Why Won’t You Adopt a Green Transportation System?

Carbon dioxide (CO2) is the primary greenhouse gas emitted through human activities, and the electric power and transportation sectors are the two largest emitters of carbon dioxide in the United States. Unsurprisingly, these two sectors are the main targets of climate policies. While in recent years the electric power sector has been moving fast towards decarbonization, the transportation sector has not. According to the U.S. Energy Information Administration (EIA), between 2007 and 2017, CO2 emissions from the electric power sector dropped 27 percent, whereas transportation emissions were reduced 6.4 percent. In fact, the downward trend in transportation emissions reversed in 2012 (see the graph below). In 2016, transportation emissions surpassed total electric power emissions for the first time.

Source: Monthly Energy Review, EIA

This is puzzling. Both sectors have viable technologies and substantial policy support. Aggregate emission patterns should be similar for the two sectors, so what drives the difference? My observations, based on knowledge about consumer behavior, production technology, market organization, and regulation in these sectors, as well as continuous attention to conversations in the media, academic outlets, and daily life, tell me that human factors are a large part of the differing emission trends between the transportation and electric power sectors.

Passenger cars are consumer goods. Electric generators are not.

There are fundamental differences in how humans interact with vehicles and electricity. These differences affect how the transportation and electric power markets operate. In the electric power sector, when a person pays her electricity bill, she is probably not thinking about buying something she will develop a personal connection to. The source of electricity she pays for does not impact her experience of consuming electricity. The consumer does not even directly participate in the transaction of procuring electric power. Electric service providers purchase electricity on behalf of residential customers in their territories, either from a wholesale electricity market or by negotiating contracts with power generators, before delivering it to households. The electric power sector works because of the well-designed market mechanism and underlying physical systems. In this market, there is not much space for customer engagement (at least not until recently[1]).

The transportation sector differs from the electric power sector in that the entire process is dominated by the consumers’ will, from purchasing a vehicle, to driving it, and, eventually, to scrapping it. New car models are pushed to the market every year, and hundreds of customized add-ons are provided to satiate consumers’ desires for novelty and uniqueness. Automobile advertisements are getting fancier day by day. Driving behavior is ever-changing and hard to predict: the same driver on the same segment of road under the same conditions can go faster or slower, sometimes influenced by her moods rather than the traffic (unlike autonomous vehicles with set algorithms). Driver preferences are similarly fickle and hard to predict. Leveraging data of more than 40 million vehicle transactions, a study showed that general feelings caused by random elements like weather at the point of transaction can alter purchase decisions. For instance, people tend to buy a convertible on a warm sunny day or a four-wheel drive vehicle when it’s cold outside. In another study, researchers found evidence for transmission of vehicle brand preferences across generations within families.

Scientists, engineers, and policy makers have come up with numerous ideas to decarbonize the transportation sector. In particular, for light-duty vehicles (passenger cars and trucks we normally see on the road, which account for around 60 percent of total energy consumption of the sector), two proposals receive the most attention: to replace fossil fuels with cleaner fuels, or to reduce fuel consumption by improving fuel efficiency. Both proposals have been successfully realized. Can we move our cars with something other than gasoline or diesel? Yes. To name a few alternative sources: electricity, hydrogen, and biofuel. Can we drive the same distance but use less fuel? Yes. Thanks to the Corporate Average Fuel Economy standard, one gallon of gasoline can now last 34.2 miles on average for passenger cars, 6.7 miles longer than two decades ago, as stated in a 2014 report of National Highway Traffic Safety Administration.

But great invention and improvement do not appear on the road automatically. Advancing the deployment of new technologies requires catering to consumer culture and preferences (bottom-up approaches), which is more difficult than overhauling integrated systems like power grids (top-down approaches). In a free-market economy, it’s those busy, emotional, demanding, and heterogeneous consumers—voting with their feet and pockets—who determine what technologies enter the traffic system. If the technologies cause too much disutility relative to enjoyment derived from utilization, people get frustrated. If they are too frustrated, they refrain from owning and using those technologies. And if users desert technologies that bring environmental benefits, we see sluggish pollution reduction.

Electric Vehicles (EV) are hard and inconvenient to use.

EV drivers often must bear more inconvenience than gasoline car drivers. Long road trips are particularly challenging with EVs, because the current minimum and median range of pure EVs in the U.S. are 58 and 114.5 miles, versus 240 and 412 miles for gas/diesel cars. For comparison, the median distance of long-distance trips by personal vehicles in the 2001 National Household Travel Survey is 194 miles. Therefore, EV drivers must plan their routes carefully to ensure they can recharge as they go, because the distribution of public charging points is sparser than that of gas stations. There are 21,882 public charging stations in the US (among which only 2,872 are fast-charging, disproportionally located in urban areas), compared to around 111,100 gas stations. It also takes much longer to charge a battery than to top off a gas tank. Depending on the battery size, the type of outlet at the charging station, and whether the car is equipped for fast charging, charging time ranges from 40 minutes to more than 24 hours.

To put this into context: this summer, I booked a ride with a driver from a transportation network company to visit my grandparents, who live in a town four hours away from where my family lives. When my mother saw that the car we booked was an EV, she insisted that the driver find a gasoline car. Her strong feeling stemmed from her previous unpleasant experience with an EV, which almost ran out of power in the middle of the freeway. The EV driver had to get off the freeway, look around for a charging station (the nearest one turned out to be in a city 30 minutes away), and wait another hour to charge the car. What was supposed to be a four-hour trip became seven hours instead.

