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New Mitsubishi Plug-In Hybrid Beats New York Transit on Green House Gas Emissions

sam.staley@reason.org (Samuel Staley) — Mon, 22 Jun 2009 21:02:00 EDT

Wendell Cox, writing at newgeography.com, notes that the new MIEV plug-in electric electric car expected to be be on the market from Mitsubishi Motors in two years beats mass transit on greenhouse gas emissioins.

"The average GHG reduction compared to the current US automobile and sport utility vehicle fleet average would be 83 percent. The car would emit approximately less than one-half the GHGs per passenger mile as transit in New York area (the best in the nation) and one-fourth the overall US transit average."

The downside? It can only travel 100 miles between charges. Still, the new car is an illustration of how quickly technology can move to address green house gas concerns.

More Thoughts on "Stimulus" Tax Cuts and the States

adrian.moore@reason.org (Adrian Moore) — Thu, 09 Apr 2009 14:47:00 EDT

In an earlier post I pointed out a new paper on the high cost and distortion of tax credits for hybrid vehicles to cut ghgs. Now a Portland Tribune article points out the problems with that state's green tax credit program.

But the credit comes with a hefty price tag for Oregon taxpayers. State projections expect the program to double in cost in the next biennium, providing $143.8 million in tax breaks during the next two years.

What’s more, an investigation of the program’s inner workings by the Pamplin Media Group shows that when state agencies use the tax credit to fund sustainability projects, those projects often wind up costing the state more than what it would have cost to just pay for them outright.

The Pros and Cons of Tax Incentives for Hybrid Vehicles

adrian.moore@reason.org (Adrian Moore) — Wed, 08 Apr 2009 13:59:00 EDT

Tax incentives for green cars are hot. Check out this guide. But then check out this research paper from the University of British Columbia:

We estimate the effect of tax rebates on sales of Hybrid Electric Vehicles, offered by Canadian provinces. We find that these rebates had a large and significant effect on raising the market share of hybrid vehicles and that Intermediate cars, Intermediate SUVs and some high performance compact cars were crowded out as a result. Nevertheless, we find that these programs have a very high cost relative to other methods of reducing carbon emissions. The rebate programs largely subsidized consumers who would have bought hybrid vehicles or other fuel-efficient vehicles in any case. If carbon reduction is the goal, provincial governments may be better off purchasing carbon credits rather than providing tax incentives for hybrid cars.

Another reminder that quick, feel-good policies to address climate change have real consequences that have to be thought through.

President Obama's Fuel Economy Standard Follies

rbailey@reason.com (Ronald Bailey) — Tue, 27 Jan 2009 00:00:00 EST

Reason.com

"We must ensure that the fuel-efficient cars of tomorrow are built right here in the United States of America," President Barack Obama declared yesterday. He also signed an order directing the Environmental Protection Agency (EPA) to review the denial of California's request to set its automobile mileage standards higher than those adopted by the federal government.

In 2007, Congress passed and President George Bush signed legislation aimed at increasing Corporate Average Fuel Economy (CAFE) standards to at least 35 miles per gallon (mpg) by 2020, up from 27.5 today. Federal CAFE standards were originally set in 1975 during the first "energy crisis." If an automaker's average mileage fails to meet the CAFE standards, it must pay a fine which currently stands at $5.50 per 0.1 mpg, multiplied by the manufacturer's total domestic production. Some companies choose to simply pay the penalty. For example, BMW handed over $230 million in fines last year while Daimler, the maker of Mercedes-Benz automobiles, paid $55 million, and Volvo paid $56 million.

Now, California and 13 other states, representing about 50 percent of the U.S. automobile market, want to force carmakers to meet the 35.7 mpg standard by 2016, rising to 42.5 mpg in 2020. Proponents argue that the higher mileage standard is needed to both cut the emissions of greenhouse gases that are contributing to man-made global warming and to reduce our dependence on foreign oil.

Do CAFE standards work? The CAFE standards established in 1975 during the first "oil crisis" explicitly aimed to reduce America's dependence on imported oil. In 1975, the U.S. imported about one-third of the petroleum it consumed. By 2008, imports accounted for about two-thirds of consumption. On the other hand, a National Academy of Sciences (NAS) report in 2002 estimated that CAFE standards had reduced U.S. oil consumption by 14 percent below what it would otherwise have been.

