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Will restrictions on CO 2 emissions require reductions in transport demand? Bengt Johansson a,b, a Environmental and Energy Systems Studies, Lund University, P.O. Box 118, SE-22100 Lund, Sweden b Swedish Defence Research Agency, SE-164 90 Stockholm, Sweden article info Article history: Received 20 February 2009 Accepted 7 April 2009 Available online 9 May 2009 Keywords: CO 2 emission reductions Alternative fuels Resource limitations abstract In this paper, the potential for the transportation sector to develop in a way that is consistent with long- term climate targets will be discussed. An important question is whether technical measures will be sufficient for reaching long-term climate targets. Although there is a large potential to significantly increase the use of bioenergy from today’s level, there will be severe restrictions to its use within the transportation sector. Other renewable energy sources such as wind and solar are much more abundant and could provide the majority of the necessary transportation fuel in the long run. Although potentially much more expensive than current fuels they could, in combination with strong efficiency improvements, provide transport services at costs that could be acceptable in a growing economy. Transport levels as high as today or even higher could be consistent from a climate perspective if such fuels and technologies are utilised. Relying only on technical measures would, however, be risky, as there is no guarantee that the technology will develop at a sufficient rate. Furthermore, the existence of other negative environmental effects would argue for the implementation of measures affecting transport demand as well. & 2009 Elsevier Ltd. All rights reserved. 1. Introduction Climate change has evolved as perhaps the most challenging environmental problem during recent decades. Increasing concen- trations of greenhouse gases (GHG) in the atmosphere are expected to lead to significant changes in temperature and precipitation patterns. Significant emission reductions will be necessary to avoid unacceptable changes. There are still many uncertain factors regarding the exact correlation between GHG concentrations and temperature change, but emission reductions of 70–95% in industrialised countries are expected to be necessary by the year 2050 to avoid temperature changes greater than 2 1C compared to preindustrial times (Scientific Council on Climate Issues, 2007). Transport energy use is growing and is expected to reach approximately 175EJ/yr by 2050equivalent to more than double the current level (Kahn Ribeiro et al., 2007). The fastest growth will be in developing countries. Road transport will continue to dominate transport emissions even though air transport is expected to expand at a faster rate. Transport energy growth in OECD countries is expected to be slower, 1.2–1.3%/yr, than in developing countries but this growth will be starting from a higher per capita level. While emissions from other sectors have been stabilised or even reduced in industrialised countries, emissions from the transportation sector continue to increase. Important driving forces for transportation emissions are increases in real income, which allow for more distant and energy-intensive journeys, and the globalisation of the economy which leads to an increased amount of long-distance goods transport (see e.g. Gilbert, 2006). Furthermore, a more diversified labour market encourages long- distance commuting, while urban sprawl requires more service and everyday leisure journeys (see e.g. EEA, 2006). These trends can be expected to continue unless stringent policy instruments are implemented. As GHG emissions from some sources, especially of nitrous oxides and methane from agriculture, are very difficult to eliminate, the requirement for a society-wide GHG emission reduction of 70–95% means that the transportation and energy sectors will have to provide their services with near zero emissions in a 50 y perspective. The more ambitious these mitigation policies are, the more costly measures will have to be utilised. Technological development can reduce cost increases but the implicit carbon price necessary to enforce the climate target will nevertheless most likely continue to increase. In this paper, it will be discussed how the transportation sector could develop in a way that is consistent with a long-term climate target. A specific question is whether technological development will be sufficient for reaching long-term climate targets or if significant changes in behaviour also will be required. The study ARTICLE IN PRESS Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/enpol Energy Policy 0301-4215/$ - see front matter & 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2009.04.013 Corresponding author at: Environmental and Energy Systems Studies, Lund University, P.O. Box 118, SE-22100 Lund, Sweden. E-mail address: [email protected] Energy Policy 37 (2009) 3212–3220

Will restrictions on CO2 emissions require reductions in transport demand?

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Page 1: Will restrictions on CO2 emissions require reductions in transport demand?

ARTICLE IN PRESS

Energy Policy 37 (2009) 3212–3220

Contents lists available at ScienceDirect

Energy Policy

0301-42

doi:10.1

� Corr

Univers

E-m

journal homepage: www.elsevier.com/locate/enpol

Will restrictions on CO2 emissions require reductions in transport demand?

Bengt Johansson a,b,�

a Environmental and Energy Systems Studies, Lund University, P.O. Box 118, SE-22100 Lund, Swedenb Swedish Defence Research Agency, SE-164 90 Stockholm, Sweden

a r t i c l e i n f o

Article history:

Received 20 February 2009

Accepted 7 April 2009Available online 9 May 2009

Keywords:

CO2 emission reductions

Alternative fuels

Resource limitations

15/$ - see front matter & 2009 Elsevier Ltd. A

016/j.enpol.2009.04.013

esponding author at: Environmental and En

ity, P.O. Box 118, SE-22100 Lund, Sweden.

ail address: [email protected]

a b s t r a c t

In this paper, the potential for the transportation sector to develop in a way that is consistent with long-

term climate targets will be discussed. An important question is whether technical measures will be

sufficient for reaching long-term climate targets. Although there is a large potential to significantly

increase the use of bioenergy from today’s level, there will be severe restrictions to its use within the

transportation sector. Other renewable energy sources such as wind and solar are much more abundant

and could provide the majority of the necessary transportation fuel in the long run. Although potentially

much more expensive than current fuels they could, in combination with strong efficiency

improvements, provide transport services at costs that could be acceptable in a growing economy.

Transport levels as high as today or even higher could be consistent from a climate perspective if such

fuels and technologies are utilised. Relying only on technical measures would, however, be risky, as

there is no guarantee that the technology will develop at a sufficient rate. Furthermore, the existence of

other negative environmental effects would argue for the implementation of measures affecting

transport demand as well.

