1
Introduction

The impacts of fuel consumption by light-duty vehicles are profound, influencing economic prosperity, national security, and Earth’s environment. Increasing energy efficiency has been a continuing and central objective for automobile manufacturers and regulators pursuing objectives that range from reducing vehicle operating costs and improving performance to reducing dependence on petroleum and limiting greenhouse gas emissions. Given heightened concerns about the dangers of global climate change, the needs for energy security, and the volatility of world oil prices, attention has again been focused on reducing the fuel consumption of light-duty vehicles. A wide array of technologies and approaches exist for reducing fuel consumption. These improvements range from relatively minor changes with low costs and small fuel consumption benefits—such as use of new lubricants and tires—to large changes in propulsion systems and vehicle platforms that have high costs and large fuel consumption benefits.

CURRENT POLICY CONTEXT AND MOTIVATION

The rapid rise in gasoline and diesel fuel prices experienced during 2006-2008 and growing recognition of climate-change issues have helped make vehicle fuel economy an important policy issue once again. These conditions have motivated several recent legislative and regulatory initiatives. The first major initiative was the mandate for increased CAFE standards under the Energy Independence and Security Act of 2007. This legislation requires the National Highway Traffic Safety Administration (NHTSA) to raise vehicle fuel economy standards, starting with model year 2011, until they achieve a combined average fuel economy of at least 35 miles per gallon (mpg) for model year 2020. The policy landscape has also been significantly altered by separate Supreme Court decisions related to the regulation of carbon dioxide as an air pollutant and the California greenhouse gas vehicle standards. These decisions helped spur the Obama administration to direct the U.S. Environmental Protection Agency (EPA) and the NHTSA to develop a joint fuel economy/greenhouse gas emission standard for light-duty vehicles that mirrors the stringency of the California emissions standard. Finalized on April 1, 2010, the rule requires that fleet-averaged fuel economy reach an equivalent of 35.4 mpg by model year 2016.

The significant downturn in the United States and world economies that occurred during the course of this study has had substantial negative impacts on the global automobile industry. Most manufacturers have experienced reduced sales and suffered losses. The automobile industry is capital intensive and has a very steep curve on profits around the break-even point: a small increase in sales beyond the break-even point can results in large profits, while a small decrease can result in large losses. Consumer spending decreased markedly due to lack of confidence in the economy as well as difficulties in the credit markets that typically finance a large portion of vehicle purchases. The U.S. market for light-duty vehicles decreased from about 16 million vehicles annually for the last few years to about 10 million in 2009. The overall economic conditions resulted in Chrysler and GM deciding to file for Chapter 19 bankruptcy and in Ford excessively leveraging its assets. GM and Chrysler have recently exited bankruptcy, and the U.S. government is now the major shareholder of GM. Fiat Automobiles has become a 20 percent shareholder in Chrysler, with the potential to expand its ownership to 35 percent, and the newly formed Voluntary Employee Beneficiary Association has a 55 percent stake.

These economic conditions will impact automotive companies’ and suppliers’ ability to fund in a timely manner the R&D necessary for fuel economy improvements and the capital expenditures required. Although addressing the impact of such conditions on the adoption of vehicle fuel economy technologies is not within the purview of this committee, these conditions do provide an important context for this study. Manufacturers will choose fuel economy technologies based on what they think will be most effective and best received by consumers. Customers also will have a central role in what technologies are actually chosen and will make those choices based partly on initial and operating costs.



