The Roles of Technological Change and Climate Policy for Greenhouse Gas Emissions from U.S. Transportation and Electricity Generation

Transportation and electricity production account for 28.2 percent and 27.1 percent of total US GHG emissions. Alternative Fuel Vehicles (AFVs) that use fuels such as biofuels, natural gas, hydrogen, or electricity, generally with higher fuel economy than traditional fossil-fuel vehicles, have been suggested as a low-carbon alternative to further reduce the dependence on fossil-fuel-based transportation and reduce GHG emissions. The cost of renewable electricity generation, especially solar and wind, has been reduced dramatically recent year, making it an alternative energy source to reduce GHG emissions. A Computable General Equilibrium Model (CGE) with highly disaggregated transportation and electricity generation sectors – ADAGE is used to examine the market potential of AFVs for on-road transportation of both passengers and freight as well as electricity generation mix under different carbon price pathways and their influence on GHG emissions and U.S. economy, energy markets. Without any carbon policy, electricity from conventional technologies continues to decline over time while nuclear, hydro and biomass remain relatively flat. Wind, solar and natural gas combined cycle rise significantly, accounting for 12%, 14% and 40% of total generation by 2050. Thanks to the declining electricity cost from wind, solar and natural gas combined cycle, AFVs, especially hybrid and battery electric vehicles rise dramatically, replacing conventional vehicles using refined oil and biofuels. The overall GHG emissions in the U.S. do not increase but decline by 8% during 2010 to 2050 under the reference case. When a carbon price is applied to all sectors, wind and solar generation rise even further while natural gas combined cycle rises slower than in the reference case. AFVs, especially battery vehicles, take off earlier and speed up the turnover of conventional vehicles. The overall GHG emissions in U.S. decline further by 2050 under these carbon price scenarios.