Tuesday, March 12, 2013

The wrong reasons for not purchasing an electric car

I have no personal bias in favour of electric or plug-in hybrids and no personal bias against gasoline cars or fossil fuels. On the contrary, in an earlier post, I have expressed my disappointment at not being able to convince myself to buy a hybrid car let alone an electric car. However, I feel the need to disagree with some points in an Op-Ed in the WSJ that claims to reveal a dirty little secret about electric cars and which is based on a paper in an academic, peer-reviewed journal. The peer-reviewed paper suggests that electric cars are not zero-carbon and the GHG emissions avoided over the life of the car is heavily dependent on the life of the electric car. I find nothing wrong with that. But one has to be very careful in interpreting the results of a life cycle assessment (LCA).

To me a key sentence in the Hawkins et al. paper is "Our LCA is attributional and process based." An attributional LCA is a rigorous accounting of the total material and environmental burden from all activities connected to the production, use phase and end-of-life of a product or a service. This is also referrd to as crade-to-grave or wells to wheels analysis. Researchers and practitioners of LCA generally agree that attributional LCA is not suitable for making the extrapolations the op-ed makes based on the paper. One cannot extrapolate two attributional LCAs to infer what would be the benefits or costs of replacing one product or technology or another on a large scale. There are several reasons for this. In this one technology is nascent, i.e., electric car and the other is mature, i.e., gasoline car. The nascent technology offers enormous scope for learning-by-doing. At the same time gasoline is getting dirtier because of the transition to lower-grade resources, like oil sands, heavy oils, gas/coal to liquids etc. In the high-income countries where expensive electric cars are first likely to be first adopted, the share of coal is declining in the electricity mix. The academic paper comes with a warning that it performs an attributional LCA but the Op-ed which is meant for consumption by the lay person either does not appreciate this statement or conveniently ignores it. This can lead one to draw the wrong conclusions.

The op-ed also mentions “Similarly, if the energy used to recharge the electric car comes mostly from coal-fired power plants, it will be responsible for the emission of almost 15 ounces of carbon-dioxide for every one of the 50,000 miles it is driven—three ounces more than a similar gas-powered car.  I am not an expert on the life of the battery system of an EV but 50000 miles seems low. I find it hard to believe an expensive investment will be go under-utilized relative to a cheaper investment. Obviously, if electric cars are to succeed their battery life has to improve (the driving range is different issue). I have seen Prius cars that have logged more than 150000 miles. So the assumption of 50000 miles as the life and that the electricity is entirely from coal is unreasonable.

Also electric cars impact society in more ways than one. GHG is one attribute. There are important other benefits and costs. Life cycle assessment gives no guidance on how one should weight these different impacts in decision making.

My final complaint is with the statement in op-ed that “The real challenge is to get green energy that is cheaper than fossil fuels.” The problem is not that green energy is costly but that fossil fuels are under priced. So it is unfair and inefficient to force the price of green energy down to that of fossil fuels. Subsidies to green energy lower the cost of energy consumption and only serve to increase energy consumption in the long run. 
As an environmental economist, I believe there are cheaper ways to mitigate than switching to electric cars, which may be more essential in the longer run. So my disappointment with electric cars is based on cost-effectiveness and the opportunities for cheaper options such energy efficiency and conservation. By driving less we are causing less congestion, creating less risk of accidents, incur lower fuel and maintenance costs, etc., which are not achieved by driving a less polluting vehicle. But alas not every one is able to drive less and this is where investments in public transportation and smarter urban planning matter.


Tuesday, May 15, 2012

Green watts before green horsepower?

