conditions and evaluate the benefit of the program under both conditions. In the Low HEV market condition, HEV sales increase linearly from today’s market share to about 12 percent of new vehicle sales in 2050. In the High HEV condition, HEV sales increase exponentially from today and ultimately account for about 40 percent of new vehicle sales in 2050.

The market acceptance of new CVs was assumed to be strictly a function of the trade-off between increased capital costs and decreased lifetime fuel costs. To determine which type of CV would be purchased in any given year, a simple cost comparison is made of the total capital and fuel costs assuming a 14-year vehicle life, annual vehicle mileage over the life of the vehicle, and a consumer discount rate of 7 percent. Whichever vehicle has the lower discounted total cost is assumed to capture the entire market for CVs in that year.

Calculating Fuel Usage, Fuel Expenditures, Incremental Vehicle Cost, and Carbon Emissions for a Given Set of Vehicle Characteristics

Based on the market assumptions (total vehicles sold, fraction of total vehicles that are HEVs, and fraction of CVs that implement new technologies) and fuel economy estimates for the three vehicle types, the model produces an estimate of annual gasoline usage by light-duty vehicles annually from 2006 through 2050. The estimated gasoline usage is then translated into economic expenditures and carbon emissions.

Economic expenditures on gasoline are estimated based on the projected price of gasoline (excluding taxes) by year and the total volume of gasoline used. The price of gasoline is estimated based on the price of oil: Refining and distribution are assumed to add about 42 cents per gallon to the crude oil price. The price of oil is defined by the global scenarios being considered: the 2005 Reference Case prices and twice those prices for the High Oil and Gas Prices scenario. The price of oil in the Carbon Constrained scenario is assumed to be the same as in the Reference Case. Prices were assumed to be constant after 2025 through 2050.

Annual carbon emissions are calculated based on the total gasoline usage and an estimated 3.04 kg carbon emitted per gallon of gasoline consumed.

Finally, HEVs and new CVs will cost the consumer more than base case CVs, and those incremental costs must be accounted for in the estimate of the total economic impact of the new technologies. In 2005, HEVs cost approximately $2,500 more than comparable CVs. As with the fuel economy estimates, the incremental costs of HEVs and of new CVs are defined for the specific case being evaluated. The incremental per-vehicle costs are multiplied by the number of vehicles of each type that are sold to produce an estimate of the incremental vehicle costs by year.

Estimating the Benefit of the DOE R&D Program

As described above, the panel’s discussion and assessment of the technical risks associated with DOE’s R&D activities resulted in the identification of 145 “cases,” or different possible outcomes for fuel economy and incremental vehicle cost for new CVs and HEVs. The assessment also results in two probabilities for each case: the probability of that outcome with DOE’s research program and the probability of the outcome without DOE’s research program.

The expected economic benefit of the DOE program is the difference in the expected value of total consumer expenditures on vehicles and fuel with the program and those expenditures without the program. The expected value of total consumer expenditures in each case is calculated as the probability-weighted average of the expenditures in each of the 145 cases. The total consumer expenditures is calculated as the discounted net present value of fuel costs and incremental vehicle costs between 2006 and 2050, discounted at 3 percent or 7 percent real.

Similar calculations for the difference in the expected value of carbon emissions and gasoline consumption yield values for the expected environmental and security benefits of the DOE program.

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