8
The Role of Government

In every country, transport is largely in the public sector. Even vehicle manufacturing and use, the part that is commonly dominated by the private sector, is highly dependent on government services and government-provided infrastructure and is subject to government regulation and monitoring.

In China, the relationship between the government and automotive industry is in transition. Increasing uncertainty about the future structure of the industry and the growing dependence on market forces may test the relationships between industry and government and among different levels of government. Who will have responsibility for the dealing with the consequences of rapid motorization has not been clearly established. Meanwhile, cities are decentralizing, land markets are changing, and the dynamical forces involved are not well understood. The institutions dealing with motorization have limited experience with land markets, accelerating migration, and other externalities. The government will have to deal with conflicts between personal desires and the public good, between expanded vehicle ownership and equitable land use management.

STRATEGIC FRAMEWORK

Governments play a significant role in shaping the development of their domestic industries, and in determining the standards governing individual products and the impact of those products on the environment. For the automotive industry, governments around the world have used the following tools, singly or in combination:



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Personal Cars and China 8 The Role of Government In every country, transport is largely in the public sector. Even vehicle manufacturing and use, the part that is commonly dominated by the private sector, is highly dependent on government services and government-provided infrastructure and is subject to government regulation and monitoring. In China, the relationship between the government and automotive industry is in transition. Increasing uncertainty about the future structure of the industry and the growing dependence on market forces may test the relationships between industry and government and among different levels of government. Who will have responsibility for the dealing with the consequences of rapid motorization has not been clearly established. Meanwhile, cities are decentralizing, land markets are changing, and the dynamical forces involved are not well understood. The institutions dealing with motorization have limited experience with land markets, accelerating migration, and other externalities. The government will have to deal with conflicts between personal desires and the public good, between expanded vehicle ownership and equitable land use management. STRATEGIC FRAMEWORK Governments play a significant role in shaping the development of their domestic industries, and in determining the standards governing individual products and the impact of those products on the environment. For the automotive industry, governments around the world have used the following tools, singly or in combination:

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Personal Cars and China tariff and nontariff import barriers—used by many countries, including China, to protect their domestic industry during the early stages of development vehicle and fuel taxes—used to support or discourage the purchase and use of vehicles and fuels and to favor one technology or fuel over another prescriptive and performance standards—used by government to force certain vehicle attributes (e.g., low emissions, good fuel economy) or technologies (e.g., air bags) direct and indirect investment—used to assist industry with capital, tax relief, and support for research and development (e.g., the U.S. Partnership for a New Generation of Vehicles program in which government joined industry in funding research) or in building assembly plants. One area in which most governments have intervened is reducing air pollution. Generally, a motor vehicle pollution control program seeks to reduce vehicle emissions to the degree necessary to achieve healthy air quality as rapidly as possible within the practical limits of effective technological, economic, and social constraints. A comprehensive strategy to achieve this goal usually includes four key components: increasingly stringent emissions standards for new vehicles, which require new technology; specifications for clean fuels; programs to ensure proper maintenance of in-use vehicles; and traffic and demand management (see Figure 8-1 and Box 8-1). FIGURE 8-1 Elements of a comprehensive vehicle pollution control strategy. SOURCE: Michael P. Walsh.

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Personal Cars and China Because vehicles are, by nature, mobile and therefore capable of being driven from one area to another, and because a proliferation of standards would be very costly to the manufacturer and to the purchaser of the product, new vehicle emissions standards are usually set by national governments to apply to a country as a whole (the state of California being a notable exception in the United States) or even to a group of countries. For similar reasons, clean fuels are mandated at the national level. The other two components, vehicle maintenance and traffic management, are usually the responsibilities of local governments and are applied in ways to respond to local air pollution problems. These can include measures such as: restrictions on the use of vehicles, including both cars and trucks high-occupancy vehicle lanes to encourage ride sharing inspection and maintenance programs, including protocols and training mandatory or voluntary retrofits of pollution control technology, with appropriate training recycling programs parking restrictions and parking taxes. Details of the vehicle emissions control programs in the United States, Europe, and Japan are summarized in the next section. That summary is followed by a review of these countries’ programs to reduce fuel consumption and carbon dioxide (CO2) emissions. The chapter concludes with a brief look at inspection and maintenance programs, which is expanded in the appendix to this chapter, and, finally, a review of industry-government partnerships in the United States and Europe. SUMMARY OF WORLDWIDE GOVERNMENT EMISSIONS STANDARDS Because the United States, European Union (EU), and Japan each base their emissions regulations on different test procedures based on presumed typical driving patterns, it is difficult to compare precisely the stringency of those regulations. Tables 8-1 through 8-3 summarize the passenger car and heavy truck requirements in each region for nitrogen oxides (NOx) and particulate matter (PM). Table 8-1 indicates that the NOx standards for passenger cars will become quite low in all three regions by 2005. However, the number of kilometers over which the European and Japanese governments require that vehicles in use meet emissions standards appear to be substantially lower

