SUMMARY REPORT

FIFTH ANNUAL CONFERENCE ON TRANSPORTATION, ECONOMICS, ENERGY AND THE

ENVIRONMENT (TE3)

October 25-26, 2018University of Michigan

Ann Arbor, MIwww.energy.umich.edu\te3

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Fifth Annual Conference on Transportation,

Economics, Energy and the Environment (TE3) October 25-26, 2018

University of Michigan Ann Arbor, MI

www.energy.umich.edu\te3

Summary Report

The Fifth Annual TE3 Conference was organized around key themes of new mobility: electrified, shared, connected and automated transportation. The richness of our program required that we extend our conference to include 1½ days of proceedings. Over 150 people attended TE3 2018, and we are so grateful to the attendees and presenters for the quality of this event’s conversations. This summary report includes high-level takeaways from each session. Slide presentations and video of panel sessions can be accessed here, and photos from the conference can be found at the very end of this tab. Here are just five of the key takeaways from our expert speakers:

1. The “clean energy” and environmental benefits of electrified and shared mobility could materialize as the power market transitions to cleaner sources such as renewables. Of concern are the offsets if shared mobility induces an increase in overall vehicle miles travelled. Here the evidence remains mixed and inconclusive. More research is needed.

2. Connected and automated vehicles will take many years to be fully deployed as governments and businesses progress in technology development, lower cost structures, and a workable regulatory framework.

3. It may be premature to think oil demand and supply is likely to peak in the next decade, especially as it pertains to the likely penetration rate of electrified vehicles.

4. China is leading the way in stimulating demand for lithium-ion battery cells and electrified vehicles, due in large part to an array of purchase and investment incentives, as well as fuel efficiency and consumption standards.

5. Battery technology advances could support growth in electrified light-and-medium duty commercial truck fleets, but not heavy-duty trucks yet due to lack of appropriate battery pack application.

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The conference organizers issued a call for research papers around the themes of the future of mobility. Five papers were accepted and presented at the conference (ordered below according to sequence on the conference agenda): Cynthia Lin Lawell (Cornell University), Yuan Chen (University of California). Supply, Demand, and the Effects of Government Policy in the Chinese Automobile Market: A Random Coefficients Mixed Oligopolistic Differentiated Products Model David Rapson (University of California, Davis) and Erich Muehlegger (University of California, Davis) A Quasi-Experimental Estimate of the Demand Elasticity for Electric Vehicles in the Mass Market Jonathan B. Scott (University of California, Berkeley) Arms Race Dynamics in Vehicle Purchases Lang Sui (Aramco Services Company), Steven Przesmitzki (Aramco Services Company) American Mobility: Change in American Travel Behavior and Implication on Future Fuel Consumption Benjamin Leard (Resources for the Future), Joshua Linn (Resources for the Future), Clayton Munnings (Resources for the Future) Explaining the Evolution of Passenger Vehicle Miles Traveled in the United States In addition to these presentations, submitted papers underpinned panel discussion roles by Todd Davidson (University of Texas, Austin), Tayo Fabusuyi (University of Michigan), Tom Lyon (University of Michigan) and Jacob Ward (Carnegie Mellon University). The Summary Report below includes two parts. High-level key takeaways are presented in bullet form for each session and speaker. A few paragraphs are also included for most of the speakers to capture more detail and attribution of key takeaways. You can skim the bullet points and then read a few paragraphs if you would like more detail. Thanks to our sponsors! Auto Alliance, Ford Motor Company, GM, Global Automakers, Mcity, Michigan Agency for Energy, Oak Ridge National Laboratory, Alfred P. Sloan Foundation, and the US Environmental Protection Agency. We would like to extend appreciation to our team at the Energy Institute who made this event possible: Kelly Chantelois, Shelly Christian-Sherman, Susan Fancy, Amy Mast, Nick Soberal, and Bruno Vanzieleghem. A special thanks to our student research assistants – Evan Leon, Alex Maranville and Mitch Mead – who were steadfast in their support of this Conference. We look forward to seeing you at the Sixth Annual TE3 Conference on October 17-18, 2019!

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THURSDAY, OCTOBER 25 1:30 to 3:00pm Paper Session: Global Transportation Energy Demand Chair: John DeCicco, Research Professor, University of Michigan Energy Institute Dr. John M. DeCicco started the session with some important observations about transportation energy demand:

● Consumer preferences for vehicle types are linked to fuel prices - Low gasoline prices tend to contribute to an increase in demand for less fuel-efficient crossover

and sport utility vehicles (SUVs) ● Growth in electrified vehicles (EVs) in operation is far less than the penetration of SUVs worldwide ● The International Energy Agency (IEA) World Energy Outlook 2017 report projected that the electric

car fleet would reach nearly 300 million by 2040 (see chart below) ● This is well below even the recent estimates of 1.2 billion motor vehicle population ● The right panel on the chart below shows IEA’s projection that passenger cars will represent a decline in

oil demand of nearly 2 million barrels per day in the period 2016 to 2040 ● However, the low cost of fuel continues to support demand growth worldwide from commercial truck

transport and other sectors ● These data provide a valuable backdrop for our expert panelists today

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Cynthia Lin Lawell (Cornell University), Yuan Chen (University of California) Supply, Demand, and the Effects of Government Policy in the Chinese Automobile Market: A Random Coefficients Mixed Oligopolistic Differentiated Products Model

