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1 Study Purpose and Background This study examines challenges and opportunities associated with reduc- ing the use of petroleum fuels and emissions of carbon dioxide (CO2) and other greenhouse gases (GHGs) by the U.S. transportation sector over the next half century. As explained in the study’s statement of task (Box 1-1), the emphasis is on reviewing candidate strategies and policy options for achieving this outcome. In 1997, a Transportation Research Board committee conducted a sim- ilar study of transportation’s contribution to GHG buildup in the atmo- sphere and urged a program of research to identify government policies to curb the sector’s growing energy use and emissions (TRB 1997). During the late 1990s, however, fuel prices were falling, and any underlying public interest in reducing energy use did not slow the upward trend in energy demand. Federal fuel economy standards remained flat, and Americans increasingly bought larger and more fuel-intensive cars, pickup trucks, and sport utility vehicles. Transportation activity grew rapidly in nearly all modes, particularly by car, truck, and airplane. Several developments over the past decade have renewed public con- cern over transportation’s use of energy, and particularly its near exclusive use of petroleum fuels. Swings in oil prices have burdened consumers, hampered the economy, and increased the risk of investing in energy alter- natives. The threat of global climate change from the atmospheric buildup of CO2 emitted from the burning of petroleum and other carbon-rich fossil fuels has heightened this public concern. The September 11, 2001, terrorist 15

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16 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation box 1-1 Statement of Task This project will examine the challenges and opportunities associated with reducing the use of petroleum fuels and emissions of greenhouse gases (GHGs) from the U.S. transportation sector. It will review policy approaches and strategies to affect the amount of transportation activity and the energy and GHG efficiency of transportation vehicles and their operations across all passenger and freight modes that are major contributors to the sector’s demand for fuel and emissions of GHGs. The emphasis will be on policy and strategy options whose adoption can have meaningful effects on fuel and emissions trends over the next 20 to 50 years. The discussion of options should recognize that decision makers must also take into account the safety, economic, transportation finance, environmental, and other consequences of their choices. The committee will not assess the specific consequences on climate change of the options it examines and it will not recommend any particular option. The report will offer insight on the potential energy and GHG reduction impacts of various options and the pros and cons of pursuing each. Although the report will place the U.S. transportation sec- tor’s contribution to fuel use and GHG emissions in both a national and worldwide context, the analysis of strategies will focus on those the United States can implement. attacks and the wars in Iraq and Afghanistan are viewed by many as being linked to the massive transfer of wealth to politically unstable regions of the world that supply much of the petroleum used for transportation. And the offshore oil drilling calamity in the Gulf of Mexico during spring and summer 2010, which occurred while this study was under way, is another compelling reason for finding ways to curtail demand for oil and to lessen the incentive for exploiting increasingly costly and environmentally risky oil reserves. In the case of climate change, much research and modeling have been undertaken during the past decade to ascertain the magnitude of reduc- tions in fossil fuel use and GHG emissions required worldwide and on the part of the United States to limit global climate risks.1 In the aggregate, 1 A review of the state of climate change science is contained in the recent suite of reports produced by the National Research Council project America’s Climate Choices. See http://americasclimatechoices.org/.

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17 Study Purpose and Background this work reveals a challenge that goes well beyond making incremental cuts in fossil fuel use. The scale of emissions cuts needed to stabilize GHG buildup may require the decarbonization of most of the world’s energy supplies and their production methods by the middle of the cen- tury. For the transportation sector to contribute meaningfully to these reductions will almost certainly require early and sustained increases in the energy and emissions efficiency of vehicles and system operations and an eventual shift to low- and no-carbon fuels. Absent dramatic progress in increasing system efficiency and diversifying the energy supply, the total volume of transportation activity may need to be reduced, particu- larly in the most energy- and emissions-intensive transportation modes. Such changes will not be easy to bring about through public policy. The transportation sector is fragmented and ubiquitous. It is integral to the national economy, intertwined in the daily lives of Americans, and provided through an intricate mix of private and public entities. Policy changes that affect the cost structure, technology, and functioning of the system have implications that extend well beyond the transportation sector, affecting where people live and work; where they shop, socialize, and vacation; and how businesses are structured and operate. Thus, how policy measures are likely to play out to yield reductions in energy use and GHG emissions can be difficult to predict. The more urgent the need to make deep cuts in energy use and emissions from transportation, the more likely are required policy actions to be disruptive to households and commerce and to present policy makers at all levels of government with difficult choices. The appendix explains why scientists have urged action to stabilize GHG concentrations by making deep and sustained emissions reduc- tions over the next several decades. Stabilizing GHG concentrations will likely require much lower emissions from all energy-using sectors and all regions of the world. While the actions taken in individual sectors and countries will be crucial, their cumulative impacts will be of greatest relevance. The U.S. transportation sector now accounts for about 25 to 30 percent of the CO2 emitted in this country and about 5 percent of worldwide emissions. Therefore, significant reductions in emissions from the U.S. transportation sector may have only modest effects glob- ally. The fact that most countries and most economic sectors contribute