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Personal Cars and China BOX 8-1 Transportation Planning and Traffic Management Governments play an important role in effecting changes in land use that can reduce vehicle miles traveled (VMT). Over the long term, regulators should promote effective town and city land use planning that integrates mass transit options, promotes safe passage for pedestrians and cyclists, and uses design features to minimize single-occupancy vehicle use. The challenge is to make modes of living and working that reduce daily travel needs attractive to the public. The many possible options for reducing VMT in urban areas include the following: Internalizing costs. Internalizing the cost of driving means shifting the expense to the consumer. Such a shift can be achieved through congestion pricing at automated tolls and parking facilities, reduced free parking and increased parking rates in general. “Pay-as-you-drive” insurance systems also are emerging as effective ways to distribute driving costs fairly. One example of these costs is parking. In the United States, roughly 90 percent of employee parking is either subsidized by the employer or free. Many areas have begun to increase the cost of parking to drivers, thereby internalizing the costs. Alternatively, some employers have implemented “cash out” policies, providing employees with the cash value of parking. Some other externalized costs of driving are the costs of policing and motorist protection; uninsured accidents; noise; vibration damage to structures; pollution damage to human health, crops, and structures; and petroleum industry subsidies. Traffic management. Traffic management strategies that increase vehicle occupancy directly reduce VMT, congestion, vehicle operating time, and therefore emissions. The special travel lanes for high-occupancy vehicles established in many urban areas to encourage car pooling have reduced the number of cars operating during peak travel periods. Advanced sensing systems at traffic lights facilitate the optimum utilization of urban street and intersection capacity, reducing congestion and the associated idling time. Many cities also have expanded the size of cyclist and pedestrian rights of way, while reducing street width and intersection size. Increasing public transit use. Public transportation provides an alternate means of mobility. The use of public transportation can be enhanced in three ways: by expanding public transit systems or making them more user-friendly; by increasing public awareness or acceptance of public transit; and by subsidizing the cost of consumers’ use of public transit. Public awareness can be raised through traditional advertising campaigns, publicity events, and “free-ride” days that familiarize the public with transit systems. Subsidization of public transit commuting costs, either directly or through company programs, also has been effective in increasing transit

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Personal Cars and China use levels. Often, enhancements to transit systems are most effective when coupled with other mechanisms, such as reduced parking availability, higher parking costs, or higher tolls. Promotion of car and van pooling also increases vehicle occupancy and reduces VMT. Government agencies, private corporations, and other institutions have offered this strategy. Altering land use patterns. Research clearly shows that gasoline use increases as decentralization increases, simply because people have farther to travel. A survey of 32 major cities around the world found that the residents of American cities consume nearly twice as much gasoline per capita as Australians (Kenworthy and Laube, 1999), nearly four times as much as residents of the more compact European cities, and 10 times that of those living in very compact Asian cities. Moreover, average living area per person was closely correlated with average gasoline consumption per capita. Land use patterns can be changed in ways that significantly reduce VMT and improve quality of life by providing for nearby amenities, such as pedestrian malls, and the preservation of undeveloped land. There are many ways to approach this task, including limiting development on urban fringes; offering location-specific mortgages that reward homeowners for buying in certain areas; creating more densely populated, mixed-use neighborhoods; changing vehicle rights of way to pedestrian malls; and reducing the number of parking spaces. Telecommuting also is a form of changing land use, in that it moves the office not just closer to the home, but into the home itself. than the actual number of kilometers accumulated during average vehicle lifetimes. A key element of the low emissions level requirements has been the shift to very low-sulfur gasoline. Japan has traditionally had very low levels, usually below 30 parts per million (ppm) sulfur, but the EU recently capped levels at 50 ppm by 2005 and the United States capped them at 80 ppm with a 30 ppm average. The EU also is in the late stages of a process that will likely cap sulfur levels for both gasoline and diesel fuel at 10 ppm. As for diesel-powered passenger cars, it is clear that the European Union and Japan, while substantially tightening their requirements over the next several years, will maintain substantially weaker NOx requirements for diesel than for gasoline-fueled vehicles, unlike the United States (see Table 8-1 and Box 8-2). Similarly, the diesel car particulate requirements in the European Union and Japan are more lenient than those in the United States (Table 8-1). It appears that in Europe only the heavier diesel cars will require PM filters. In Japan a new round of standards will be introduced in 2005 to address particulates.

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Personal Cars and China TABLE 8-1 Passenger Car Emissions Standards, Nitrogen Oxides(Gasoline and Diesel) and Particulate Matter (Diesel), United States, European Union, and Japan   Standard Year of Introduction NOx, Gasoline (g/km) NOx, Diesel (g/km) PM, Diesel (g/km) Vehicle Useful Life (thousand km) U.S.—national Tier 1 1994 0.373 0.777 0.062 160   NLEV 2001 0.186 0.777 0.050 160   Tier 2 2004 0.043 0.043 0.006 193 U.S.—California TLEV 1994 0.373 0.373 0.050 160   LEV 1994 0.186 0.186 0.050 160   ULEV 1994 0.186 0.186 0.025 160   LEV2 2004 0.043 0.043 0.006 193   ULEV2 2004 0.043 0.043 0.006 193   SULEV 2004 0.012 0.012 0.006 193 European Union Euro III 2000 0.150 0.500 0.050 80   Euro IV 2005 0.080 0.250 0.025 100 Japan Japan 2002 0.080 0.280 0.052 80     2005 0.050 0.140 0.013 80 NOTE: NOx = nitrogen oxides; PM = particulate matter; g/ km = grams per kilometer; NLEV = national low- emission vehicle; TLEV = transitional low-emission vehicle; LEV = low-emission vehicle; ULEV = ultra-low-emission vehicle; SULEV = super ultra-low-emission vehicle. SOURCE: Daisho Yasuhiro, Waseda University.