In 2007, the Pew Campaign For Fuel Efficiency released a poll in which 89 percent of respondents said that it was important for Congress to pass higher automobile fuel efficiency standards. Whatever Americans might tell pollsters, they voted quite differently with their pocketbooks. For example, CAFE standards on passenger vehicles had a big unintended consequence—the rise of sport utility vehicles (SUVs). Mileage standards for light trucks were set lower at 20.7 mpg and SUVs and minivans qualified as light trucks. In 1975, only 20 percent of vehicles sold were light trucks, but by 2002, that had risen to more than 50 percent of vehicles. In 2002, the San Francisco Chronicle reported that the EPA's 10 most fuel efficient models constituted less than 2 percent of auto sales. As recently as 2007, none of the top 10 vehicles chosen by consumers voting at the popular website CarGurus.com had an average gas mileage that met current federal CAFE standards

In his announcement yesterday, Obama estimated that the new federal mileage standard would save 2 million barrels of oil per day. Although estimates vary considerably, boosting fuel efficiency is not cost-free. California Air Resources Board Chair Mary Nichols endorses a rosy scenario, claiming that the state's new standards will only add about $400 per car. On the other hand, General Motors Vice Chairman Bob Lutz apocalyptically predicts that even the less stringent new federal CAFE standards will boost car prices by $4,000 to $10,000 per vehicle, averaging around $6,000. The Energy Information Administration's middle of the road calculation is that the new California regulations would add about $1,900 in costs to each vehicle. Essentially, CAFE standards function as a kind of inefficient stealth tax on driving. It's inefficient because drivers pay more, car companies make less money, and state and federal governments don't get any extra revenues.

But CAFE proponents argue that there is a bright side—the higher costs for the gas-sipping cars will be offset by lower gas bills. For example, a car driven 12,500 miles per year at 27.5 mpg would use 454 gallons of gas annually. Raising the mileage to 35 mpg reduces that figure to 357 gallons per year. So the new California standards would save drivers an average of 100 gallons per year. At $1.50 per gallon that comes to $150 per year; at $4 per gallon it comes to $400.

Politicians claim that manufacturing the new CAFE-compliant cars will increase jobs in the auto industry. But will it? All other things being equal, increasing the price of a product is not usually considered a sure fire recipe for attracting more customers. Higher prices mean lower demand, something that normally results in fewer jobs in the auto industry. On top of that is the fact that it takes fewer workers to manufacture the generally smaller cars that meet CAFE standards. It's hard to see how higher CAFE standards will produce more jobs.

If California's state legislators—and the other politicians who favor the new higher mileage standards—really want their citizens to drive more fuel efficient (and generally smaller) cars, there is a simpler and more honest policy: Hike gasoline taxes substantially. In 2002, the NAS's report correctly observed, "There is a marked inconsistency between pressing automotive manufacturers for improved fuel economy from new vehicles on the one hand and insisting on low real gasoline prices on the other. Higher real prices for gasoline—through increased gasoline taxes—would create both the demand for fuel efficient new vehicles and an incentive for owners of existing vehicles to drive them less." In other words, taxing gasoline would achieve the politicians' stated goals of reducing imports of foreign oil and cutting greenhouse gas emissions much more efficiently than convoluted CAFE standards—since taxes would apply to all vehicles, not just new ones.

The NAS further noted that more models of high mileage cars were produced abroad largely because gasoline in other countries costs $4 to $5 per gallon. Last year, we learned definitively that Americans respond with alacrity to higher fuel pump prices. As gasoline prices soared to over $4 per gallon, consumer demand for smaller cars rose by 37 percent over the previous year. At nearly 64 cents per gallon, California already imposes the highest gasoline tax in the country, yet Californians continue to insist on buying and driving cars of which their legislators disapprove. Ultimately, setting CAFE standards is just a way for cowardly politicians to avoid telling their fellow citizens that they should pay more for the privilege of driving.

Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.

This column first appeared at Reason.com.

Have You Hugged a Hummer Today?

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 19 Jul 2006 00:00:00 EDT

Ford Motor Company did itself a huge favor recently by backing away from its pledge to bump-up its hybrid production ten-fold in four years. But, as it turns out, the company might have done the planet a whale of a favor too.

Just last fall, CEO Bill Ford was valiantly promising in a mega-million dollar ad campaign that the company would never, ever turn away from its hybrid pledge because these vehicles were central to the company's reputation as an "innovator and environmental steward."

Never mind that at the time Ford was losing $2,000 to $3,000 for every hybrid it sold because consumers won't pay the entire $6,000 extra that it costs to produce a hybrid over its gas-powered counterpart. Never mind also that in the real world — outside of the Environmental Protection Agency's tax-payer funded testing sites — hybrids don't deliver anywhere close to the gas mileage that the agency attributes to them, as auto-writer Richard Burr reported in the Weekly Standard.

Bill Ford had given his word on hybrids and you could take that to the bank (ruptcy court). But hybrids have received such a thrashing in the market lately that even Ford was forced to take-off his green eye-shades and read the red-ink on the wall.

According to Art Spinella, the uber-auto analyst and President of CNW Marketing Research, hybrid sales every month this year have been down compared to the same time last year. Even sales of the Toyota Prius — the darling of the greens — have dropped significantly. The only segment besides taxis where hybrids are still holding steady — taxpayers will be happy to note — is the car fleets maintained by the government.

