Light duty vehicle transportation and global climate policy: The importance of electric drive vehicles

• Significant increase in vehicles across regions in the medium to long term future.
• Climate policy costs are sensitive to a lack of electric drive vehicles (EDVs).
• Achieving 450ppm with no change in battery costs has a policy cost that is 2.86 percentage points higher than the base 450ppm scenario.
• Climate policy hastens the introduction of electrified vehicles, however EDVs do not become the dominant vehicle of choice before the middle of the century.

With a focus on the interaction between long-term climate targets and personal transport we review the electrification of light duty vehicles (LDVs) within a model that utilizes a learning-by-researching structure. By modeling the demand of vehicles, the use of fuels and emissions implied, the model solves for the optimum RD&D investments that decrease the cost of hybrid, plug-in hybrid and electric vehicles. A range of technology and climate policy scenarios provide long term projections of vehicle use that highlight the potential synergies between innovation in the transportation sector and the energy sector. We find that even when the capital cost of electric drive vehicles (EDVs) remains higher than that of traditional combustion engine alternatives, EDVs are likely to play a key role in the decarbonisation implied by stringent climate policy. Limited innovation in batteries results in notable increases in policy costs consistent with a two degree climate policy target.