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Personal Cars and China BOX 8-2 Diesel Cars The popularity of diesel cars varies widely worldwide, largely depending on government policies. They are found most commonly in Europe, accounting for one-third of car sales (and over half in some countries). In Japan they account for about 10 percent of sales, and in United States for only about 2 percent of light-duty vehicle sales (almost all light trucks). A comparison of diesel cars and gasoline-powered cars reveals the advantages and disadvantages of diesel. In the area of pollution, diesel engines have inherently lower carbon monoxide and hydrocarbon emissions, and inherently higher particulate matter (PM) and nitrogen oxide (NOx) emissions. In fact, Europe and Japan have adopted emissions standards that specifically allow diesel engines to emit higher levels of nitrogen oxides and particulate matter. Thanks to new technology, PM emissions from diesel engines have begun to fall dramatically, so that in future years if particulate filters are applied across the board, diesel emissions will be similar to those from gasoline engines,1 but NOx emissions from diesel engines are expected to remain higher than those from gasoline engines. Because diesel engines are inherently more energy efficient, they have lower carbon dioxide emissions than gasoline engines. In other performance characteristics, diesel engines are now roughly comparable to gasoline engines, including noise of operation. Diesel engines are somewhat more costly to manufacture than gasoline engines, but the higher costs are countered by lower fuel costs. In regions where diesel fuel prices are significantly lower than gasoline prices (a result of political and economic tax policies but not fundamental cost differences), or where vehicles are used intensively, diesel cars will have strong cost advantages. In China, diesels are likely to proliferate if diesel fuel is priced lower than gasoline (which is the case in most countries but not the United States), if stringent fuel economy standards are adopted, and if more lenient NOx standards are adopted for diesel. Otherwise, diesel cars are likely to be scarce in China. 1   The currently adopted Euro IV standards, which go into effect for cars in 2005, are not stringent enough to require filters on all but the largest diesels. Great progress is being made in reducing heavy-duty vehicle diesel emissions (Tables 8-2 and 8-3). Clearly, the major countries of the world have concluded that fundamental advances in heavy truck pollution controls and post–combustion technology are both necessary and feasible. A critical precondition of emission reduction, however, will be the introduction of very low or near-zero sulfur levels in fuel.

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Personal Cars and China TABLE 8-2 Heavy-duty Diesel Nitrogen Oxide (NOx) Standards, United States, European Union, Japan, 1990–2010 (grams per kilowatt-hour) Model Year United States European Uniona Japan 1990 8.1 15.8 n.a. 1991 6.7 15.8 n.a. 1992 6.7 15.8 n.a. 1993 6.7 9 n.a. 1994 6.7 9 6 1995 6.7 9 6 1996 6.7 7 6 1997 6.7 7 6 1998 5.4 7 4.5 1999 5.4 7 4.5 2000 5.4 5 4.5 2001 5.4 5 4.5 2002 5.4 5 4.5 2003 2.7 5 3.38 2004 2.7 5 3.38 2005 2.7 3.5 2.0 2006 2.7 3.5 2.0 2007 0.27 3.5 2.0 2008 0.27 2 2.0 2009 0.27 2 2.0 2010 0.27 2 2.0 a Euro IV from 2005 and Euro V from 2008. NOTE: n.a. = not applicable. SOURCE: Daisho Yasuhiro, Waseda University. United States As indicated in Table 8-1, a notable exception to the rule that standards are normally set for an entire country is the provision in the U.S. Clean Air Act that allows the state of California to adopt its own vehicle emissions regulations. California is considered a unique case for several reasons. First, California has consistently had the most serious motor vehicle-related air pollution problems in the United States.1 Second, Califor- 1   Even today, despite the most aggressive car pollution control program in the world and despite significant progress, California’s air pollution problems remain serious, and Los Angeles is consistently ranked as one of the most polluted cities in the United States.

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Personal Cars and China TABLE 8-3 Heavy-duty Diesel Particulate Matter (PM) Standards, United States, European Union, Japan, 1993–2010 (grams per kilowatt-hour) Model Year U.S. Trucks U.S. Buses European Uniona Japan 1993 0.3 0.13 0.4 n.a. 1994 0.13 0.094 0.4 n.a. 1995 0.13 0.094 0.4 n.a. 1996 0.13 0.067 0.15 0.25 1997 0.13 0.067 0.15 0.25 1998 0.13 0.067 0.15 0.25 1999 0.13 0.067 0.15 0.25 2000 0.13 0.067 0.1 0.25 2001 0.13 0.067 0.1 0.25 2002 0.13 0.067 0.1 0.25 2003 0.13 0.067 0.1 0.18 2004 0.13 0.067 0.1 0.18 2005 0.13 0.067 0.02 0.027 2006 0.13 0.067 0.02 0.027 2007 0.013 0.013 0.02 0.027 2008 0.013 0.013 0.02 0.027 2009 0.013 0.013 0.02 0.027 2010 0.013 0.013 0.02 0.027 a Euro IV from 2005 and Euro V from 2008. NOTE: n.a. = not applicable. SOURCE: Daisho Yasuhiro, Waseda University. nia had already adopted its own motor vehicle pollution control program before the U.S. national program came into being, and the state has sufficiently large a market that an independent distribution system could provide unique vehicles for the rest of the country. California adopted performance standards for vehicle exhaust emissions in 1968, the first place in the world to do so. Since then, the standards have been gradually tightened. These performance standards have resulted in a gradual reduction in emissions from cars as newer cleaner vehicles have replaced older, more polluting ones. In fact, California has taken the lead in stimulating the development and mandating the commercial introduction of advanced zero emissions technologies, including electric and fuel cells, many of which also can improve fuel efficiency. Standards also have been established in the United States that require that specified emissions levels be maintained under special geographic conditions. For example, vehicles must be able to meet standards at both sea level and at an altitude of 1,609 meters (m).