What's particularly interesting is that individual consumers are defying all expectations and turning their backs on hybrids at a time when gas prices are soaring. (The average U.S. retail price of gas spiked to a record high of $3.01 last September following hurricane Katrina, and just last week it hit its second highest price ever at nearly $3.00.) Nor is the reason all that mysterious. Spinella's customer satisfaction surveys show that 62 percent of hybrid owners are dissatisfied with the fuel-economy performance of their cars given what they have paid for them.

This means that when gas prices go up, these people don't rush out to buy more hybrids. "They buy a Chevy Aveo," says Spinella. "It delivers the same fuel economy as a Prius, but at half the price."

Consumer interest might revive if the cost of hybrids goes down substantially — or the cost of fuel goes up and stays up for a long period of time, Spinella believes. Until then, however, the hybrid market is unlikely to come out of the deep freeze, a reality that even Ford had to finally acknowledge.

But despite all these drawbacks, hybrids are at least better for the environment than say�.. a Hummer, right? Nope.

Spinella spent two years on the most comprehensive study to date — dubbed "Dust to Dust" — collecting data on the energy necessary to plan, build, sell, drive and dispose of a car from the initial conception to scrappage. He even included in the study such minutia as plant-to-dealer fuel costs of each vehicle, employee driving distances, and electricity usage per pound of material. All this data was then boiled down to an "energy cost per mile" figure for each car (see here and here).

Comparing this data, the study concludes that overall hybrids cost more in terms of overall energy consumed than comparable non-hybrid vehicles. But even more surprising, smaller hybrids' energy costs are greater than many large, non-hybrid SUVs.

For instance, the dust-to-dust energy cost of the bunny-sized Honda Civic hybrid is $3.238 per mile. This is quite a bit more than the $1.949 per mile that the elephantine Hummer costs. The energy cots of SUVs such as the Tahoe, Escalade, and Navigator are similarly far less than the Civic hybrid.

As for Ford cars, a Ford Escape hybrid costs $3.2 per mile — about a third more than the regular Escape. But on the whole, ironically enough, the dust-to-dust costs of many of the Ford non-hybrids — Fusion, Milan, Zephyr — are not only lower than comparable Japanese hybrids — Prius, Accord — but also non-hybrids — Seville, Civic.

Spinella's finding that a Hummer on the whole consumes less energy than a hybrid than even some smaller hybrids and non-hybrids has infuriated environmentalists. And on its face it does seem implausible that a gas-guzzling monster like a Hummer that employs several times more raw material than a little Prius' could be so much less energy-intensive. But by and large the dust-to-dust energy costs in Spinella's study correlate with the fanciness of the car — not its size or fuel economy — with the Rolls Royces and Bentleys consuming gobs of energy and Mazda 3s, Saturns and Taurus consuming relatively minuscule amounts.

As for Hummers, Spinella explains, the life of these cars averaged across various models is over 300,000 miles. By contrast, Prius' life — according to Toyota's own numbers — is 100,000 miles. Furthermore, Hummer is a far less sophisticated vehicle. Its engine obviously does not have an electric and gas component as a hybrid's does so it takes much less time and energy to manufacture. What's more, its main raw ingredient is low-cost steel, not the exotic light-weights that are exceedingly difficult to make — and dispose. But the biggest reason why a Hummer's energy use is so low is that it shares many components with other vehicles and therefore its design and development energy costs are spread across many cars.

It is not possible to do this with a specialty product like hybrid. All in all, Spinella insists, the energy costs of disposing a Hummer are 60 percent less than an average hybrid's and its design and development costs are 80 percent less.

One of the most perverse things about U.S. consumers buying hybrids is that while this might reduce air pollution in their own cities, they increase pollution — and energy consumption — in Japan and other Asian countries where these cars are predominantly manufactured. "In effect, they are exporting pollution and energy consumption," Spinella says.

But while the environment has dodged Ford's hybrid foray, Toyota has shown no planetary concerns. It is going full throttle ahead with its plan of putting one million hybrids on the road by the end of the decade. Nor is there much hope that it will back-off in the near future given that it has already sunk $2 billion just in hybrid-related research and development, Spinella points out. Ironically Ford and some of the other car makers' exit from the hybrid segment means that Toyota will be able to consolidate its domination in it even more.

Thus the only hope of prodding Toyota to get out of the hybrid business would be if its customers jumped off the Prius bandwagon and embraced non-hybrids — even Hummers — instead.

Now here's a catchy slogan for the next Save the Earth campaign: Have you hugged a Hummer today?

Shikha Dalmia is a senior policy analyst at Reason Foundation. An archive of her work is here and Reason's environment research and commentary is here.

