According to a new study commissioned and financed by BMW, including road transport in a cap and trade scheme is the most promising policy option for future climate regulation of the road transport sector.
The study was developed under the direction of Professor Ottmar Edenhofer of the Potsdam Institute for Climate Impact Research and was written by the scientists of the Technical University Berlin and PIK. Known as “Car Industry, Road Transport and an International Emission Trading Scheme”, it notes that fuel producers, car manufacturers and consumers are the actor groups corresponding to drivers such as carbon intensity, energy intensity and travel demand.
The report argues that current regulation relies heavily on fuel efficiency and low carbon fuel standards but that they lack scope and there is a failure to set optimal incentives. So it argues that there should be quantity instruments, regulating absolute emissions and an associated price signal – for example, in the form of cap and trade.
Such a policy would include a transport-sector or economy-wide cap with a corresponding price on greenhouse gas emissions that ensures efficiency as well as environmental effectiveness. Low carbon fuels would be incentivised with a cap complementing fuel efficiency standards measured in tank-to-wheel efficiency. An economy wide cap would also make cross-sectoral regulation unnecessary.
In addition, the report suggests that to reduce CO2 emissions in the transport sector, all participants must live up to their responsibility including automobile manufacturers increasing the efficiency of their products. It also points out that CO2 content varies depending on the production method, irrespective of fuel used; and political instruments must be created to address fuel producers and automobile manufacturers in their respective responsibilities.