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1 Introduction The impacts of fuel consumption by light-duty vehicles fuel economy/greenhouse gas emission standard for light- are profound, influencing economic prosperity, national duty vehicles that mirrors the stringency of the California security, and Earth’s environment. Increasing energy effi- emissions standard. Finalized on April 1, 2010, the rule re- ciency has been a continuing and central objective for auto- quires that fleet-averaged fuel economy reach an equivalent mobile manufacturers and regulators pursuing objectives that of 35.4 mpg by model year 2016. range from reducing vehicle operating costs and improving The significant downturn in the United States and world performance to reducing dependence on petroleum and economies that occurred during the course of this study has limiting greenhouse gas emissions. Given heightened con- had substantial negative impacts on the global automobile cerns about the dangers of global climate change, the needs industry. Most manufacturers have experienced reduced for energy security, and the volatility of world oil prices, sales and suffered losses. The automobile industry is capital attention has again been focused on reducing the fuel con- intensive and has a very steep curve on profits around the sumption of light-duty vehicles. A wide array of technologies break-even point: a small increase in sales beyond the break- and approaches exist for reducing fuel consumption. These even point can results in large profits, while a small decrease improvements range from relatively minor changes with can result in large losses. Consumer spending decreased low costs and small fuel consumption benefits—such as use markedly due to lack of confidence in the economy as well of new lubricants and tires—to large changes in propulsion as difficulties in the credit markets that typically finance systems and vehicle platforms that have high costs and large a large portion of vehicle purchases. The U.S. market for fuel consumption benefits. light-duty vehicles decreased from about 16 million vehicles annually for the last few years to about 10 million in 2009. The overall economic conditions resulted in Chrysler and CURRENT POLICY CONTEXT AND MOTIVATION GM deciding to file for Chapter 19 bankruptcy and in Ford The rapid rise in gasoline and diesel fuel prices experi- excessively leveraging its assets. GM and Chrysler have re- enced during 2006-2008 and growing recognition of climate- cently exited bankruptcy, and the U.S. government is now the change issues have helped make vehicle fuel economy an major shareholder of GM. Fiat Automobiles has become a 20 important policy issue once again. These conditions have percent shareholder in Chrysler, with the potential to expand motivated several recent legislative and regulatory initia - its ownership to 35 percent, and the newly formed Voluntary tives. The first major initiative was the mandate for increased Employee Beneficiary Association has a 55 percent stake. C AFE standards under the Energy Independence and These economic conditions will impact automotive com- Security Act of 2007. This legislation requires the National panies’ and suppliers’ ability to fund in a timely manner the Highway Traffic Safety Administration (NHTSA) to raise R&D necessary for fuel economy improvements and the cap- vehicle fuel economy standards, starting with model year ital expenditures required. Although addressing the impact 2011, until they achieve a combined average fuel economy of such conditions on the adoption of vehicle fuel economy of at least 35 miles per gallon (mpg) for model year 2020. technologies is not within the purview of this committee, The policy landscape has also been significantly altered by these conditions do provide an important context for this separate Supreme Court decisions related to the regulation of study. Manufacturers will choose fuel economy technolo- carbon dioxide as an air pollutant and the California green- gies based on what they think will be most effective and best house gas vehicle standards. These decisions helped spur received by consumers. Customers also will have a central the Obama administration to direct the U.S. Environmental role in what technologies are actually chosen and will make Protection Agency (EPA) and the NHTSA to develop a joint those choices based partly on initial and operating costs. 9