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Personal Cars and China European Union As the pollution control program has matured in Europe, stringent vehicle emissions standards have been adopted for all 15 member states of the European Union, and Norway and Switzerland, non-EU member states, have decided to adopt identical standards. Furthermore, some of the central and Eastern European countries that have applied for EU accession, such as Poland and the Czech Republic, have already moved to adopt the EU vehicle and fuel standards. The European Union also includes a unique provision in its directives by which member states are allowed to encourage the early introduction of vehicles that meet future emissions standards or fuel standards through the use of tax incentives. These incentives have been used successfully in both Germany and Denmark. Japan Japan was the first major industrialized country to eliminate the use of lead in gasoline; it introduced stringent car standards requiring catalytic converters in 1978. Since then, it has gradually tightened gasoline-fueled car standards and most recently began to move rapidly to reduce diesel-fueled vehicle standards. Before the end of 2004 sulfur levels in diesel fuel will be lowered to a maximum of 50 ppm, and it is expected that all new diesel vehicles sold in 2005 will be equipped with particulate filters. Like some European countries, Japan is encouraging tighter vehicle standards through the use of tax incentives. With the enforcement of new emissions standards in the major member countries of the Organisation for Economic Co-operation and Development (OECD), substantial reductions in emissions will be occurring for all on-road vehicle categories, both gasoline and diesel. In addition, fuel sulfur levels will be limited to a maximum of 50 ppm or less. Recent Developments around the World Most regions of the world have been significantly tightening their motor vehicle regulations. The major recent developments are described in this section. United States In 1998 the U.S. Environmental Protection Agency (U.S. EPA), in conjunction with the California Air Resources Board (CARB), imposed the largest enforcement action in history on the heavy engine industry.

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Personal Cars and China CARB formally decided in August 1998 that diesel particulate matter is a toxic air contaminant, triggering an effort to further reduce PM emissions from urban vehicles, including retrofit where feasible. During 1999 CARB took emissions standards to the next level, not only tightening carbon monoxide (CO), hydrocarbon (HC), NOx, and PM requirements but also establishing the principles of fuel neutrality (diesel vehicles must meet the same standards as gasoline-fueled vehicles) and usage neutrality (light trucks and sport-utility vehicles used primarily as passenger cars must meet the same standards as cars). In December 1999 the U.S. EPA adopted light-duty vehicle standards closely modeled after the California LEV 2 (low-emission vehicle, so-called Tier 2) standards and tighter sulfur requirements for gasoline. In December 2000 the U.S. EPA tightened its heavy-duty engine emissions requirements, with a special focus on tighter PM and NOx standards and on low-sulfur diesel fuel. European Union During 1998 the EU adopted directives for light-duty vehicle emissions and fuel quality that tightened emissions standards significantly (2000 and 2005), broadened the scope of coverage (e.g., cold temperature), added several important features previously missing (onboard diagnostics, in-use durability), and imposed low sulfur requirements for diesel fuel and gasoline. The EU and the auto industry reached agreement in 1998 on a voluntary commitment to reduce by 2008 the CO2 emissions per kilometer driven by 25 percent. In January 2000 the EU adopted the next phases of heavy-duty standards—European Emission Standard III (Euro III), IV, and V—which will likely result in particulate and NOx aftertreatment. Asia and Eurasia In 1999 Japan tightened its gasoline-fueled automobile standards for the first time in 20 years and introduced the next phase of diesel-fueled vehicle requirements. Also in 1999 Japan’s Ministry of International Trade and Industry (MITI) and Japanese industry reached agreement about lowering CO2 emissions from vehicles. During 1999 China formally adopted the Euro I auto emissions standards and decided to phase out the use of leaded gasoline across the entire country by 2000. Taipei adopted step four of its motorcycle control program in late 1999, effectively banning two-stroke motorcycles by the end of 2003.

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Personal Cars and China to establish an independent standing committee to prepare an annual review of the PNGV program. Committee members, many of whom had automotive backgrounds, were experts on different aspects of the program. Seven reports were issued. Evaluation of the PNGV Program In 1997, as planned, the large set of candidate technologies that had been examined during the first years of the partnership was reduced to a few for further development. Each of the three companies selected diesel-electric hybrids as their preferred technology. In early 2000, again in line with program milestones, each of the three companies unveiled concept cars. Ford’s Prodigy, GM’s Precept, and DaimlerChrysler’s ESX3 all used lightweight materials and combined small advanced diesel engines with electric drive trains, with projected fuel economy of 60–80 mpg (NRC, 2001). As indicated in the seventh (and last) annual review of the PNGV program by the National Research Council, the automotive companies appeared to be meeting the program schedule for achieving the fuel economy goals, but they would not meet the cost goals (NRC, 2001). The efforts to meet the emissions goals are discussed later in this chapter. The National Research Council’s seventh review of the PNGV Program made the following observations about the achievement of program goals (NRC, 2001): At the end of 1997 PNGV made a technology selection based on assessments of system configurations for alternative vehicles. Several technology options—such as gas turbines, Stirling engines, ultracapacitors, and flywheels for energy storage—were eliminated as leading candidates. The 10-year span of the program dictated some of these choices. In its fourth review the committee agreed with PNGV’s technology selections (e.g., four stroke, internal combustion engines, fuel cells, batteries, power electronics, and structural materials). The four-stroke compression-ignition direct-injection (CIDI) engine was selected as the most likely power plant to enable the fuel economy goal to be met within the program time frame; the fuel cell power plant was retained in the program as a highly promising longer-range technology. * * * The second major milestone, the development of concept vehicles, was met in early 2000. Using PNGV-developed technologies and their own in-house proprietary technologies, the . . . . companies each developed separate concept vehicles with fuel economies between 70 and 80 mpg. * * * The power train with the highest probability of meeting the vehicle fuel-