Fueling America

info@reason.org (William J. Korchinski) — Mon, 01 Nov 2004 00:00:00 EST

Executive Summary

In recent years, the use of hydrogen as a fuel for cars has become an increasingly popular idea. Many influential people endorse the idea as an important milestone on the road to U.S. energy independence. Others support it because they see hydrogen as the ultimate clean fuel to help the environment. But can the mass conversion of vehicles to hydrogen power significantly improve the environment? And given the high cost of building the infrastructure necessary to transport and distribute hydrogen, would it be worth it? This study sets out to answer these very questions.

When a vehicle’s engine burns gasoline, carbon dioxide (CO₂) is produced in the exhaust gases that then enter the air around the car. Proponents of using hydrogen to power automobiles generally point out that a hydrogen-fueled car produces only water in its exhaust, and no CO₂. While this is true, it is an incomplete picture. This study, unlike many others, opens the aperture in which CO₂ emissions are measured, to include not only the release caused by vehicles, but the emissions caused by the manufacture, transport and distribution of both hydrogen and gasoline, to foster a more accurate comparison of their relative benefits. Using various hydrogen production methods depicted by 11 case studies, this study measures hydrogen fuel cells and liquid fuel cells against a base case of the modern, internal combustion engine, gasoline-powered vehicle to assess which results in the least CO₂ emissions and the relative value of converting vehicles to hydrogen power.

We performed a simulation for each case study based on a 300-mile drive for the candidate vehicle. Results, including raw materials, energy requirements, and atmospheric CO₂ production, were calculated based on the resources required to generate the fuel necessary to drive the car 300 miles. To standardize for the various types of power generation infrastructures, we used the state of California as the geographic area for this study. Additionally, hydrogen-powered vehicles require a far heavier weight to achieve the same horsepower performance of gasoline-powered vehicles. We therefore did not normalize for relative vehicle performance; as a result, the fuel cell vehicles used in this study will not perform as well as the gasoline-powered one.

We found that while hydrogen fuel cell cars powered by hydrogen manufactured using hydroelectricity resulted in the least CO₂ emissions, this case was rendered impractical due to the limited amount of electricity generated by a hydroelectric source. In California, hydrogen would most likely be manufactured through electrolysis produced via natural gas, which resulted in the highest CO₂ emissions. We found the decline in emissions to be barely discernible, leading to the conclusion that the reduction in CO₂ emissions gained by using hydrogen-powered vehicles is not significant.

To assess the significance of the impact of converting to hydrogen-powered cars we projected the effect on CO₂ emissions if all cars in California had converted to hydrogen in 1981. We found the decline in emissions to be barely discernable and probably not even measurable, leading to the conclusion that the reduction in CO₂ emissions gained by using hydrogen-powered vehicles is not significant.

The most compelling reason for the inability of hydrogen-powered vehicles to significantly affect CO₂ emissions is that total vehicular emissions pale in comparison to the total CO₂ emitted statewide from all hydrocarbon (fossil fuel) combustion. In fact, this study found that if vehicular emissions were entirely eliminated, total emissions statewide would fall by 10 percent or less. This fact, combined with the CO₂ emissions generated by hydrogen manufacture and distribution, calls into question the value of converting the present gasoline-powered vehicle into the expensive hydrogen-powered vehicle considered by so many to be the answer to today’s global warming problems.

Our study concludes that converting vehicles to run on hydrogen would have at best a marginal effect on CO₂ emissions. In fact, if hydrogen-powered vehicles are made to have the same performance characteristics as gasoline-powered ones, the use of hydrogen may actually increase atmospheric CO₂ emissions.

There are far simpler, less expensive, and more effective ways to reduce carbon dioxide emissions. People and businesses already have strong incentives to conserve energy, and competitive electricity markets and real-time pricing of electricity will strengthen those incentives. Gasoline cars are increasingly efficient and targeting gross polluting vehicles on the road today will greatly reduce auto emissions. None of these alternatives requires constructing a hydrogen generation and distribution infrastructure, a massive and expensive undertaking.

Hybrids in Carpool Lanes: A Nonstarter

bob.poole@reason.org (Robert Poole) — Wed, 14 Apr 2004 00:00:00 EDT

Los Angeles Times

When a policy proposal has the bipartisan support of Republican Gov. Arnold Schwarzenegger, Democratic state Treasurer Phil Angelides and the Natural Resources Defense Council, can it really be a bad idea? Quite simply, yes. That's the verdict on the bill now in the state Legislature to allow hybrid cars getting at least 45 miles per gallon to use the carpool lane, even if they hold just one occupant.

Politicians should think seriously about the consequences of this proposal.

Carpool lanes — formally called high occupancy vehicle, or HOV, lanes — were put in place to ease traffic congestion and to improve the efficiency of our freeways. So the first problem with allowing hybrids into HOV lanes is that these additional vehicles will soon use up the carpool lanes' capacity, making them nearly as congested as the regular lanes.