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18 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation only marginally to global emissions means that substantial progress can only be made through collective actions. In light of the global nature of the climate change problem, the next section explains the rationale for this study, which focuses on strategies for reducing energy use and emissions from one sector in one country— that is, U.S. transportation. Background is then provided on the current use of petroleum and other fossil fuels in U.S. transportation and on pro- jections of consumption over the next two to three decades. Although the CO2 produced from the burning of petroleum is the main source of GHGs from transportation, several other GHGs are emitted, and they are reviewed briefly. The chapter concludes by outlining the organization of the remainder of the report. Why Examine Policies for a Single Sector, Transportation? Until recently, the emphasis of federal policy to reduce transportation’s energy use has been on setting standards for automobile fuel economy and to a lesser degree on fostering alternatives to single-occupant driv- ing and promoting various alternative fuels and vehicles. For more than 30 years, the primary federal policy to reduce energy use has been the Corporate Average Fuel Economy (CAFE) program. CAFE establishes fleetwide average fuel economy minimums for manufacturers of cars and light trucks. Various other programs have been instituted (and in some cases withdrawn) over the years to promote automotive fuel effi- ciency and oil conservation, including excise taxes on “gas-guzzling” cars, fuel economy labeling requirements for new cars and light trucks, a national highway speed limit, capital grants for the supply of mass transit services, and programs to promote ridesharing. For the most part, the other major domestic freight and passenger modes—trucking, rail, and aviation—have not been subject to similar federal efforts intended to curtail their energy consumption. In recent years, additional policies have been introduced to reduce GHG emissions from light-duty vehicles as well as other modes. After years of remaining unchanged, the CAFE standards were restructured and tightened. Federal energy policies were modified to include mea- sures aimed at diversifying the fuel supply and vehicle technologies

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19 Study Purpose and Background through mandates for the use of advanced biofuels, R&D support for alternative energy sources and propulsion systems for vehicles (e.g., bat- teries, hydrogen fuel cells), and tax incentives for the development and purchase of vehicles powered by electricity. A 2007 ruling by the U.S. Supreme Court that GHG emissions are candidates for regulation under the Clean Air Act (CAA)2 is prompting even more policy attention. After actions by California and several other states to regulate GHG emissions from automobiles, the U.S. Environmental Protection Agency (EPA) has exercised its CAA authority to introduce GHG performance standards for cars and light trucks starting in model year 2012, and the agency is expected to introduce similar standards for trucks and possibly vehi- cles in other modes. These standards represent the first concerted effort at the federal level to regulate transportation for the express purpose of GHG mitigation. Whether targeting the GHG emissions of transportation or any other individual energy-using sector is useful is a subject of debate. Even as EPA was devising GHG performance standards for light-duty vehicles during 2009, Congress was working on legislation to create a broader, market- oriented means of GHG reduction through economywide carbon pric- ing. The basic premise of such a program is that the setting of a national price on emissions of CO2 and other GHGs would cause an increase in the retail price of hydrocarbon fuels used across the economy, including the gasoline, diesel, and jet fuels used in transportation. Businesses and households would be expected to respond in various ways to curb their consumption of these fuels—for example, by using and demanding prod- ucts having greater energy efficiency, switching to lower-carbon energy supplies, and cutting back on their least valued energy- and emissions- intensive activities. The least costly responses to the higher prices would be taken first, causing varying degrees of energy and emissions reduction within and across economic sectors. By generating such a broad response, economywide carbon pricing is generally viewed as having the greatest potential to bring about emissions cuts through the widest array of means at the lowest overall cost. Sector- specific policies such as vehicle efficiency regulations and mandates for 2 Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007).

