**4. Results**

### *4.1. Life-Cycle CO2 Emission Intensities of Vehicle Models*

Table 1 shows the data showing mean, standard deviation, maximum value and minimum value of the life cycle CO2 emission intensities of vehicle models of seven automobile manufactures in Japan estimated by Equations (12) and (13). According to Table 1, the maximum value of the life cycle CO2 intensity in seven firms is 60.74 t-CO2/car Toyota CENTURY (gasoline vehicle) and the minimum value is 14.8 t-CO2/car Toyota AQUA (Hybrid vehicle). Thus, there is a large difference in life cycle CO2 intensities within a firm as well as between firms. The mean of the intensities of each firm is caused by the number attributes (e.g., body weight, fuel economy, etc.) of cars sold by the firm and it means that firms with a higher standard deviation of the intensities like Toyota have more varieties of cars.


**Table 1.** Lifecycle CO2 intensities and life cycle CO2 emissions in 2015.

The last column of Table 1 shows the life cycle CO2 emissions of each firm in 2015 that is the benchmark emissions in this analysis. Importantly, Toyota has the largest number of vehicle models sold (see first column of Table 1) and it has the largest life cycle CO2 emissions, amounting to 28.4 million t-CO2 in 2015. This is because the life cycle CO2 emissions depend on the number of sold cars as well as the number of sold vehicle models. The total of CO2 emissions of Japan in 2015 was 1325 million t-CO2 [28] and the sum of the life cycle CO2 emissions of seven automobile manufactures in 2015 was 54.2 million t-CO2 that accounts for 4% of the total CO2 emissions of Japan. Therefore, it is essential to managemen<sup>t</sup> the life cycle CO2 emissions in automobile industry.

### *4.2. CAFEs and CAFE Targets of Seven Automobile Manufacturers in Japan*

Table 2 shows the CAFEs and CAFE targets of Japan's seven major automobile manufacturers (Toyota, Nissan, Honda, Mitsubishi, Mazda, Subaru, and Suzuki), as estimated using Equations (1) and (2).


**Table 2.** CAFEs and CAFE targets of seven automobile manufacturers (unit: km/L).

Table 2 shows that the CAFEs of Toyota and Honda exceeded their CAFE targets, while those of Nissan, Mitsubishi, Mazda, Subaru, and Suzuki fell below their CAFE targets. When the CAFE standards are introduced in 2020, Nissan, Mitsubishi, Mazda, Subaru, and Suzuki which cannot currently meet their targets, will need to step up their efforts to improve fuel economy. The relationships between fuel economy by vehicle model, vehicle weight, and the number of vehicle sales by model for the two automobile manufacturers that met their CAFE targets, Toyota and Honda, are plotted in Figures S1 and S2 of the Supporting Information, respectively. Figure S1 shows that Toyota sells a large number of vehicle models that have exceptionally good fuel economies. The fact that Toyota sells a much larger number of hybrid vehicles than the other six automobile manufacturers appears to be a factor in Toyota's success in meeting the CAFE standards. On the whole, Honda sells fewer vehicle models with poor fuel economies than does Toyota, and for that reason, it too managed to meet the CAFE standards (Figure S2). Thus, differences in sales patterns and fuel economy technology between companies account for the gaps in their ability to achieve their targets.

### *4.3. Sales Maximization Under the CAFE Standards*

Before delving into the results for sales maximization, let us first review the state of Japan's seven major automobile manufacturers as of 2015. According to the Japan Automobile Dealers Association, approximately 2.7 million passenger vehicles (standard-sized vehicles (white plate vehicles) and Kei passenger cars (yellow plate vehicles)) were sold in 2015. It should be noted that Kei passenger car has an engine of 660 cc or smaller, whereas standard-sized vehicles has a larger internal-combustion engine than 660 cc. Sales shares by company were led by Toyota at 46% (1.25 million vehicles), followed by Honda at 14% (380,000), Nissan at 11% (290,000), Mazda at 7% (180,000), Subaru at 5%, (120,000), Suzuki at 3% (70,000), and Mitsubishi at 1% (30,000). Japan's automotive-related industries combined for a market scale of 64 trillion yen [29].

While these 2015 sales figures do not account for CAFE standards, as given in the previous section, fuel economy and sales patterns for each vehicle model are two necessary elements for achieving

the CAFE standards. Thus, the sales for each scenario will now be given with regards to the CAFE standards by performing sales maximization as specified in Equation (3).

