The transport sector accounts for more than half of the oil used world-wide and roughly a quarter of energy-related CO2 emissions. If emissions from feedstock and fuel production are included, the transport sector is responsible for close to 27% of global greenhouse gas (GHG) emissions. The sector’s global growth rate of energy consumption during 1990–2002 was highest among all the end-use sectors. In the USA, for instance, between 1990 and 2006, growth in transport emissions represented almost half of the increase in total US GHG emissions.

The global rise of greenhouse gas emissions and its potentially devastating consequences require a comprehensive regulatory framework for reducing emissions, including those from the transport sector. Alternative fuels and technologies have been promoted as a means for reducing the carbon intensity of the transport sector. However, the overall transport policy framework in major world economies is geared towards the use of conventional fossil fuels.

This paper evaluates the effectiveness and efficiency of current climate policies for road transport that (1) target fuel producers and/or car manufacturers, and (2) influence use of alternative fuels and technologies. With diversifying fuel supply chains, carbon intensity of fuels and energy efficiency of vehicles cannot be regulated by a single instrument. We demonstrate that vehicles are best regulated across all fuels in terms of energy per distance. We conclude that price-based policies and a cap on total emissions are essential for alleviating rebound effects and perverse incentives of fuel efficiency standards and low carbon fuel standards. In tandem with existing policy tools, cap and price signal policies incentivize all emissions reduction options.

Download the paper here: Climate policies for road transport revisited (I): Evaluation of the current framework