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An Economic Assessment of Low Carbon Vehicles

Czech Republic EU France Germany Poland Spain
| 30.06.2013

Europe could enhance its growth prospects and create additional employment through innovation to improve vehicle efficiency, according to analysis by Cambridge Econometrics and Ricardo-AEA. The report Fuelling Europe’s Future was commissioned by the European Climate Foundation and was informed by a panel of experts from the motor vehicles industry and other transport sector stakeholders.

Improving the efficiency of energy conversion in vehicles would allow the EU to reduce its dependence on foreign oil, delivering €58-83 billion in annual fuel savings by 2030. Jobs would be created by increased spending on vehicle technology but, more importantly, by a shift in spending away from imported fossil fuels and back towards other areas of the European economy.

The study used Ricardo-AEA’s modeling framework to assess the impact of four transition scenarios on the total cost of vehicle ownership, highlighting the trade-off between increasing capital costs of vehicles and falling fuel costs. The net impact on the economy of these changes was then assessed using Cambridge Econometrics’ integrated European model E3ME.

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The research shows that a cost-effective transition to fuel efficient cars is possible and that, if this can be realised, it will improve the spending power of European consumers, with positive impacts for the wider economy. The transition from lower spending on fuel to increased spending on vehicles will also generate jobs across the European motor vehicle sector and its supply chain; while the reduction in spending on imported oil means that Europe’s net trade position also improves. In a case where the technology costs are higher than those forecast by the SULTAN model, the economic impact will be diminished, but the environmental benefits will still be realised.