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10 ASSESSMENT OF FUEL ECONOMY TECHNOLOGIES FOR LIGHT-DUTY VEHICLES Subsidies and other incentives also can significantly impact and suppliers worldwide are improving their capabilities the market acceptance rate of technologies that reduce fuel in hybrid-electric technologies. Further, policy incentives consumption. Finally, adoption of these technologies must may help favor one technology over another in individual play out in a sometimes unpredictable marketplace and pol- countries. icy setting, with changing standards for emissions and fuel economy, government incentives, consumer preferences, and STATEMENT OF TASK other events impacting their adoption. Thus, the committee acknowledges that technologies downplayed here may play The NHTSA has a mandate to keep up-to-date on the a bigger role than anticipated, or that technologies covered potential for technological improvements as it moves into in this report may never emerge in the marketplace. planned vehicular regulatory activities. It was as part of its The timing for introducing new fuel consumption tech- technology assessment that the NHTSA asked the National nologies may have a large influence on cost and risk. Academies to update the 2002 National Research Council The individual vehicle models produced by automobile report Effectiveness and Impact of Corporate Average Fuel manufacturers pass through a product cycle that includes Economy (CAFE) Standards (NRC, 2002) and add to its introduction, minor refreshments of design and features, assessment other technologies that have emerged since that and then full changes in body designs and power trains. report was prepared. The statement of task (see Appendix B) To reduce costs and quality concerns, changes to reduce directed the Committee on the Assessment of Technologies fuel consumption normally are timed for implementation for Improving Light-Duty Vehicle Fuel Economy to estimate in accordance with this process. Further, new technologies the efficacy, timing, cost, and applicability of technologies are often applied first in lower-volume, higher-end vehicles that might be used over the next 15 years. The list of tech- because such vehicles are better able to absorb the higher nologies includes diesel and hybrid electric power trains, costs, and their lower volumes reduce exposure to risk. In which were not considered in the 2002 NRC report. Weight general, 2 to 3 years is considered the quickest time frame and power reductions also were to be included, but not for bringing a new vehicle model to market or for modify- size or power-to-weight ratio reductions. Updating the fuel ing an existing model. Significant carryover technology and economy-cost relationships for various technologies and dif- engineering from other models or previous vehicle models ferent vehicle size classes as represented in Chapter 3 of the are usually required to launch a new model this quickly, 2002 report was central to the study request. and the ability to significantly influence fuel consumption The current study focuses on technology and does not is thus smaller. More substantial changes to a model occur consider CAFE issues related to safety, economic effects on over longer periods of time. Newly styled, engineered, and industry, or the structure of fuel economy standards; those redesigned vehicles can take from 4 to 8 years to produce, issues were addressed in the 2002 report. The new study each with an increasing amount of new content. Further, the looks at lowering fuel consumption by reducing power engine development process often follows a path separate requirements through such measures as reduced vehicle from that for other parts of a vehicle. Engines have longer weight, lower tire rolling resistance, or improved vehi- product lives, require greater capital investment, and are not cle aerodynamics and accessories; by reducing the amount of as critical to the consumer in differentiating one vehicle from fuel needed to produce the required power through improved another as are other aspects of a car. The normal power train engine and transmission technologies; by recovering some development process evolves over closer to a 15-year cycle, of the exhaust thermal energy with turbochargers and other although refinements and new technologies will be imple- technologies; and by improving engine performance and mented throughout this period. It should be noted that there recovering energy through regenerative braking in hybrid are significant differences among manufacturers in their ap- vehicles. Additionally, the committee was charged with as- proaches to introducing new models and, due to regulatory sessing how ongoing changes to manufacturers’ refresh and and market pressures, product cycles have tended to become redesign cycles for vehicle models affect the incorporation of shorter over time. new fuel economy technologies. The current study builds on Although it is not a focus of this study, the global set- information presented in the committee’s previously released ting for the adoption of these fuel economy technologies is interim report (NRC, 2008). critical. The two main types of internal combustion engines, gasoline spark-ignition (SI) and diesel compression-ignition CONTENTS OF THIS REPORT (CI), are not necessarily fully interchangeable. Crude oil (which varies in composition) contains heavier fractions that The committee organized its final report according to go into diesel production and lighter fractions that go into broad topics related to the categories of technologies impor- gasoline. A large consumer of diesel, Europe diverts the re- tant for reducing fuel consumption, the costs and issues asso- maining gasoline fraction to the United States or elsewhere. ciated with estimating the costs and price impacts of these China is now using mostly gasoline, and so there is more technologies, and approaches to estimating the fuel con- diesel available globally. And automobile manufacturers sumption benefits possible with combinations of these tech-

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11 INTRODUCTION nologies. Chapter 2 describes fundamentals of determining approaches. Chapter 9 provides an estimate of the costs and vehicle fuel consumption, tests for regulating fuel economy, the fuel consumption benefits of multiple technologies for an and basic energy balance concepts, and it discusses why this array of vehicle classes. The appendixes provide information report presents primarily fuel consumption data. Chapter 3 related to conducting the study (Appendixes A through C), describes cost estimation for vehicle technologies, including a list of the acronyms used in the report (Appendix D), and methods for estimating the costs of a new technology and additional information supplementing the individual chapters issues related to translating those costs into impacts on the (Appendixes E through K). retail price of a vehicle. Chapters 4 through 7 describe tech- nologies for improving fuel consumption in spark-ignition REFERENCES gasoline engines (Chapter 4), compression-ignition diesel NRC (National Research Council). 2002. Effectiveness and Impact of Cor- engines (Chapter 5), and hybrid-electric vehicles (Chapter 6). porate Average Fuel Economy (CAFE) Standards. Washington, D.C.: Chapter 7 covers non-engine technologies for reducing light- National Academy Press. duty vehicle fuel consumption. Chapter 8 provides a basic NRC. 2008. Interim Report of the Committee on the Assessment of Tech - overview of and discusses the attributes of two different ap- nologies for Improving Light-Duty Vehicle Fuel Economy. Washington, proaches for estimating fuel consumption benefits—the dis- D.C.: The National Academies Press. crete approximation and the full-system simulation modeling