If two or more of the fuel and/or vehicle technologies evolve through policy and technology development as shown in a number of the committee’s scenarios, the committee’s model calculations indicate benefits of making a transition to a low-petroleum, low-GHG energy system for LDVs that exceed the costs by a wide margin. Benefits include energy cost savings, improved vehicle technologies, and reductions in petroleum use and GHG emissions. Costs refer to the additional costs of the transition over and above what the market is willing to do voluntarily. However, as noted above, modeling results should be viewed as approximations at best because there is by necessity in such predictions a great deal of uncertainty in estimates of both benefits and costs. Furthermore, the costs are likely to be very large early on with benefits occurring much later in time.

Depending on the readiness of technology and the timing of policy initiatives, subsidies or regulations for new vehicle energy efficiency and the provision of energy infrastructure may be required, especially in the case of a transition to a new vehicle and fuel system. In such cases, substantial subsidies might be required for at least 5 to 10 years, and possibly as long as 20 years if technological progress is slow (e.g., starting grid-connected vehicles now is likely to require 20 years of subsidy to stabilize them at a significant market share). And, as shown above, there is likely to be a high degree of risk in policies targeted to a particular technology. For these reasons, it is important to consider carefully when and if such policies are necessary and to make policy adaptable to changing evidence about technology and market conditions. It is also very important that policy makers obtain objective, expert advice on the readiness of both fuel and vehicle technologies and markets. Scenario analysis has identified strong tipping points for the transition to new vehicle technologies. If sufficiently large subsidies are not applied to overcome the early cost differentials, then the transition will not occur and the subsidies will have been wasted. In pursuing these goals, the rate of cost decline and the subsidies applied at each stage must be carefully weighed to establish that the program is effective.

Advance placement of refueling infrastructure is critical to the market acceptance of hydrogen fuel cell and CNG vehicles. It is likely to be less critical to the market acceptance of grid-connected vehicles, since many consumers will have the option of home recharging. However, the absence of an outside-the-home refueling infrastructure for grid-connected vehicles is likely to depress demand for these vehicles. Infrastructure changes will not be needed if the most cost-effective solution evolves in the direction of more efficient ICEVs and HEVs combined with drop-in low-carbon biofuels.

Empirical knowledge of the barriers to major energy transitions is currently inadequate to make robust assessments of public policies. The modeling analysis presented in this chapter is intended to be an initial step in the right direction rather than a definitive assessment of alternatives. Research is needed to better understand key factors for transitions to new vehicle fuel systems such as the costs of limited fuel availability, the disutility of vehicles with short ranges and long recharge times, the numbers of innovators and early adopters among the car-buying public, as well as their willingness to pay for novel technologies and the risk aversion of the majority, and much more. More information is also need on the transition costs and barriers to production of alternative drop-in fuels, especially on the type of incentives necessary for biofuels. The models that the committee and others have used to analyze the transition to alternative vehicles and/or fuels are first-generation efforts, more useful for understanding processes and their interactions than producing definitive results.

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