& 2009 Elsevier Ltd. All rights reserved.

1. Introduction

Climate change has evolved as perhaps the most challengingenvironmental problem during recent decades. Increasing concen-trations of greenhouse gases (GHG) in the atmosphere are expectedto lead to significant changes in temperature and precipitationpatterns. Significant emission reductions will be necessary to avoidunacceptable changes. There are still many uncertain factorsregarding the exact correlation between GHG concentrations andtemperature change, but emission reductions of 70–95% inindustrialised countries are expected to be necessary by the year2050 to avoid temperature changes greater than 2 1C compared topreindustrial times (Scientific Council on Climate Issues, 2007).

Transport energy use is growing and is expected to reachapproximately 175 EJ/yr by 2050—equivalent to more than doublethe current level (Kahn Ribeiro et al., 2007). The fastest growthwill be in developing countries. Road transport will continue todominate transport emissions even though air transport isexpected to expand at a faster rate. Transport energy growth inOECD countries is expected to be slower, 1.2–1.3%/yr, than indeveloping countries but this growth will be starting from ahigher per capita level.

ll rights reserved.

ergy Systems Studies, Lund

While emissions from other sectors have been stabilised oreven reduced in industrialised countries, emissions from thetransportation sector continue to increase. Important drivingforces for transportation emissions are increases in real income,which allow for more distant and energy-intensive journeys, andthe globalisation of the economy which leads to an increasedamount of long-distance goods transport (see e.g. Gilbert, 2006).Furthermore, a more diversified labour market encourages long-distance commuting, while urban sprawl requires more serviceand everyday leisure journeys (see e.g. EEA, 2006). These trendscan be expected to continue unless stringent policy instrumentsare implemented.

As GHG emissions from some sources, especially of nitrousoxides and methane from agriculture, are very difficult toeliminate, the requirement for a society-wide GHG emissionreduction of 70–95% means that the transportation and energysectors will have to provide their services with near zeroemissions in a 50 y perspective. The more ambitious thesemitigation policies are, the more costly measures will have to beutilised. Technological development can reduce cost increases butthe implicit carbon price necessary to enforce the climate targetwill nevertheless most likely continue to increase.

In this paper, it will be discussed how the transportation sectorcould develop in a way that is consistent with a long-term climatetarget. A specific question is whether technological developmentwill be sufficient for reaching long-term climate targets or ifsignificant changes in behaviour also will be required. The study

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B. Johansson / Energy Policy 37 (2009) 3212–3220 3213

starts with a review of a collection of studies on the future oftransportation. The results of the studies are discussed and themain factors for their differences are identified. Then a closer lookis taken into the resources for low carbon energy carriers fortransportation. Finding that low-cost resources might be scarce,the potential consequences of turning to more abundant yet moreexpensive resources for transportation are discussed.

1 All the concentration levels in this paragraph refer to CO2 only.

2. Future transportation and GHG mitigation

Many studies exist in which the future development of thetransportation system is analysed and the system’s consistencywith low GHG emissions is evaluated. The approaches and results,however, differ among these studies.

First, there is a methodological difference between (i) scenariostudies analysing how emissions from the transportation sectorcan develop as a consequence of specific assumptions ontechnology development, on the implementation of non-technicalmeasures and on implemented policies (see e.g. Johansson, 1995;Greene and Plotkin, 2001; Mathiesen et al., 2008; Ahman andNilsson, 2008) and (ii) studies taking their starting point indesirable futures, for example regarding acceptable emissionlevels, and then analysing how such a future can be reached(see e.g. Johansson, 1998; Azar et al., 2003; Bristow et al., 2004;Akerman and Hojer, 2006; Grahn, 2006; Turton, 2006; Robert etal., 2007; Hickman and Banister, 2007; Krewitt et al., 2007; vanRuijven et al., 2008).

In this paper, the focus will be directed mostly towards theselatter target-oriented types of studies. Some of them are stronglymodel based, and scenarios are developed using differentmethodologies such as optimisation methodologies. In otherstudies, scenarios are developed with less formal methods suchas back-casting (for a discussion on back-casting as a methodol-ogy, see e.g. Dreborg, 1996).

All of the above referred to studies are so-called bottom-upstudies with a strong focus on specific measures and technologies(for a discussion on bottom-up versus top-down methodologies,see e.g. Wilson and Swisher, 1993; Hourcade et al., 1996). Thereare other mitigation studies founded in economics where focus isless on specific measures and more on aggregate effects ontransport emissions resulting from changes in fuel prices. Thescenarios in these studies are usually based on historicallyestimated relations between price and energy consumption.Such studies are of special interest for identifying system effectsof policies and determining the aggregate costs to society.A potential problem with these approaches is, however, that themeasures needed for reaching very tough emission targets willprobably require significant changes in fuel prices. It can bediscussed how well the estimated price elasticities used in top-down models can describe energy–economy relations in arelevant way if prices are far outside the narrow range in whichthese elasticities have been estimated. The assumption thatenergy–economy interactions do not change over time, which isimplicitly made in many top-down studies, can also be disputedespecially in a long-term perspective.

The conclusions of the studies regarding necessary measuresdiffer. The results of some studies (e.g. Akerman and Hojer, 2006)indicate that technology alone will not be enough to reachsustainable GHG emission levels. In other studies, such as Azaret al. (2003), only technological solutions are included in theassessments (some changes in behaviour might have been takeninto account, although not explicitly, through assumptionsregarding energy consumption).

