Impacts of a super credit policy on electric vehicle penetration and compliance with China's Corporate Average Fuel Consumption regulation

A super credit policy provides favorable accounting rules for extremely low emission vehicles under several passenger vehicle fuel economy regulations. This policy was initially designed to promote promising advanced technologies complying with fleet-wide fuel economy regulations so that these technologies could achieve cost-effective breakeven points. The favorable multipliers offered range from 3.5 to 1.33 in the various fuel economy regulations by the year 2021. Under China's Corporate Average Fuel Consumption regulation, two types of super credit schemes are designed in the Phase IV Corporate Average Fuel Consumption regulation through 2020. One is the fuel-efficient vehicle super credit for vehicles with fuel consumption rates below the threshold of 2.8 L/100 km. Another is the new energy vehicle super credit for battery electric vehicles and plug-in hybrid electric vehicles. However, the effectiveness of this incentive in promoting electric vehicles and the optimal size of the multiplier are not well understood. This paper analyzes the impacts of the super credit policy from the perspective of automakers. A mathematical model based on combinational optimization is established to describe an automaker's decision-making process, and a genetic algorithm is employed to solve this problem. The conventional and plug-in hybrid electric vehicles cost-effectiveness frontier curves are fitted to illustrate the principle of new energy vehicle and fuel-efficient vehicle super credit schemes. Various multipliers of new energy vehicle and fuel-efficient vehicle super credit policy scenarios are simulated under the 2020 and 2025 Corporate Average Fuel Consumption targets. By analyzing the impact of the policy on the reduction of compliance costs, the super credit multiplier, the cost and the fuel consumption rates reduction effect are found to be the determining factors. The results confirm that the multiplier and China's super credit policy scheme will be effective by 2020, under which plug-in hybrid electric vehicles would account for 7.8% of the fleet at a cost of 6.6% Corporate Average Fuel Consumption target impairment. Under the assumed next phase of regulation by the year 2025, the optimal multipliers for the new energy vehicle and fuel-efficient vehicle super credit will be 1.5 and 1, respectively. It is noteworthy that the super credit policy may impair the energy saving target of Corporate Average Fuel Consumption regulations while promoting the market penetration of the targeted technologies. Despite other policies that benefit battery electric vehicles over plug-in hybrid electric vehicles, battery electric vehicles are not competitive with plug-in hybrid electric vehicles under either the 2020 or 2025 Corporate Average Fuel Consumption regulations. The fuel-efficient vehicle super credit policy will not promote the targeted advanced technologies under the next phase of regulation unless the 2.8 L/100 km fuel-efficient vehicle definition threshold can be adjusted along with the strengthened 2025 Corporate Average Fuel Consumption target.