An Assessment of Corporate Average Fuel Economy Standards for Passenger Cars in South Korea

Abstract

The shift in consumer preferences for large-sized cars has increased the energy intensity (EI) of passenger cars, while growth in battery electric vehicle (BEV) sales has decreased EI in recent years in South Korea. In order to lower passenger cars’ EI, the South Korean government has implemented the Corporate Average Fuel Economy (CAFE) standards with a credit system, in which the sale of one energy-efficient car (for example, a BEV) can get multiple credits. This study analyzes CAFE standards in terms of both the EI improvement sensitivity scenarios and the degree of credits for BEVs and fuel cell electric vehicles (FCEVs) by using the Global Change Assessment Model (GCAM). In this study, passenger cars include small, medium, and large sedans, sport utility vehicles (SUVs) of internal combustion engine vehicles (ICEVs), BEVs, and FCEVs. The findings of this study are as follows: First, from the policy design perspective, a proper setting of the credit system for BEVs and FCEVs is a very important variable for automakers to achieve CAFE standards. Second, from the technology promotion perspective, active promotion of fuel efficiency improvements through CAFE standards are important since Better-EI and Best-EI scenarios are found to achieve CAFE standards even when a BEV or a FCEV receives a credit of one car sale in 2030.