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20 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation the supply of lower-carbon fuels have a decidedly narrower effect. How- ever, as evidenced by the difficulties of introducing national carbon pric- ing, sector-specific policies have demonstrated greater potential for early implementation. transportation’s expected limited response to carbon pricing Most economic models projecting the effects of economywide carbon pricing assume that households and businesses will face significant con- straints in making adjustments to their vehicles and travel patterns that will make them less responsive, at least initially, to the higher cost of buy- ing gasoline and diesel. These assumptions derive largely from the trans- portation sector’s lack of energy alternatives, which contributes to a low fuel price elasticity of demand. Whereas operators of large electric power plants can substitute natural gas for coal, transportation vehicles have lit- tle room for energy storage, must be refueled often, and have significant range and power requirements that demand fuels with high energy den- sity and handling ease. Gasoline and diesel fuels meet these use require- ments, but few other fuels do. Other constraints include the expense and time required to transition the large and diverse vehicle fleet—owned by tens of millions of households and businesses—and to make changes in the vast physical infrastructure that is used and served by transpor- tation. The infrastructure consists of both transportation facilities and the built environment of homes, businesses, and other establishments. The latter are often situated in relatively low-density urban and suburban areas that are configured to be served by personal vehicles and trucks. Hence, even as transportation fuel prices rise in response to carbon pric- ing, the speed at which fuel consumption declines will depend largely on both the incentive and the ability of households and businesses to adjust their vehicles, mobility demands, and travel patterns. The expectation that transportation will not respond as quickly to carbon pricing as some other sectors is often used as justification for urging that additional actions be taken to reduce energy use by and emis- sions from transportation. However, there is no expectation that a carbon pricing program will yield impacts across energy-using sectors that are

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21 Study Purpose and Background proportional to the emissions produced by each sector, simply because the marginal cost of reducing emissions is likely to vary both within and across sectors. The most cost-efficient outcome may not be one that is proportional. Indeed, an imbalance in the response is to be expected. By itself, this is not a reason for pursuing additional actions in transporta- tion or any other sector that does not respond proportionally. The acceptability of a sector-specific measure to elected officials may depend on considerations other than whether it yields the most cost- efficient outcome, such as the policy’s potential for preventing undesir- able or disproportionate impacts on specific regions of the country, demographic and income groups, and industries. Another practical consideration favoring sector-specific actions is the prospects for achieving a carbon pricing system, which do not appear to be high, at least in the near term. Although carbon pricing programs are in effect in Europe and to a limited degree in some regions of the United States, there is no guarantee that such programs, or any other economywide measures, will be instituted nationally during the next decade or more. The prospect that the GHG problem may become even harder to con- trol as time passes and emissions accumulate could be a factor favoring sector-based policies. Although sector-specific policies in the transportation domain are often equated with regulation, they can encompass much more than standards and mandates for the supply of energy- and emissions-efficient vehicles and fuels. They can include transportation-targeted pricing instruments, such as higher taxes on motor fuel, higher registration fees for inefficient vehicles, and the use of other forms of taxes and financial incentives to raise consumer and supplier interest in energy- and emissions-saving products and activities. In addition, most of the infrastructure systems used by transportation vehicles are owned and operated by state and local governments. These public entities influence transportation energy use and emissions through their control of system use and their investments in system capacity and traffic operations. Fur- thermore, the policies of state and local governments influence patterns of land development, which in turn can affect transportation activity. For example, local zoning policies can affect whether residential and

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22 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation commercial development take place at the higher densities needed to support public transit use. other reasons for targeting policies at transportation Mitigation of GHGs is not the only reason for giving special attention to transportation’s use of energy. Transportation accounts for most of the nation’s petroleum demand and is the only energy-using sector that is almost entirely dependent on this fuel, most of which is imported into the United States. Transportation’s dependence on petroleum has contributed to concern over the world’s oil supplies, most of which are from politi- cally unstable regions of the world (Council on Foreign Relations 2006). A Rand Corporation study has estimated that the United States might have saved an amount equal to between 12 and 15 percent of its Fiscal Year 2008 defense budget if all concerns over securing oil from the Persian Gulf were to disappear (Crane et al. 2009). Transportation’s use of petroleum has other troubling side effects. The growing consumption of petroleum around the world coupled with fewer readily exploited oil reserves has contributed to large fluctuations in oil prices. During the past dozen years, oil prices have ranged from $20 to $140 per barrel. This price volatility creates many challenges for petroleum users and suppliers, as well as for manufacturers of vehicles and other products that use petroleum fuels and for investors in alternative energy supplies. A particular concern is that oil price volatility can have pernicious effects on the diversification of transportation energy sources and technologies by discouraging capital-intensive investments that require long payoff peri- ods. Diversification of energy supplies could be instrumental in curbing demand and dampening oil price volatility in the long run. The burning of petroleum fuels in transportation contributes to other problems, such as local and regional air pollution. The byproducts of petroleum fuel consumption, such as emissions of oxides of nitrogen, carbon monoxide, volatile organic compounds, and aerosols, are sources of metropolitan and regional air pollution detrimental to humans and the environment. Flammable petroleum fuels can create public safety risks when they are released in heavily traveled transportation corridors. Environmental disturbances from oil exploration, extraction, and refin- ing activities have been controversial for decades. Oil leaks and spills

