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THE FUTURE OF AUTOMOBILE ENERGY IN THE UNITED STATES OF AMERICA

By Nicole Hancock
  

The year 2000 has brought sweltering heat, little rain, and skyrocketing gas prices to the southeastern portion of the United States of America. Intense temperatures and lack of rainfall have increased awareness and fear of global warming. Society began to realize that global warming is happening right now and cannot be ignored. At the fuel pumps drivers found themselves digging deeper into their pockets to fill their vehicles with gasoline. The whole of the USA experienced a hike in gas prices and every country dependant on OPEC for oil began paying exorbitant amounts for fuel. Both the increasing dependence on the OPEC cartel for petroleum and the immediate global warming phenomenon encourage finding an alternative to gasoline-powered automobiles. While many civilians may only now recognize the need for petroleum alternatives, government officials and environmentalists across the globe have been working over 20 years to locate viable options. The United States government in recent years has passed legislation concerning air pollution and supporting alternative fuels. In 1990 amendments to the Clean Air Act (CAA) heightened standards on automobile emissions. Two years later the Energy Policy Act of 1992 (EPACT) required the U.S. Secretary of Energy to determine "the technical and economic feasibility of replacing 10 percent of projected motor fuel consumption with non-petroleum alternative fuels by the year 2000 and 30 percent by 2010?span style="mso-spacerun: yes">??(USGAO, 1996, p. 7). Thus, the pattern emerges that replacing gasoline in automobiles links directly to environmental gains and economic costs. By examining the advantages and disadvantages of various alternative fuels, the economic effect for manufacturers, and results of other countries using alternative-fueled vehicles one may assess likely options for fuel in the United States transportation sector. The future, if it follows projections, has many obstacles to overcome in replacing gasoline automobiles.

Gasoline Alternatives

Many options exist for replacing petroleum as a transportation fuel. However, research must focus on the most realistic choices. The first successor of gasoline will come from alternatives already in use. This includes liquefied petroleum gas (LPG), compressed natural gas (CNG), liquefied natural gas (LNG), and varying forms of methanol and ethanol. Electricity and fuel cell technology present other substitutes, however they have not reached the higher stages of development required to be considered as real choices in the next few years. To assess the above alternatives, one must first know how they improve upon gasoline technology.

Liquefied petroleum gas leads in number of vehicles operated in the United States. It consists of a "mixture of petroleum and natural gases that become liquid under pressure or at reduced temperatures?(USGAO, 1990, p.14). The principle LPGs, propane and butane, mainly come from natural gas processing and crude oil refining. Most information about the air quality implications of LPG stems from the industry itself, yet the information remains consistent across the board. Liquefied petroleum gas vehicle emissions produce half the hydrocarbon of gas vehicles, have lower ozone formation potential, and produce substantially less amounts of carbon monoxide than gasoline (p. 8, 14). Disadvantages of LPG vehicles includes reduced driving range, refueling inconveniences, decreased cargo space because of specialized fuel tanks, and an increase in cost of approximately $1000.

Compressed natural gas offers a second option for consideration in replacing gasoline. It contains methane and small amounts of other gases. Small quantities have been used for automotive fuel since the late 1800s, held back because the technology never caught on due to lack of storage and compression facilities (ibid. p.16). Advantages of CNG include cutting hydrocarbon emissions 50 to 90 percent and carbon monoxide emissions by the same amount. Additionally, benzene and other toxic pollutants may be reduced. More nitrogen oxides (an ozone component), reduction in driving range and refueling difficulties, and large, heavy fuel tanks offer a few of the downsides to CNG. Also, CNG increases costs because it requires a new distribution system and adds $2000 to the price of a new vehicle (p.9).

Refrigerating natural gas at ?60 degrees Fahrenheit it becomes a third possibility for replacing gasoline. Liquefied natural gas has high energy density compared to other alternative fuel options. It produces significantly less particulate matter, carbon monoxide, nitrogen compounds, and hydrocarbons, all of which are listed as problematic in the 1990 Clean Air Act. Fueling stations and times are similar to that of gasoline and thus would not cause trouble in transition. Also, the U.S. Department of Energy reports that with existing technology the U.S. has enough natural gas for at least 65 years, with almost 90 percent produced in the United States and most of the remaining 10 percent coming from Canada. However, estimates range from $3000-$5000 to convert vehicles to use LNG, and new vehicles cost $3500-$7000 more than gasoline vehicles. Yet with mass production and a decrease in federal taxes in 1997, the DOE estimates a reduction to only $800 more than comparable gasoline vehicles (www.ch-iv.com/lng/lngfact.htm) (www.ngvc.org/qa.html#trans).