There are several important factors that explain differencesbetween the results of the studies. First, the assumptions of

acceptable CO2 concentration levels and the associated emissionreduction levels differ among studies. For example, Turton (2006)assumes that a CO2 concentration of 550 ppm1 would beacceptable, whereas others such as Azar et al. (2003) base theirstudy at CO2 levels of 400 ppm. Bristow et al. (2004) base theiranalysis on two different concentration levels (450 and 550 ppm)whereas Akerman and Hojer (2006) take their starting point in450 ppm. Hickman and Banister (2007) design their systemsbased on a 60% emission reduction which is assumed to beconsistent with a CO2 concentration level of 450–500 ppm.Generally, the lower the acceptable concentration level, the fasterthe emission reduction has to take place, and the more challen-ging the changes for the transportation system will be.

A second important assumption is regarding how the neces-sary emission reductions are assumed to be divided amongcountries. The underlying assumption in most of the studies isthat the per capita emissions eventually should converge,allowing an initial increase in emissions in developing countrieswith a simultaneous reduction per capita in developed countries.This approach is used in for example Bristow et al. (2004), leadingto the conclusion that a 60–80% emission reduction will berequired in the UK by 2050. Akerman and Hojer (2006) choose aslightly different approach calculating a total potential globalenergy supply consistent with a certain CO2 concentration level,and then divide it among countries on an equal per capita basis. Inother studies, such as van Ruijven et al. (2008), Azar et al. (2003),no assumption on any specific division of reduction commitmentsamong countries is made, but instead a cost-effective globalemission reduction is simulated.

Another difference arises from how mitigation efforts aredifferentiated among the various sectors in society. In somestudies, the energy and transportation systems are modelled as awhole (e.g. Azar et al., 2003; Krewitt et al., 2007; van Ruijven etal., 2008) and the required mitigation effort for the transportationsector is a result of the study rather than based on an initialassumption. In other studies, assumptions are made of similarpercentage mitigation reductions throughout all sectors. Thisgenerally leads to more stringent challenges for the transportationsector than the first methodology.

Bristow et al. (2004) choose to analyse two scenarios. In thefirst, the transportation sector’s share of total emissions isassumed to be the same in 2050 as today whereas in the second,this share increases. The latter assumption is based on conclusionsin several studies showing that emission mitigation is moredifficult in the transportation sector. In the latter case, the allowedemission level for the transportation sector is approximately 50%higher than in the case of proportional emission reduction.

Renewable energy is seen in all studies above as a strategicoption to reduce CO2 emissions. However, the assumptionsregarding available resources differ in many aspects. Many ofthe studies do not or only to a small extent describe the resourceissue at all. Other studies take a national approach assuming thata fraction of the national resources could be attributed to thenational transportation sector (see e.g. Robert et al., 2007). Otherstudies take a global view assuming that a specific country and/ora specific sector can utilise a certain fraction of the availableglobal resources (see e.g. Akerman and Hojer, 2006). For Sweden,as an example, a national approach results in larger amounts ofbioenergy available than a global approach due to the country’slarge biomass resources.

The studies also differ in how large and what types ofrenewable resources that are possible to utilise. Whereas Aker-man and Hojer (2005) identify relatively small renewable

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B. Johansson / Energy Policy 37 (2009) 3212–32203214

resources except for biomass, Azar et al. (2003), Grahn (2006)include large but more expensive resources such as solarhydrogen, which by the end of the century becomes a dominantenergy carrier in the transportation sector. The focus purely onbiomass in many studies is probably based on an implicitassumption that only biomass-based transportation fuels can beproduced at a low enough cost to compete with fossil fuels. Thisassumption, however, does not take into account (i) thepotentially large increases in biomass prices as a result of biomassscarcity in world with restrictions on CO2 emissions or (ii) thepotential for future more wealthy generations to utilise morecostly energy carriers if climate change continues to be aprioritised issue.

The studies also differ in the anticipated impact of technolo-gical developments, not the least in regards to future costs forfuel. Another important assumption is whether it is assumed thatcarbon capture and storage (CCS) will be an environmentallyacceptable technology and available for fossil fuels and biomass.Important differences also appear as a result of differentassumptions on the future development of nuclear energy.A large expansion of nuclear energy as described in Turton (2006)reduces the demand for biomass in the electricity sector leavinglarger amounts of biomass for use in the transportation sector. Theopposite effect appear in Azar et al. (2003) where an assumption ofonly insignificant amounts of nuclear electricity production lead to alarge demand for biomass for electricity production leaving nobiomass left for use in the transportation sector.

Worth noting is that most transportation scenarios only takeinto account GHG emissions directly connected to the use ofvehicles. Although vehicle emissions are dominating today,indirect emissions are important (see e.g. Jonsson, 2006) andmight increase as a fraction of total emissions in the future ifvehicle energy-efficiency improvements and low carbon fuels areimplemented. On the other hand, it is reasonable to expect thatthe indirect emissions, emanating largely from stationary indus-tries and machineries, could be reduced at a similar pace as GHGemissions from vehicles used for transportation.

3. The approach of this paper

One hypothesis in this paper is that there are importantphysical restrictions to some of the renewable resources, mainlybiomass. For other energy sources, such as solar energy, there are

Fossil fuelsPetroleum, coal

natural gas

BiomassCrops and residu

Petrol/Diesel

BiodieselMethane fuel

ICEV HEV

Fig. 1. Possible energy pathways from primary resource to end-use. ICEV ¼ internal c

vehicle and BPEV ¼ battery-powered electric vehicle. From Johansson (2003).

few physical restrictions and the availability is instead a functionof the prices the consumers are willing to pay.

Today, aesthetic aspects act as important restrictions for theexpansion of energy sources such as wind power in industrialisedcountries. Whether this restriction will prevail in the future isdifficult to say. With the growing prominence of the climate issue,there might be greater support to loosen some of the aestheticrestrictions currently put on the expansion of these energysources, if the alternative is to restrict the possibility to travel orto enjoy large residential living space. We therefore cannot be surethat current restrictions on the use of renewable energy willremain, at least not those restrictions that are not based on therisk for irreversible adverse changes in the functioning ofecosystems.

