Vehicle fuel economy can save $2 trillion and help fund transition to plug-in vehicles

By Alston Lim • UC Davis 2014

Fuel economy improvements from conventional internal combustion engine cars have the potential to save $2 trillion over the next decade, according to a new report published by the ITS-Davis NextSTEPS program in conjunction with the Global Fuel Economy Initiative (GFEI). Lew Fulton, co-director of NextSTEPS, presented the findings at a joint webinar between GFEI, NextSTEPS and the UC Davis Policy Institute in November.

According to Fulton, these savings could be used in part to help offset the costs of developing a global market for electric vehicles. He estimates the potential fuel economy savings to be at least four times the EV market development costs.

Fulton’s paper finds improvements to conventional vehicles, including but not limited to hybridization, could achieve a 50 percent reduction in fuel use per kilometer for new cars by 2030, in line with GFEI targets. Fulton estimates a high-end subsidy of $500 billion for the global PEV market, although that number could be much lower if battery costs drop quickly or if consumers consider the full value of fuel cost savings.

“We know that a 50 percent improvement in vehicle fuel economy worldwide is both technically achievable and cost effective,” says Fulton. “What we’ve now shown is that the financial benefits of this move could be staggering. With smart policies such as a feebate scheme, the financial benefits could be leveraged, and it would provide the answer to an electric vehicles market that currently does not have such a positive outlook. If the question is ‘how do we move to a low carbon future for vehicles?’ this could be the answer.”

About GFEI

The GFEI is a partnership of the UN Environment Programme (UNEP), International Energy Agency (IEA), International Transport Forum (ITF), the FIA Foundation, the International Council on Clean Transportation (ICCT) and the Institute of Transportation Studies at the University of California, Davis. The GFEI exists to promote debate and discussion around the issue of vehicle fuel economy.

For more about GFEI, click here

To view the webinar presentation, click here