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Personal Cars and China economy target of 80 mpg by 2004 is the hybrid-electric power train powered by a CIDI engine. In 1999 approximately midway through the program, the Environmental Protection Agency promulgated Tier 2 emission standards for particulate mater and oxides of nitrogen (NOx) substantially more stringent than those at the start of the program. . . . This action brought into question the possibility of meeting these emission requirements with a CIDI engine in a production prototype by 2004. Consequently, a major portion of the program resources was reallocated to address this new development risk. Alternative power plants (e.g., homogeneous spark-ignition engines or gasoline-fueled direct-injection engines) with a higher probability of meeting the Tier 2 standards in the PNGV 2004 time frame would result in vehicles with reduced fuel economy compared with the CIDI engine. Perhaps equally important, the program gave rise to a “boomerang effect”—that is, the existence of this program encouraged competitors to go forward more aggressively (Sperling, 2001). Apprehensive European and Japanese automakers quickly accelerated their efforts through programs such as the European Car of Tomorrow Task Force (1995) and the Japan Clean Air Program (1996), and through individual company efforts such as Toyota and then Honda’s commercialization of hybrid electric cars and Daimler-Benz’s enhanced fuel cell program. Many executives in European and Japanese companies readily concede that PNGV was clearly seen as a threat, and that it therefore served as the catalyst for increased investment in advanced propulsion technology in their companies. The competition intensified as U.S. automakers responded to the aggressive commercialization efforts by Toyota, Honda, and the Daimler side of DaimlerChrysler. As for gauging the success of the program, one might ask: Why did the PNGV effort not lead to the commercial advances envisioned in 1993, even in some cases when those advances were being actively pursued by automakers and other technology companies elsewhere the world? As noted earlier, the National Research Council evaluation suggests that the shortcoming stemmed from the initial schedule and design of the program (NRC, 2001). Indeed, it appears that PNGV formalized a very ambitious schedule with specified deliverables that led, ironically, to a conservative approach. Fearing that the time horizon that was too short to allow much development of emerging technologies, industry and government managers focused on relatively mature technologies for which fuels were available—that is, diesel-electric hybrid cars. Even then, automakers were falling far short of meeting the goal of comparable cost. Another major issue for the PNGV program, and government-industry partnerships in general, was control of knowledge and rights to technology. The automakers, adhering to common practice in competitive industries, essentially created “firewalls” of varying permeability around

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Personal Cars and China their PNGV work. Companies engaging in collaborative work with competitors in their own or related industries routinely create these walls to protect themselves against antitrust lawsuits and, more important, to ensure confidentiality. The concern is that the more government funding and competitors are involved, the more likely it is that companies will lose control of knowledge and technology.6 These firewalls work effectively with small innovations that affect a small part of the business, because the protected knowledge may not be central to the business interests of the company. But this situation was different. First, virtually all of the targeted technologies were close enough to commercialization that a company would want proprietary rights to any advances. Second, fuel cell and hybrid propulsion systems, if successfully developed, had the potential to be core technologies for these huge companies. In any case, the PNGV experience provided the following insights and lessons. First, if properly structured, a joint program between government and industry can successfully develop new technologies of interest to the commercial sector. Second, unforeseen indirect effects (the “boomerang effect” in this case) may prove to be very important. Third, program objectives must be reexamined in light of changing conditions and objectives changed accordingly. Fourth, targeted technologies should be far from commercialization (or have large social benefits). Fifth, progress is greatest with partners wholly committed to the technology development and commercialization goals of the partnership. Finally, it is important that the government limit its participation to the noncompetitive phase of research and development and leave the final development of a marketable product to industry. Overall, the partnership generated many successes. An important benefit has been the greater communication between industry and government and therefore less adversarial tension. The high-profile collaboration between government and the automotive industry also spurred the development of new technologies, many of which are being used to improve the efficiency of vehicle subsystems and components. The program also focused government’s advanced technology R&D efforts and highlighted, for the public and the automotive industry, the potential for major technology enhancements. 6   The financial and legal claims by government on publicly funded innovations vary greatly. The European Union, for example, rarely asserts a claim to technologies developed by automakers with public funds. The U.S. government, in contrast, has become quite aggressive at asserting a claim.