The fuel of Indianapolis racing cars, methanol, also exists an alternative to gasoline. This clear, colorless liquid comes primarily from natural gas. Two forms of methanol, M85, 85 percent methanol and 15 percent gasoline, and M100, 100 percent methanol have been evaluated by the Environmental Protection Agency. According to the EPA, M85 emits 20 to 40 percent less ozone-forming compounds than gasoline vehicles. Automobiles tested with M100 have 75 to 90 percent less ozone-forming emissions (USGAO, 1990, p.10). Though disagreement exists between the EPA and the automobile industry as to some of the emissions of methanol vehicles, most agree methanol fuel vehicles eliminate benzene and other toxic emissions. Disadvantages associated with methanol are increase in formaldehyde emissions, significant costs for new production and distribution systems, a reduction in driving range, and difficulty starting in cold temperatures (p. 9).

Ethanol, the liquid alcohol fuel produced from corn and other agriculture products like sugar cane, provides another possible alternative fuel. Though usually found in mixtures, it may be used in pure form. The primary gains in using ethanol are reduced hydrocarbon, toxic, and carbon dioxide emission (ibid. p.8). Additionally, costs associated with producing ethanol vehicles give reasonable comparison to gasoline vehicles. To produce an ethanol vehicle requires only about $300 more dollars than a gasoline vehicle, a marginal cost in the grand scheme of automobile prices. However, even with vehicle production costs down, without tax modifications the price per gallon of ethanol goes well beyond what consumers would pay for gasoline. Other weaknesses for pure ethanol include increased acetaldehyde emissions and possible health risks if ingested by infants (p.13).

A modification to methanol and ethanol fuels, called oxygenated fuels, consist of a mixture of traditional gasoline and additives. The two most widely used forms of oxygenated fuels are gasohol, a 10 percent ethanol and 90 percent gasoline mixture and a gasoline/methanol blend which contains no more than 5 percent methanol (ibid. p.17). (Two other possible blends using Methyl Tertiary Butyl Ether (MTBE) and Ethyl Tertiary Butyl Ether have limited usage and availability to the commercial market.) Incentives to use these blends include an estimated 12 to 20 percent reduction in carbon monoxide emissions and increased octane levels. Conversely, gasoline blends increase volatile organic compound emissions, form toxic chemicals when oxidized, and raise gasoline costs. They may also increase nitrogen oxide emissions and contribute to fuel system problems (p. 17).

The previous fuel alternatives all attempt to lower harmful emissions. Yet the capabilities exist to create zero-emission vehicles (ZEVs). These include electric vehicles and fuel cell vehicles, which turn hydrogen and fuel and oxygen into electricity. With zero emissions, the advantages of electric vehicles, which can run on various types of batteries, are numerous. However, most electric vehicles fail to match the maximum speeds of traditional vehicles and can only go approximately 200 miles before needing to recharge their batteries (www.energy.ca.gov/education/AFVs/electric.html). Similarly, there are evident advantages for fuel cell technology in automobiles. However, they suffer the same problems as electric vehicles and at the current time are far too costly to affect the market. Fuel cells likely hold the future of automobiles, however the research is in its early stages and automobiles are still in prototype form (www.energy.ca.gov/education/AFVs/fuelcells.html).

Industry Costs

Just as cost presents an enormous problem for fuel cell technology, it also poses threats to many of the alternative fuels discussed above. Each fuel introduces different costs to consumers above the cost of gasoline vehicles. Automobile manufacturers, too, have cost concerns to address when creating and alternative-fueled vehicle (AFV). To further assess the feasibility of AFVs one must consider the implications and incentives to the supply side of the automobile industry.

Possible incentives for automobile manufacturers include subsidizing the building of AFVs and other purely monetary accompaniments. However, such bonuses would only result from new legislations and policies. A study conducted by Jonathan Rubin and Paul Leiby examines how producing AFVs may prove profitable for manufacturers under existing laws in the United States. Rubin and Leiby cite corporate average fuel efficiency (CAFE) standards as problematic for individual manufacturers. The standards call for an average fuel efficiency among a manufacturer's new vehicle fleet. If they do not meet these standards, manufacturers incur fines based on how far below the miles per gallon standard they fall. In contrast, if manufacturers exceed the standards they earn credits that can roll over for three years.