● China has two, somewhat overlapping fuel consumption regulations: - The fuel consumption standard (FCS) which establishes a requirement that passenger cars,

SUVs and light commercial vehicles (LCVs) achieve the equivalent of 34 MPG; and - The corporate average fuel consumption (CAFC) standard, which is designed to target the level

of a firm’s sales-weighted average fuel consumption ● China-Japanese company joint ventures (JVs) are associated with lower marginal costs of fuel

efficiency, while China-US JVs are associated with lower marginal cost of horsepower - Preferences differ across markets. For example, fuel efficiency in Japan is highly valued, while

horsepower is highly valued in US - These empirical results were derived from an oligopolistic stochastic demand model based on

automobile sales data ● CAFC and FCS counteract one another and impose undue cost burdens ● The CAFC is inefficient because of redundancy; this standard also imposes compliance costs across the

entire fleet ● JVs have comparative advantages over domestic companies and state-owned enterprises

Dr. Cynthia Lin Lawell’s presentation centered on a co-authored research paper entitled, Supply, Demand, and the Effects of Government Policy in the Chinese Automobile Market: A Random Coefficients Mixed Oligopolistic Differentiated Products Model. Lawell and co-author Yuan Chen investigated how the Chinese automobile markets interplay with policies for fuel consumption and fuel efficiency. They deploy a stochastic model of hypothetical changes on vehicle characteristics and demand mix. The paper analyzed the impact of policies (i.e., fuel efficiency requirements and corporate average fuel consumption) on different types of auto companies (i.e., state-owned enterprises, domestically owned, and JVs). The research found that comparative advantages existed for JVs in the Chinese market. For example, JVs between a domestic and a Japanese-owned firm had the highest average fuel efficiency per vehicle; while JVs between a domestic and US auto companies had the lowest average marginal cost for horsepower. Additionally, the policy analysis included in the paper showed that combining corporate average fuel consumption with average fuel efficiency is redundant and imposes costly constraints on auto companies. Lawell concluded that an efficient policy approach would include the elimination of the CAFC, followed by an increase in the fuel economy target under the FCS by 25% gain from current levels, or the equivalent of 42.6 MPG. Marianne Kah, Center on Global Energy Policy, Columbia University

● Metals prices creating challenges to reach $100/kWh for the cost of a lithium ion battery pack, particularly for cobalt, and make it difficult to estimate and project future trends

● A battery pack cost in this range is necessary for EVs to be competitive with conventional internal combustion engine vehicles (ICEs)

● Kah’s recent survey of oil and gas industry and government officials indicated that battery pack costs are expected to reach $100/kWh by mid-2020s

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● Passenger vehicle sector is only 26% of world oil demand. Other transport sectors — aviation, freight, and maritime — are much more difficult to penetrate with electric applications

● China wants to be the leading EV manufacturer as well as tech leader in EVs ● Rising EV penetration through the next decade will be important, but it is not likely that EV penetration

will reduce oil demand by a significant amount until 2030 ● Global oil demand in passenger transport is currently an estimated 25 million barrels per day ● There is uncertainty regarding the impact of connected and automated vehicles on vehicle miles

travelled (VMT) - Ride hailing has increased 240% in just 6 years - Kah thinks ride hailing services will increase - Removal of drivers, should that materialize, would lower cost, thereby incentivizing a VMT

rebound effect ● Overestimating the speed of electrification could cause a disorderly transition in energy markets,

choking off investment in new oil supplies and accentuating oil price volatility - Kah mentioned this is already happening with the decrease of long-term projects from oil

companies

Marianne Kah’s presentation focused on market interactions of demand and supply between oil and EVs. Currently, 26% of oil demand comes from the passenger vehicle sector. Demand for oil from the passenger vehicle sector is expected to drop off around 2040. This expectation is based on projected cost parity between EVs and ICEs sometime in the next decade. Kah conveyed the importance of a gradual increase in market penetration for EVs. A fast transition could lead to reduced investment in oil, in turn increasing market volatility in pricing and in overall energy consumption. Timothy Johnson, Advisor on Emerging Technologies and Regulations, Corning Inc.

● EVs will happen, the question is timing and trend ● Emerging ICE technologies will not likely make it to market if they do not reach production by 2025,

i.e., electrification technology could supersede ICE technology - ICEs can achieve up to 50% CO2 reductions

● Fast charging will be needed for EVs to take off, however fast charging stations are currently expensive ● Wireless charging is needed and is preferred; this is already available in E-bus and public transit

applications ● General 20-80 rule in automotive innovation: 20 years for technology to penetrate 80% of market share ● What will customers be willing to buy? Need for blind market studies to see what customers want: Will

EVs be “fun to drive?” Are other positive EV attributes likely to offset the current charging time downside?