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Personal Cars and China The Next Phase of Cooperation In January 2002 the U.S. government announced a significant redirection of the PNGV program and gave it a new name: the FreedomCAR (Cooperative Automotive Research). Rather than maintaining the heavy focus on demonstration vehicles, the program will concentrate more on technology and on developing the fuel cell for passenger vehicles and a hydrogen fuel infrastructure for those vehicles. The generation of hydrogen fuel, its distribution and storage, and its storage or generation on board the vehicle, will be an important part of the program. A particular thrust of the program will be an effort to ensure more coordination among its various participants—industry suppliers, universities, and government laboratories. USCAR will continue to be the sole industry partner, and the Department of Energy will serve as the lead government agency. However, an effort will be made to expand the membership to include energy suppliers, along with automakers, their suppliers, and research groups from around the country. A procedure for external review of the program will continue, but on a biannual basis. The European Experience In Europe, automakers and governments have engaged in several high-profile international R&D partnerships since the mid-1980s.7 The most recent incarnation, the European Council for Automotive R&D (EUCAR), was launched in 1994, partly in response to the PNGV program. EUCAR comprises 10 automotive companies located in five countries and has its headquarters in a sixth, Belgium. From 1994 to 1999 EUCAR undertook 88 projects, of which 14 were self-funded (by EUCAR members) and 74 were cofunded with the European Union. The total budget for the 88 projects was EUR302 million, about half of which was provided by the European Union (half of that going to the automakers and the other half to suppliers, universities, and independent centers). EUCAR has created an array of technical and policy committees not unlike those associated with the PNGV program, which are aided by a skeletal administrative staff. Interviews with a variety of senior officials from the government and automotive partners indicate that two major benefits have arisen from the EUCAR partnership: (1) automakers have gained access to European research institutes (which are similar to the U.S. national energy laborato- 7   This section is based on Sperling (2001).

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Personal Cars and China ries); and (2) communication has increased across the industry and between industry and the European Union. EU funding itself was rarely cited as an important benefit. The EU provides even less public R&D funding to automakers than that provided through the PNGV program. EUCAR, then, is principally an organization designed to share information. With the challenge of managing the politics and interests of a wide variety of countries and a broader array of companies, the “cultural” commitments of some countries to their major car companies, and the various relationships among governments, universities, and companies, it is difficult to imagine EUCAR expanding into an integrated R&D partnership. EUCAR also has played a pivotal role in maintaining communication between the European Commission (the executive arm of the European Union) and automakers about follow-up to their voluntary agreement to reduce CO2 emissions (per vehicle-kilometer) by 25 percent between 1998 and 2008. General Lessons of PNGV and EUCAR The PNGV and EUCAR programs can provide valuable insights and lessons for China. Partnerships can play an important role in identifying technologies that are in the public interest and also commercially viable. Moreover, they help inform the public debate about new vehicle technologies, highlight opportunities, and provide a mechanism for directing government resources. Independent research centers play an important role in accelerating development, and such research centers will be most successful when closely partnered with industry members. Government funding of universities is critical, and a principal aim should be training of engineers and scientists. As any such partnership proceeds, the goals and programs need to be flexible and reviewed on a regular basis. The government must recognize that the companies will need to control any proprietary knowledge they develop. All companies will expect to be treated equally. In a free market economy, decisions about commercialization must remain with the industry. Although the commercialization of advanced technology is most likely to occur in response to specific performance standards and goals or competitive market forces, R&D “partnerships” can provide important information during the pre-competitive phase of the development process. An important lesson from the PNGV experience for China is related to developing human capabilities. Even in the United States, with its massive university and national lab systems, the automotive companies concluded that “the lack of talented people is a greater handicap than the lack of adequate funding and [we] need ideas (breakthroughs) more than dollars” (NRC, 2000:9)

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Personal Cars and China In the end, China will need to adjust any strategy it follows for generating and sharing knowledge and working with industry to fit its special circumstances. Such a strategy will differ from the U.S. PNGV experience because China does not have large, existing automotive-related research capabilities in its industry, universities, or government research centers. One overarching lesson learned, however, is that the partnership process, in whatever form it takes, is difficult and requires a strong commitment on both sides. Also, because reducing energy consumption and emissions is a large-scale systems problem, it is important that all of the key players be involved in any partnership process. One weakness of the PNGV program was that the energy suppliers were not partners in the effort. The overriding lesson, though, is that in this globalizing and networking world, communicating and partnering are more essential than ever. Because foreign original equipment manufacturers are highly involved in the Chinese automotive industry, the government must soon decide how much these foreign members will be allowed to participate in any government-industry program. CONCLUSION Governments have an important role to play in fostering improved research and development and an even more important role in determining the attributes of individual vehicles. The government’s role in research and development can vary from providing resources for basic research to stimulating the development of human resources. As for vehicle attributes, government can stimulate advanced technologies by setting performance standards or introducing strong incentives for rapid advances. It is important that those trying to leapfrog to more advanced technology pay careful attention to other important conditions that could limit their success such as assuring the availability of fuels of the appropriate quality. APPENDIX: INSPECTION AND MAINTENANCEPROGRAMS Effective inspection and maintenance programs can identify the cars with emission control malfunctions and assure their repair.8 Test procedures must keep pace, however, with the advances in vehicle technology. 8   Some of the material in this appendix has been derived from LAT, Aristotle University of Thessaloniki, Greece (1998). The project described in this report was funded by the European Commission, Directorate Generals for Environment (DG XI), Transport (DG VII) and Energy (DG XVII).