Rubin and Leiby postulate that by manufacturing AFVs automobile companies can earn significant credit and decrease concerns for other vehicles meeting the standard. Total fines incurred since 1985 range from $15, 565,000 to $48, 449,000 with the highest years being 1989 and 1990 (Rubin and Leiby, p. 592). By dividing AFVs into dedicated fuel vehicles and flexible fuel vehicles (which can run on either alternative fuels or traditional gasoline), Rubin and Leiby assert that credits of $1100 and $550 per vehicle respectively may be earned. Comparing these credits with incremental costs of manufacturing AFVs on a medium to large-scale production range yields profit on four of eight types of AFVs examined. Alcohol dedicated AFVs prove most profitable because they incur incremental costs of only $223 per vehicle for large-scale production. After adjusting for actual fines paid over a 10 year period and averaging the credits for AFV production, Rubin and Leiby calculate values of ?638-$319 for dedicated and flexible fuel vehicles respectively?(p. 596).

To determine if CAFE credits will affect production Rubin and Leiby put their projections into a case simulator, which takes into account fuel suppliers, vehicle producers, and consumer behavior among other variables. Their results show that through 2010 AFV sales are projected to be only about 1% of new vehicle purchases (ibid. p. 597). Furthermore, many of the flexible fuel vehicles sold will use gasoline instead of alcohol, thus displacing little gasoline. Even changing variables such as altering standards and presenting a case of "no barriers?to AFVs provides discouraging results. Thus, Rubin and Leiby conclude, "current CAFE credits induce some AFV production, but not enough to really get the ball rolling?(p. 598). In other words, the CAFE credits earned by AFVs will have little to no effect in manufacturer production because the market will not buy the alternative-fueled vehicle.

Usage of AFVs in Other Countries

Rubin and Leiby's study provide estimations of a future with uncertain variables. Another way to assess feasibility of AFVs is by looking at countries that have already implemented programs for AFVs. Brazil, Canada, and New Zealand comprise some countries available to observe for past actions involving AFVs.

Brazil, Canada, and New Zealand all have organized alternative fuel programs in operation (Rezendes, p. 2). In 1975 the Brazilian government began a program that uses corn to produce ethanol. Thirty percent of "Brazil's passenger vehicles were manufactured to operate only on ethanol?(p. 3). To aid AFVs Brazilian government offered loans or favorable loan terms for conversion to alternative fuels and reduced taxes on ethanol to consumers. Government also took responsibility for providing adequate fueling facilities and keeping gasoline prices higher than ethanol (p. 2). Additionally, they provided subsidies to manufacturers for alternative fuel production and distribution. In 1981 the Canadian government implemented their plan for installing AFVs. They provided grants to consumers who converted their vehicles to operate on propane as well as natural gas. Other incentives consist of tax reductions on alternative fuels and grants from the industry to consumers for conversion. The New Zealand government began in 1979 to encourage natural gas and propane use in order to decrease dependence on imported oil. Government support materialized as grants and loans for vehicle conversion to consumers, grants or tax breaks for fueling facilities, and subsidies for alternative fuel production and distribution to the industry (p. 16).

All countries indicated that government backing and a commitment to the alternative fuel system proved essential for consumers. Saving money, having convenient fueling, and reliability of the vehicle ranked as the top three concerns of consumers. In Canada, 92 percent of consumers polled said, "saving money on fuel was the major reason they converted their vehicles?(ibid. p. 5). When governmental policies or events occurred which caused consumers to question the quality of vehicles or endanger convenience, the number of conversions in every country to the alternative fuel declined. ?/span>For instance, when an ethanol shortage occurred in Brazil sales of ethanol powered vehicles dropped from 50 to less than 5 percent of all new car sales within one year (p. 6). In New Zealand, when incentives declined, so did public faith in AFVs and the number of conversions (p. 7).