● Regulations can induce growth in the BEV market, whereas hard targets would not — chart below includes a summary of EV goals and mandates by country

● Fast or passive charging is likely needed to reach 50-70% of commuting market ● Estimate that ICEs and EVs will have cost parity around 2025 ● An increase of 75% EV market penetration is estimated to cause a 12% increase in grid demand ● Powertrain companies have reportedly indicated that it is difficult to retool an internal combustion

engine plant, signaling a move away from investment in ICE technology ● Johnson indicated the top reason people are purchasing EVs is the novelty of owning one

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- This may suggest that, at present, the “true” utility measure for owning an EV is not yet its environmental benefits

Tim Johnson stressed the importance of not disregarding the potential for ICEs to curb emissions. His analysis found that improved technology for ICEs could lead to a 50% decline in CO2 emissions from these vehicles. Many of the current obstacles EVs are facing arise from costs and lack of charging stations. Johnson views the limited charging infrastructure as a constraint on EV sales today; however, this may change in the future as the cost declines, supported a higher pace of investment. A 3-point charging station costs on average $225,000. Newer technologies include wireless charging, which could incentivize EV demand. However, Johnson estimates that the quickest technology penetration for EVs will likely come from horsepower innovation due to strong US consumer demand for this vehicle attribute. Johnson also noted that even if there were a 75% penetration of EVs as compared to the demand for ICEs, this would increase electricity demand by an estimated 12%.

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3:30 to 5:00pm Panel: Economic, Environmental and Energy Assessment of Emerging Mobility Systems

● Transportation Network Companies (TNCs) are estimated to benefit between 10-30% of Americans ● The true annual cost of owning a car is increasing due to more time behind the wheel resulting from

longer commutes and more congestion ● The ban on TNCs in Austin, Texas revealed multi-dimensional impacts on consumer behavior and are

likely specific to local conditions ● Lack of sufficient data precludes reliable cost-benefit analysis of TNCs

Chair: Mark Schwartz, S&P Global Platts

● Over 50% of oil demand in the transport sector derives from use in commercial vehicles, aviation and marine sectors (see chart below)

● Annual growth rate of VMT peaked in 2000-2005, and has steadily declined since that time ● EV batteries will be at $70/kWh by 2035 ● There are concerns presently about EV values in the used vehicle market. Resale values are soft as the

used market has not fully developed ● Europe leads the way in VMT per capita, followed by China and the US ● Beyond 2030, road transport will be dominated by non-oil energy sources ● CO2 emissions from passenger vehicles are falling due to reductions in oil use ● In the near term, EVs will not have a significant impact on the cumulative level of CO2 emissions from

passenger vehicles

Dr. Mark A. Schwartz provided a summary of key factors affecting energy demand (see chart). He also provided an assessment of EV trends, including implications for the longer run energy demand outlook. Schwartz emphasized the importance of VMT when considering the environmental benefits of EVs. The highest per capita VMT comes from Europe, China, and the US. Schwartz noted that Johnson (former Director at Corning and speaker on prior panel) estimates that EV batteries will achieve an average cost of $70/kWh by 2035. While an increase in EV demand will put downward pressure on CO2 emissions, the overall impact of the transportation sector on emissions will remain relatively stable due in large part to oil demand coming from other road transport (i.e., commercial vehicles).

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F. Todd Davidson, Energy Institute, University of Texas at Austin

● Electrified ride sharing: can it be cost competitive? - Vehicle ownership is expensive: It is estimated that the annual cost is $16,667 - This cost estimate includes the time value associated with driving, especially in congested areas

● Mobility service providers know if they can get cost below a $1 per mile, they can be competitive with personal car ownership

- However, people won’t sacrifice driving own car when comparing against median income and median price of a vehicle

● Mobility services might be economical for about 20% of drivers ● Cars are personal: Americans’ use of personal vehicles may not be economically rational at all times

Tayo Fabusuyi, University of Michigan Transportation Research Institute (UMTRI) and Carnegie Mellon University

● Research examined the effects of a TNC ban in Austin, Texas

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● The effects of this TNC service disruption from the imposition of the ban is specific to local conditions in Austin

● Individuals who were most satisfied with TNCs experienced the largest drop in trip frequency ● Individuals who switched to personal vehicles increased their trip frequency ● These two effects were offsetting ● Only 3% of TNC users moved to public transit after the ban was implemented

Dr. Tayo Fabusuyi presented his research focusing on the impact of the ban on TNCs in Austin, Texas. This study examined how consumers perceived the ban, both before and after its implementation. He found that consumers who were most satisfied with TNCs before the ban had the largest decrease in trip frequency after the ban. Additionally, the ban caused an increase in trip frequency, but only 3% of TNC users switched to public transit. Fabusuyi emphasized that his analysis of Austin was context specific, and generalizing these results to other cities could miss important regional differences. More data and analysis are needed to validate conclusions about the interplay between increased TNC penetration and VMT. Jacob Ward, Carnegie Mellon University

● TNCs move people differently ● More trips of empty miles for TNCs (i.e., “deadheading” which requires empty vehicle travel in route

to/from passenger pickups); TNCs could cause higher emissions due to the roaming component ● Frees people from personal vehicle dependence ● Higher perceived marginal cost of a trip ● The effect of TNCs on vehicle registrations is really not known; VMT may go either way as well ● Ward’s working paper finds a decline in vehicle registrations due to TNCs (3.1%) (about 8 million

vehicles -- see chart below) ● Estimated $20-800 million benefit from reductions in volatile organic compounds (VOC) reductions

from TNCs ● Uber and Lyft could achieve the same level of efficiency as a personal vehicle. Consumer adoption may,

however, be challenging ● Average American drives an estimated 13,000-14,000 miles a year; Davidson’s model considers people

who have below average VMT ● To quantify opportunity cost of driving time, can use wage data

- Literature suggests about 50% of wages are a reasonable estimate for the opportunity cost of driving time

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Jacob (Jake) Ward presented results on the inter-relationship between TNCs, the public, and consumers’ behavior, especially the variability of impacts that TNCs will have on society. He conveyed the importance of analyzing the entire process, from TNC driver behavior prior to a ride booking through to the customer drop off. The nature of roaming before a ride request could lead to an overall increase in VMT compared to personal VMT behavior. However, his research indicated that TNCs could lead to a $20-800 million benefit due to VOC reductions. Ward’s research results show that TNCs have led to a 3.1% drop in vehicle registrations. More data and analysis are necessary to validate this result.