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23 Study Purpose and Background are sources of both chronic and acute environmental disturbances—they infect groundwater, sully surface waters, and cause harm to marine life and ecological and economic damage along shorelines. Informing Transportation Policy Choices This report does not advise on whether the U.S. transportation sector should be the subject of special policy actions to reduce its consump- tion of energy and emissions of GHGs. Nor does it urge the pursuit of specific policies. Decisions about whether and how best to reduce transportation energy use and emissions must involve numerous con- siderations that go well beyond the study scope and expertise of the committee. Elected officials must make these decisions after weigh- ing the costs and benefits of reducing energy use and GHG emissions, assessing where the greatest opportunities lie to achieve desired reduc- tions from the economy as a whole, and taking into account the eco- nomic and societal distribution of the costs associated with specific policy actions. Not having examined all of these implication or oppor- tunities to reduce energy use and emissions in other sectors, this study committee is not in a position to offer advice on how much attention should be paid to transportation. Nevertheless, it is self-evident that if deep reductions in GHG emissions are desired across the economy by the middle of the century, all of the country’s energy-intensive sectors will need to make meaningful contributions. Knowledge of the economics of the transportation sector is important in making sound policy decisions. For example, knowledge of the extent to which fuel represents a major operating cost is important in consider- ing transportation policy options. Fuel is a major input for carriers pro- viding long-distance passenger and freight services, such as airlines and trucking companies, and these carriers operate in highly competitive and cost-conscious industries. Under these circumstances, will policy mea- sures that cause relatively small increases in fuel prices spur industry- wide interest and investments in fuel-saving technologies and practices? Conversely, since the same profit and efficiency motives do not exist for most cars and light trucks owned by private households, will fuel pricing policies produce a weaker energy consumption effect?

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24 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation Knowledge of the structure of the industry, including how the varied mix of public and private entities in different modes can affect the policy response, is also important. For example, freight railroads own and oper- ate their locomotives and tracks; hence, they have a large amount of lati- tude to adjust their operations, equipment, and infrastructure to control energy costs. In contrast, most of the highways, airports, and airways that are used by commercial trucking companies and airlines are owned and operated by government agencies. As a consequence, these carriers cannot control many aspects of operations, such as traffic conditions and routing options, that can affect their energy usage. These are but a few examples illustrating how an understanding of the functioning and diversity of the transportation sector is important in making policy choices. Furthering this understanding to support sound policy making is the aim of the remainder of this report. Transportation’s Current Dependence on Fossil Fuels Since the invention of coal-powered steamships and trains in the early 19th century, transportation has been increasingly reliant on fossil fuels for energy. Oil, rather than coal, is now the predominant energy source, and it accounts for 97 percent of the energy used in the sector.3 Petroleum fuels made from crude oil power nearly all cars, trucks, ships, and air- craft. They power the vast majority of buses and freight trains. The only motorized modes not powered almost exclusively by petroleum fuels are some commuter and urban transit railways. While these modes run wholly or partly on electric power, much of this energy too is generated from the burning of coal and other fossil fuels by electric utilities. The transportation sector accounts for about two-thirds of the liq- uid petroleum fuels consumed each year in the United States. By far the largest users are cars, trucks, and other motor vehicles. The light-duty fleet, consisting of approximately 140 million cars and 100 million light trucks, accounts for about 68 percent of transportation’s use of petro- leum, mainly gasoline (Figure 1-1). Larger single-unit and combination (tractor-trailer) trucks, nearly all of which run on diesel fuel, consume 3 Transportation Energy Data Book 27 (http://cta.ornl.gov/).

