KOTELNIKOVA Alena

The correct affiliation for Anna Creti is: Universite Paris-Dauphine, PSL Research University, LEDa, CGEMP, 75016 Paris, France.

We consider a partial equilibrium model to study the optimal phasing out of polluting goods by green goods. The unit production cost of the green goods involves convexity and learning-by-doing. The total cost for the social planner includes the private cost of production and the social cost of carbon, assumed to be exogenous and growing at the social discount rate. Under these assumptions the optimization problem can be decomposed in two questions: (i) when to launch a given schedule. (ii) at which rate the transition should be completed that is, the design of a transition schedule as such. The first question can be solved using a simple indicator interpreted as the MAC of the whole schedule, possibly non optimal. The case of hydrogen vehicle (Fuel Cell Electric Vehicles) offers an illustration of our results. Using data from the German market we show that the 2015-2050 trajectory foreseen by the industry would be consistent with a carbon price at 52(sic)/t. The transition cost to achieve a 7.5 M car park in 2050 is estimated at 21.6 billion (sic) that is, to JEl 4% discount rate, 115 (sic) annually for each vehicle which would abate 2.18 tCO(2) per year.

What economic and policy framework would foster a transition in the European transport sector from fossil fuels to hydrogen in the long term (2030-50)? This research combines empirical and theoretical approaches and aims to answers the following questions:1.How to design appropriate policy instruments to solve inefficiencies in hydrogen mobility deployment?2.How to define abatement cost and an optimal launching date in the presence of learning-by-doing (LBD)?3.How to define an optimal deployment trajectory in presence of LBD and convexity in investment costs?The paper ‘Transition Towards a Hydrogen-Based Passenger Car Transport: Comparative Policy Analysis‘ draws a cross-country comparison between policy instruments that support the deployment of Fuel Cell Electric Vehicle (FCEV). The existing policy framework in favour of FCEV and hydrogen infrastructure deployment is analysed. A set of complementary ex-post policy efficiency indicators is developed and calculated to rank the most active countries, supporters of FCEV. Denmark and Japan emerge as the best providers of favourable conditions for the hydrogen mobility deployment: local authorities put in place price-based incentives (such as subsidies and tax exemptions) making FCEV more financially attractive than its gasoline substitute, and coordinate ramping-up of their hydrogen infrastructure nationally.The paper ’Defining the Abatement Cost in Presence of Learning-by-doing: Application to the Fuel Cell Electric Vehicle’ models the transition of the transport sector from a pollutant state to a clean one. A partial equilibrium model is developed for a car sector of a constant size. In this model the objective of the social planner is to minimize the cost of phasing out a stock of polluting cars from the market over time. The cost includes the private cost of green cars production, which are subject to LBD, and the social cost of carbon, which has an exogenous upward trend. During the transition, the equalization of marginal costs takes into account the fact that the current action has an impact on future costs through LBD. This paper also describes a suboptimal plan: if the deployment trajectory is exogenously given, what is the optimal starting date for the transition? The paper provides a quantitative assessment of the FCEV case for the substitution of the mature Internal Combustion Engine (ICE) vehicles. The analysis concludes that the CO2 price should reach 53€/t for the program to start and for FCEV to be a socially beneficial alternative for decarbonizing part of the projected German car park in the 2050 time frame.The impact of LBD on the timing and costs of emission abatement is, however, ambiguous. On the one hand, LBD supposes delaying abatement activities because of cost reduction of future abatement due to LBD. On the other hand, LBD supposes starting the transition earlier because of cost reduction due to added value to cumulative experience. The paper ‘The Role of Learning-by-Doing in the Adoption of a Green Technology: the Case of Linear LBD’ studies the optimal characteristics of a transition towards green vehicles in the transport sector when both LBD and convexity are present in the cost function. The partial equilibrium model of (Creti et al., 2015) is used as a starting point. For the case of linear LBD the deployment trajectory can be analytically obtained. This allows to conclude that a high learning induces an earlier switch towards green cars in the case of low convexity, and a later switch in the case of high convexity. This insight is used to revisit the hydrogen mobility project in Germany. A high learning lowers the corresponding deployment cost and reduces deepness and duration of the, investment ‘death valley’ (period of negative project’s cash flow). An acceleration of exogenously defined scenario for FCEV deployment, based on the industry forecast, would be beneficial to reduce the associated transition cost.

