Economic and Environmental Optimization of Vehicle Fleets: A Case Study of the Impacts of Policy, Market, Utilization, and Technological Factors

This paper focuses on the economic and environmental optimization of vehicle replacement decisions from a fleet manager’s perspective. An integer programming vehicle replacement model (VRM) is utilized to evaluate current environmental and policy issues such as greenhouse gas (GHG) taxes and fiscal incentives for electric vehicle purchases. In addition, this research analyzes the impacts of utilization (mileage per year per vehicle) and gasoline prices on vehicle purchasing decisions. Energy and emissions reductions for a variety of scenarios using real-world data in the United States are presented as well as breakeven points where electric vehicles are competitive. Findings include: (a) fuel efficient vehicles such as hybrid and electric vehicles are purchased only in scenarios with high gasoline prices and/or utilization, (b) current European CO2 cap and trade emissions price (around $18.7/ton) do not significantly alter fleet management decisions, and (c) electric vehicle incentives (i.e., tax credits) do increase the rate of purchases of hybrid or electric vehicles in scenarios with high gasoline prices and vehicle utilization. This research indicates that the proposed model can be effectively used to inform environmental and fiscal policies regarding vehicle regulations, tax incentives, and GHG emissions