This is not an extreme example. My story lines up with broader consumers’ concerns suggested by a myriad of small- and large-scale surveys. In 2011, Deloitte asked 13,000 individuals in 17 countries about their attitudes towards pure EVs. They found that both driving range and recharge time are far from reaching consumers’ expectation. Another survey by Cox Automotive in 2016, with 6,499 U.S. respondents, revealed more subtle doubts: longevity of the battery, performance in harsh winters, manufacturers’ roadside assistances, compatibility of charging standards, and so on.

Fuel economy does not sell well.

Fuel efficiency, also often termed fuel economy, describes how well the potential energy embedded in one unit of fuel is transformed into movement. One specific way to measure fuel economy is the number of miles that a vehicle can travel using one gallon of gasoline (miles per gallon, or MPG). The higher fuel economy of a car, the more money the driver can save, because with the same amount of gasoline, the driver can drive farther. Meanwhile, carbon emission is reduced, as less fuel is consumed. This sounds like a win-win situation for consumers and environmentalists.

Yet the reality is that car buyers are not as excited about fuel economy as expected. Fuel economy is less frequently cited as the most important factor determining purchase than attributes like safety, comfort, or new technology. Moreover, consumers are not quite willing or able to pay the price premium upfront, even though the projected cost saving is relatively large. Finally, people may be confused and make mistakes about which car model can achieve specific savings under what gas price[2].

Numerous studies have tried to uncover the underlying mechanisms creating this tepidness. The behavioral school of thought mainly focuses on issues with a human’s decision-making process: incomplete information, cognitive limitations, biased beliefs, etc. People are busy, and when they are not, they prefer leisure over tedious tasks like searching and solving math problems. If time and effort are required to accurately ascertain the lifetime value of fuel economy, consumers might just ignore it. Besides, they might be myopic and discount wealth in the far future more than near feature. Fuel savings in 10 years might not sound as appealing as an extra $1,000 in their bank account today.

An alternative school of thought suggests that consumers could still be fully informed and rational, but simply be unable to afford a more expensive, fuel-efficient vehicle even though it will eventually offer savings. Besides,  fuel economy can also come with something that the consumers dislike. For instance, automakers may sacrifice other attributes of cars, such as size and horsepower, to boost up fuel economy. Fuel-efficient cars, then, become less favored by drivers who value things like size and horsepower.

What can we do?

Understanding and catering to human factors is crucial. Even in the electric power sector, which enjoys the advantage of having a relatively centralized system, consumer engagement still brings additional benefits. For example, promoting demand response to fluctuation in supply using time-varying electricity prices is one of the most important items on policymakers’ agendas. Findings from several studies[3] suggest that consumers do respond to price signals, but responses vary in terms of magnitude and persistency. So, while consumer engagement is important, it is also difficult to manage. If the electric power sector has taught us that it’s already hard to alter consumer behavior when only one factor (price) is involved, then one can imagine the difficulty of altering behaviors when location, speed, comfort, and connectivity all require consideration, as is the case in the transportation sector.

However, some early endeavors to understand consumer behaviors in transportation look promising. A team at Lawrence Berkeley National Laboratory developed BEAM (short for Behavior, Energy, Autonomy, and Mobility), a transportation simulation framework explicitly incorporating travel choice behaviors and spatial distributions of EV charging infrastructure. It’s a powerful virtual environment to analyze the impacts of changing mobility trends and rapidly-evolving technologies.

There are also experimental programs initiated by industry partners. For instance, RetailCo, a major US retailer, accepted the offer from ChargePoint, a network company of EV charging infrastructure, to install six stations near its stores. According to their estimation, after the EV charging stations were installed, the average customer dwell time within stores increased by 50 minutes and gross revenue by approximately $56,000 over the course of the nine-month piloting period. This success was followed by construction of more stations funded by RetailCo.

We now have quite mature and ever-improving technologies for fuel economy and alternative fuel sources, as well as political momentum and policy prototypes. But to realize the full environmental benefits of the new technologies, we have to pay more attention to what consumers want. Changing the everyday decisions taking place within each household, on each street, and in each person’s mind can achieve real and widespread changes in transportation CO2 emissions.

[1] Things have changed a bit lately with retail restructuring (allowing a person to switch to another electricity service provider) and time-varying electricity pricing (allowing temporal shift in consumption based on change in prices).

[2] One widely-cited example is MPG illusion. People falsely believe that the amount of gas consumed by an automobile decreases as a linear function of a car’s MPG, while the actual relationship is curvilinear. For instance, an increase from 10 to 20 MPG corresponds to a 100 percent reduction in fuel consumption, whereas an increase from 50 to 60 MPG is only a 20 percent improvement, although in both cases the difference is 10 MPG. Consequently, people underestimate the value of removing the most fuel-inefficient vehicles.

[3] See Fowlie et. al. (2018), Gillan (2018), Ito et. al. (2018), Jessoe and Rapson (2014), Wolak (2011), Allcott (2011) for findings from field experiments; Harding and Sexton (2017) for a comprehensive review.

Featured image source: Hugues Draelants, Tomorrow Needs Today

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