What is the long-term (2030-50) economic and regulatory framework to support the energy transition from fossil fuels to hydrogen in the European transport sector? This research combines theoretical and empirical approaches to answer the following three questions:1. How to design appropriate support policies to overcome market imperfections in the deployment of hydrogen mobility technologies? 2. How to model abatement costs taking into account learning effects (LBD)?3. How to define the optimal deployment trajectory when LBD and convexity of investment costs are present? The paper 'Transition to a Hydrogen Passenger Transport System: Comparative Policy Analysis' scrutinizes support policies aimed at solving market imperfections in the deployment of hydrogen mobility. The paper makes an international comparison of instruments to support vehicle deployment. Ex-post indicators of policy effectiveness are developed and calculated to classify countries according to their willingness to promote fuel cell vehicles (FCEV). Today, Japan and Denmark appear to be the best providers of an enabling environment for hydrogen mobility deployment. Local authorities are introducing strong pricing instruments (such as subsidies and tax exemptions) to make FCEVs more attractive than their gasoline counterparts and are coordinating the deployment of hydrogen infrastructure in the territory.The paper 'Modeling Abatement Costs in the Presence of Learning Effects: The Case of the Hydrogen Vehicle' presents a model of the transition of the transportation sector from a polluting state to a clean state. A partial equilibrium model is developed for an automotive sector of constant size. The social optimum is reached by minimizing the cost of the transition of the car fleet over time. This cost includes the private costs of producing decarbonized vehicles (subject to learning effects) as well as the social cost of CO2 emissions which follows an exogenous upward trend. The paper characterizes the optimal trajectory as a gradual replacement of polluting vehicles by decarbonized ones. During the transition, the equalization of marginal costs takes into account the impact of present actions on future costs via the learning effect. The paper also describes a sub-optimal trajectory where the deployment trajectory would be an exogenous data: what would be the optimal starting date of the transition? The paper presents a quantitative assessment of the substitution of FCEVs for internal combustion vehicles (ICEs). The analysis concludes that FCEV will become an economically viable option to decarbonize part of the German car fleet by 2050 as soon as the carbon price reaches 50-60€/t.The paper 'The Role of Learning Effects in the Adoption of Green Technology: The Linear LBD Case' studies the characteristics of an optimal deployment path of decarbonized vehicles in the case where learning effects and convexity are present in the cost function. The partial equilibrium model of Creti et. al (2015) is used as a starting point. In the linear LBD case the optimal deployment trajectory is obtained analytically. Strong learning induces an earlier transition to green vehicles in the weak convexity case and a later transition in the strong convexity case. This result allows us to revisit the H2 Mobility project in Germany. A stronger learning effect and an accelerated deployment lead to a less costly transition and a shorter period of negative cash flow.