With continued economic growth (which is one of the drivingfactors for increasing GHG emissions) the economic resourcesavailable for utilising more expensive low carbon energy carrierswill increase. Whether future consumers, with strict restrictionson GHG emissions, will prefer to maintain a high transportintensity even if they have to pay significantly more for the fuels,or if they will rather invest in other services and goods is notpossible to say today. If current preferences prevail manyconsumers will probably choose the high-cost solution combinedwith continued transportation services. This would imply acontinued growth in transport in the future, although at asomewhat slower pace than without any climate restriction.

The discussion above does not imply that the transportationsector will continue to develop in a business-as-usual fashioneven if there would be few physical restrictions to renewableenergy. The transportation sector will most certainly be affectedby reduced possibilities to use conventional fossil fuels. Increasingfuel prices will drive transport in a more energy-efficient waycompared to a business-as-usual situation, and will reduce thecompetitiveness of energy-intensive transport services comparedto other products and services. (see e.g. Robert et al., 2007).

4. Resources for low carbon transportation fuels

There are several options for producing energy carriers fortransportation as shown in Fig. 1 below. Low carbon solutionscould be based on renewable and nuclear energy or on fossil fuelscombined with carbon capture and storage under the conditionthat the permanence of the storage is safeguarded.

esPrimary electricity

Hydro, wind, solar, nuclear

Alcohol/DME Hydrogen

FCEV BPEV

Electricity

ombustion engine vehicle, HEV ¼ hybrid electric vehicle, FCEV ¼ fuel cell electric

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Table 1Potential for fossil fuels (Sims et al., 2007).

Specific energy source Estimated available energy

resource (EJ)

Rate of use in

2005 (EJ/yr)

Coal (conventional) 4100,000 120

Coal (unconventional) 32,000 0

Peat Large 0.2

Gas (conventional) 13,500 100

Gas (unconventional) 18,000 Small

Coalbed methane 48000? 1.5

Tight sands 8000 3.3

Hydrates 460,000 0

Oil (conventional) 10,000 160

Oil (unconventional) 35,000 3

Table 2Global future biomass potential (Hoogwijk et al., 2003).

Category Potential bioenergy supply

(EJ/yr)

Biomass from surplus agricultural landa 0–988

Biomass production from degraded landsb 8–110

Agricultural residues 10–32

Forest residues 10–16 (+32 from

biomaterials waste)

Animal manure 9–25

Tertiary residue (organic waste) 1–3

Totalc 33–1130

a Available area 0–2.6 Gha, energy crops yield 10–20 Mg ha�1 yr�1. The area

depends on population, diet, productivity of food crops, etc.b Available area 430–580 ha, yield 1–10 Mg ha�1 yr�1.c The total is adjusted taking into account that biomaterials might compete

with the production of biomass from agriculture and forest land.

B. Johansson / Energy Policy 37 (2009) 3212–3220 3215

Renewable energy sources such as biomass, wind, hydro andsolar have the potential to be viable options both in the short andthe long run provided that they are produced in a sustainablemanner including measures such as preservation of long-termproductivity and biodiversity. The climate impact of the renew-able sources depends on the fossil-energy inputs along the fuellife cycle and, for biomass utilisation, on its effect on the carbonpools. Both advanced biofuels and hydrogen system could providevery significant (470%) emission reductions also even if fossilfuels are used for energy inputs (see e.g. Kahn Ribeiro et al., 2007).If energy inputs along the fuel chain will to a greater extent bebased on renewable energy, nearly zero emission fuels can beprovided.

While biomass can be converted to liquid or gaseous hydro-carbons suitable for vehicle use, solar, wind, hydro and nuclearenergy sources are preferably converted to electricity or tohydrogen through electrolysis. The use of fossil fuels with CCSas a low carbon energy source would also be in the form ofelectricity or hydrogen. Although electricity and hydrogen areexcellent energy carriers for use in electric motors, fuel cells andcombustion engines, the storage of these energy carriers remainsa major problem, adding both higher costs and extra weight to thevehicle. Furthermore, the integration of large amounts of inter-mittent sources in the power system is still a problematic issueand the fraction of energy supply based on intermittent energysources are in many cases restricted to 30%. The development ofefficient storage systems might in the future help bridging thepotential lack of correlation between supply and demand andcould loosen these restrictions. Electric vehicles and plug-inhybrid vehicles could play a role here as distributed storagefacilities (see e.g. Kempton and Tomic, 2005).

The economic potential of the different energy sourcesdepends on the physical availability, technology and the pricethe consumer is prepared to pay. Higher market prices andtechnological development, reducing the production costs, willincrease the amount of economically attractive resources.

There are still large fossil-fuels resources available, see Table 1.There is an on-going discussion whether the era of cheap oil isnear its end. However, with price levels around 100–110 USD/barrel2 it would be economically feasible to produce petroleumproducts from a variety of unconventional fossil fuels and coal(IEA, 2008), albeit with potential negative effects for the climate.

Coal is significantly more abundant than resources such asnatural gas and oil. Therefore, coal combined with CCS might be apossible complement to renewable energy in a low carbon system

2 IEA (2008) forecasts an oil price of 110 USD/barrel in 2020.

during the coming century if technological and environmentalissues are solved.3

The potential for renewable energy sources is often restrictedby competition with other uses for the same resources. Bioenergyfor fuel will for example compete with the need to produce foodand fibre. The potential use of biomass for transportation will inturn compete with the demand for heat and power production.The need to preserve biodiversity will also act as an importantrestriction. The many roles for biomass in the ecological systemare different when compared to the restrictions of other renew-able systems such as wind and solar power.

