The decarbonization potential of alternative fuel and vehicles choices in the US transportation sector: Behavioral, technological and policy determinants

Zhong, Jia

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Description

Title

The decarbonization potential of alternative fuel and vehicles choices in the US transportation sector: Behavioral, technological and policy determinants

Author(s)

Zhong, Jia

Issue Date

2021-11-29

Director of Research (if dissertation) or Advisor (if thesis)

Khanna, Madhu

Doctoral Committee Chair(s)

Khanna, Madhu

Committee Member(s)

• Onal, Hayri
• Ouyang, Yanfeng
• Gramig, Benjamin

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Renewable Fuel Standard
• Electric Vehicle
• Vehicle Adoption

Abstract

Decarbonizing the US transportation sector will require a mix of alternative vehicles and low-carbon biofuels to displace fossil fuels. Advanced biofuels and electricity are the two most anticipated alternative energy sources for advanced powertrain vehicles to use that are less carbon-intensive. However, the current consumptions of biofuel and alternative fuel vehicles fall short of the expectation. The Renewable Fuel Standard (RFS) has failed to achieve its original goal of inducing the consumption of E85 (with up to 74% blend in gasoline), and the adoption of alternative fuel vehicles is restricted by the dominating liquid fuel vehicles. The purpose of this research is to analyze the policy incentives, technological and behavioral factors that will determine the choices and mix of alternative fuels and vehicles and their implications for the extent of decarbonization that can be achieved in the near future. This dissertation has three chapters. The first study examines the effect of the design of RFS on creating disincentives for ethanol fuels but favoring biodiesel production. I develop a welfare-economic framework and a simulation model to examine the implications of the design features of the policy (specifically, its nested structure and the accompanying cellulosic waiver credit and biodiesel tax credit) on the mix of biofuels blended and on social welfare. The results show that the flexibility allowed for compliance reduces the incentives for selling a higher blend of corn ethanol and cellulosic ethanol and leads to an overall blend wall for ethanol. They raise the retail price of higher ethanol blend (E85) higher than the energy-equivalent price of motor fuel (E10). Though social welfare is enhanced and GHG emission reduces marginally, the design features impose welfare costs on corn ethanol producers and taxpayers. The second study examines the behavioral and technological determinants of the adoptions of alternative fuel vehicles by incorporating the consumers' vehicle choice model with the random utility framework in a dynamic, open-economy, multi-market optimization model. We find that behavioral factors limit the adoption and distribution of battery-electric vehicles for consumers with less public charging or fast-charging coverage that increases the costs of range limitation, detour, and waiting. Idiosyncratic preferences of consumers show a persistent preference for the conventional vehicle as well as emerging interest for electric vehicles. We also find that market acceptance of battery-electric vehicles is more responsive to the market uncertainties than the GHG emissions, where the growing the electricity demand and corresponding GHG emission restricts the social benefit from GHG mitigation. The EV tax credit is the main driver of the BEV uptake even under market uncertainty, but it also leads to a net welfare loss requiring substantial government investment. The third paper explores the role of cellulosic biofuel policy in decarbonizing US transportation while interacting with the incentives for electrification in US transportation. We first use graphical analysis to examine the interaction between the ethanol blend mandate and the electrification incentives. We find changes in the implicit price incentives for E85, E10, and diesel from blend mandate are ambiguous, which depends on the extent of E10 displacement and increased blend rate. Our numerical model using the same model developed in chapter 3 finds that the synergy between the cellulosic biofuel policy and incentives for electric vehicles reduces the total emission and carbon intensity of the mileage in the US. Though the cellulosic biofuel policy alone leads to greater net welfare loss than the federal tax credit for electric vehicles (EV) alone due to high fuel prices, the joint implementation of both policies leads to cheaper abatement costs than the cellulosic ethanol mandate alone. This dissertation contributes to the literature with advanced understandings of the implication of decarbonization strategies, especially Renewable Fuel Standard and the electrification incentives and their interactions. The findings in Chapter 2 suggest the need to shift the structural design of RFS policy towards a non-nested structure with a separate fossil fuel base to eliminate the blend wall and to create demand for cellulosic ethanol and minimize the GHG intensity of transportation fuel. Chapter 3 identifies the pathways of overcoming the behavioral and technological barriers to stimulate the adoption of battery electric vehicles and identifies the key driver of EV adoption being the costly EV tax credit. Chapter 4 demonstrates the role of cellulosic biofuel policy in the tradeoffs between economic surplus and GHG emissions due to the policy interactions between electrification incentives and biofuel blend mandate.

Graduation Semester

2021-12

Type of Resource

Thesis

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Copyright 2021 Jia Zhong

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