A general equilibrium analysis of individual choice behavior on alternative fuel vehicles

Abstract

This study empirically analyzed the effect of the distribution of alternative fuel vehicles (AFVs) that are expected to reduce CO2 emissions and improve the national economy. The effect of individual vehicle choices, determined using a discrete choice (DC) model, on the overall economy was quantified using a computable general equilibrium (CGE) model. After integrating the two models, the DC model captured more elastic changes in the price-attribute levels by endogenously reflecting the results of the CGE model. Furthermore, the CGE model reflected the technical specification in the DC model to identify the effect of AFVs proliferation in detail. The results show that replacing ICEVs with AFVs decreased CO2 emissions in the transportation sector, but emissions from other increased production in other industries offset this reduction. AFVs are set to be mainstream in the market by 2050 and, with improved technological performance and infrastructure, fuel economic growth. Expecting that increased AFV demand will reduce CO2 emissions without the support of renewable energy generation and electrolysis of hydrogen production may be too optimistic.