Driving a Sustainable Economy
A 21st century marked by climate change and other sustainability challenges must quickly pave a path for more fuel efficient vehicles, cleaner fuels and better infrastructure for every mode of travel. Yet the transportation sector remains largely tied to decades-old technologies, high carbon fuel sources, and a transportation infrastructure that spawns more pollution and congestion. A new energy economy is emerging, and with it new solutions and opportunities for the sector to move forward sustainably.
Transportation is the second largest carbon emitter in the U.S., and the sector accounts for more GHG emissions than any other nation’s entire economy, with the exception of China and India. For U.S. businesses, more fuel efficient vehicles make both environmental and economic sense. In addition, the availability of clean fuels both insulates businesses from oil price volatility and reduces GHG emissions.
Ceres works with corporations, investors, and policymakers to reduce the transportation sector’s environmental and social impacts and create more sustainable and efficient ways of driving the economy forward.
Improving Fuel Economy Standards
Medium- and Heavy-Duty Truck Standards
Freight trucks account for over half a billion tons of GHG emissions a year, and their emissions are projected to increase by 40% by 2040, which makes them the fastest growing single source of GHG emissions. Trucking also imposes significant financial costs; US businesses spend $650 billion a year on freight trucking services. Fuel is largest cost associated with owing and operating a heavy truck, and inefficiency cuts into the bottom line; the average tractor-trailer truck on the road today averages slightly less than six miles per gallon, and many of these trucks burn more than $80,000 worth of fuel per year. We can reduce these costs as well as GHG emissions; existing and emerging cost-effective technologies can reduce fuel consumption by 40% (compared to 2010 trucks) by 2025.
The ongoing development of fuel efficiency and GHG emission standards for medium- and heavy-duty trucks provides an important opportunity to both reduce emissions and costs. EPA and DOT are currently determining the stringency of standards for medium- and heavy-duty trucks for 2020 and beyond (“Phase 2” standards), which will build on the successful existing Phase 1 standards for 2014-2018 (which will save $50 billion in fuel costs and 530 million barrels of oil). The proposed standards will be released in June 2015 and followed by a comment period.
Ceres and EDF commissioned independent consultant MJ Bradley to assess the impact of strong Phase 2 standards (requiring a 40% improvement in fuel efficiency) on freight costs. The analysis shows that strong standards are a win-win proposition; strong standards will cut freight costs in addition to cutting GHG emissions.
The report finds that strong Phase 2 standards would:
- Achieve fleet average net savings of $0.21 per mile by 2040 (this translates to an annual savings potential of more than $34 billion).
- Save sleeper truck operators $18,000-$38,000 during the first year the new truck is in service. A new day cab and trailer would realize $4,100-$4,800 in net savings the first year.
- Lower the per-mile cost of shipping freight by 2.6% in 2030 and 6.8% in 2040, compared to baseline costs.
For more information about how to support strong truck standards, please contact Carol Lee Rawn, Director, Transportation Program, Ceres.
Light Duty Vehicle Standards
In addition to cutting carbon emissions and decreasing our dependence on oil, improved fuel economy standards are vital to U.S. automakers’ competitiveness,. Setting strict fuel economy standards will help create jobs, save businesses money and encourage investment in the U.S. auto industry. Stricter standards will also promote energy security by decreasing the amount of fuel needed to power cars and trucks, lessening our dependence on foreign oil. In August of 2012, the Obama Administration announced groundbreaking fuel economy and GHG standards for 2017-2025.
Ceres actively supports improved fuel economy standards by rallying investor and corporate support for stringent new standards and publishing cutting-edge studies that make the economic case for more fuel-efficient vehicles.
In April 2012, we issued the report "Fuel Economy Focus: Perspectives on 2020 Industry Implications," which evaluates the impact that the proposed fuel economy/GHG standards would have on the automotive industry in the year 2020. Produced by Citi Investment Research and Analysis, in collaboration with Ceres, the report finds that under the proposed vehicles standards, the auto industry, and particularly American automakers, would likely see higher profits and sales.
The report findings include the following:
- Adopting technologies necessary to meet proposed new fuel economy standards will likely boost industry profits by 5%, or 4.76 billion in 2020.
- Ford, Chrysler and GM would likely see a larger increase in profits than the rest of the industry, earning a 6% increase in profits of $2.44 billion in 2020.
- Technologies required to meet the proposed standards are cost effective for consumers; even if gas prices dropped to $1.50 in 2020, fuel savings would fully offset the additional cost of the technologies.
- The proposed standards could largely be met by using existing, cost-effective technologies that improve the performance of cars powered by traditional internal combustion engines.
