The CNG Age is upon us
edmondsun.com
Published: July 10, 2009 10:51 pm
Mickey Hepner
The Edmond Sun
EDMOND — When it comes to environmental policy, much of the attention in Washington, D.C., has focused on the cap-and-trade bill working through Congress. However another bill, authored by Dan Boren, Oklahoma’s lone Congressional Democrat, might just provide more significant benefits to the environment and the economy.
In this column a few months ago I wrote about six ideas that could transform America — ideas that I hope candidates running for Oklahoma’s 5th Congressional District will embrace. Among my six suggestions was a call for an expansion of tax credits for the production and purchase of compressed natural gas vehicles, along with tax credits for CNG refueling stations. Both of those suggestions are included in legislation now working through Congress.
Earlier this year Oklahoma’s own U.S. Rep. Dan Boren introduced H.R. 1835 — the aptly named New Alternative Transportation to Give Americans Solutions Act — which significantly increases financial incentives for the production and purchase of compressed natural gas vehicles. The measure also has 71 cosponsors including Oklahoma’s other four House members. This past week Senate Majority Leader Harry Reid, D-Nev., and Sen. Orrin Hatch, R-Utah, introduced a Senate version of the bill.
Among the bill’s provision is a plan to increase to $12,500 the tax credit for the purchase of a CNG vehicle — more than triple the value of the credit that buyers of Honda’s Civic GX currently receive. Furthermore, the bill provides for a $100,000 tax credit for each CNG refueling station. Both of these provisions are necessary to speed the widespread adoption of CNG vehicles.
And it is important that we speed the transition to CNG vehicles. Compared to traditional gasoline, CNG provides three main benefits:
1. CNG vehicles generate 30 percent less greenhouse gas emissions — thus CNG provides an important tool to fight climate change.
2. CNG is a domestic fuel source as more than 97 percent of the natural gas consumed in this country is produced in North America. Consequently, the more vehicles in this country powered by CNG the less money we give to oil-exporting nations across the world, many of whom do not like the U.S. very much.
3. CNG has greater price stability. Because much of our gasoline comes from imported oil, its price is highly dependent upon currency exchange rates. As the value of the dollar falls, the price of oil (and gasoline) rises. However natural gas, because it is domestically produced, is less exposed to this exchange-rate volatility. Without this additional source of volatility, CNG prices are more stable than traditional gasoline prices.
Each of these benefits generate what economists call a positive externality — a general benefit to society that extends beyond just the buyers and sellers of the product. In other words, increasing the use of CNG promotes our environmental security, our national security, and our economic security — each of which justifies the use of government subsidies like those contained in H.R. 1835.
However, just subsidizing the purchase of CNG vehicles is not likely to generate the needed behavioral change among car buyers. While the purchase price of the vehicle is certainly important, one of the largest costs CNG vehicle buyers face is the inconvenience cost generated by having limited refueling stations. Consumers are not going to make the transition to CNG vehicles unless they can easily refuel those vehicles. This is why the $100,000 tax credit for refueling stations is so important. By promoting the development of the CNG refueling infrastructure, this provision further reduces the cost of owning a CNG vehicle — leading to more CNG vehicle purchases.
Compressed natural gas vehicles offer a way to reduce greenhouse gas emissions, to reduce our dependence upon foreign oil, and to boost our economy too. Interestingly, when it comes to environmental policy it might just be a centrist Democrat from Oklahoma that is leading the way.
MICKEY HEPNER is an associate professor of economics at the University of Central Oklahoma. |