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5:15 to 5:35pm Perspectives on Connected and Automated Vehicle Developments Carrie Morton, Deputy Director, Mcity

● Much more testing and research to undertake before we experience higher levels of automation in vehicles, especially the defined Society of Automotive Engineers (SAE) Levels 3-4 (See definitions here and in chart below)

● Mcity participants are learning a lot about the technology and how it can be deployed and tested

Steve Vozar, Co-Founder and COO, May Mobility

● May Mobility is a vertically integrated driverless vehicle startup with operations in Detroit. Upcoming rollouts are expected in Columbus, Ohio and Grand Rapids

● Driverless vehicle applications are suited for 10 square mile, geo-fenced areas, servicing first and last mile travel at 25-35 MPH. Significant growth is expected because there are many use cases of these environments, especially in collaboration with public transit agencies to supplement existing routes

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FRIDAY, OCTOBER 26 9:00 to 10:20am Paper Session: Empirical Research on New Mobility Topics Chair: Gloria Helfand, US Environmental Protection Agency Dr. Gloria Helfand introduced the panel with a discussion of vehicle preference and the challenges to confirm the determinants of segment demand for vehicles (i.e., demand for different types of vehicles, such as cars, SUVs, and trucks). Vehicle attribute preferences differ greatly between individuals. Helfand was encouraged by the expert panel’s work in uncovering relationships between different types of buyers and the vehicles they preferred. Helfand made a plea for more such applied research on this topic, including additional case studies at the state, national, or even global level. EPA researchers also will be actively engaged in this effort. David Rapson (University of California, Davis) and Erich Muehlegger (University of California, Davis) A Quasi-Experimental Estimate of the Demand Elasticity for Electric Vehicles in the Mass Market

● California EV policy stimulus is designed to expand the market demand for EVs to lower-income households

● California’s goal is 5 million EVs in operation by 2030 ● Batteries account for almost one-half of EV costs at present ● Potential challenges for California targets:

- Expensive electricity - More aggressive infrastructure requirements - Subsidy costs in order to incentivize EV demand

● The subsidy elasticity of demand would need to be as high as 5.3 to over 6 in order for the lower subsidy-adjusted EV price to incentivize enough sales to reach the target of 1.5 million EVs on the road by 2025

● How do people make the trade-off between electricity bill and gasoline costs? Rapson finds that people typically do not factor in electricity costs when considering the purchase of an EV. If they did, it might be much more difficult to sell EVs in California

Dr. David Rapson spoke on the possibilities of extending the electric vehicle market beyond wealthy buyers. California has established a target of 5 million EVs on the road by the year 2030, yet the vehicle costs remain too high to reach large demographics of people not in the middle to upper class. Batteries are a significant factor in driving up marginal costs, accounting for almost 50% of the cost of the entire vehicle. There are other challenges. For example, electricity prices in California are high and the current pace of EV infrastructure building is not nearly aggressive enough to match their 2030 goal. In addition, it is difficult to implement a subsidy bill for EVs that is aggressive enough to match the goal while remaining feasible for the

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government budget. Rapson and Muehlegger estimate that the subsidy elasticity of demand would need to be 5.3 by 2025 in order for California to achieve their target of 1.5 million EVs on the road by that date. Jonathan B. Scott (University of California, Berkeley) Arms Race Dynamics in Vehicle Purchases

● Consumers with strong preference for safety buy heavier vehicles ● In the period since the 1980s through 2005, there has been a 12.5% increase in overall weight of

passenger cars, and a 26% increase in the weight of light SUVs and trucks ● Costs of vehicle size fatalities is estimated at $136 billion per year ● 47% increase in fatality associated with a 1,000 lb. increase in striking vehicle

- 27% in struck vehicle ● Vehicle owners’ assessment of the value associated with the weight and size of their vehicle could be

traced to his/her neighbor’s fatality ● Research found that an individual who experienced the death of a neighbor in a vehicle accident

subsequently purchased a heavier vehicle Dr. Jonathan Scott’s presentation pointed to an overall upward trend in vehicle size, which he came to understand as more than a preference for the size attributes such as towing or passenger seat capacity. His studies showed that negative external costs of vehicle size fatalities are around $136 billion a year. In addition, there is a 47% reduction in fatality rates for every additional 1,000 pounds a striking vehicle has and a 27% reduction for the struck vehicle. Thus, Scott chose to look at whether the demand for a heavier vehicle is dependent upon a neighbor’s fatality in an automobile accident. The empirical research results suggest that individuals are influenced by a neighbors’ fatality in an auto accident. A control group of individuals who bought lighter vehicles was specified. The results were compared against this control group. It is also interesting to point out that the effects of the fatalities lingered more in a primarily heavyweight US county than in a predominantly lightweight county. After two years, people in a lightweight county diverged to their before-accident preferences while people in a heavyweight county continued to buy large. The overall effect is a prisoner’s dilemma in which people buy larger vehicles to protect against other larger vehicles on the road. Discussant: Tom Lyon, Ross School of Business, University of Michigan

