail to arrive at an estimate for technology costs, assuming high-volume production. The US regulatory agencies then combined the results of the Ricardo and FEV work to arrive at cost curves that show how much CO2 reduction can be achieved by deploying a certain set of technologies at a given cost.
This approach allows for a very transparent analysis and for more realistic results than does the industry consultation approach. In fact, the combination of vehicle computer simulations and tear-down cost assessments is used by the automotive industry itself. A detailed description [.pdf] of the methodology, a peer-review [.pdf], and the results for the US market can be found on the US EPA website.
The vehicle simulation/tear-down cost assessment approach has three fundamental disadvantages, related to its reliance on very detailed analyses: (a) it takes a long time, (b) it costs a lot of money, and (c) only technologies that are already in production can be torn-down. The US agencies worked on the assessment from 2008 until 2012 and spent close to 10 million dollars (US) on the studies.
Luckily, the vehicle market is a global one, and the technologies needed to meet the US 2017—2025 light-duty vehicle standards are very similar to the ones required for the EU 2020 and beyond CO2 emission standards. This was the basis on which ICCT decided to transfer the US studies to the European vehicle market. The ICCT asked the same consultants—Ricardo for vehicle computer simulations and FEV for tear-down cost assessments—to adapt the results to the EU. For the vehicle simulations this meant adding the European drive cycle, adding vehicle segments that had previously not been considered for the US study, updating diesel technology assessments, and adding manual transmission assessments. For the cost assessment, it meant applying German labor rates and material costs, assumed to be representative of Western European rates, adapting the costs to EU vehicle segments, and updating costs for diesel engine technology and manual transmissions. Based on the Ricardo and FEV results, ICCT then developed a set of cost curves specifically for the European vehicle market.
The consultants’ reports have now been published on our website. The final Ricardo report on the vehicle computer simulation work can be found here. In addition to the report, Ricardo developed a software tool that allows the user to run various scenarios by changing the technical properties of a vehicle and to re-calculate its energy consumption and CO2 emissions. The software tool and a users’ guide [.pdf] are freely available as well.
On the cost side, FEV produced three detailed reports: (1) EU cost data for those technologies that had previously also already been assessed for the US market is summarized here [.pdf]. (2) The results for those technologies that were specifically added for the EU analysis can be found here [.pdf]. (3) Additionally, an overview of start-stop systems applied in the EU market is given here [.pdf].
We at ICCT are currently working on a series of working papers that will summarize the Ricardo and FEV work and develop EU cost curves based on the results. Two papers in this series have been released thus far. The first provides a summary of the Ricardo vehicle computer simulation results. The second explains the methodology for deriving cost curves and presents a first set of cost curves for the EU cars and vans market as a whole as well as for specific vehicle segments. Based on the results, we come to the conclusion that meeting the envisioned 95 g/km target for passenger vehicles by 2020 will require additional investments of approximately 1000 Euro per vehicle, and about 500 Euro per vehicle to meet the 147 g/km target for light-commercial vehicles by 2020.
It is important to understand that these cost-effectiveness estimates are most likely conservative (i.e. towards the upper range), for a number of reasons: (a) An underlying assumption of the cost assessment is that all technologies are manufactured entirely in Western Europe—more precisely in Germany. In reality, a significant portion of the manufacturing processes will take place in Eastern Europe, or even outside of Europe in countries with lower labor costs than in Germany. (b) Another underlying assumption of the cost assessment is that high volume mass production costs are assumed, but no consideration is made for future improvements in the design of a technology (as compared to today’s state-of-the-science). (c) Recently updated (lower) costs for vehicle weight reduction have not been incorporated yet, no optimization has been carried out in terms of vehicle fuel or segment shifts, and there have not been any compromises in terms of vehicle performance.
For the near future it is planned to address a number of these issues and to publish additional working papers that will then include new sets of cost curves that will allow for a sensitivity analysis of the ones that are published at this point in time. So stay tuned for updated on the ICCT EU cost curves work . . .