Impact of the dual-credit policy on improvements in fuel economy and the production of internal combustion engine vehicles

Abstract

The implementation of the parallel management method for Corporate Average Fuel Consumption (CAFC) and New Energy Vehicles (NEV) Credits (thereafter “the dual-credit policy”) has increased the pressure on conventional automakers, although multiple ways to comply with this policy exist. We develop a decision-making model to optimize the fuel economy improvement level and the production of internal combustion engine vehicles (ICEVs) under the dual-credit policy. Combined with theoretical analysis and numerical simulation methods, the effects of the dual-credit policy on the enterprise level are discussed. The implementation of the dual-credit policy may not be able to help automakers improve the fuel economy of ICEVs or reduce the production of high fuel consumption vehicles (HFCVs). When the year-end NEV credit of an automaker does not meet the standard, the dual-credit policy is not conducive to the production of energy-efficient vehicles, but increases HFCV production. We recommend that the policy should decouple the standard of an NEV credit from ICEV production and establish a reasonable upper and lower limit for the price of credit transactions. We also suggest that different NEV accounting discount multiples should be established for different automakers, as a one-size-fits-all policy is not necessarily optimized.