Proponents, such as Jeff Morales, former director of Caltrans, try to reassure us by noting that over the next 15 years, hybrids will make up, at most, 2% of the vehicle fleet.

But 2% of the 29 million vehicles already on our roads would be 580,000 vehicles. If even half of those hybrids tried to use the HOV lanes at rush hour, the lanes would be swamped. It is predicted by the Bay Area's Metropolitan Transportation Commission that by 2010, seven of the region's 18 HOV corridors will be at capacity, and by 2025 nearly all of them will be congested.

It is true that the measure pending before the Legislature would expire in 2008, but by that time driving in the carpool lane will have become an entitlement for the 50,000 to 70,000 hybrid owners in the state. It probably would prove difficult to prevent the law's extension. The larger the entitled group becomes, the harder it will be to alter the law.

Also, letting in thousands of hybrid cars probably would create an enforcement nightmare for the California Highway Patrol. Today, a Prius is instantly recognizable as a hybrid. But the hybrids due out in 2005, 2006 and 2007 model years will be identical in appearance to ordinary cars; it's just an engine option, not a different body style. They would be identified as authorized HOV-lane users only by a small decal.

Once drivers of the nonhybrid versions of these same models catch on, many of them will take their chances in the HOV lanes.

And the implications go far beyond congestion in the HOV lanes and law enforcement. In their original incarnation, HOV lanes were intended to be used for express bus service. Adding congestion to the HOV lanes would destroy the attraction of using regional express bus service — a way to move people quickly and more affordably than building rail lines or other forms of mass transit.

Clogging up the HOV lanes also precludes the possibility of turning some of them into high-occupancy/toll lanes, where single-occupant vehicles are allowed to use the carpool lane if they are willing to pay a toll. Higher tolls are charged electronically during rush hours to manage traffic flow, as has been done for years in San Diego and Orange County. Plans are underway in a dozen other metro areas around the nation for similar toll lanes.

These high-occupancy/toll lanes do three very good things.

First, they give all drivers the option of paying for a faster trip when it's really important to them.

Second, they add only a limited number of cars to the lane, controlled by the size of the toll. That gives express bus service an uncongested guideway — offering a real speed advantage over freeway driving.

And third, they generate toll revenue to help pay for expanding the HOV/toll system.

When I was a boy, my father taught me the importance of always selecting the right tool for the job. Carpool lanes are a tool for managing traffic and making our freeways flow better. There are many ways public policy can encourage less-polluting and more energy-efficient vehicles. But trying to make HOV lanes solve energy and emissions problems is using the wrong tool for the job.

Robert W. Poole, Jr. is Director of Transportation Studies and founder of Reason Foundation.

Are Hydrogen Fueling Station Subsidies Necessary?

info@reason.org (Lynne Kiesling) — Wed, 26 Mar 2003 00:00:00 EST

In the wake of the President's State of the Union Address, Representatives Cox and Wyden proposed a bipartisan bill that would subsidize the construction of hydrogen filling stations. It's common wisdom that hydrogen vehicles suffer from a chicken-and-egg problem — no one will buy hydrogen vehicles until they can get them fueled, and no one is going to build a hydrogen filling station until there's a critical mass of consumers that have purchased hydrogen vehicles. Chicken-and-egg problems are fascinating illustrations of how markets can harness individual incentives to bring complementary new technologies to fruition efficiently.

The hydrogen vehicle/fueling infrastructure chicken-and-egg problem is not the first or only time such an issue of complementary technologies has occurred. Take the example of the major transportation revolution of the 20th century — the internal combustion-powered automobile. Why did Henry Ford and his competitors even consider marketing cars, given that there were no filling stations? Yet by the 1930s an extensive retail filling station industry co-evolved with a thriving automobile industry and we (well, most of us) have never looked back. But how did we get there without government subsidies to build gasoline filling stations?

Before the invention of the automobile and its first commercial sales in the early 20th century, the predominant commercial product from crude oil was kerosene, not gasoline. Kerosene provided primarily cooking fuel and lamp fuel. Consumers bought kerosene at their local dry goods store or general store. Oil companies provided wholesale distribution to these stores. Then, in the early 20th century, the automobile began to create a demand for gasoline (which, interestingly, had been perceived as a waste product in the pre-car era). But early automobiles were not very comfortable and not many folks viewed car journeys as a pleasant way to travel, so gasoline demand increased slowly.

Where do you think those "early adopters" could buy gas? You bet — that same dry goods store! The wholesale distribution channel worked for gasoline much as it had for kerosene.

But the car was not a stagnant technology. Automobile entrepreneurs competed to offer consumers a more comfortable ride, and after World War I and with rising incomes in the 1920s, the market for automobiles grew. More people wanted to drive further, and the technology made it both possible and pleasant.