● People do buy more EVs when they get a subsidy: estimated subsidy elasticity of demand in California is high (5.3-6.5)

● This means that every $1,000 subsidy produces a 5-7% increase in EV sales ● VMT is lower for younger age cohorts, and much higher for older individuals ● Millennials are sensitive to environmental concerns and the opportunity costs of driving

- They also do not consider driving as a form of “independence,” but that driving can be unsafe, and that travel should offer co-benefits such as exercise or the use of social media

● In California, used EVs are not as subsidized as new vehicles. Used EVs are actually leaving the state; California officials would like to keep these vehicles in-state to enhance the EV share of vehicles in operation

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Dr. Tom Lyon wrapped up the panel with a few thoughts on where vehicle preferences sit currently. In the EV market, he concludes that people do in fact buy more EVs when they get a subsidy, and the estimated price elasticity of demand in California is around 5.3-6.5, according to Rapson and Muehlegger’s paper. Furthermore, he considered that VMT for younger age cohorts is lower than for older age groups due to several factors, including environmental concerns, driving opportunity costs, safety, and a lack of positive externalities. Lyon concluded with insights from the papers and panel discussion: Poorer people will buy EVs if subsidies are high enough, and millennials are less likely to own personal vehicles as compared to other age cohorts.

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10:40am to 12:00pm Panel: Economics of Batteries and Electrified Vehicle Demand

● Energy metals (lithium, cobalt, and nickel) are fundamental to high capacity cathode materials used to scale battery cell production for EVs

● Battery industry’s nickel demand is growing around 20% per year ● Lithium and cobalt markets lack transparency in volume and market trading or any widely available

financial contracts • Both the mining and refining of these energy metals have significant producer and

geographic concentrations ● Manganese and nickel mining and production activities are much more stable and competitive as

compared to lithium and cobalt markets ● Battery industry participants are focused on reducing cobalt content given its cost and industry

concentration among a few companies, but there are technology challenges due to the stability and density attributes of battery chemistries with cobalt.

Chair: Ellen Hughes-Cromwick, University of Michigan Energy Institute ● An estimated 1.9 million global EV sales projected this year, up 40% ● International Energy Agency (IEA) projects 125 million EVs in operation worldwide by 2030 (30@30

scenario published in their Global EV Outlook Report) Dr. Ellen Hughes-Cromwick opened the battery economics panel by highlighting how the IEA’s EV adoption scenarios hinge on the policy and regulatory mix to reduce the gap in pricing between EVs and ICEs. EV battery costs are also a key factor making EVs more expensive than ICEs. Nearly one-half of battery cell costs are tied to raw materials, specifically metals that are traded in relatively thin, opaque markets - lithium and cobalt. Panel of Experts: Alex Laugharne, CRU Group

● Battery demand growth for nickel is growing around 20% a year, but is starting from small base relative to the overall size of the nickel market

● A baseline vs aggressive scenario sees anywhere from 6-14 million EVs on road in 2025, which equates to somewhere between a 400% to a 700% increase in nickel sulphate demand compared to 2017.

● We are going to need more nickel sulphate capacity to meet this demand – the actual amount will depend on scenarios about demand for EVs

● There is a lag with recycling for nickel in EVs, and new sulphide ore discoveries have been limited, so laterite ores are the most likely source for majority of new nickel sulphate capacity

● New hydrometallurgical plant aimed at nickel sulphate most likely source of new capacity; project costs uncertain due to high degree of variance in proposed capital costs

● 70% of lithium demand growth will be for EVs ● Lithium demand is expected to catch up to capacity currently being built, but there could be an excess of

material in the early 2020s Alex Laugharne presented CRU’s views regarding the impact of electric vehicle industrialization on the nickel market. Nickel demand from the battery industry is growing at 20% annually, incentivizing nickel producers to invest in processes that produce nickel sulphate, a key metal chemical used in cathode material production.

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CRU Group’s baseline vs. aggressive EV adoption scenarios project 6-14 million EVs on road in 2025, resulting in the need for more nickel capacity. This capacity is likely to come from processing nickel laterite ores in new hydrometallurgical refining plants; however, the cost of such plants is highly uncertain. These are generally higher cost assets, which will hopefully be supported by a high nickel prices. Looking at the lithium market, EV’s will account for 70% of demand growth. Over the last two years, there have been a number of lithium development projects announced, spurring oversupply fears. However, lithium demand is expected to catch up to supply capacity over the next few years.