Future in the United States Transportation Sector

Alternative-fueled vehicles already exist in the United States. The total as of 1998 was approximately 403,000 AFVs. Liquefied petroleum gas vehicles hold the largest share of AFVs with 279,000. However, their percentage of AFVs in the U.S. has declined since 1992. Compressed natural gas vehicles will likely increase the most of any AFV in absolute number and by the end of 1998 accounted for over 85,000 vehicles. The third largest percentage of the American market, at 5 percent of all AFVs is methanol vehicles, both M85 and M100. Ethanol vehicles numbered around 11,000 in 1998 while liquefied natural gas and electric vehicles hold marginal percentages of AFVs. Zero-efficiency vehicles are also being considered by state legislators in California and other states and have already been implemented in New York. To help start AFV use in the United States, President Clinton signed Executive Order 13031 in 1996 which called for each Federal agency to comply with EPACT requirements and have 75 percent of all newly acquired vehicles be AFVs by 1999 (USOCNEAF, pp. 9-17). However, this is only the beginning of steps that must be taken by the U.S. government in order to fully establish AFVs in the American market. It must follow the example and learn lessons from countries such as Brazil, Canada, and New Zealand and offer incentives to both consumers and manufacturers for converting and buying AFVs.

The problem still exists, though, as to which form of alternative fuel presents the best substitute for gasoline. Currently no form of alternative fuel seems poised to make a significant impact on the U.S. gasoline market. Liquefied petroleum vehicles, though comprising the largest percentage of AFVs in the U.S., are giving way to other AFVs like compressed natural gas and methanol. However, at the present time too many problems plague these forms for any of them to emerge as a predominant choice over gasoline. The most hope for gasoline alternative stems from research into electric cars and fuel-cell technology, both of which produce zero emissions. Unfortunately, at the present time not enough research has been conducted to make the cost of either option practical and automobiles remain in prototype form. Over the next decade zero-emission vehicles will significantly improve and offer a better choice for alternatives to gasoline.

For electric and fuel-cell technologies, as well as for alternative fuels, to prove feasible they must meet consumer requirements and expectations. Cost, of course, remains the most important factor. Even if prices equal or compare to gasoline vehicles, other costs such as refueling and locating convenient fueling stations still persist. Without a means to refuel cars easily and cheaply, consumers will not purchase an AFV. A factor almost equal to cost is performance of the vehicle. Consumers must have adequate driving range, acceleration, and overall quality. Gasoline powered vehicles provide hefty standards which as of yet cannot be equaled by AFVs. Therefore, no option is currently feasible. As the market grows for AFVs, costs will decrease, and quality will improve with time. However, in order to provide motivation for both these advancements, the market must be informed and have incentives to change. Government subsidies, grants and loans will prove essential in establishing AFVs but will not suffice on their own. Aggressive marketing, advertising, and campaigning are also needed. Finally, to pave the way for individual ownership, both government and private fleets must lead the way as President Clinton demonstrated by signing Executive Order 13031. The tradition of oil in the United States and across the globe runs deep. Without hard-line techniques to draw consumers to AFVs, gasoline vehicles will always prevail. The United States cannot presume to act alone in this matter. Global warming is a worldwide phenomenon and while specifics of alternative vehicles must relate to the needs of a location's drivers, the problem of replacing gasoline with something lies in the hands of every country. Only by working with other nations and observing their results with AFVs can the United States and the world create a feasible option to replace gasoline powered vehicles.

Bibliography

Ewing, Gordon. "Assessing Consumer Preferences for Clean-Fuel Vehicles: A discrete choice experiment". Journal of Public Policy and Marketing 19 (2000): 106-119.
Rezendes, V.S. "Alternative fuels experiences of countries using alternative motor fuels: statement of Victor S. Rezendes, Director, Energy Issues, Resources, Community, and Economic Development Division, before the Subcommittee on Government Operations, House of Representatives."

Rubin, Jonathan and P. Leiby. "An analysis of alternative fuel credit provisions of US automotive fuel economy standards"Energy Policy 13 (2000): 589-601.

United States. General Accounting Office. Motor fuels issues related to reformulated gasoline, oxygenated fuels, and biofuels: report to the Honorable Tom Daschle, U.S. Senate. 1996.

United States. General Accounting Office. Air Pollution: Air quality implications of alternative fuels: report to the chairman, Subcommittee on Energy and Power. Committee on Energy and Commerce. 1990.

United States. Office of Coal, Nuclear, Electric, and Alternative Fuels. Alternatives to traditional transportation fuels 1996. Energy Information Administration, 1996.

www.ch-iv.com/lng/lngfact.htm

www.ngvc.org/qa.html#trans

www.energy.ca.gov/education/AFVs.html


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