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May 12, 2020   |   Diesel Technology Forum

Policy Insider

What Does COVID-19 Economic Recovery Look Like? Can it Be Green?

A well-crafted green recovery brings together near term and longer term considerations, with a realistic assessment of what is possible versus what is aspirational.

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Suspension of the federal excise tax and a boost to the DERA program are both very good options to provide these immediate term benefits and can be a strong component of a green recovery.

COVID-19’s devastating impact on public health continues to play out each day. One consequence of widespread shutdowns in economic activity is noticeable and significant improvements in air quality and lower greenhouse gas emissions. But these have come at a devastating cost to our economy, including more than 20 million Americans suddenly without work, many businesses shuttered and state budgets in a freefall.

With Congressional passage of first and second economic rescue packages, attention now turns to national recovery and what measures can be taken that can restore jobs, jump start the economy and restore long term growth and prosperity. Considerations run the gamut from an “Eisenhower-like” national infrastructure program to a recovery contingent on transformative measures that move away from conventional fuels and technologies to those identified as the greenest and lowest impacts on greenhouse gas emissions.   

The best strategy and one most likely to gain political approval probably lies somewhere in the middle - a mix of deep rapid investment in proven, here and ready now strategies that boost manufacturing immediately coupled with longer term investments in less proven and available technologies.   

Air quality and climate benefits realized during the ramp up of the pandemic response are attributable largely to the steep drop in consumption of fossil fuels used in power generation, industry and transportation. Over the last decade, electric power generation had already begun a considerable shift away from coal to natural gas. Solar and wind power as generation sources were gaining market share as well, though these relatively newer technologies often rely on ratepayer financing and government subsidies, which may not be fully realized in the recovery, making them more likely to be negatively impacted in the post-COVID-19 era than established utilities. 

Personal Mobility:  Gas, Electric, Hybrid, Diesel or None At All? 
Perhaps the largest questions surround those of our personal mobility - the vehicles and fuels we use, how the pandemic has impacted public and mass transportation for the future, and the fate of those trends already upending personal transportation before the pandemic - electrification, shared ride services and autonomous vehicles. 

Since about 95 percent of our cars and SUVs are powered by gasoline, the precipitous drop in gasoline consumption of 33 percent at the height of the pandemic shutdown and implementation of stay-at-home orders is largely about reduced passenger vehicle traffic. As stay-at-home orders are lifted, stores reopen and economic recovery begins, rebounds in traffic levels and fuel consumption are already trending upwards, and we can expect emissions to inch back upward as well. 

But there are many new factors to consider: Will Americans shun mass transit and take their cars to work and school? Will employees currently working from home continue, or do more of it? At what level will auto sales return? Predictions are for 2020 to be a year of 11 million autos sold, down from 17 million as recently as 2018, meaning more older (and less efficient) vehicles being on the road for longer. Will consumers be more risk-averse to new and often more expensive technologies like electric vehicles, than conventional gas and diesel ones? Answers to these questions are largely unknown but are central to decision making for any next round of recovery and stimulus legislation. Which is why a mix of strategies, with input from manufacturers who must produce and sell any technology is imperative. 

As for goods movement, construction and agricultural sectors, diesel technology dominates because of its unique combination of power, performance, efficiency, reliability and durability. Powering more than three out of every four commercial vehicles and 97 percent of the largest “tractor-trailer- size” (Class 8) trucks, diesel also is the primary power for the overwhelming majority of school and transit buses, larger agricultural tractors, construction and mining equipment, marine vessels, ferryboats and locomotives. 

Consumption of diesel fuel is down by 20 percent compared to this time last year, owing largely to the drop off in trucking demand from retail sales due to store closures. At the same time, the business of farming and agriculture and in many states construction, has continued on unabated, with these sectors relying almost exclusively on diesel power in all but the very smallest equipment.

Energy choices are top of mind for future investments - which fuels and technologies are most valuable to our economy today and which will be in the future? What is the state of choices available today/now compared to established fuels and technologies like gasoline and diesel? What factors influence new investments in these units? How long will be they be in service? What are the costs and benefits of any post-COVID-19 investments, and what are the risks of investments in emerging technology?

Recovery Opportunities: Jobs
Across all of these sectors, there are similar considerations for potential recovery measures – the means to restore jobs but also to seed the future through investments in the future through technology choices, pursuing new work practices, and the selection, and in the case of construction projects, approvals and conditions with an aim toward building in resilience to climate change.    