But the technology was not perfect. Breakdowns and required maintenance created profit opportunities for the mechanically talented — they opened service stations (think, for example, of the tragic cuckolded husband in The Great Gatsby). That created an alternative distribution channel for gasoline, a distribution channel that created profits for service station owners while providing convenience for customers — the full-service filling station.

Note that the early service and filling stations were usually independents — they had wholesale contracts with oil producers. Only once automobile ownership and increased vehicle miles traveled hit a critical mass later in the 1920s did the oil companies start operating retail filling stations, complete with attendants in spiffy uniforms. The fully vertically integrated oil company, from exploration and drilling to wholesale to retail filling station, was therefore a fairly late development, following the increased customer demand for automobiles.

What does the internal combustion engine automobile/gasoline filling station experience tell us about the development of hydrogen fueling infrastructure? I would not expect the development to mirror gasoline development, nor should we force it to. But some simple insights apply.

1. Fueling is likely to follow "early adopter" hydrogen vehicle consumers. We owe a debt of gratitude to early technology adopters, but they do not do it out of altruism — they like being the first ones on the block to have those newfangled fuel cell vehicles, and they feel good about clean technology. As demand for fuel cell vehicles moves beyond early adopters, the demand for fueling will follow.
2. Fueling will be decentralized and local, and will exploit existing distribution channels. Both because of the evolution of demand from early adopters and because of the technology and danger of generating and transporting hydrogen, local inventories of natural gas and/or water to provide fuel make the most sense. Hydrogen's volatility also makes locking in to a fueling technology by subsidizing it extremely risky. In my opinion, those who have both the economic interest and the space for this to make economic sense are automobile dealers. For example, if Honda and Toyota sell fuel cell vehicles and provide their dealers with a profit opportunity to sell hydrogen fuel, that would help them sell more fuel cell vehicles. The oil companies do not have an existing distribution channel to take advantage of like they did in the kerosene/gasoline markets, so they do not really have a leg up relative to automobile manufacturers.
3. Fueling infrastructure will evolve as the vehicles, and the demand for them, do. One major lesson from the gasoline experience is that entrepreneurs who see profit opportunities will cause the evolution of distribution channels, and will do so in ways that benefit consumers.

Forcing hydrogen fueling to replicate the existing gasoline distribution infrastructure by subsidizing the construction of a fueling network is a very static approach to an incredibly, beautifully dynamic co-evolution of technologies and consumer preferences. Such subsidies are also likely to undercut the creativity of entrepreneurs who will seek to find novel and convenient ways to provide hydrogen fueling to consumers who want it, and to profit from it.

Lynne Kiesling is director of economic policy at Reason Foundation and senior lecturer in economics at Northwestern University.

This is part 3 of Reason's 5-part Let the Hydrogen Economy Evolve series:

Part 1: The Science of Hydrogen Fuel Cells
Part 2: The Economics of Hydrogen: Innovation in Mature and New Technologies
Part 3: Are Hydrogen Fueling Station Subsidies Necessary?
Part 4: Hydrogen-Powered Buildings
Part 5: Can the Government Pick Technology Winners? Can Anyone?

The Economics of Hydrogen: Innovation in Mature and New Technologies

info@reason.org (Lynne Kiesling) — Tue, 25 Mar 2003 00:00:00 EST

The science of hydrogen as a fuel source indicates that hydrogen fuel cells are not a "silver bullet" to generate clean fuel and eliminate fossil fuel dependence. The economics of fuel cells reinforce that interpretation. Platinum and other catalysts are costly and scarce. Natural gas and water as hydrogen sources are also costly and scarce, and have many competing alternative uses. Furthermore, natural gas is also facing increasing demand from electricity generation, because it is a cleaner fuel than coal in many ways. So the combination of increased demand for electricity generation and increased demand for hydrogen generation could increase natural gas prices, making hydrogen power even more expensive.

High natural gas prices are also likely to do two things: induce companies to explore and drill for more natural gas deposits, and induce researchers to work on finding alternative ways to generate hydrogen.

The economics of hydrogen as a fuel derive from the comparison with our existing hydrocarbon fuel framework. Once you take into account the cost of releasing hydrogen from molecules, the use of hydrocarbons to produce hydrogen, the less-than-hoped-for benefits of decreased emissions, the costs of inputs, the much lower energy intensity of hydrogen relative to hydrocarbons, and the costs of transporting hydrocarbons and/or water so they can be processed into hydrogen on-site, it becomes pretty clear that hydrogen is not likely to be ready for economic prime time for a while. Most estimates put commercial fuel cell vehicles at 10-30 years in the future.

Importantly, companies are investing in the research to push that commercial timeframe closer to 10 years. Given those time frames and the risks associated with the research, companies must be investing in anticipation of large future returns.