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Personal Cars and China For the most advanced vehicles, the emissions, when properly maintained, will be so low that a more sophisticated test will be required. Vehicles equipped with electronic controls of air-fuel and spark management systems and equipped with catalytic converters to reduce CO, HC, and NOx emissions are best tested using a transient test on a dynamometer that includes accelerations and decelerations typical of actual driving. In general, I/M programs are most effective when they take the form of centralized I/M systems in which the testing of vehicles is completely separated from those carrying out repairs. These programs also cost much less overall because they tend to be high throughput. The rest of this appendix summarizes the various test procedures that can be used in I/M programs and some of the more recent experiences with vehicle inspection and maintenance efforts. No-Load Short Tests The term no-load denotes all tests during which no external load is imposed and the car operates with the transmission in the neutral position. Idle/Fast Idle Test This test measures CO, HC, and CO2 concentrations in the raw exhaust gas at idle speed and possibly a higher engine speed, 2,000–3000 revolutions per minute (rpm). The test could last from less than one minute for a one-speed idle test without preconditioning to about 10 minutes for a two-speed test that includes a “second chance” test with preconditioning (Tierney et al., 1991; Laurikko, 1994). A garage-type nondispersive infrared (NDIR) analyzer capable of measuring CO, HC, and CO2 concentrations is sufficient for detecting the level of the pollutants. Today, idle/fast idle tests are still widely used in I/M programs because they are the fastest, cheapest, and easiest to perform with the least possible testing equipment. For carbureted cars, they can effectively identify malfunctioning mixture preparation systems by checking the performance of the carburetor’s idle mixture orifice in the idle test and the main fuel metering orifice in the fast idle test. However, modern cars equipped with electronic fuel injection and ignition systems and three-way catalysts may have a defect—such as defective sensors and degraded catalyst efficiency (Pidgeon and Dobie, 1991)—that cannot be detected through their pollutant emissions at idle; even worse, the great bulk of emissions may be generated during transient engine operation. An additional very significant drawback is the negligible amount of NOx emissions at idle.

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Personal Cars and China Idle/Fast Idle Test with Lambda Test For catalyst-equipped cars, a lambda test may be coupled with an idle/fast idle test in order to check the performance of the mixture preparation system. Three steps are usually performed: The fuel/air ratio is indirectly determined by measuring the CO2, CO, O2, and HC concentrations in the raw exhaust at fast idle (2,000– 3,000 rpm). The fuel/air ratio is artificially modified by adding oxygen, propane, or recirculated exhaust gas to the intake air, and the response of the lambda control system is checked. Long response times imply that the oxygen sensor is degraded, and no response means that the lambda control system is not operating. One or more of the characteristics of the electronic lambda control circuit are measured and compared with the auto manufacturers’ specifications. Since December 1993, Germany has used a test that involves both test types 1 and 2. Evaluations have shown that the test performs fairly well with excess emitters. A combined idle/fast idle–lambda test (involving lambda test types 1 and 2) also is being used in Austria, where it has demonstrated satisfactory effectiveness (Pucher and Lenz, 1990). Steady-State Loaded Tests Because NOx emissions at no-load conditions are negligible, a loaded test is required to measure NOx emission levels, which are a critical source of urban air pollution. The simplest loaded tests involve a dynamometer with steady-state power absorption. A simulation of the car’s inertia weight is not required, because there is no transient phase in the emission test: the car is driven at constant speed and load, and pollutant concentrations (CO, HC, NOx, and CO2) are measured during the load phase. In response to the introduction of three-way catalyst-equipped cars, the acceleration simulation mode (ASM) test was developed. For this test the car is driven on a chassis dynamometer at a constant speed and steady-state power absorption that is equal to the actual road load of the car during acceleration. Thus one can achieve a realistic simulation of the car’s load at a specific driving mode without the need of flywheels for inertia simulation. However, at high speed/high acceleration combinations the required power absorption is too high to be achieved without overheating the engine (Austin and Sherwood, 1989). Pollutant concentrations (CO, HC, NOx) are in principle measured in the raw exhaust. Each steady-state

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Personal Cars and China test mode requires about 10 minutes for preparation, preconditioning, actual testing, and documentation. Austin and Sherwood (1989) compared several ASM speed/load combinations with idle tests and already developed steady-state loaded tests as well as with a transient loaded test. The best results were obtained from the ASM 5015 test, which has a constant speed of 15 mph (24 kilometers per hours and a steady-state load equal to 50 percent of the load required to accelerate at 1.47 meters per second squared (m/s2)—the maximum acceleration rate on the Federal Test Procedure (FTP)—at a speed of 15 mph. In the late 1980s TÜV, a German company that undertakes a great deal of government-type work, including certification of new vehicles, I/ M testing, and government research projects such as emissions factor tests, investigated a similar loaded test. The car is driven at 50 kph and at 7-kilowatt dynamometer power absorption in third gear (position “D” for cars with automatic transmission) and then idles; pollutant concentrations (CO, HC, NOx) in the raw exhaust are measured at the end of both the loaded and the idling phases (Voss et al., 1987). Vehicle preparation, preconditioning, testing, and documentation take about 10 minutes. The study concluded that the test is much more appropriate than a simple idle/fast idle test for inspecting catalyst cars. Transient Loaded Tests In transient tests, cars are driven on the dynamometer according to a specific driving schedule; the main differences between these tests and those used for type approval or new vehicle certification are the duration of the driving cycle and the hot start. Because exhaust gas emissions are expressed in mass units, a constant volume sampler (CVS) system and laboratory-quality analyzers are required to detect low pollutant concentrations in the diluted exhaust sample. A multiple-curve dynamometer with flywheels also is required to simulate the instantaneous road load and the power needed to accelerate the inertia masses of each car. The CDH 226 test developed by the Colorado Department of Health (CDH) sought to achieve a high correlation with the U.S. Federal Test Procedure, especially for three-way catalyst cars. Numerous studies have demonstrated correlation coefficients (R2) of 0.79–0.96 for all three pollutants (Ragazzi et al., 1985; Austin and Sherwood, 1989; Klausmeier, 1994). Excess emission identification rates were about 90 percent for all three pollutants at 5 percent errors of commission (Ragazzi et al., 1985). The U.S. Environmental Protection Agency, however, decided to develop a more transient alternative to the CDH 226 in order to better simulate the FTP. The result was the IM240 (Pidgeon and Dobie, 1991). The

