Regulatory adaptation: Accommodating electric vehicles in a petroleum world

This paper addresses the policy challenges of adjusting established regulations to accommodate evolving and new technologies. We examine energy and emissions regulations for older petroleum powered vehicles and newer plug-in electric vehicles. Until now, vehicle regulations across the world have ignored energy consumption and emissions upstream of the vehicle (at refineries, pipelines, etc), largely because of the convenient fact that upstream emissions and energy use are nearly uniform across petroleum-fueled vehicles and play a relatively minor role in total lifecycle emissions. Including upstream impacts would greatly complicate the regulations. But because the vast majority of emissions and energy consumption for electric vehicles (and hydrogen and, to a lesser extent, biofuels) are upstream, the old regulatory design is no longer valid. The pressing regulatory question is whether to assign upstream GHG emissions to electric vehicles, or not, and if so, how. We find that assigning zero upstream emissions—as a way of incentivizing the production and sale of PEVs—would eventually lead to an erosion of 20% of the GHG emission benefits from new vehicles, assuming fixed vehicle standards. We suggest alternative policy mechanisms and strategies to account for upstream emissions and energy use.