De-Coding the West’s Addiction to Fossil Fuels: Fostering a Sustainable Transportation Fuel Market in the US & EU

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February 15, 2018

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by Michael Eggleston* (Advanced Biofuels USA) “If we do not break the lock-in effect of our dominant fuel sources, we may in fact facilitate mother nature in breaking the lock-out of her dominant species,” wrote Stephen L. Bi in The Path Dependent Road to Sustainable Personal Transport: Increasing returns economics and the lock-in and lock-out effects on the history and future of motorized transport.

Stephen Bi is a recent graduate of the Centre international de formation européenne’s (CIFE) Master in Global Energy Transition and Governance, a program that aims to give a deep understanding to the complexity of the current energy transformations in Europe and around the world.

Specifically, the author’s thesis, which has been nominated for the European Energy Exchange (EEX) Excellence award in October of 2018, focuses on the experiences of the United States (US) and the European Union (EU) with the personal automobile, and how the social institutional environments across the two compare and contrast in policies surrounding the de-fossilization of transport.

To claim the global energy transition to be a technological transition would be misleading, Bi remarked, because society has never lacked the access to alternative fuel systems. Rather, he argued that to a large extent, despite technical inferiorities compared to electric vehicles (EV’s) and ethanol fuel, the gasoline-powered internal combustion engine (ICE) came to dominate the market due to economic appeal and some plain old dumb luck. For instance, it was by pure coincidence that the first American oil fields were discovered immediately before financing the Civil War would impose a heavy sin tax on alcohol, thus gifting the oil tycoons a distinct competitive advantage for the industry’s first half century of development. The US ethanol industry had all but dissolved, and he reasoned that decades of infrastructural, financial, political and institutional lock-out came to follow.

Rather than being dependent on the petroleum industry, Bi proposed that it is in the automotive industry’s best interest to survive in a post-oil economy.

Specifically, to understand the hypothesized outlook on the transportation sector of the two states he asked the following questions:

What are the major barriers to the de-fossilization of transport in the USA and EU?
What insights can be gained from a path dependency perspective of automobile history for policy making, and to what extent have they been acknowledged by the US or EU governments?
What would an ideal sustainable transportation sector look like in either region, and how should they shape their short-, medium- and long-term visions?

United States

It was conveyed that in the US, gasoline consumption has become synonymous with driving, which in turn has become a symbol of independence, control and status.

On Capitol Hill, this culture is propagated by lawmakers whose interests have become so aligned with the oil industry that they refuse to adopt any institutional view apart from the fossil fuel lock-in. Owing to the country’s loose lobbying regulations, American oil companies now enjoy the highest rate of oil subsidization in the developed world. In other words, the corruption of governmental officials through financial and/or personal influence has become institutionalized in this capitalistic democracy, the author theorized.

For example, Bi mentioned that in the early 1920s, the Ethyl Gasoline Corporation (Ethyl Corp), a cooperation between General Motors (GM) and Standard Oil of New Jersey (later to be renamed Exxon) discovered that adding lead to gasoline could not only impart the same octane boosting properties as ethanol blends, it could also be patented. Almost all US gasoline would be leaded from the 1930s through the 1980s, when it was finally revealed to have caused extremely high incidence of lead poisoning. The fact that Ethyl Corp was able to convince the public to use this product against their own common sense and to the detriment of their own health is a sobering indication of the power held by the institutionalization of fossil fuels, asserted Bi.

Hampered by this political and cultural self-identity in oil dependency, Bi summarized that alternative fuels have been envisioned in this country as a supplemental supply for energy security and for techno-economic reasons.

To foster a sustainable transportation fuel market, Bi suggested that the short-term objective should focus on further investments in a wide range of R&D technologies to reduce costs, and to improve market readiness, as the current political climate is not conductive to any meaningful break from the fossil fuel lock-in.

In regards to biofuels, Bi hypothesized that as they are phased in, the reduction in gasoline consumption will directly result in a decrease in gasoline subsidies. These savings should then be spent on subsidies for biofuel consumption, suggested the author, such that the end-user cost of fuel per mile driven should not increase noticeably. This policy strategy would serve the dual purpose of unlocking the “petroleum techno-institutional complex,” as denoted in the thesis, while building an institutional structure around advanced biofuels and other sustainable technologies such as electric vehicles (EVs).

European Union

On the other side of the coin, Bi theorized that the extremely low oil subsidies in the EU indicate that it is not subject to the same intentional lock-out forces that have dominated the American political economy for decades. Instead, EU energy governance is beholden to the interests of civil society and of its member states.

However, Bi suggested that the EU has provided anything but a long-term perspective for investment and may put the whole biofuels sector at risk of losing the trust of investors. In other words, the author suggested that a “technocratic adaptive approach” may not be compatible with modern economic institutions and can potentially lead to financial lock-out. He later stated that too much specificity in short term policies can only lead down the familiar path of lock-out and technological inertia.

Bi further elaborated that since the long-term goal in the EU’s energy strategy is to eliminate dependence on oil, it would be wise to replace as much as possible in the short-term. The short-term objective should be to displace fossil fuels as quickly as possible through support for enhanced market penetration of competitors, the author proposed.

On a medium-term outlook, the support of technological diversity in R&D to determine sustainability and feasibility of all potential fuels should be emphasized, he suggested.