In Europe the transport sector contributes about 25% of total GHG emissions, 75% of which come from road transport. Contrarily to industrial emissions road emissions have increased over the period 1990-2015 in OECD countries: California (+26%), Germany (0%), France (+12%), Japan (+2%), Denmark (+30%). The number of registered vehicles on road in these countries amounts respectively to: California (33 million), Germany (61.5 million), France (38 million), Japan (77 million), Denmark (4 million). Even if these numbers are not expected to grow in the future this calls for major programs to reduce the corresponding GHG emissions in order to achieve the global GHG targets for 2050. The benefits from these programs will spread out to non OECD countries in which road emissions are bound to increase. Programs to promote zero emissions vehicles (ZEV) effectively started in the 2000’s through public private partnerships involving government agencies, manufacturers, utilities and fuel companies. These partnerships provided subsidies for R&D, pilot programs and infrastructure. Moreover, technical norms for emissions, global requirements for the portfolio of sales for manufacturers, rebates on the purchasing price for customers as well as various perks (driving bus lanes, free parking, etc.) are now in place. These multiple policy instruments constitute powerful incentives to orient the strategies of manufacturers and to stimulate the demand for ZEV. The carbon tax on the distribution of fossil fuels, whenever it exists, remains low and, at this stage, cannot be considered as an important driving force. The cases studies reveal important differences for the deployment of battery electric vehicle (BEV) versus fuel cell electric vehicle (FCEV). BEV is leading the game with a cheaper infrastructure investment cost and a lower cost for vehicle. The relatively low autonomy makes BEV mostly suited for urban use, which is a large segment of the road market. The current level of BEV vehicles on roads starts to be significant with California (70,000), Germany (25,000), France (31,000), Japan (608,000) Denmark (3,000), but they remain very low relative to the targets for 2020: California (1.5 million), Germany (1 million), France (2 million), Japan (0.8-1.1 million for ZEV new registrations), Denmark (0.25 million). The developments and efficiency gains in battery technology along with subsidies for battery charging public stations are expected to facilitate the achievement of the growth. The relative rates of equipment (number of publicly available stations / number of BEV) provide indirect evidence on the effort made in the different countries: California (3%), Germany (12%), France (28%), Japan (11%), and Denmark (61%). In some countries public procurement plays a significant role. In France Autolib (publicly available cars in towns) represents a large share of the overall BEV deployment (12%), and the government recently announced a 50% target for low emissions in all public vehicles new equipment. FCEV is still in an early deployment stage due to a higher infrastructure investment cost and a higher cost for vehicle. The relatively high autonomy combined with speed refueling make FCEV mostly suited for long distance and interurban usage. At present there are only a very limited numbers of HRS deployed: California (28), Germany (15), France (6), Japan (31), Japan (7), Denmark (7), and only a few units of H2 vehicles on road: California (300), Germany (125), France (60), Japan (7), Denmark (21). However, a detailed analysis of the current road maps suggests that FCEV has a large potential. Targets for the 2025-2030 horizons are significant in particular in Germany (4% in 2030), Denmark (4.5% in 2025) and Japan (15-20% for ZEV new registrations in 2020). The California ARB has recently redefined its program (subsidies and mandates) to provide higher incentives for FCEV. France appears to focus on specialized regional submarkets to promote FCEV (such as the use of H2 range extending light utility vehicles). The financing of the H2 infrastructure appears as a bottleneck for FCEV deployment. Roadmaps address this issue through progressive geographical expansion (clusters) and a high level of public subsidies hydrogen refueling station (HRS) in particular in all countries except France. At this stage of BEV and FCEV do not appear as direct competitors. they address distinct market segments. Unexpected delays in the development of infrastructure in FCEV, possible breakthroughs in battery technology, and the promotion of national champions may change the nature of this competition, making it more intense in the future.

The transition of a sector from a pollutant state to a clean one is studied. A green technology, subject to learning-by-doing, progressively replaces an old one. The notion of abatement cost in this dynamic context is fully characterized. The theoretical, dynamic optimization, perspective is linked to simple implementation rules. The practical "deployment" perspective allows to study sub-optimal trajectories. Moreover, the analysis of the launching date provides a denition of a dynamic abatement cost easy to use for evaluation of real-world policy options. The case of Fuel Cell Electric Vehicles offers an illustration of the proposed methodology.

This study develops a consistent framework to compare FCEV with gasoline ICE (ignition combustion engine) and applies this framework to the German market over the period 2015-2050. As such it provides for: - The formulation of a proper cost benefit analysis, including the definition of the abatement cost for the hydrogen technology. - The simulation of the results under various technological and cost assumptions. - The identification of the major conceptual issues to facilitate analytical developments. The sources used in the analysis are based on an update of previous industry studies. The main conclusion is that FCEV could be a socially beneficial alternative for decarbonizing part of the projected German car park at the horizon 2050. The corresponding abatement cost would fall in the range of 50 €/t CO2 to 60 €/t CO2. This range is higher than the current estimate for the normative cost of carbon as expressed in Quinet (2009 and 2013), which is around 30€/t in 2015. Still the gap is not out of hand. We identify the market and cost conditions that would shorten the gap. The methodology used in this study could be expanded to integrate two pending issues noted in the literature for the successful deployment of FCEV: - Making the deployment for FCEV endogenous and depending on the public and private instruments that could induce the decreasing of costs and the acceptance of the FCEV technology by consumers. - Designing an appropriate institutional framework to promote cooperation for manufacturing FCEV, producing carbon free H2 and investing in the distribution of H2. The initial sunk costs necessary for investment cannot be recouped through pure market equilibrium behavior. This study already provides an order of magnitude to quantify these issues.