How much will meeting these targets cost the industry?

We are talking about technologies already in production into which investment has already been made. It is also clear that the most forward looking manufacturers of cars and components are already investing massively elsewhere. We believe that if car and component producers, Governments and others can work together on this there should be a massive opportunity for manufacturers who are able to deliver a more energy efficient product, to benefit from a growing global demand for transportation. That is a very positive message given the very difficult times many are now enduring.

The challenge is more on the roll out and massive application of existing technologies (like hybrids or improvement to existing engines and cars) than on developing new technologies. So the GFEI is focusing on the further introduction and application of existing technologies. As mentioned, we can achieve a doubling of the fuel economy of the global fleet with technologies commercially available today. So the cost is not so much in developing new high-tech vehicles as in spreading and applying existing technologies.

Costs will vary by type of vehicle and the specific manner in which the targets are met. But our estimates suggest that substantial improvements can be made for under $1000 per vehicle. To fully hybridize a mid-size car may cost substantially more, though costs are expected to decline in the future. The benefits in terms of fuel savings should (for consumers) offset most or all of these costs over time, though this will depend on oil prices and fuel tax systems in different countries. From a societal point of view (using a low discount rate), the net cost of achieving the targets will likely be low or even negative (i.e. net cost per tonne CO2 close to, or perhaps below, $0.)  The IEA Energy Technology Perspecitves (ETP) 2008 report describes this in more detail.

Fuel savings from individual technologies are provided in the IEA ETP 2008 report.

One important aspect is that when manufacturers deploy technologies over time, they must ensure that these are used to maximize efficiency, rather than enable on-going increases in vehicle size, weight and power while holding efficiency constant – as has happened so often in the past.  So part of the story is to use technologies – that are planned to be used anyway - to maximize CO2 reductions.