Prospects for Plug-in Hybrid Electric Vehicles in the United States and Japan: A General Equilibrium Analysis

Abstract

The plug-in hybrid electric vehicle (PHEV) may offer a potential near term, low carbon alternative to today's gasoline- and diesel-powered vehicles. A representative vehicle technology that runs on electricity in addition to conventional fuels was introduced into the MIT Emissions Prediction and Policy Analysis (EPPA) model as a perfect substitute for internal combustion engine (ICE-only) vehicles in two likely early-adopting markets, the United States and Japan. We investigate the effect of relative vehicle cost and all-electric range on the timing of PHEV market entry in the presence and absence of an advanced cellulosic biofuels technology and a strong (450ppm) economy-wide carbon constraint. Vehicle cost could be a significant barrier to PHEV entry unless fairly aggressive goals for reducing battery costs are met. If a low cost vehicle is available we find that the PHEV has the potential to reduce CO2 emissions, refined oil demand, and under a carbon policy the required CO2 price in both the United States and Japan. The emissions reduction potential of PHEV adoption depends on the carbon intensity of electric power generation and the size of the vehicle fleet. Thus, the technology is much more effective in reducing CO2 emissions if adoption occurs under an economy-wide cap and trade system that also encourages low-carbon electricity generation.