Figure 1 shows the rate of change in current sales for Scenarios I through IV compared to 2015 sales. Sales tend to increase with the rate of fuel economy improvements but are still decreasing for some companies; this likely depends on the sales patterns of the different companies. The slumping sales of certain companies can be explained by the poor fuel economy of each vehicle model and limited vehicle models that can be sold to satisfy the CAFE standard constraint. In contrast, sales for Nissan and Suzuki, two manufacturers who have not met their CAFE targets, increased in Scenario I, illustrating the vital importance of sales patterns (Figure 1). In Scenario IV (fuel economy improved 20%), total sales across all seven manufacturers increased by 13.7 trillion yen, with each manufacturer increasing as follows: 10 trillion yen at Toyota, 2 trillion at Nissan, 700 billion yen at Mazda, 600 billion yen at Subaru, 200 billion yen at Honda, 100 billion yen at Mitsubishi, and 100 billion yen at Suzuki. Overall, the automotive market would increase 20% (Figure 1). For the optimal sales patterns for each company, please refer to the Supporting Information.

Scenario III: uniformly improved from the baseline fuel economy by 15% (Ή=1.15) Scenario IV: uniformly improved from the baseline fuel economy by 20% (Ή=1.2) 

**Figure 1.** Percentage changes in car sales under optimal Scenarios I–IV relative to the actual sales.

Currently, five of the seven manufacturers—Nissan, Mitsubishi, Mazda, Suzuki, and Subaru—have not achieved their CAFE targets (Table 1). As shown in Table 3, however, all seven can implement sales plans for maximizing sales and still achieve the CAFE standards in all of the fuel economy scenarios. Even though the sales optimization has the CAFE standards imposed as an inequality constraint, note that the CAFEs, which are based on the endogenously determined optimal vehicle model sales figures, are the same as the CAFE target. One important point is that Toyota's CAFE target based on its actual units sold for 2015 is 17.0, whereas its CAFE target based on optimized

units sold would have been 15.6. This illustrates that sales activity aimed at sales maximization will bring down the CAFE target and consequently lead to a lack of discipline.


**Table 3.** CAFEs and CAFE targets of seven automobile manufacturers for the actual and optimal cases.

If the above CAFE standards are instated, each company can fashion their sales activity to maximize sales by shifting their sales patterns. In the next section, the environmental loads brought about by the sales activity of each company if this happens are analyzed.

### *4.4. Lifecycle CO2 Emissions Under the Optimized Sales Pattern*

The original purpose of the CAFE system was to restrict CO2 and air pollutant emissions by making fuel economy standards more flexible. Thus, a simple analysis of CAFE standard achievement rates would be insufficient; one needs to analyze how the CAFE standards relate to the lifecycle CO2 emissions associated with vehicles. Therefore, this section analyzes the lifecycle CO2 emissions derived from vehicles with the CAFE standards introduced.

As estimated with Equation (7), the lifecycle CO2 emissions associated with vehicles manufactured by their relevant automobile manufacturer (the carbon footprint of that automobile manufacturer) in 2015 were as follows: 20 million tons for Toyota, 8 million tons for Honda, 7 million tons for Nissan, 3.6 million tons for Mazda, 3 million tons for Subaru, 1.4 million tons for Suzuki, and 730,000 tons for Mitsubishi. These constitute a footprint of approximately 40 million tons for all seven manufacturers. Thus, the Japanese automotive industry's carbon footprint accounts for roughly 30% of CO2 emissions attributed to Japan's transportation sector [3].

Next, Figure 2 shows the rate of change in carbon footprint for each company from their baseline carbon footprints, based on the optimal units sold for each company in fuel economy improvement Scenarios I through IV if they maximize their sales while meeting the CAFE standards. From Figure 2, one can see that as the fuel economy improvement rates increase and gasoline consumption decreases, a company's carbon footprint will also tend to decrease.

In addition, from Figures 1 and 2, although optimal vehicle sales patterns under the CAFE standard constraint would help to increase sales, they would also increase carbon footprints and thus be bad for the environment (see the Toyota and Nissan values in Figures 1 and 2). Based on the estimated optimal sales patterns for each company in Scenario IV, where fuel economy for the vehicle models sold is improved 20%, the overall carbon footprint for all seven companies would be approximately 53 million tons, a 1.2-fold increase over their 2015 carbon footprint. In looking to maximize sales, manufacturers have tended to sell heavier vehicles, given the correlation between weight and price. Thus, their carbon footprint based on the optimal sales patterns has not decreased compared to the 2015 baseline value. One important finding in this study is that automobile manufacturer behavior—striving to achieve CAFE standards with the goal of maximizing car sales—will increase their carbon footprint and actually worsen the environment. It is therefore

concluded that it is necessary for automobile manufacturers to mitigate the carbon footprint associated with vehicle lifecycle under the CAFE standards.

**Figure 2.** Percentage changes in lifecycle CO2 emissions under optimal scenarios I–IV relative to the actual emissions.