Stronger standards are key to promoting advanced vehicle technologies, which will help make the domestic auto industry globally competitive. In February 2011, Ceres partnered with Citi Investment research to produce Electric Vehicles; Perspectives on a Growing Investment Theme, on the viability of the growing electric vehicle industry, and the policy framework needed to support the industry.
Developing a Clean Fuel Standard
Establishing well designed Clean Fuel Standard (CFS) would lower emissions by curbing the use of high-carbon fuel sources like oil sands while gradually reducing the carbon content of other fuels over time – in part by mixing in higher proportions of lower carbon fuels or using clean electricity to power vehicles. Many of these fuels could be locally sourced, helping to further reduce their overall carbon footprint while bolstering local economies.
California has such a standard in place and Ceres is helping to support efforts to adopt a CFS in Oregon and Washington; BICEP members have submitted letters to both states supporting a CFS.
Ceres recently partnered with industry groups to commission ICF International, a firm widely respected for its economic and policy expertise, to assess the economic impacts of California's Low Carbon Fuel Standard (LCFS). ICF found that the LCFS is working; it is driving investment in cleaner fuels, and industry is on track to meet its goals. Further, ICF found that, under the LCFS, the economy will continue to expand, and that by spurring greater use of clean alternative fuels and vehicles, the LCFS will result in $1.4 - $4.8 billion in societal benefits by 2020 as a result of reduced air pollution and increased energy security.
Tier 3 Standards
Another important regulatory initiative is the EPA's Tier 3 standards for fuels and vehicles, which are the most cost effective way to realize significant reductions in pollutants such as ozone (smog), particulate matter (soot), and air toxics. The proposed Tier 3 standards represent a unique opportunity for the United States to strengthen the economy, create jobs, prevent illness, reduce healthcare expenditures and contribute to the long term growth of the auto and emission control industries.
The standards are the most cost effective way to realize significant reductions in pollutants like smog, soot, and air toxins. The standards would reduce the sulfur content of gasoline, making pollution control equipment more efficient, and facilitating compliance with the new fuel economy and greenhouse gas vehicle standards.
The public comment period for Tier 3 standards ended on July 1st 2013. Members of Ceres' Investor Network on Climate Risk (INCR), including the Office of the Connecticut State Treasurer and Wespath Investment Management, have urged the Environmental Protection Agency to adopt the standards this year in order to realize their significant economic and public health impacts as soon as possible.
Ceres also produced the report Canada’s Oil Sand, Shrinking Window of Opportunity, which focuses on environmental and regulatory risks posed by tar sands development to investors. Ceres used the report to brief policymakers as well as investors and companies on the link between carbon intensive tar sands and a low carbon fuel standard.
Learn more about a Clean Fuel Standard by downloading our fact sheet.
Learn more about California's Low Fuel Standard by downloading our fact sheet.
Learn more about the Tier 3 standards by downloading our fact sheet.
Pay-As-You-Drive Auto Insurance
Ceres is helping to craft performance standards for Pay-As-You-Drive (PAYD) auto insurance. PAYD prices insurance policies based on miles driven - the less you drive, the less you pay. It saves consumers money, incentivizes reduced pollution and traffic congestion and helps cut wear and tear on roadways. In 2009, Ceres convened state regulators, auto insurers and advocates to create a performance standard for PAYD policies, and is working to advance the standard in states and regions around the U.S.
To learn more about PAYD Insurance, download the PAYD Technical Report by the Victoria Transport Policy Institute.
Ceres Roadmap for Sustainability
Ceres has releasedas a vision and practical roadmap for integrating sustainability into the everyday practices of all businesses, regardless of sector or industry. It analyzes the key drivers, risks and opportunities in making the shift to sustainability, and details strategies and results from companies already tackling these challenges. The Ceres Roadmap is designed to provide a comprehensive platform for companies and investors alike to design sustainable business strategies and accelerate innovative solutions that increase performance.
Ceres, drawing on the expertise from the Ceres Coalition, holds regular stakeholder engagements with companies such as Ford, General Motors, Virgin America, and other transportation-related companies. These stakeholder meetings bring together corporate executives, investors and public interest groups to boost company attention to sustainability risks and set specific goals for managing them, including increasing fuel efficiency, reducing carbon emissions from transportation activities and improving supplier sustainability performance.
Investors in Ceres' Investor Network on Climate Risk are using their leverage as shareholders to secure meaningful commitments on sustainability challenges from companies they invest in. Through shareholder resolutions and face-to-face meetings, investors working with Ceres are asking auto, rail, shipping and airline companies to improve their transparency on sustainability-related risks and to set tangible performance goals for reducing their carbon emissions and improving fuel efficiency.
For More Information
Read article and download reports about the transportation industry listed on the right-hand side of this page.
To learn more about how Ceres works with the transportation sector, or to get involved in Ceres' work, contact Carol Lee Rawn, director of Ceres Transportation Program.