Evan Leon, University of Michigan ● Energy metals contribute to the industrialization of EVs ● Battery cells have different attributes across their stability, capacity to store energy, and operating

voltage which are dependent on the cells’ energy metals (see chart of trade-offs)

Evan Leon’s presentation stressed the importance of energy metals, such as lithium, cobalt, nickel, and copper, to the industrialization of EV battery cell technology. Chinese government policy has been instrumental in driving the use of higher capacity nickel-rich cathode materials that provide battery pack energy density needed to qualify for government EV sales incentives. Globally, EVs will likely use nickel-based cathode materials (NCM or NCA) that have different ratios of nickel, cobalt, and manganese or aluminum (see chart below). Nickel provides higher capacity while cobalt provides stability to battery cell during cycling – delaying cell material degradation and cycle life reduction. As NCM cathodes increase in nickel content from NCM 111 (equal parts all metals) to NCM 622, there is a roughly 50%

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reduction in cobalt; however, metal markets will likely still feel pressure due to the projected growth in global EV volumes. Ultimately, EV manufacturers need to be mindful of end-of-life vehicle recycling and ensure that recycling processes yield valuable outputs for the metals and materials markets.

Elsa Olivetti, Massachusetts Institute of Technology

● Geographic concentration is high level of concern as is growth in tech, while recycling and recovery rates and coupled production and depletion indices are lower

● Manganese and nickel have stable markets, while lithium has an overcapacity and cobalt is highly unstable due to geographic concentration of the material in the Democratic Republic of Congo (DRC). Cobalt is a byproduct of other metals

● Cobalt is also used in other industrial sectors for the production of magnets, catalysts, cutting tools, and super alloys

- Cobalt used for batteries is divided between EVs, electronics products, grid, and other ● In contrast, lithium production is more geographically diverse and has fewer production constraints as

compared to cobalt ● At present, “second use” cobalt applications (i.e., recycling) will not close the gap in the short run ● To close the gap between supply and demand, need to exploit secondary market as well as new mines

that open up new geographic locations outside of the DRC Dr. Elsa Olivetti’s research focuses on improving the environmental and economic sustainability of materials using methods informed by materials economics, machine learning, and techno-economic analysis. Olivetti presented on the market characteristics of a number of metals used in batteries. Manganese and nickel have stable market production characteristics, while lithium and cobalt are highly unstable due to their smaller market size. Both metals have a small number of producers.

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Lithium production is more geographically diverse as compared to cobalt, but does have significant concentration among a small group of producers. This concentration is diminished as new producers emerge in Western Australia. Cobalt mining has substantial geographic concentration in the DRC; it is considered a companion metal - a byproduct of nickel and copper production. The cobalt market is segmented between non-battery use in magnets, catalysts, cutting tools, super alloys and battery use, which is divided between EVs, electronics applications, electricity grid, and other. Secondary supply, meaning recycled cobalt, will not close the gap between supply and demand in the short run. Going forward, we will need to exploit the secondary market as well as new mines, which will open up the potential for geographic diversification of cobalt production. 1:20 to 2:40pm Paper Session: Travel Behavior and Demand Chair: Kate Whitefoot, Carnegie Mellon University

● US VMT has trended higher in the US for several decades (see chart) ● Recession periods are characterized by a temporary pause in VMT growth; the global financial crisis

contributed to an outright decline in VMT for a short period in 2007-2011

Dr. Kate Whitefoot’s introductory presentation discussed the transportation sector as a primary driver of petroleum consumption and greenhouse gas emissions across the globe. In total, 72% of petroleum consumption and 28% of all greenhouse gases come from the transportation sector. Thus, VMT plays a crucial role in environmental impacts. VMT is expected to increase globally over the next 30 years. Lang Sui (Aramco Services Company), and Steven Przesmitzki (Aramco Services Company) American Mobility: Change in American Travel Behavior and Implication on Future Fuel Consumption

● Research study focused on data and insights from the US Bureau of Labor Statistics’ (BLS) American Time Use Survey

● Transportation accounts for 72% of petroleum use ● Approximately 20% of travel time per day is due to work

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● 62.2 minutes of driving a day accounted for an estimated 17% of fuel consumption in 2017 ● The chart below depicts the translation of oil consumption for each of five major daily activities

described in the BLS survey ● Work and activities associated with consumer purchases account for 56% of oil used by American

households on a daily basis ● Americans took an average of 2.37 trips per day per person in 2017 compared to 3.2 trips in 2003, a

decline of nearly 26% ● Travel time per day is high for working age individuals: It was an estimated 68 minutes for working age

Americans last year - Younger age cohorts, for example, the 19-25 year old age bracket, reduced work travel time

from 76 minutes to 60 minutes per day last year, or a 21% drop from the prior year ● Displaced trips include ability to interact through social media and E-commerce

- People do not travel for socializing as much anymore

“Saudi Aramco produces 10% of daily oil production globally” Dr. Lang Sui’s presentation focused on travel behavior and the different driving demographics. Only 5% of people's time in the US is spent driving. Most of the typical American’s time is socializing and relaxing, followed by work, household activities, eating, and care. Approximately 20% of the travel time is spent going to or coming from work. Americans spend about 62 minutes driving each day, accounting for an estimated 2 million barrels per day of oil demand. In addition, they make about 2.37 trips a day (presumably a trip from and to work at least). That

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number has fallen from 3.2 trips in 2003 as other alternatives such as ride sharing have entered the market. There is also a stark difference in demographics of drivers. Working age people travel about 68 minutes a day, while a young person spends around 60 minutes driving per day. On the topic of youth, they are also less likely to leave their place of residence for social activities as compared to prior historical periods. Social media and other digital platform activity has contributed to the drop in travel for social activities. As a whole, this trend is expected to continue, with E-commerce and online digital platforms playing a key role in putting downward pressure on VMT. Benjamin Leard (Resources for the Future), Joshua Linn (Resources for the Future), Clayton Munnings (Resources for the Future). Explaining the Evolution of Passenger Vehicle Miles Traveled in the United States