The potential for biomass resources as a source of energy hasbeen estimated in several studies. In a review by Hoogwijk et al.(2003), it is shown that the global potential may vary between 33and 1135 EJ/yr, depending on assumptions (see Table 2). For thehigh-end potential to be realistic it would require a rather slowpopulation growth, a diet less dependent on meat and a highincrease in crop productivity.

In another review of 17 studies on bioenergy potential(Berndes et al., 2003), the potential was estimated to be between100 and 400 EJ/yr. The most important parameters determiningthe potential were land availability and yield levels in energy cropproduction. WEA (2000) estimated a total potential of 276–446 EJ/yr. In the IPCC Fourth Assessment Report it is recognised thatestimated biomass potentials are accompanied with considerableuncertainties and might be 125–760 EJ/yr by 2050 (Barker et al.,2007). In the chapter on energy supply (Sims et al., 2007) biomassresources was estimated to 250 EJ/yr These estimates could becompared to a forecasted total global primary energy demand of450–900 EJ/yr in 2030 and 600–1350 EJ/yr in 2050 (WEA, 2000;IPCC, 2000; Sims et al., 2007).

There is strong reason to believe that, even though there is asignificant potential for increasing bioenergy use compared to thecurrent situation, biomass will be a scarce resource in the longterm.

The physical potential for intermittent renewable resourcessuch as solar or wind is significantly larger than for biomass (seeTable 3). According to the WEA (2000), the annual solar energypotential ranges from between 1600 and 50,000 EJ/yr. Thepractical potential will, however, be lower depending ontechnical, economic and social constraints. Annual wind energyresources would be equivalent to around 500,000 TWh/yr

3 Also biomass could be combined with CCS and thus act as a carbon sink in

the future (see e.g. Azar et al., 2006).

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Table 3Global renewable resource base (Johansson et al., 2004).

Resource Technical potential

(EJ/yr)

Theoretical potential

(EJ/yr)

Hydropower 50 150

Biomass energy 4250 2900

Solar energy 41600 3,900,000

Wind energy 600 6000

Geothermal energy 5000 140,000,000

Ocean energy – 7400

Total 47500 4143,000,000

B. Johansson / Energy Policy 37 (2009) 3212–32203216

(5,800 EJ/yr) with a practical potential of at least19,000–50,000 TWh/yr (200–600 EJ/yr). The potential forgeothermal energy is of similar magnitude as wind and solarpower.

There seem to be few physical restrictions that would preventsolar, wind and geothermal energy from providing the dominatingfraction of global energy supply even though there will berestrictions for some of the potential low-cost solar technologiesdue to limited resources for certain materials (see e.g Anderssonand Jacobsson, 2000). This might force technology in the long runto turn to more expensive but more abundant technologies.Systems based on solar energy could act as a form of backstoptechnology for transportation, defining a maximum fuel cost fortransportation (and other sectors as well).

5. Future cost of low carbon fuels

In most studies, low carbon fuels are estimated to be morecostly than conventional fuels, at least if external costs are notincluded. The extra costs consist of:

Higher production costs. This extra cost includes both the costof the plant and the cost of the used feedstock. � Higher distribution costs. There might be a significant

difference between liquid fuels, gaseous fuels and electricity.New long-distance fuel distribution systems for solar-basedenergy carriers might add significant costs to the energysystem.

� Higher vehicle costs. Storage of hydrogen and electricity in

vehicles might add significant extra costs to the vehicles asmight energy-efficient energy conversion systems such as fuelcells and hybrid systems.

Future costs of all these factors are very uncertain as theydepend on the development of both conventional and newtechnologies. Turning a technology from a marginal phenomenonto a mass-produced technology could be expected to generatesignificant learning effects (see e.g. Ahman, 2003). The magnitudeof these effects is, however, uncertain. Although there are generalhistorical experiences of such learning effects (see e.g. Neij, 1997;IEA, 2000), it is very difficult to project the probable developmentfor a specific technology in the future.

5.1. Biomass-based transportation fuels

Many cost estimates show that the cost of biomass-basedtransportation fuels will be somewhat higher than the currentcost of petroleum fuels (see e.g. Ahman et al., 2005). With higherpetroleum prices or adequate policy instruments the competi-tiveness will improve. A carbon price in the magnitude of USD50–150/tonne CO2 would in the medium term be sufficient for

making biomass-based transportation fuels competitive withfossil fuels (see e.g. Kahn Ribeiro et al., 2007; Johansson, 1996).

The cost estimates are usually based on assumptions ofimproved production technologies and falling feedstock costs,the latter as a result of breeding efforts and improved cultivationand harvesting methods. They usually do not, however, takescarcity into account, resulting in a more positive picture of theavailability of cheap biomass-based transportation fuels thanwhat is reasonable to expect.

Modelling work taking this effect into account indicates thatbiomass-based transportation fuels will not be able to competeeven with significant increases in carbon prices (see e.g. Grahn,2006). The reason for that is that higher CO2 costs will increasethe ability to pay for biomass in all sectors which, when combinedwith physical restrictions of the resource, will lead to significantlyhigher prices of biomass. For example, in the modelling exercise ofGrahn (2006) aiming at a CO2 stabilisation at 450 ppm, a biomassprice of around 10 USD/GJ by 2050 and 37 USD/GJ by 2090 weregenerated. This could be compared to a level of 2–3 USD/GJ oftenused in calculations of future biofuel costs.

5.2. Hydrogen systems

Estimated future production costs for different hydrogenalternatives vary significantly from less the 10 USD/GJ for fossilfuels with CCS up to 40–45 USD/GJ for solar-based hydrogen (IEA,2005; Johansson, 2003). For the production costs of solarelectricity the solar influx is a key parameter together withsuccessful technology development. Therefore, solar hydrogencould be a major export product from sun-rich countries.Biomass-based hydrogen seems to be the cheapest renewablehydrogen alternative in the short term, but would be in the longerterm suffer from the same scarcity problem as the other biomass-based transportation fuels above.

