Autogas Adoption Challenges - Policies and Laws

Goals

To identify laws and policies in the United States that limit the adoption of natural gas for use in vehicles (autogas).

Early Findings

The United States has enacted a number of laws and policies around the adoption of autogas in the country. Below are some policies that currently limit the adoption of natural gas for use in vehicles in the country.

INABILITY TO MEET STATED TIMELINE

  • The first laws and policy statements directly relating to the use of natural gas as an alternative fuel for vehicles were enacted in 1992. The law, titled "the Energy Policy Act (EPAct) of 1992," mandated that 75 percent of the federal fleet be powered by alternative fuel systems, including natural gas. This goal of achieving a 75 percent adoption rate for the federal fleet was slated for 2007.
  • However, goals stated in the EPAct could not be achieved within the stated timeframe. In January 2004, the Department of Energy (DOE), acting on a court ruling, extended the EPAct to 2030. In addition, the target to develop a domestic production capacity for alternative fuels sufficient to replace 30 percent of U.S. motor fuel consumption was also extended.
  • As of 2018, autogas still remains less than 0.1 percent of total fuel sales in the United States. Also, there are only 155,000 road vehicles that utilize autogas.

HIGH RELATIVE COST OF AUTOGAS

  • The cost of autogas per liter in the United States is cheaper than the cost of diesel and gasoline. However, this is only half of the picture. When the energy equivalence of autogas is compared to gasoline, it is clear that gasoline is cheaper. On average, the comparative cost of autogas is about 104 percent that of gasoline in the United States, indicating that autogas costs about 4 percent more to complete the same distance compared to gasoline powered vehicles.
  • This price difference is directly linked to the high federal excise tax imposed on autogas, which has remained unchanged since 1992. In other developed economies around the world where autogas has enjoyed better adoption, autogas is totally exempt from excise taxes, as is the case in China, India, Mexico, and Russia. As of present, the United States has the highest ratio of autogas taxes to gasoline taxes in the world.
  • According to the World LPG Association, high pump prices of autogas relative to conventional fuels, which is caused mainly by a relatively high federal excise tax, is the "main reason" for the low market penetration of autogas in the United States.

Summary of Findings

The policy direction regarding the adoption of autogas in the United States, which has been lax in nature and open to extensions, has been a limiting factor in the adoption of natural gas as an alternative source of fuel for use in vehicles. In addition, the tax regime, which mandates federal excise tax for autogas, has also played a role in limiting the adoption of the fuel.

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