● Transportation sector is greatest emitter of CO2 (60% from passenger vehicles) ● Increasing VMT will offset the benefits from improving fuel efficiency ● Online shopping reduces travel demand – the so-called “Amazon effect” ● Greater demand for public transit, virtual connectivity, especially for younger age cohorts ● Travel demand growth slowdown evident in US government statistics ● Changes in household demographics and economic characteristics are also influencing travel demand:

Aging population, stagnant income gains for lower and middle income households, as well as high gasoline prices during the decade of the 2000s all contributed to the flat to declining VMT in that period

● Empirical results suggest that travel demand will grow at .9% annually through 2025, while oil consumption and GHG emissions are projected to rise by a cumulative 10% in the period through 2025

● Ride sharing is estimated to account for around .5% of VMT in 2017 Dr. Benjamin Leard collaborated with RFF colleagues Joshua Linn and Clayton Munnings on the evolution of passenger vehicle miles in the US. Leard began the presentation by explaining that the transportation sector is the greatest emitter of CO2. Over 60% of CO2 emissions comes from passenger vehicles. He expects that there will be an increase in VMT associated with improved fuel efficiency, offsetting some of the positive environmental benefit associated with more fuel-efficient vehicles. Leard also pointed out that the “Amazon effect” of E-commerce will play a role in influencing VMT, reinforcing the points made by Sui. Virtual connectivity could reduce congestion on roads, giving way to more freight and heavy-duty commercial vehicles on the road. Even taking into account this impact, their research predicted average annual travel demand growth of .9% through 2025. During this period, they expect oil and greenhouse gas emissions to rise by a cumulative 10%. Leard briefly discussed ride sharing in his concluding remarks. Their research leaned more toward the potential for more negative outcomes, i.e., adverse environmental impacts associated with VMT growth. Ride sharing only accounted for .5% of VMT in 2017. As a result, beneficial offsets to greenhouse gas emissions are projected to be limited in the period out to 2025. Discussant: Sam Stolper, School for Environment and Sustainability, University of Michigan

● Average time use for travel dropped between 2003 and 2017 ● Passenger VMT leveled off in the 2000s

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● Structural determinants of VMT include gasoline prices, household wealth, and driving “utility” (i.e., when the opportunity cost of VMT increases, the amount of VMT declines)

● Energy efficiency gains tend to push up VMT Dr. Sam Stolper reviewed overall trends of vehicle travel in the US and drew some comparisons with other determinants of VMT. First, he noted that average time for travel dropped between 2003 and 2017. Furthermore, passenger vehicle miles actually leveled off during the 2000s in terms of growth. This was largely due to demographic and economic preferences. There were also structural determinants as well: Gasoline prices, household wealth, and utility of driving. Moreover, in this interconnected world, the opportunity cost of driving is relatively high and should not be ignored when conducting empirical research on travel preferences. Finally, Stolper agreed that as energy efficiency rises, VMT increases as well, inducing greater CO2 emissions.

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3:00 to 4:20pm Panel: Mobility at the Intersection of People and Goods Chair: Robert Hampshire, University of Michigan Transportation Research Institute and Gerald R. Ford School of Public Policy Dr. Robert Hampshire introduced the panel by setting out some key points on the topic:

• This panel will address the movement of goods and people and how they intersect • For example, international travel includes an intersection of air freight and passenger air travel • Rail and long haul trucking does intersect with people (e.g., roads have rising delivery trucks from E-

commerce and personal vehicle travel for work, leisure and other activities) • FedEx and UPS last mile deliveries have grown -- consumer purchase behavior and goods movement

most evident from online shopping • Recent survey showed 55% of people have ordered something online in last 30 days, purchasing an

average 5 items; a 12% increase as compared to 2009 • This sharp rise in package deliveries is not be compensated by a drop in trips to the store • The net result: More delivery vehicles on the road and upward pressure on VMT of all vehicles • The panelists will hopefully address these issues today

Panel of Experts: Cheryl Bynum, U.S. Environmental Protection Agency

● EPA regulation has impacted reduction in GHG emissions; growth and regulation can go hand in hand ● US GHG emissions from freight emissions are rising ● Grid is not decarbonized, and today the infrastructure doesn’t exist ● A typical trucking fleet is one truck per company

- Smaller fleets are the oldest and thus most inefficient ● Moore’s Law, logistic possibilities through artificial intelligence (AI) will create best routes, and best

meeting points in the future ● Autonomous vehicles can be designed to reduce drag, thus increasing fuel efficiency ● Blockchain may help protect against criminal activity on connected and automated vehicles ● Since 2004, SmartWay partners saved 106 million tons of C02 emissions and billions of dollars

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Cheryl Bynum’s presentation focused on the rise of greenhouse gas emissions from freight and potential ways to mitigate such environmental degradation. She started out by addressing that growth and regulation are not mutually exclusive; they can go hand in hand if done correctly. However, there are some serious barriers to overcome. First, the infrastructure for a decarbonized grid does not exist nor is the US particularly close to achieving such a lofty ambition. In addition, a typical trucking fleet is one truck per company, and these trucks happen to be the oldest and most inefficient of freight vehicles on the road. Looking to the future though, Bynum expects artificial intelligence technologies to improve the outlook for autonomous freight vehicles. It is expected there will be 163 zeta-bytes of data floating around by 2025, which according to Moore’s Law will lead to logistic possibilities for driverless vehicles creating best routes, meeting points, and other solutions to maximize efficiency. Autonomous vehicles can also be designed to reduce drag, cutting emissions considerably. Blockchain could be implemented to protect against criminal activity. Overall, Bynum was hopeful for the future of efficient freight vehicles, adding that since 2004 her SmartWay partners have cut 106 million tons of CO2 emissions. Ali Hortacsu, University of Chicago Have goods shipping networks changed much as transportation technology has evolved?