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25 Study Purpose and Background Single-unit Domestic waterways trucks (5.1%) (1.3%) Combination Cargo airlines trucks (14.2%) (1.5%) Transit bus and rail Freight railroads (0.4%) (2.1%) Commuter rail Motor coach (0%) (0.2%) General aviation Intercity passenger (1.3%) rail (0%) Passenger airlines Cars and light (5.9%) trucks (68%) figure 1-1 Share of petroleum fuel consumption by U.S. domestic transportation mode, 2007. NOTE: The volume total consists of consumed gallons of gasoline, diesel, and jet fuel and does not account for differences in energy content of each type of fuel by volume. Percentage shares by mode were calculated by the committee on the basis of various government and industry data sources. Fuel used during the transmission and distribution of commodities by pipeline is excluded from the totals. an additional 19 percent. The fleet of jet and turboprop aircraft that are used for passenger service, air cargo, and business aviation has the next largest share of fuel consumption, accounting for nearly 9 percent. All other modes combined account for less than 5 percent of the sector’s petroleum use. The fact that three basic vehicle types—cars, trucks, and aircraft— account for about 95 percent of transportation fuel use stems in large part from their relatively high energy requirement per unit of transportation output. The main reason why highway vehicles consume so much petro- leum is that they account for the large majority of the people and goods moved in transportation. Cars and light trucks account for 85 percent of all passenger miles, while airlines account for the next largest share at 12 percent (Figure 1-2). Collectively, public transit, motor coaches, inter- city passenger trains, and general aviation aircraft make up only 3 per- cent of total passenger miles. Freight traffic is more evenly split among the truck, rail, and water modes (Figure 1-3). Nevertheless, trucks move almost half the nation’s freight, as measured in ton-miles, including

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26 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation Motor coach (1.3%) General aviation (0.4%) Transit bus and rail (0.6%) Commuter Airlines rail (0.2%) (12.5%) Intercity passenger rail (0.1%) Cars and light trucks (84.8%) figure 1-2 Share of U.S. domestic passenger miles by mode, 2007. NOTE: Percentage shares by mode were calculated by the committee on the basis of various government and industry data sources. Airlines (0.3%) Domestic waterways (13.4%) Freight railroads (38%) Single-unit trucks (5.7%) Combination trucks (42.5%) figure 1-3 Share of U.S. domestic freight ton-miles by mode, 2007. NOTE: Percentage shares by mode were calculated by the committee on the basis of various government and industry data sources.

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27 Study Purpose and Background nearly all freight shipped over shorter distances (less than 100 miles), which are not conducive to service by other modes. The widely used ton- mile metric does not fully convey the ubiquity of trucks, which carry many low-density goods that are in low in total tonnage but are moved many miles. Outlook for Transportation Energy Use Since 1982, the Energy Information Administration (EIA) of the U.S. Department of Energy (DOE) has produced long-range energy projec- tions by using its National Energy Modeling System (NEMS). NEMS is a general equilibrium model that includes assumptions about many fac- tors expected to influence future U.S. energy use, including the rate of development and deployment of energy-saving technologies, trends in energy prices, the effects of new federal energy policies, and national eco- nomic and demographic trends. DOE uses NEMS to produce its Annual Energy Outlook (AEO) cover- ing the next 25 years.4 The AEO projects and analyzes U.S. energy supply, demand, and prices. Although the AEO release for 2011 is now available, the projections referenced here are from the AEO issued in January 2010, when this report was being developed. In the January 2010 AEO reference case, EIA assumes that cars and light trucks will remain the dominant means of personal transportation in the United States, although the total amount of energy used by these vehicles is expected to remain relatively stable, increasing by only 10 percent from 2010 to 2035 (Figure 1-4). Planned increases in federal fuel economy and GHG performance stan- dards are assumed to counteract most of the upward pressure on energy demand that will be caused by a growing U.S. population and economy. Most of the NEMS-projected growth in transportation energy use is expected to come from freight trucks (Figure 1-5). NEMS assumes that trucking, like all other modes, will become more energy efficient over time; the growth in freight demand from an expanding economy is the cause of this mode’s increase in fuel use. 4 AEO 2010 includes a reference case and additional cases examining alternative energy prices and rates of technology development. http://www.eia.doe.gov/oiaf/archive/aeo10/index.html.