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Personal Cars and China IM240 procedure requires a constant volume sampler and laboratory-grade analyzers for carbon monoxide, hydrocarbons, nitrogen oxides, and carbon dioxide. Emissions in the diluted exhaust gas are normally derived on a mass basis with a CVS, and the test takes about 10 minutes to perform. The IM240 showed correlation coefficients of 0.89–0.97 for all three pollutants with the FTP hot start portion; another test sample showed coefficients of 0.54–0.82 with the full FTP, including cold starts (Klausmeier, 1994). This procedure evolved into the VMass test procedure, which has demonstrated very close correlation with the IM240 test but at much lower cost. REFERENCES Austin T. C., and L. Sherwood, 1989. Development of Improved Loaded-Mode Test Procedures for Inspection and Maintenance Programs. SAE Technical Paper No. 891120. Society of Automotive Engineers. Chapman, R. 1996. Testimony, Hearing on Partnership for a New Generation of Vehicles (PNGV): Assessment of Program Goals, Activities and Priorities. Subcommittee on Energy and Environment of the Committee on Science, U.S. House of Representatives. 104th Cong., 2d sess. Washington, D.C.: Government Printing Office. European Environment Agency. 2002. Annual European community greenhouse gas inventory 1990–2000 and inventory report 2002. Technical report no. 75. Online. Available at reports.eea.eu.int/technical_report_2002_75/en.f Accessed October 22, 2002. Hellman, K. H., and R. M. Heavenrich. 2001. Light-Duty Automotive Technology and Fuel Economy Trends. EPA 420-R-01-008. Advanced Technology Division, Office of Transportation and Air Quality, U.S. Environmental Protection Agency. September. Kenworthy, J. R., and F. B. Laube. 1999. An International Sourcebook of Automobile Dependence in Cities, 1960–1990. Boulder: University Press of Colorado. Klausmeier R. 1994. Analysis of I/M test alternatives. Paper presented at the International Conference on Ozone Control Strategies for the Next Decade (Century), San Francisco. LAT, Aristotle University of Thessaloniki, Greece; INRETS, France; TNO, The Netherlands; TÜV, Rheinland, Germany; and TRL, United Kingdom—in collaboration with MTC, Sweden; IVL, Sweden; VKM-Thd, Graz University of Technology, Austria. 1998. The Inspection of In-Use Cars in Order to Attain Minimum Emissions of Pollutants and Optimum Energy Efficiency. May. Laurikko J. 1994. In-Use Vehicle Emissions Control in Finland: Introduction and Practical Experience. SAE Technical Paper No. 940930. Society of Automotive Engineers. National Research Council (NRC). 2000. Review of the Research Program of the Partnership for a New Generation of Vehicles: Sixth Report. Washington, D.C.: National Academy Press. ———. 2001. Review of the Research Program of the Partnership for a New Generation of Vehicles: Seventh Report. Washington, D.C.: National Academy Press. Pidgeon W. M., and N. Dobie. 1991. The IM240 Transient I/M Dynamometer Driving Schedule and the Composite I/M Test Procedure. U.S. EPA Technical Report AA-TSS-91-1. U.S. Environmental Protection Agency, Washington, D.C. Pucher E., and H. P. Lenz. 1990. First results in testing in-use catalyst cars using air-fuel ratio measurement from the exhaust gas. ATA 905114. Paper presented at the Twenty-third FISITA Congress.

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Personal Cars and China Ragazzi, R. A., J. T. Stokes, and G. L. Gallagher. 1985. An Evaluation of a Colorado Short Vehicle Emission Test (CDH-226) in Predicting Federal Test Procedure (FTP) Failures. SAE Technical Paper No. 852111. Society of Automotive Engineers. Sperling, D. 2001. Public-private technology R&D partnerships: Lessons from U.S. Partnership for a New Generation of Vehicles. Transport Policy 8(4):254. Tierney E. J., E. W. Herzog, and L. M. Snapp. 1991. Recommended I/M Short Test Procedures for the 1990s: Six Alternatives. U.S. EPA Technical Report AA-TSS-I/M-90. U.S. Environmental Protection Agency, Washington, D.C. U.S. General Accounting Office (GAO). 2000. Results of the U.S.-Industry Partnership to Develop a New Generation of Vehicles. GAO/RCED-00-81. Available at www.gao.gov. Voss H.-J., D. Hassel, H.-P. Neppel, A. Richter, N. Heckötter, and A. Friedrich. 1987. Periodic Inspection of Exhaust Emissions from Low Pollutive Otto Engine Vehicles and Diesel Engine Vehicles. SAE Technical Paper No. 871084. Society of Automotive Engineers.