Out with the Old, In With the New for Fast Benefits for Society and Truckers
One consideration for recovery policy is meaningful incentives for replacing older and higher emitting vehicles and equipment. For example, commercial truckers are mostly small companies or independent-owner operators without ready access to capital and cheap credit, and for every new truck they purchase, the 12 percent federal excise tax (FET) adds substantial additional costs on a new $120,000 to $150,000 truck. Suspending the FET could remove one barrier to get more new clean trucks on the road quickly and generate big environmental benefits with technologies ready to go in service now. Consider that replacing a single older Class 8 truck with newest generation of advanced diesel technology can eliminate over 2 tons of smog forming compounds and almost 10 tons of greenhouse gas emissions. The opportunity is significant as more than half (57 percent) of all commercial trucks on the road today are of an older generation of technology, without the full suite of advanced emissions control technologies that enable trucks to consume less fuel and achieve near zero emissions.

Longer term, commercial truck manufacturers are exploring and developing a wide range of fuels including hydrogen fuel cells, full battery-electric vehicles, and other technologies as alternatives to diesel, yet none are commercially available today at scale, or are limited by unavailable fueling infrastructure. Prior to the pandemic, industry analysts were looking at the 2040-2050 timeframe for widescale introduction of alternative powertrains to diesel achieving modest market penetration. The impact of the pandemic on manufacturer’s plans and global investments in research, manufacturing and infrastructure for alternatives to diesel remains to be fully understood.

Much like trucks, the enormous variety of off-road equipment types must meet stringent tailpipe emissions standards established by EPA. This equipment and the engines that power them are durable with long useful lives, an important investment for the contractors and small business people for whom these are the tools of work. While clean, near zero emission options are available today, there is a relatively large population of older and higher emitting  equipment that remains in service. The State of Oregon estimates that 35 percent of agricultural equipment and 25 percent of construction equipment in use in the state are powered by engines that pre-date federal EPA emissions standards. To get contractors and others moving to new technology through incentives or as part of a federal infrastructure package would make sense and deliver benefits to them and society at large.

Renewable Biofuels: Under-Valued, Greater Opportunity
Moving the nation and economy forward with greater sensitivity to greenhouse gas and environmental impacts must include consideration of advanced renewable biofuels. One of biggest benefits of diesel technology is its ability to operate on a variety of advanced biofuels like biodiesel and renewable diesel fuel. Typically produced via recycled waste animal fats and vegetable oils, they are capable up reducing GHG emissions up to 80 to 85 percent, without expensive investments in refueling or recharging infrastructure or the purchase of new vehicles, equipment or engines. In targeted sensitive areas and regional applications, these low-carbon fuels can bring rapid impacts to the entire fleet of existing vehicles.

Additional considerations for proven near-term recovery policies are also available, such as the Diesel Emission Reduction Act (DERA) that provides owners of older and higher emitting trucks and equipment with some funds to help replace old with new. Expanded funding for the DERA program can greatly help generate immediate term benefits. According to EPA, who manages the program, between 2008 and 2016 the program has eliminated 472,000 tons of smog forming compounds and over 5 million tons of greenhouse gas emissions by replacing over 67,000 vehicles, equipment or engines with new clean models, most of which are diesel.

Manufacturing Diesel Engines is Big and Good Business
Suspending the FET and boosting funding for DERA provide substantial immediate term environmental benefits that can sustain some of the pandemic’s clean air benefits we realize today, while also providing a big boost to domestic manufacturing and employment. About 1 million heavy-duty diesel engines rolled off assembly lines in 13 states in the U.S. in 2019. These engines power everything from large commercial pickups to locomotives, the vast majority of which are manufactured or assembled in the U.S. Many of these facilities have stopped production during the crisis, along with many local dealer networks that rely on them. According to the Association of Equipment Manufacturers, the production of diesel-powered equipment supports 1.3 million jobs and generate $158 billion in economic value. The average wage in the industry exceeds the national average, paying workers about $78,000 per year. 

A well-crafted green recovery brings together near term and longer term considerations, with a realistic assessment of what is possible versus what is aspirational. Buying more new technology and replacing old is a win all the way around for society and users alike, and it can happen very quickly. Strategies that invest in longer term future fuels and technologies deserve consideration with eyes wide open about availability and timing of impacts. In doing so, we can hold on to immediate term air quality benefits we all enjoy right now while getting millions back to work. Suspension of the federal excise tax and a boost to the DERA program are both very good options to provide these immediate term benefits and can be a strong component of a green recovery.


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Allen Schaeffer
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