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20,000 18,000 16,000 Light-duty vehicles Automobiles Energy Use (trillion Btu) 14,000 Light trucks Motorcycles 12,000 Commercial light trucks 10,000 8,000 6,000 4,000 2,000 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 figure 1-4 AEO 2010 reference case projections of energy use (in British thermal units) by light-duty vehicles to 2035. 7,000 6,000 Fuel Energy Consumption (trillion Btu) 5,000 Freight trucks Freight rail 4,000 Domestic shipping 3,000 2,000 1,000 0 20 6 20 7 20 8 20 9 20 22 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 0 32 20 3 20 4 35 20 0 20 2 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 1 20 1 20 1 2 3 0 0 0 0 1 2 2 2 2 2 2 2 3 3 3 1 1 1 1 1 1 1 1 1 20 20 20 20 figure 1-5 AEO 2010 reference case projections of energy use (in British thermal units) by major domestic freight modes through 2035.

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29 Study Purpose and Background A number of demographic and macroeconomic factors drive the AEO projections. In addition to growth in population and gross domes- tic product (which are projected to increase by 0.9 and 2.5 percent per year, respectively), the assumed trend in energy prices is a critical fac- tor. Petroleum is assumed to remain the dominant source of fuel for all transportation modes. The AEO 2010 reference case assumes that the real price of gasoline will be 50 percent higher by 2035, rising from $2.69 to $3.91 per gallon. Diesel and jet fuel prices are projected to grow similarly. In the case of light-duty vehicles, gasoline consumption is pro- jected to remain flat during the period as a result of the tighter federal fuel economy and GHG performance standards as well as the increas- ing use of ethanol to replace some gasoline in compliance with federal renewable fuels mandates (Figure 1-6). 18,000 16,000 Fuel Energy Consumption (trillion Btu) 14,000 12,000 Motor gasoline Ethanol Distillate fuel oil (diesel) 10,000 Energy consumed from other fuel 8,000 types is too small to appear in chart 6,000 4,000 2,000 0 20 6 20 7 20 8 20 9 20 0 20 2 20 3 20 4 20 5 20 6 20 7 20 8 29 20 0 20 2 20 3 20 4 35 10 12 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 1 20 1 20 1 2 3 0 0 0 0 1 2 2 2 2 2 2 2 2 3 3 3 3 1 1 1 1 1 1 1 20 20 20 20 figure 1-6 AEO 2010 reference case projections of energy use (in British thermal units) by light-duty vehicles through 2035.

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30 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation History Projections 40 30 Quadrillion Btu Industrial 20 Transportation Residential 10 Commercial 0 1980 1990 2000 2009 2015 2025 2035 figure 1-7 AEO 2010 reference case projections of U.S. energy consumption (in British thermal units) by major economic sector. For the U.S. economy as a whole, AEO 2010 projects that total energy consumption will be about 20 percent higher in 2035 than today (Fig- ure 1-7). The energy used by transportation, however, is projected to grow by 16 percent. Transportation’s share of national energy consump- tion will therefore remain fairly stable. Transportation Energy Use and GHG Buildup Concerns over energy consumption and GHG emissions are interrelated because most of the energy used throughout the world is derived from fossil fuels. In 2009, the United States emitted about 6.6 billion metric tons (6.6 Gt) of CO2-equivalent GHGs.5 While CO2 is also emitted from industrial processes such as cement manufacturing, the consumption of fossil energy is its main source, contributing about 82 percent of the total U.S. emissions of GHGs (Figure 1-8). Two other major GHGs—methane and nitrous oxide—make up most of the remaining emissions. In total, 5 Because GHGs differ in their potential to affect warming, each gas is assigned a unique weight, called a global warming potential. This weighting is based on the heat-absorbing ability of each gas relative to CO2 over a defined time period. Each gas is thus assigned a CO2-equivalent (CO2-eq) value. The CO2-eq values in this report are calculated for a 100-year period.