Rather than its immediate goal, the author advises the long-term goal of the EU should be the European Commission’s desire for “unequivocal sustainability” in personal transport, in which only the most proven technologies will receive public support.

It is possible that the ICE ban passed in some European countries may ultimately prove environmentally detrimental, he commented. He surmised it would inherently lock out biofuels, which are better equipped to displace oil in the short-term and may even become the more sustainable option in the long-term as advanced biofuels continue to develop.

Moving forward, Bi recommended that research towards a more precise definition of sustainability must also continue in parallel, particularly on indirect land-use change (iLUC) and the relationships between biofuels and food supply and demand.

Paving the Way for Flex Fuel Plug-in Hybrids (FFPHEVs)

For Bi, the ideal vehicle fleet would empower drivers with the freedom to choose any transport fuel they prefer based on price, environmental responsibility and performance. In societal terms, the vehicle fleet needs better absorptive capacity for a transition away from fossil-dependent mobility.

Case in point, flex fuel plug-in hybrids (FFPHEVs) are a more attractive investment for car-makers than revolutionary technologies such as hydrogen vehicles since they do not require much new infrastructure to perform and thus support short term returns in today’s oil-dominant transport fuel market, he theorized.

Not only are FFPHEVs an attractive short-term solution, however, Bi implied that they are also an impactful transitional force in the medium-term. Investments into expanding the market-penetration of FFPHEVs will buy time for advanced biofuels and EVs to advance along their “learning curves”, elaborated Bi optimistically. In other words, this should pave the way for further sustainability research data to be collected in order to legislate wise and rational policy, which may vary with geography. Examples of this research include Life Cycle Assessment (LCA) and iLUC modeling of biofuel production, he explained.

Bi recommended that regulatory objectives should begin with manufacturer tax incentives or outright mandates on the production of FFPHEVs. This market-ready technology unlocks the greatest potential for optimal sustainability in the transport sector and offers consumers freedom of choice in the fuel market thus mitigating the risk of getting into another techno-institutional lock-in.

However, price point in comparison to the low-end petrol car market remains the biggest question and potential hurdle to FFPHEV adoption. This is where legislation will be necessary to artificially deflate costs through tax incentives, asserted Bi.

FFPHEVs are certainly a more profitable long-term investment, he stated, since this technology will be subject to increasing returns by network economies with both the biofuels market and the development of EV infrastructure.

There is hope for the continued increase of advanced biofuels production and blending mandates which were instituted a decade ago, he expressed, but the funding for the short-term goals concerning FFPHEVs will likely have to rely on coordinated action in the private sector.

Conclusion

Bi recommended that the medium-term objective for both regions should turn to developing infrastructure to support the incoming technologies and to provide technology neutral support for all alternative fuels.

Following this pattern, he implied that the long-term objective should then consist of a liberalized market of sustainable transportation fuels including ethanol, biodiesel and EVs among others and a vehicle fleet capable of using them interchangeably.

Marketing schemes suggested, which would resonate with the American public, are the high octane performance of ethanol, the freedom of fuel choice that FFPHEVs offer and the low cost of refueling EVs.

While the early history of motorized vehicles was largely a tale of luck, greed and lies in America, the EU has the opportunity to direct the future of sustainable transport through science, cooperation and transparency, the author concluded.

To read the full text of Bi’s inclusive explanation to the novel concepts of inherent and intentional lock-out of sustainable transport alternatives please click here.

As mentioned before, Bi is a recent graduate of CIFE and now holds a Research Assistant position at the Potsdam Institute for Climate Impact Research (PIK). There, he is helping to develop a software package which improves the reproducibility and transparency of data from PIK’s Model of Agricultural Production (MagPIE) land-use model and Regionalized Model of Investments and Development (REMIND) climate-energy-economic model. Following this experience, he is planning to pursue a PhD to further investigate the sustainability and economic prospects of alternative transportation technologies through quantitative methods, which he hopes can be used to impact policy decisions moving forward. He may be contacted at slb462@gmail.com regarding questions about his thesis or inquiries about his research.

Thesis: The Path Dependent Road to Sustainable Personal Transport: Increasing returns economics and the lock-in and lock-out effects on the history and future of motorized transport

Summary for European Energy Exchange (EEX) Excellence award

CIFE is a private institution of higher education and research, founded in 1954, which receives special funding in the framework of the Jean Monnet Program of the European Union and operates from its head office in Nice and branches offices in Berlin, Brussels and Istanbul. Every year, students from all continents and a great variety of countries enroll into its programs, which lead to a degree at Master Level (EQF 7) recognized by the French state. The graduates of CIFE’s Master’s programs, like Bi, work as Senior officials in European institutions, policy officers within the UN framework, administrators, diplomats, consultants, researchers for think tanks, lobbyists and academic experts.

To learn more specifically about CIFE’s Master in Global Energy Transition and Governance please click here. MORE

* Michael Eggleston is an aspiring policymaker studying interdisciplinary & intercultural communication with the University of Rhode Island’s International Engineering Program. He is spending a semester abroad at the Technische Universität Darmstadt in Darmstadt, Germany and will be reporting on and representing Advanced Biofuels USA at international conferences surrounding Europe’s energy transition.

2/16/18 updates to correct typos, clarification.