Light-duty vehicle policy mixes for climate goals: Modeling effectiveness, efficiency and automaker response

The reality of political acceptability has led policy makers to implement policy mixes which often include supply-focused regulations, such as a zero-emissions vehicle (ZEV) mandate or vehicle emissions standard (VES). I look more closely at policy mixes that include regulations, to explore how policies might be designed to effectively and efficiently achieve climate targets within the light-duty vehicle sector (using the case of Canada). In this effort, the thesis includes four research papers. In the first research paper I review the broader, mostly non-transport literature and identify several rationales for pursuing policy mixes. Based on this review, I develop a framework to guide the examination of policy interactions across multiple criteria, namely GHG mitigation, cost-effectiveness, political acceptability, and transformative signal. I demonstrate this framework by setting hypotheses for interactions across six light-duty vehicle policies. In the second paper I develop and apply the AUtomaker-consumer Model (AUM) to examine automaker response to a ZEV mandate. AUM endogenously represents multi-year foresight for the automaker, including decisions about: (i) increasing ZEV model variety, (ii) intra-firm cross-price subsidies, and (iii) investing in R&D to reduce future ZEV costs. I simulate the case of a ZEV mandate (requiring 30% ZEV sales by 2030) and find that of the three compliance mechanisms, intra-firm cross-price subsidization dominates. In the third research paper, I use AUM to examine the impacts of different policy designs (with varying non-compliance penalties and credit schemes) on ZEV adoption, consumer surplus and industry profits. I find that a higher penalty for non-compliance (CAD$ 10k per credit) is needed to achieve the 30% by 2030 policy target. Compliance is further impacted by the allocation of ZEV credits. In the fourth paper, I compare several policies in terms of effectiveness (reaching 2030 GHG mitigation goals) and mitigation costs, namely: (i) a carbon tax; (ii) a VES; (iii) a ZEV mandate, and (iv) combinations of all three at alternative stringencies. Among regulations, the VES is cheaper than a ZEV mandate at lower stringencies, but at higher stringencies the two are similarly efficient (both incentivize widespread ZEV deployment). In policy mixes, cost-effectiveness is improved by a carbon tax.