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31 Study Purpose and Background Methane, 219.6, 3% Other carbon dioxide, 178.2, 3% Nitrous oxide, 730.9, 11% High-GWP gases, 87.3, 1% Energy-related carbon dioxide, 5,359.6, 82% figure 1-8 U.S. emissions of GHGs from human activity in 2009 (in millions of metric tons of CO2-eq). GWP = global-warming potential. SOURCE: http://www.eia.gov/environment/emissions/ghg_report/. the United States accounted for about 20 percent of world energy-related emissions of CO2 in 2007.6 The appendix explains why scientists and others are urging action to stabilize GHG concentrations by making deep emissions reductions over the next several decades. Determining by how much emissions will need to be reduced worldwide and in the United States over the next half century is complicated by a range of uncertainties. Among them are the degree of international action that will take place and the forces that will influence global emissions over a period of decades such as changes in population, economic development, and technology advancement. Even stabilization of emissions at current levels for the next four decades will present challenges if increases in population and economic growth continue as expected. Nevertheless, for reasons given in the appendix, annual emissions that are 50 to 80 percent lower in 40 years than they are today are widely viewed by scientists as being minimally necessary to limit the risk of dangerous changes in climate. Achievement of such deep reductions in the United States would have significant impacts on all energy-using sectors, including transportation. 6 http://www.eia.gov/environment/emissions/ghg_report/pdf/tbl4.pdf.

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32 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation ghgs from transportation energy use The combustion of a single gallon of gasoline, diesel, and other petro- leum fuels (such as jet fuel) yields between 19 and 23 lb of CO2. Accord- ingly, 1 metric ton (2,204 lb or 1,000 kg) of CO2 is emitted from every 95 to 115 gallons consumed. In burning approximately 200 billion gal- lons of gasoline, diesel, and jet fuel each year, U.S. transportation pro- duces about 1.8 Gt of CO2 annually. While the main source of GHGs from transportation is the CO 2 produced from the fuel burned to power vehicles, fossil energy is con- sumed and GHGs are emitted during the manufacture of these vehicles and the construction and maintenance of transportation facilities and infrastructure. In addition to the CO2 emitted from fuel combustion, CO2, methane, and other GHGs are emitted during the extraction, refining, and distribution of transportation fuels before they are ever pumped into the vehicle. Uncertainty with regard to the total amount of GHGs emitted from such “upstream” sources, including those residing outside the coun- try, is greater. EPA has estimated that for every 100 lb of CO2 emitted from the burning of conventionally derived gasoline, another 20 to 25 lb of CO2-equivalent gases is emitted during fuel production and distribution.7 The uncertainty with regard to GHG emissions grows when the effect of the production of alternative fuels on net GHG emissions is consid- ered. The potential exists for the production of biofuels, through the cultivation of land, to reduce the capacity of the world’s carbon sinks to store carbon and remove GHGs from the atmosphere. For example, conversion of land for the growing of biomass can release carbon stocks from soil, creating emissions of the GHGs CO2 and methane (CH4). It can also lead to the emission of the GHG nitrous oxide (N2O). Analyses of carbon cycle flows must account for the release of carbon stocks in assessing whether these fuel alternatives can help reduce the contribution of transportation to the atmospheric buildup of GHGs. 7 The estimation of total life-cycle GHG emissions from fuels, including petroleum fuels, requires many assumptions about the emissions characteristics of the fuel production process. EPA’s life- cycle figures for gasoline are derived from a presentation to the committee by Sarah Dunham, Director of EPA’s Transportation and Climate Division, “Update on EPA’s Transportation and Climate Activities,” July 16, 2009. These figures are consistent with those used by others, including Heywood (2008, 7), who assumes that petroleum fuel production and distribution processes add about 20 percent to total carbon emissions from petroleum fuel consumption.

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33 Study Purpose and Background other transportation sources of ghgs Fully accounting for transportation’s GHG sources can become more com- plex as the scope of transportation-related activity and infrastructure is expanded, since CO2 and other GHGs are produced from transportation sources other than fuel consumption. Refrigerant leaks from vehicle air- conditioning systems, for example, are a source of hydrofluorocarbons, which are powerful and long-lived GHGs.8 Moreover, transportation activity is the source of other substances and disturbances that can affect climate. Aircraft, for instance, emit water vapor and other aerosols, which can encourage the formation of clouds, with positive or negative effects on the earth’s radiative balance. Although it is not a GHG, the black car- bon (or soot) emitted in exhaust from transportation vehicles that use diesel and other heavy fuels can settle on Arctic snow and increase the rate of melting and create other short-term warming effects. The magni- tude of the climate effects from these other substances will differ on the basis of numerous factors, including where and when the substances are released. If the boundaries of the transportation sector are extended further, emissions sources can be considered even more extensive, encompass- ing the activities involved in the construction, operation, and mainte- nance of transportation facilities and the materials and energy used in the manufacture and disposal of transportation vehicles and their parts. Steel, aluminum, cement, and asphalt—key materials in transportation infrastructure and equipment—are produced through energy-intensive industrial processes that release CO2 from fossil fuel combustion. GHGs are also emitted through means other than energy use, including produc- tion processes that involve chemical reactions such as limestone calcina- tion during cement production. Fossil energy is consumed to heat and cool transportation-related structures and buildings, such as bus and train stations, airports, parking garages, marine terminals, and warehouses. Many of these other transportation-related sources of GHG emissions are included in the emissions inventories for other economic sectors, 8 As explained later, EPA expects that reductions in GHGs (hydrochlorofluorocarbons) emitted from vehicle air-conditioning systems will be one means by which automobile manufacturers strive to meet the new federal GHG performance standards for cars and light trucks.

