Localized innovation, localized diffusion and the environment: an analysis of reductions of CO2 emissions by passenger cars

Los, Bart; Verspagen, Bart · 2009 · Crossref

DOI: 10.1007/s00191-009-0146-8

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Summary

This study investigates the nature of technological change and diffusion regarding CO2 emissions in the passenger car market, motivated by the European Commission’s targets to reduce average emissions to 120 g/km and subsequently 130 g/km. The authors address the heterogeneity of the automotive market, questioning whether emission reductions are driven by uniform technological progress or by shifts between different fuel technologies (e.g., diesel, gasoline, hybrid). The research aims to determine if further reductions require a shift toward specific car types or if existing technologies can achieve targets through localized innovation. The authors utilize a dataset of all car models available in the UK market from July 2000 to May 2007, sourced from the Vehicle Certification Agency. The sample includes 1,738 models in 2000 and 2,971 in 2007. To analyze technological frontiers, the study employs Free Disposal Hull (FDH) methodology, chosen over Stochastic Frontier Analysis and Data Envelopment Analysis to avoid assuming linear combinations of frontier points, which is unrealistic for discrete car models. The analysis treats CO2 emissions as an input to be minimized and engine capacity (displacement) as a proxy for performance output. The study distinguishes between "localized innovation" (shifts in the technological frontier) and "diffusion" (the distance of individual brands from the frontier). Results indicate that CO2 emissions are tightly linked to fuel consumption, with different fuel types exhibiting distinct linear relationships. Diesel engines generally emit less CO2 than gasoline engines at average fuel use levels, while LPG and CNG engines show the lowest emissions for a given fuel use. Hybrid vehicles perform similarly to gasoline cars in terms of emission-fuel relationships but achieve lower emissions through reduced fuel consumption. Frontier analysis reveals that technological progress was uneven. Between 2000 and 2007, the gasoline frontier shifted significantly to the left (indicating greater emission reductions for given engine capacities), whereas the diesel frontier shifted less than 10%. Hybrid cars dominated the absolute lowest emission points, but diesel cars comprised the majority of the frontier for mid-range engine capacities. The study concludes that technological change and diffusion are highly localized, varying substantially across market segments and fuel types. Because rates of innovation differ between diesel and gasoline engines, and between small and large engines, successful policy should focus on the diffusion of best-practice technologies rather than assuming uniform progress. The authors argue that policies must account for the differing potentials for further progress within specific segments, suggesting that maintaining technological heterogeneity is crucial for achieving emission targets, rather than relying on a single dominant technology.

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• eco driving