Of course, this is not the first time in human history that we have experienced an energy transition. From the 18th century move from wood to coal that fueled the industrial revolution to the late-19th century transition from coal toward oil, history abounds with examples of old and new energy technologies evolving simultaneously, created by human striving for better economic and environmental lives.

Take for example the invention of the steam engine during the early industrial revolution. Over six years from 1776 to 1783, James Watt and Matthew Boulton created, built, and marketed the first commercially viable steam engine for uses beyond just pumping water out of mines. However, steam engines did not become the standard power source for industry until the 1840s. Why the 60-year delay in the widespread adoption of a clearly superior technology?

One reason was innovation in the mature power technology — the water wheel. Water wheels had been used for centuries to generate power, but they had some serious shortcomings when compared to steam engines. They were not mobile, the depended on seasonal water levels, and the intensity of their power generation was pretty low. But water wheels had a substantial "installed base", so there was certainly an issue of switching costs. More importantly, though, water wheel technology kept innovating. Inventors like Victor Poncelet applied their increasing understanding of fluid dynamics to invent curved blades for the wheel, which increased the wheel's energy generation from a given amount of water and improved its viability as a power source.

Thus early on, the margin between water technology and steam technology was small. Only as steam technology continued to innovate beyond Watt's and Boulton's original did it start to replace water wheels. During the 60-year transition, water and steam technologies coexisted and evolved simultaneously, increasing power generation at decreasing cost for decades.

We are in the midst of a similar transition from internal combustion to hydrogen engines. The transition will be an incremental evolution because internal combustion engines continue to innovate, as illustrated by the increasing power and commercial viability of hybrid engines. Hybrid technology will continue to evolve as hydrogen technology evolves, and that's a good thing. Given the science of generating hydrogen, it is not clear that hydrogen vehicles would be any cleaner than hybrid vehicles, as a recent MIT study found.

So it comes as no surprise that during our current transition toward hydrogen, which has been in progress for at least two decades, we have made simultaneous innovations that make hydrocarbon technologies cleaner, more energy efficient, and better able to deliver the same amount of power with less energy use.

This simultaneous evolution of mature and new technologies is one reason why diversity of technologies, a portfolio of technologies approach, will deliver cleaner power in a dynamically efficient manner. The flexibility to include both hydrogen and other fuels, and to have these alternatives innovate and compete against each other over time, will lead to better long-run fuel solutions and a cleaner environment.

Lynne Kiesling is director of economic policy at Reason Foundation and senior lecturer in economics at Northwestern University.

This is part 2 of Reason's 5-part Let the Hydrogen Economy Evolve series:

Part 1: The Science of Hydrogen Fuel Cells
Part 2: The Economics of Hydrogen: Innovation in Mature and New Technologies
Part 3: Are Hydrogen Fueling Station Subsidies Necessary?
Part 4: Hydrogen-Powered Buildings
Part 5: Can the Government Pick Technology Winners? Can Anyone?

The Science of Hydrogen Fuel Cells

info@reason.org (Lynne Kiesling) — Mon, 24 Mar 2003 00:00:00 EST

In the State of the Union Address in January, President Bush promised an additional $1.2 billion in subsidies for hydrogen fuel cell research. Since then the number has increased to $1.7 billion, and President Bush has agreed with European Union leaders to work jointly on a five-year effort to bring hydrogen fuel cells, particularly for vehicles, closer to commercial reality.

Would that be money well spent? Or would federal hydrogen research subsidies be a waste of taxpayer money? The answers to those questions depend on several variables, almost all of which are beyond the control of the federal government. Because of the risks associated with such research, both economic and political, federal research subsidy efforts should proceed with caution.

And public opinion on these questions should be grounded in a firm understanding of the science of hydrogen fuel cells, and how they really work. Several recent articles have done a good job of summarizing the challenges in moving toward hydrogen as an energy source, including this Gregg Easterbrook article in The New Republic, and this International Energy Agency white paper entitled "Moving to a Hydrogen Economy: Dreams and Realities." These analyses highlight some important aspects of hydrogen, and of fuel cell technology, to bear in mind.

1. Pure hydrogen does not exist on Earth. Given existing and foreseeable technology, as well as the fact that pure hydrogen does not exist in isolation on Earth, hydrogen on Earth is an energy medium, not an energy source. Because hydrogen on Earth occurs in molecules that also contain either carbon or oxygen, isolating pure hydrogen involves "reforming" existing hydrocarbon molecules.

2. Isolating hydrogen still requires fossil fuels as inputs. Reformation of hydrogen still means using hydrocarbons such as natural gas as a source of hydrogen, because the primary potential sources of hydrogen on Earth are hydrocarbons and water. Both hydrocarbons and water are in scarce supply. Furthermore, this use of hydrocarbons to isolate hydrogen offsets some of the optimistic predictions about the emissions reductions we could expect from using hydrogen fuel cells.