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34 Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation such as buildings and manufacturing. Therefore, any conversion to new types of transportation vehicles and infrastructure that involves much different equipment, materials, and manufacturing processes will have implications (positive or negative) for the GHG emissions observed in these other sectors. Report Organization Chapter 2 presents an overview of the U.S. transportation system. It describes the scale, scope, and patterns of personal and goods transpor- tation in the United States and factors that have been driving trends in activity. It also describes the energy use and associated emissions char- acteristics of the modes, including factors that influence user demand for energy efficiency and emissions performance. The chapter portrays a transportation sector that is diverse and dynamic. Chapter 3 discusses the decision-making and institutional context in which transportation policy choices will need to be made over the next several decades. Effective policy making will require the contribution of many different actors and an alignment of many different interests. The actors include both public and private entities, ranging from large orga- nizations to individual households. The chapter also discusses current policies affecting transportation energy use and emissions. Chapter 4 examines some of the key factors that are likely to influence energy use and emissions in the modes that contribute to them the most. The focus of the discussion is on cars and light trucks, freight-carrying trucks, and passenger airlines. In each case, factors likely to have important effects on energy and emissions trends are identified, and projections of modal fuel use and emissions are developed to illustrate them. It is rec- ognized that some of these factors may be prime candidates for policies targeted to reduce transportation energy use and emissions. The background and analyses in Chapters 2 through 4 allow for a more focused assessment of the main policy instruments available to reduce energy use and emissions in the U.S. transportation sector. Chap- ter 5 examines several policy options and their ability to affect the main sources of transportation energy use and emissions in the future. The options examined represent a range of approaches, from fuel taxes and

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35 Study Purpose and Background efficiency standards to a more targeted set of measures aimed at reducing household vehicle use. Because some of the policies are market-oriented, some are regulatory, and some are hybrids, they bring about different responses by users and suppliers of transportation fuels and vehicles. They also have different track records of implementation. The different responses that policies engender, and the varying prospects for policy implementation, are important considerations in deciding on the mix of policy instruments required to achieve energy and emissions goals. Chapter 6 offers a summary assessment of the information and analy- ses in the report and the implications for policy making. Consideration is given to how a policy goal of deep reductions in transportation’s petro- leum use and GHG emissions over the next half century can be achieved from the kinds of policies currently in effect as well as other policies that will broaden the response. Adopting policies that will cause both the users and suppliers of transportation fuels and vehicles to respond with a strong interest in saving energy and reducing emissions is the funda- mental policy challenge. References abbreviation TRB Transportation Research Board Council on Foreign Relations. 2006. National Security Consequences of U.S. Oil Dependency. http://www.cfr.org/content/publications/attachments/EnergyTFR.pdf. Crane, K., A. Goldthau, M. Toman, T. Light, S. E. Johnson, A. Nader, A. Rabasa, and H. Dogo. 2009. Imported Oil and U.S. National Security. MG-838-USCC. Rand Corporation. http://www.rand.org/pubs/monographs/MG838.html. Heywood, J. B. 2008. More Sustainable Transportation: The Role of Energy Efficient Vehicle Technologies. April 10. http://www.internationaltransportforum.org/ Topics/Workshops/WS1Heywood.pdf. TRB. 1997. Special Report 251: Toward a Sustainable Future: Addressing the Long- Term Effects of Motor Vehicle Transportation on Climate and Ecology. TRB, National Research Council, Washington, D.C.

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