Analysis of Alternative Fuel Vehicles by Disaggregated Cost Benefit

Author Name MANAGI Shunsuke  (Faculty Fellow, RIETI)
Creation Date/NO. May 2012 12-E-035
Research Project Economic Analysis of Environmental, Energy, and Resource Strategies Following the Great East Japan Earthquake
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The future of both the automobile and the transportation industries has been of significant interest to many people. In this study, we investigate the economic validity of the diffusion of fuel cell vehicles (FCVs) and all-electric vehicles (EVs), comparing the benefit and cost for diffusion of alternative vehicles by employing cost-benefit analysis. We assume the amount of CO2 and NOx emissions and gasoline use reduction as a benefit, by switching from internal combustion engine (ICE) vehicles to alternative vehicles; and the purchase amount, infrastructure expenses, and maintenance of alternative vehicles as a cost. We obtained data from two alternative fuel vehicles from an interview with an automobile maker in Japan. Considering uncertainties, we conducted a sensitivity analysis of the cost-benefit ratios. The scenarios used are the following: the progress of alternative vehicle production, the increase in CO2 abatement cost, the increase in the price of gasoline, and the target year for diffusion. In summary, the results show that the diffusion of FCVs will not be economically feasible until 2110, even if their purchase cost is decreased to that of an ICE vehicle. The diffusion of EVs might be possible by 2060 depending on the increase in gasoline prices and the CO2 abatement costs.