Economic Cycles and the Responsiveness of Natural Gas Demand in China’s Residential Sector

About the Project

The workshop series Drivers of Transportation Fuel Demand provides a forum for discussing key sustainability issues in transportation and current policy strategies to address them. In particular, much emphasis is placed on the adoption of fuelefficient and alternative-fuel vehicles for road transportation, innovation in fuel and vehicle technology mixes and the shift from road to other modes of transportation.

Key Points

The working assumption of most policymakers and automakers is that light-duty vehicle buyers either undervalue fuel economy or behave as if they do – perhaps because of the complexity in evaluating discounted fuel cost savings. If one accepts this argument then huge benefits can be gained from public policies that mandate fuel-efficient mobility through performance standards.

Increasing vehicle fuel economy at the expense of performance has an opportunity cost for consumers as they value performance more than fuel economy. However, it remains an open question as to whether public policy, such as fuel economy standards, should incorporate opportunity costs arising from consumers’ tendency to maximize personal over societal benefit.

Consumer concerns over the adoption of high fuel economy plug-in electric vehicle (PEV) centers around driving range, recharging time, charging infrastructure, value for money and highway performance, which continue to be major barriers. Evidence suggests that awareness and knowledge about PEVs have not yet increased substantially in many consumer segments. Finding better ways for consumers to gain firsthand experience with PEVs may help overcome this knowledge shortfall.

Short-term incentives to induce PEV sales are expensive; more than $50,000 per incremental vehicle sold according to some estimates. There is scope to improve cost-effectiveness by developing a targeted incentive structure. Alternatively, devoting resources to technology development rather than deployment might represent a more cost-effective policy approach.

Shared use of automated electric vehicles represents one possible path for achieving deep decarbonization, but its cost-effectiveness versus alternative paths has yet to be confirmed. PEVs seem unlikely to succeed if they are just a decarbonized replacement for today’s vehicles, but this can be achieved if they provide a better customer experience at a lower price point.