When I recently logged into the Los Angeles Department of Water and Power (LADWP) website, one thing that drew my attention in addition to the vastly improved and user friendly webpage (this is one metric on which it seemed LADWP was stone age) was a link to an option to buy green electricity.  As an environmental economist, one of many things I call myself, I believe in taking the cost-effective actions first. In other words I like to pick the low hanging cherries first (I am still reeling from the effects of having picked all the cherries I could for $6 last weekend at a farm near Bakersfield) . Moreover, I have been disappointed at not being able to convince myself to buy a hybrid car leave alone an electric car. While I believe there is still opportunity for me to improve my energy use efficiency (I still have a few incandescent bulbs that I turn on briefly) I am interested in contributing more directly towards the growth of alternative energy technologies. My complaint is only with the public policies that are being pursued to achieve this, which is a topic for another post. While I don't believe charity will save the day, I definitely support voluntary private action. I was therefore excited when LADWP said I could opt to buy green electricity at an additional cost of only 3 cents per kWhr. I naturally proceeded to do a cost-effectiveness calculation of what I am paying to abate carbon if I chose LADWP's green power option.

Ignoring for a moment the issues such as whether higher demand by LADWP customers for green power simply leads to reshuffling of green electrons from other regions and whether the green sources are really green and assuming the average carbon intensity of electricity in California is 0.5 kg CO2/kWhr, if I signed up for LADWP's green power, then for $0.03 cents I am reducing my emission by 0.5 kg CO2, which implies a cost of $60 per ton of CO2. If my electricity was the US average mix with a higher carbon intensity of 0.7kg CO2/kWhr, this reduces to $42 per ton CO2 and if I am on the margin displacing coal with a carbon intensity of 0.95 kgCO2/kWhr, I am paying only $32 per ton CO2. (If you  kept track of the number of things I said I am ignoring and number of things I  said I am assuming and you disapprove of it, I am sorry to say you should not consider economics as a profession :) ) 

This is not bad at all when compared to having to purchase a solar panel or electric car and having to wait for several years for an economic and environmental pay back. This seems to suggest there are economies of scale in grid scale solar and wind, which are likely to be the marginal sources of green electricity (I am assuming new large hydro and nuclear are either excluded or unlikely to be built. If, however, they are part of the green portfolio it needs more investigation). I am refraining from a comparison to hybrid cars for under some conditions hybrids have lower or even negative cost of carbon abatement i.e., the net present value of the investment is lower for the hybrid car compared to a gasoline car. But of course there is positive payback period and a slightly higher upfront cost compared to conventional cars compared to the green power option.

LADWP offers one to choose the fraction of monthly use that one would like to derive from green power. This of course does not affect the cost-effectiveness from an individual's standpoint. But the question of what happens when a large number of consumers demand green power, how does this affect the price of brown electricity, how does electricity consumption rebound as a result, how does it impact emissions and how do we avoid such unintended consequences - these are more complex and interesting questions. I have several hypotheses that can make for an interesting graduate thesis or dissertation.

My apologies to my fictional followers of this post for being slower than the economy in growing the number of posts. I however think a local minimum has been reached and so the next post is unlikely not take this long.

Saturday, November 12, 2011

Where is all your hot air coming from?

In my previous post I said I would rather pay a carbon tax than a buy a hybrid car if asked to choose between the two. Although it seems (and unfortunately so) unlikely we will have a carbon tax in the US in the immediate future, I wanted to calculate what kind of carbon tax I am personally looking at per month. So I proceeded to estimate my total carbon footprint, both - direct emissions I cause while I drive, commute, turn on stove etc  and indirect - embodied in  the electricity and water I use and also the goods and services I use. I found one  online calculator that seems easy to use and reasonably detailed to get an estimate one's carbon footprint. http://www.coolcalifornia.org/calculator.
I hope the tool takes into account the fact that some part of everything I buy in the US has originated half away around the globe and for goods like plastics, clothing, electronics etc. entirely so.

So go ahead and try the tool. See if you get a happy face or sorry face (you can get atleast one other type of face which I will reveal later). If you got a happy face, multiply your total emissions of CO2 per year by say $30, this a reasonable first approximation for the amount you can expect to pay if we had carbon fee of that amount or a policy such as that in the European Union. Do you still have a happy face? My bet is if you are bothering with reading my post or playing with tool, you will not be too worried (unless you are a friend or family member and were urged to visit my new blog and write nice comments).