A reasonable assumption of future productions costs for lowcarbon renewable hydrogen seems to be between 20 and 40 USD/GJ (Johansson, 2003; IEA, 2005; Azar et al., 2003). The distributioncost of hydrogen is estimated to be slightly higher than for liquidfuels (see e.g. Johansson, 2003; Ahman et al., 2005). Long-distancetransport of hydrogen would add another cost to distribution butit is reasonable to estimate that the distribution cost should not behigher than 20 USD/GJ.

In addition, it is expected that there will be an extra cost forhydrogen vehicles due to more costly gas storage systems.Estimates of extra costs for hydrogen vehicles are found to be inthe range 5000–7000 USD/vehicle. It is reasonable to believe thatthe cost of storage systems will be reduced in the future. Forexample, the IEA (2005) estimates that the cost for fuel storagecould be reduced by at least 50% by 2030. In many studies ofhydrogen vehicles it is assumed that fuel cells will be their powersource, which will add other costs to the vehicle. However, theseextra costs are expected to be compensated for by reduced fuelconsumption.

5.3. Potential cost for a transport backstop technology

A number of references indicate that large amounts of lowcarbon hydrogen could be available in the future at a cost of40–60 USD/GJ. Using such fuel in ICEVs could be seen as a high-cost backstop technology for the supply of long-term sustainabletransport energy. This assumption is rather conservative as it doesnot assume a full-scale commercialisation of fuel cells or vehiclesmainly using electricity from the grid.

The conclusion, based on this conservative assumption, wouldbe that the cost per kilometre of using low carbon fuels, without

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5

6

7Fuel cost includingfuel taxes

etcInsurance, vehicletaxes etc.Capital costs

Management, tires

B. Johansson / Energy Policy 37 (2009) 3212–3220 3217

assuming any major energy-efficiency improvements, would atthe highest be 70–150% higher than what consumers are facingtoday (taking extra vehicle costs for hydrogen vehicles intoaccount and including current taxes. Low carbon hydrogen is,however, assumed to be exempt from carbon taxation but notfrom the energy tax).

0

1

2

3

4

ReferenceBackstop low costEfficient

Backstop low cost

Backstop high costEfficient

Backstop high cost

Fig. 2. Kilometre costs for a reference petrol-fuelled car and for the backstop

alternatives. Backstop technologies are based on assumptions in Table 4. Efficient

technology is based on 2030 hybrid in Table 5 and an assumption that the extra

costs for hydrogen vehicle in Table 4 can be reduced by 30% as a result of lower

demand for expensive hydrogen storage. The cost of the reference vehicle is based

on the current average Swedish car. 1 USD ¼ 8 SEK. Investment costs are annual-

ised using a 6% interest rate assuming a vehicle life of 10 yr and an annual mileage

of 15,000 km/yr. Vehicle taxes, maintenance costs, management, tires, etc. are

assumed to be the same per kilometre for all alternatives. Carbon taxes are

assumed to apply only to fossil fuels. Energy taxes per MJ and VAT levels are

assumed to be the same for the reference-fuelled car and the vehicle using

backstop low carbon fuel.

Table 4Potential cost of a renewable near zero emission backstop systems.

Low cost High cost

Fuel cost (USD/GJ) 20 40

Distribution cost (USD/GJ) 20 20

Extra vehicle cost (USD/GJ)a 18 25

6. Potential impact of energy efficiency

The high fuel costs indicated above will in the future not leadto similar increases in total costs as they will probably induceenergy-efficiency improvements. Economic theory states thathigher prices will lead to lower demand. Higher fuel prices willboth reduce transport demand and induce energy-efficiencyimprovements. The latter factor is the more important one atleast in the long run, see e.g. Johansson and Schipper (1997). Long-term fuel demand elasticities (taking both changes in energyefficiency and transport demand into account) have beenestimated in several articles and seem to be within the range�0.6 to �1.0 (see e.g. Sterner, 2007). Most elasticities have,however, been estimated from empirical data at much lower pricelevels than could be the situation in the future according to thediscussion above.

In Kahn Ribeiro et al. (2007), it is estimated that energyefficiency could be increased from 7.7 l/10 km to 2.85 l/10 km at anextra investment costs of 5600 USD (see Table 5). Such efficiencyimprovements would be cost effective at a fuel price ofapproximately 34 USD/GJ (equivalent to 1.1 USD/l petrol). That islower than current Swedish fuel prices and much lower thanestimated costs for the low carbon backstop technology discussedabove. This fact indicates that a cost-efficient strategy would mostlikely include significant energy-efficiency improvements.

Historically, a large fraction of the potential gains has, however,been lost due to increases in vehicle size, weight and performance(see e.g. Greene and Plotkin, 2001; Sprei et al., 2008). To get thefull impact of the potential for energy-efficiency improvements, itis important that this trend towards larger cars with excess poweris halted (drivers staying within legal speed limits rarely need theperformance offered by many vehicles today).

Total cost (USD/GJ) 58 85

Total cost petrol-equivalent (USD/l petrol-eq) 1.8 2.7

Extra fuel cost for externalities (USD/l petrol-eq)b 0.37 0.37

VAT (25%) 0.34 0.8

End-use petrol equivalent cost 2.6 3.7Current petrol price including taxes (USD/petrol eq) 1.5 1.5

Current petrol price excluding taxes (USD/petrol eq) 0.5 0.5

Based on estimates for low CO2 emission hydrogen systems.a Based on an extra investment cost of 5000–7000 USD/vehicle. This cost has

been annualised using a 6% real interest rate, assuming a vehicle lifetime of 10 yr, a

fuel consumption of 0.8 l petrol-eq/10 km, and an annual mileage of 15,000 km/

yr.b Here set as current (2008) Swedish fuel taxes excluding the CO2 tax.1

USD ¼ 8 SEK.

