Working Paper

EU cost curve development methodology

This paper explains the methodology used to develop technology benefit and cost curves applicable for EU light-duty vehicles in 2020–2025. With appropriate modification of assumptions, the methodology described in this report can be used to develop cost curves in other regions of the world.

As described in ICCT Working Paper 2012-4, the CO2 data used in the development of the EU cost curves are derived from simulation modeling performed for the ICCT by Ricardo Inc. These data are combined with technology cost data to generate CO2 cost curves for five EU vehicle classes (namely, the B, C, D, small N1, and large N1 classes). The primary source of the technology cost data is a study carried out for the ICCT by FEV, Inc. specifically for this exercise. These cost data, developed on the basis of vehicle teardown studies, are considered to be superior to other available data due to the fact that they represent current high-volume production costs developed specifically for the EU market, and are generally consistent with the technology assumptions employed by Ricardo for the CO2 impact analysis.

The paper details the specific steps undertaken to develop the EU cost curves from the available CO2 and technology cost data. Section 2 describes adjustments to the baseline Ricardo ICCT CO2 data. Section 3 describes the basic approach to cost curve construction, including the methodologies employed to adapt the various cost data sources to the Ricardo ICCT CO2 data. Section 4 describes the steps taken to estimate the CO2 emissions performance of diesel electric hybrid technology, which is not explicitly included in the Ricardo ICCT CO2 data. Section 5 summarizes 2020 and 2025 cost curve construction given available CO2 and cost data, and presents the methodology used to extend the 2020 curve to a representative cost curve for 2015. Section 6 describes a set of final adjustments implemented to better adapt the cost curve data to average EU vehicles, while Section 7 presents the developed cost curves. Section 8 is a discussion of how these cost curves might be interpreted, and of associated limitations.