● 40% of trucking costs are labor intensive activities (truck drivers) ● Doubling distance for goods shipments tends to reduce trade by one-half

- Is world becoming ‘flat’? ● Travel elasticity of demand for EBay in US was .1 in 2009 ● Things that are virtual eliminate distance in the equation

- Evolution of consumption of different kinds of goods Dr. Ali Hortacsu presented on the ideas surrounding good-shipping networks over a history spanning many thousands of years. He presented the idea of transactions through a gravity model on international trade, which simply stated that doubling distance would halve trade over certain distances. The age of E-commerce has turned this simplistic model on its head, with distance now playing a minimal role in the interactions of people across invisible borders. For example, the travel elasticity of demand for EBay in the US in 2009 was a mere .1. Thus, the proposed gravity model has little to say about how transportation technology has evolved over the last 50 years. There is a distinction to be made for the goods people are buying now versus 50 or 3,000 years ago. Consequently, it is imperative to look at differentiation of goods in terms of size, markets, and the trust embedded in consumers that producers will provide the goods they say they will. That is to say, the model may have more relevance when assessing the shipping of a durable good like a refrigerator than the digital shipment of a song on SoundCloud. Kenny Vieth, ACT Research

● Not likely to see electric drivetrain for medium- and heavy-duty vehicles at this juncture given battery pack size, weight, density, and cost

● Opportunity for hydrogen fuel cell in long haul trucking trips, but we do not have the infrastructure (few fueling stations)

● Total cost of ownership in freight transport key aspect in commercial freight businesses: - Work goes to the lowest bidder - Driver wages: 43%, fuel costs: 22%

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● At UPS, 1 minute per driver per day = $14.5 million in labor costs per day - Drivers average 150 stops/shift

● Companies won’t “go green” if other companies aren’t doing so ● Autonomous opportunities may work best in long haul, high density freight corridors

Kenny Vieth began his presentation by stating that he did not expect medium- or heavy-duty vehicles to have electrified applications in the short or medium run. He did say there is an opportunity for hydrogen fuel cells in long haul trips, but the infrastructure to support this is very limited, costly and presently not adequate. There are too few fueling stations. Vieth did indicate that there are some market participants interested in autonomous applications for niche scenarios that involved long haul, high density freight. High wage costs – at 43% of business costs – provide an incentive to trim labor inputs in commercial long haul trucking. Those who would benefit most from autonomous vehicles would probably be delivery companies such as UPS and FedEx, who pay drivers around $14.5 million a day to deliver packages. The challenge remains that companies need a person on the ground to make final deliveries, though ideas of bot-to-door delivery and locker pickup stations have been suggested. In addition, those drivers have to stop for various reasons, whereas an autonomous vehicle would not have this inefficiency built in. As a result, even though autonomous vehicles may eventually cut down marginal costs, the technology is still in its early stages and not commercially viable. Jon Walker, Lyft

● Cities like Washington, D.C. are beginning to develop flexible parking zones to handle shared mobility services and other efficient applications being developed by digital platforms (e.g., curbside food delivery services).

● In large markets, Lyft is striving to incentivize top drivers to use electric vehicles, hoping to expand to ensure high volume of EVs available for drivers

● Lyft is launching a program to rent EVs to the high VMT drivers in a few cities - “1,000s of EVs in a few years to be rented out”

● Jon noted the potential for significant fuel cost savings as EV adoption grows in the shared mobility services sector (see chart below)

● Lyft is seeing a lot of competition for space in cities - The dynamic of parking spaces vs. roads is changing

● Transit authorities have placed a cap on number of TNC vehicles in NYC, however there is no such cap on freight movement. We really should be optimizing for having both in the city space

● TNCs and freight will be blamed for taking space in cities ● Lyft is working on the intersection of riding sharing, electric, and autonomous vehicles. The company

is currently developing its own autonomous program

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Jon Walker indicated that Lyft anticipates that 50% of the rides they offer will be shared between parties by the end of 2020. Furthermore, they are developing flex parking zones in cities across the country, starting in Washington D.C. He said this in the context of a changing dynamic between parking spaces and roads. An increase in Lyft ride sharing volume will likely increase the need for more drop-off zones in place of parking spots. What is done with the space previously used for parking remains an open question in many urban areas. Walker indicated that Lyft is seeing a lot of competition for space in cities. He acknowledged that there has been some backlash in major cities. Walker believes that the focus should be on optimizing the space in cities for all types of mobility, including TNCs. Lyft will be initiating an EV rental program for high mileage Lyft drivers in the next year.