3. Converting either water or hydrocarbons to hydrogen requires the expenditure of energy. Breaking hydrogen free from hydrocarbon molecules requires an expenditure of energy. Furthermore, depending on the process used, the reaction could actually use more energy than the electrolysis process itself actually produces. In other words, to figure out how much energy has actually been created, we have to subtract out the energy expended in getting to the point where we can separate out the hydrogens in the first place.

The most developed form of hydrogen isolation through electrolysis requires electricity to separate the hydrogens from the carbons in the hydrocarbon molecule, and within that reaction the net energy produced is positive. However, the electrolysis reaction also uses a catalyst to increase the energy release in the process. The catalyst typically used in hydrogen electrolysis is platinum. Mining and processing platinum is incredibly energy intensive, using fossil fuels such as coal to drive machinery that makes platinum available for the electrolysis.

Given the existing electrolysis technologies and platinum mining technologies, the platinum catalyst has to continue to work in the fuel cell without being damaged for almost three decades to get positive energy payback from the fuel cell. Put another way, it takes almost thirty years for the energy production of the fuel cell to equal the amount of energy that went into manufacturing the fuel cell and making the fuel available to it for the electrolysis reaction. So in energy terms, to pay for the fuel cell and start getting a net benefit from it, it has to run for at least three decades.

Furthermore, platinum is a very expensive metal, and its expense lengthens the financial payback period of the fuel cell as well as the energy payback period. Research on other catalysts is crucial for making fuel cells commercially viable, and private companies are actively engaged in undertaking such research.

4. Hydrogen is less intense than fossil fuels. For a given input, hydrogen production and fuel cell technologies generate less energy output (measured in BTUs) than traditional hydrocarbons. Recent estimates by the International Energy Agency suggest that replacing all of the transportation fuel currently used in France with hydrogen would require generating four times the electricity, which would in turn require either covering 6% of France's surface with wind turbines, or 1% of it with photovoltaic solar panels.

Thus replacing fossil fuel systems with hydrogen fuel cell systems will mean an increase in the space required for the production, transport, and use of hydrogen relative to an equivalent amount of potential energy from hydrocarbons. This fact mirrors the energy intensity issue with solar power, in which to generate a given amount of energy, a system of photovoltaic panels would have to cover a much, much larger surface area than generating the same amount of energy using hydrocarbons. Again, though, note that private companies are actively engaged in and investing in research to make hydrogen production, transportation and storage more compact.

5. Handling hydrogen can be dangerous. Remember the Hindenberg. Pure hydrogen is unstable and oxidizes easily, which makes it extremely combustible. Thus long-distance transport of hydrogen, say, to fill hydrogen fueling stations, is potentially dangerous.

Lynne Kiesling is director of economic policy at Reason Foundation and senior lecturer in economics at Northwestern University.

This is part 1 of Reason's 5-part Let the Hydrogen Economy Evolve series:

Part 1: The Science of Hydrogen Fuel Cells
Part 2: The Economics of Hydrogen: Innovation in Mature and New Technologies
Part 3: Are Hydrogen Fueling Station Subsidies Necessary?
Part 4: Hydrogen-Powered Buildings
Part 5: Can the Government Pick Technology Winners? Can Anyone?

The Case Against Electric Vehicle Mandates in California

info@reason.org (Peter Gordon) info@reason.org (Harry W. Richardson) — Mon, 01 May 1995 00:00:00 EDT

Executive Summary

Air quality has been improving in Los Angeles since 1966 in spite of brisk population growth (and much faster growth of the vehicle fleet and vehicle miles traveled). Yet, air quality standards have not yet been met; new proposals to meet Clean Air Act standards include mandated electric vehicle (EV) sales in California. Proponents have suggested that the mandate also serves long-term economic growth objectives for the region.

A survey of the literature reveals substantial evidence that the EV mandate is not costeffective; the air quality goals can be met at substantially lower cost. Resources for the Future, for example, shows that in terms of $/ton of Volatile Organic Compounds (VOC) reduced, reformulated gasoline or emissions-based vehicle registration fees are twenty times as cost-effective as EVs. In addition, there are many reasons to expect that the macroeconomic consequences of the EV mandate will be depressive rather than stimulative.

EVs will be expensive, yet short on what consumers prize most: range and power (witness the recent surge of “utility” vehicle sales). Massive subsidies and/or cost-shifts would be required that would have depressive effects on the California economy (including higher energy costs statewide). Taxpayers and/or utility ratepayers would also have to pay for new refueling infrastructure. In addition, it is not clear that EV maintenance costs will be below that of conventional autos. If consumers avoid EVs for any of these reasons, and keep their old cars longer, air quality gains will be lost.