While the tool was interesting, what I found cool was you can not only find out what actions you may take (these choices are generated and ranked based on where your hot air is coming from) and there are indeed several of these, but you can also get an estimate of what are the things you should be doing first i.e., the least cost actions you can undertake. There are several that  save you money right way and involve no additional expenditure. However, I bet they involve some cost in the form of lifestyle changes or seeking out information etc.. The usual ones such as buying more efficient products involve a positive payback period i.e., it takes a while to recoup the extra cost in the form of savings in operating cost.

Guess what, I was not advised to upgrade my car, leave alone upgrade to a hybrid car! So I decided to be a little mischievous and said I drive enough to go from Los Angeles to New York back once every month and also visit my parents in India (and of course my in-laws too) six times a year. This was enough to make the happy face on the summary page burst into tears. He suggested the first thing I do is to get a more efficient car!!!

Wednesday, November 9, 2011

Why hybrid cars are not yet green enough for some?

One year of living in Los Angeles, where a 10 mile drive can take 45 min to 1 hour, put paid to my resoluteness in holding on to my well functioning 16 year old manual transmission Corolla with only about 100,000 miles. After proudly proclaiming for several years that my next car would be a Prius, when the time came to put my money where my mouth was, it didn't seem so obvious a choice. Here's why.

1. I live and intend to live within walking distance or few miles to work. LA traffic has convinced me that I should venture out only rarely even on weekends. This means I am going to be a low mileage driver. Basic principles of finance tell you, the more intensively you utilize an investment, the more attractive it looks.    

2. In the coming years the near-monopoly of Prius is likely to be broken by a slew of alternatives - more hybrids, EVs, CNG etc. Moreover, gas mileage of all cars are going to get better thanks to Pres. Obama's revision of fuel economy standards for automobiles and higher oil prices.

3. A large amount of research suggests people place a substantial premium on appearing green relative to actually calculating their environmental impact. I for one don't care about merely appearing green. Guess how many people would have bought Prius that was identical in appearance to a Corolla or Civic?

So if the main reason I am willing to pay a  premium  for a greener car is for climate change, I am keen to know how much should I be valuing carbon at so as to justify the additional cost of a hybrid over a ten year life. Of course,  tail pipe emissions of non-carbon pollutants are also lower for hybrids but then these are already regulated and at the same battery production and disposal are not clean. So  lets assume the latter two wash, an obvious over simplification! We know very little about the what scaling up battery production will do to the environment. Nevertheless, I give the benefit of the doubt to the battery car.

For 6000 miles per year, 50% of driving in city traffic, a conservative 3.5% discount rate and 7.5% rate of increase in fuel price, $6000 in additional purchase cost, and $2000 in additional resale value after 10 years,  that I must value CO2 at $330 per tonne or higher to buy Prius instead of civic. This rises to $450 per tonne when compared to certified pre-owned Civic and $550 per tonne compared to a used civic from a private seller (ofcourse I accounted for higher maintenance cost for used cars)! Comparing the used-civic to a used-Prius did not throw any surprise either. The NPV of Prius is higher by a couple of thousands but this was not an important metric in my decision. The simple payback period, the time after which one recovers the additional upfront cost through  annual (non-discounted) savings in fuel costs, for a 2012 Prius exceeded 25 years relative to a 2012 civic!

Given the uncertainty in the various factors, I analyzed the sensitivity of the implied carbon cost to several factors - the amount I expect to drive, my expectations for the increase in fuel price, the interest I would earn on money saved by not purchasing Prius, the fact that gasoline is getting dirtier with the global transition to lower grade fossil fuels, resale value etc. Unless I doubled my annual mileage and drove most of my miles in city traffic, and/or placed a premium on appearing green, I could not convince myself to buy a Prius.  Even if I believe the damage from carbon justifies this cost, I see several lower hanging fruits one can pick before picking a hybrid or electric car.

After all the hype and hoopla and seemingly sophisticated calculations I seem to have come to the same conclusion as most people that it is worth waiting and watching while the earth is warming. I am indeed disappointed both with what my calculations revealed and that cleaner technologies are not being adopted in a big way. Charitable and voluntary action will not save the day! So bring on the carbon tax, a tax even an economist cannot oppose, or cap and trade or whatever one wants to call it but lets start paying for pollution. I am sure we will see much more and many more forms of civic engagement with the global cause.