Table 5Fuel economy and cost assumptions for efficient vehicles (Kahn Ribeiro et al.,

2007).

Medium-size car l/100 km Cost (%) D Cost USDa

2001 reference 7.69 100 0

2030 baseline 5.55 105 1000

2030 advanced 4.79 113 2600

2030 hybrid 3.33 123 4600

2030 diesel 4.05 119 3900

2030 diesel hybrid 2.85 128 5600

a Cost differential based on a reference 20,000 USD/vehicle.

7. The importance of high transportation costs—a disaggregateapproach

7.1. Passenger transport

The impact of high fuel costs on the total cost for individualpersonal transportation is an important factor when assessing itscompatibility with a transport-intensive future. Today, fuel costsconstitute approximately a quarter of the total cost/km for apassenger car in Sweden, as shown in Fig. 2. Using low carbonbackstop technologies (Table 4) increase the kilometre cost byapproximately 20–40% compared to current vehicles if notutilising more efficient technologies. If cost efficient, energy-efficient technology is used (Table 5), this increase could bereduced to less than 10% of current consumer costs. A 20–40% costincrease over a 40–50 yr period would be equivalent to an annualincrease of approximately 0.4–0.8%. This could be compared withoften expressed economic growth figures for industrialisedcountries of about 1.5–2%/yr. These relations indicate that futureconsumers would be able to consume a significant amount ofprivate transportation services in the future without reducing, theconsumption space for other goods and services when comparedwith today’s levels.

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In the comparison in Fig. 2, low carbon fuels are not assumedto be burdened by any CO2 tax. The energy tax per MJ (fuel taxexcluding CO2 tax) and VAT levels are, however, assumed to be thesame for the reference car and the vehicles using low carbonbackstop fuels. These taxes are implemented partly for fiscalreasons and partly in order to cover external effects other thanCO2 such as road wear, road accidents noise, local air pollution,etc. and in this paper, it is assumed that no major changes will bemotivated by a change of fuel.

Introducing vehicles with high energy efficiency would,however, reduce tax incomes and reduce the coverage of allexternal costs. This could motivate increases in energy tax levels.If the same energy taxes per kilometre are assumed for allalternatives instead of the same tax levels per unit of energy, asmade in Fig. 2, this would result in increase of the total cost forusing energy-efficient vehicles by 4%.

For air transportation we do not know if there will be acomparable backstop fuel as anticipated for road transportation.Instead, we assume that aviation either will be able to use afraction of the available biomass for Fischer–Tropsch fuels or,alternatively, to contribute economically to biomass CCS systems,thereby compensating for the sector’s direct emissions. In acalculation exercise to see which effect a global carbon restrictioncould have on private consumer costs for air transport, wetherefore add a carbon price of 200–900 USD/CO2 to the totalcost (consistent with a future shadow price on CO2 in a climate-restricted world, see e.g. IEA, 2008; van Ruijven et al., 2008;Grahn, 2006).

Pricing CO2 at long-term sustainable levels could be forexample lead to round trip ticket prices from Stockholm toBangkok being 10–80% higher than current prices, Table 6. If thepricing takes the effects of contrails and other greenhouse effectsinto account it could result in even higher cost increases. Howexactly contrails should be taken into account is, however,currently under debate (see e.g. Forster et al., 2006, 2007).

The extra costs would be significantly reduced if energy-efficiency improvements are implemented and the cost increasescould be somewhere between 1% and 45% compared to currentStockholm–Bangkok prices.

Air transport pricing varies between the few premiumcustomers paying higher prices for maximum flexibility and thelarge amount of lower price paying consumers with fewer

Table 6Estimated effects on transport costs from Stockholm to frequent leisure travel

destinations through introduced carbon prices.

Stockholm–Bangkok,

round trip

Stockholm–Canary

Islands, round trip

Distance (km) 16500 8700

Current price (USD/journey) 1300–2600 400–600

CO2 emissions today kg 1290a 700a

Potential cost increase

compared with today

(USD/journey) (CO2

price, no energy

efficiency)

260–1160b 140–630b

Potential cost increase

compared with today

(USD/journey) (CO2

price, energy efficiency)c

40–580b 20–310b

a Source: SAS emission calculator.b Lower level based on an assumed cost of CO2eq emission of 200 USD/tonne

CO2eq, and the higher based on 900 USD/tonne CO2.c The extra costs for CO2 emissions are reduced as an effect of lower CO2

emissions and reduced direct fuel costs. Energy-efficiency improvements are

assumed to be 40% based on Akerman (2005). The assumed fuel price is 2 USD/

gallon.

requirements in terms of flexibility and comfort. The effect of acarbon-induced cost increase will most probably affect theseconsumer groups in very different ways. The effect will dependprimarily on the response from the aviation business with regardto how to spread the extra costs amongst the consumer groups.

7.2. Goods transport

For the transport of goods by truck, fuel costs contribute toapproximately 20% of the total cost for transportation (SIKA,2002). The effect of doubling fuel prices in line with what wasindicated above would amount to transport cost increases in themagnitude of 20–25%. The effect on product prices will besignificantly less. Transportation constitutes on average less than5% of total product costs (SIKA, 2007). This would in turn indicatethat doubling fuel costs would result in an average product costincrease of approximately only 1%. For more transport-intensiveproducts such as roundwood with a transport cost fraction ofapproximately 15–25%, it would result in increased product costsof approximately 3–5%. It is doubtful that increased transportcosts would have any major impact on general global transporttrends.

8. The importance of high transportation costs—a disaggregateapproach

Is it probable that increased transportation costs due to a strictclimate restriction will be enough to stop the growth oftransportation? If economic growth continues, the answer isprobably no. Even if transportation is expected to grow at thesame pace as economic growth and fuel costs (includingnecessary vehicle adaption) would be 2–3 times higher thantoday, the resources available for consumption other thantransport would more than double compared to the currentsituation. High fuel costs could therefore probably be assimilatedin a growing economy.

This is consistent with overall analyses of GHG mitigationpolicies where rather restrictive mitigation polices would allowfor significant economic growth over the longer period (see e.g.Azar and Schneider, 2002; IPCC, 2007; Stern, 2007).4

9. Discussion

The main conclusion of this paper is that it seems to betheoretically possible to combine a relatively transport-intensivesociety with minor negative effects on the climate system. In thispaper we argue, however, that such a solution will probably not bebased on low-cost energy carriers.

In this paper, we conclude that there are restrictions forutilising biomass-based transportation fuels in the long term. Thisfact has in some studies been the basis for arguing that technologycannot solve the climate change problem and, as a consequence,major restrictions in transport demand are called for. If one wouldaccept significantly higher fuel costs than those of today thisconclusion can, however, be challenged in the longer term. Withhigh fuel prices, the potential for renewable energy can increasesignificantly, as it will be economically viable to utilise moreabundant energy sources such as solar, wind and geothermalenergy for transportation services.

4 This is compared to only slightly lower growth in the business-as-usual

scenario.

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The reliance on high-cost fuels will, however, not necessarilylead to similar cost increases for providing transport services if theexisting large potential for technical improvements is utilised forreducing specific energy use rather than for allowing stronger andheavier vehicles. A realistic scenario would be based on increases inenergy prices by 100%, but a 50% reduction in specific energy use(l/10 km), leading to similar variable driving costs. It should,however, be noted that the costs discussed in this paper areestimates for a distant future when the new technologies havegained significant market shares. During a transition period beforecost reductions have been achieved through technological learningand scale economy, the cost differences between existing and newtechnologies will probably be greater than indicated in this paper.

The conclusion that an increased transport demand can intheory be consistent with low impact on the climate is heavilydependent of the successful development and deployment of newenergy technology systems. It might require totally new infra-structure systems (in the hydrogen case) which will not bedeveloped without a strong commitment within society.

Changing the fuel supply to the transportation and othersectors will require significant efforts and large investments. Oneproblem for the development of new technological systems is theprofound uncertainty in whether the development will in fact besuccessful. Another problem is the difficulty to escape from lock-ins in historically dominating technologies. In that sense, asuccessful development of plug-in hybrids could prosper on theutilisation of a widespread existing distribution system in contrastto hydrogen that would require a totally new infrastructure. Suchdevelopment is expected to take a significant amount of time andwould require government policy interventions at several stagesin the transition (see e.g. Difiglio and Gielen, 2007; Hyways,2008).

The discussion of high-cost backstop technologies in this paperhas had the purpose of demonstrating that even this expensivetechnology could be feasible in a future, more wealthy society.However, there are reasons to believe that there might be cheaperalternatives. For example, electricity has for a long while beenpromoted as a potentially important energy carrier for transpor-tation. The direct energy cost for providing a certain transporta-tion service using renewable electricity from the net is low as aresult of the system’s high energy efficiency. The main restrictionfor widespread use is the high cost and low storage capacity of thebatteries. With a renewed interest in battery technology there is amore optimistic sentiment regarding the possibility to utiliseelectric drive systems for passenger vehicles, especially regardingplug-in electric vehicles. Plug-in electric vehicles can be expectedto take 50–75% of their energy supply from the net (cf. Karlssonand Ramirez, 2007). The use of hybrid systems would not onlyincrease system efficiency significantly (see e.g. Ahman, 2001;Johansson and Ahman, 2002), but also enable a more efficientutilisation of low carbon energy carriers at a low cost. Comparedto using hydrogen produced from electricity through electrolysis,direct use of electricity would avoid energy-consuming transfor-mation processes (Ahman, 2001).

To depend on uncertain technological development might berisky. Therefore, it would be a reasonable hedging strategy todesign a society in such a way that transport demand does notcontinue to increase at such a great pace as today, especially ifother positive effects are harvested at the same time. Otherreasons to reduce transport demand include the avoidance ofother negative effects of transport such as noise, particulateemissions, the use of natural resources in infrastructure and theencroachment on natural landscapes, indicating that technicalmeasures alone do not seem to be the most efficient measures(see e.g. Hickman and Banister, 2007; Chapman, 2007; Shaheenand Lipman, 2007; Litman, 2008).

The discussions in this paper have mainly been from theperspective of industrialised countries. It should be noted thattransport growth is expected to be faster in developing countrieswhere the economic resources to use high-cost technologies withlow CO2 emissions might be more limited. It is, however, outsidethe scope of this paper to analyse potential differences amongcountries regarding the ability to incorporate new low carbontechnologies in the transportation system.

10. Conclusion

The long-term potential for low carbon transportation fuels toa large extent depends on the prices thought to be acceptable byconsumers. Although there is a large potential to increase the useof biomass energy significantly from today’s level, there will besevere restrictions in its use within the transportation sector.Other renewable energy sources such as wind and solar are muchmore abundant and could provide the lion’s share of the necessarytransportation fuel in the long run. Although potentially muchmore expensive than current fuels, they could, in combinationwith strong efficiency improvements, provide transportationservices at costs that could be handled by the consumer in agrowing economy. Although higher transportation costs will leadto lower transportation demands compared to a business-as-usualsituation, current and even higher levels of transportation couldbe provided while at the same time meeting climate policy goals.

Relying solely on technical measures would, however, be riskyas there is no guarantee that the technology will develop at asufficient rate. Furthermore, mobility has other negative environ-mental effects that would call for measures affecting transportdemand.

Acknowledgement

I hereby acknowledge Lars J Nilsson for his valuable commentson the manuscript.

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