Benefits of natural gas make it the future leader in transportation

This article is a shortened version of an essay by Dr. Growitsch and Hannah Schwind that was published in the April edition of the Blue Fuel Newsletter. For the original article, please visit: http://www.gazpromexport.ru/content/file/bf/Blue_Fuel_April2013_FINAL.pdf
 

In early 2013, the Commissioner for Transport and European Commission Vice President Siim Kallas presented the European Union’s Clean Fuel Strategy, which includes goals for the future of Europe’s road transportation sector. Compressed natural gas (CNG), a fuel that is currently only used by about 0.5% of the total fleet, is aimed to increase ten-fold by 2020. The policy also aims to reduce the maximum distance between publicly accessible CNG refueling points to 150 kilometers (km).

Noting the economic and environmental benefits of natural gas, some countries have already achieved the second milestone of reducing the distance between CNG fueling stations. But the market for natural gas vehicles (NGVs) is not yet well developed. This is unfortunate – because increasing Europe’s NGV market could help reach the EU’s target of 95 grams Carbon Dioxide (CO2) per km as the average emissions for the new car fleet by 2020. This blog overviews the many economic and environmental benefits of natural gas for road transportation.

Benefits of Natural Gas Vehicles

The Clean Fuel Strategy encourages a way out of the vicious circle that has characterized the European NGV sector. On the one hand, it’s not profitable for filling stations to offer natural gas with so few vehicles on the road. On the other hand, too few refueling stations for customers and a relatively higher purchase costs for NGVs prevent the market from developing.

Customers often don’t take into account future savings when they make the decision to buy a new car. In 2011, natural gas in Germany was much more cost-efficient than petrol and diesel for transportation. For 20 euros, an NGV could drive 468 km, compared to 297 km for diesel and 179 km for petrol. Yet consumers face confusing pricing information, since conventional fuels and natural gas are reported in different units that ignore their different energy content. Even when taking the relatively higher purchase costs into account, NGVs are more profitable than conventional vehicles in the long run.

In addition to the more economical fuel efficiency, NGVs are also more environmentally efficient than conventional cars. Given that almost one third of the energy consumed in the EU occurred in the transport sector in 2010, these energy savings could play a crucial role in addressing climate change:

Policy responses support the benefits of natural gas 

At a European level, the recently introduced European emission standard Euro 6 will likely indirectly favor NGVs in the future by making diesel and petrol engines more expensive due to stricter requirements for nitrogen oxide emissions. In addition to having lower fuel costs, the difference in relative purchase prices compared to conventional cars is expected to decrease as well.

The inclusion of the transportation sector into the Emission Trading Scheme (ETS) would also establish a market mechanism to encourage the use of NGVs due to the environmental benefits of natural gas. Contrary to the commodity price relationship in the power sector, in which price differentials between coal and gas are too high for the ETS to promote gas as the cleaner fuel, the current gas-to-oil relationship in the transport sector would bring the desired effects if the trading scheme were to be extended.

Clearly, natural gas has many advantages as a transportation fuel. In the future, these economic and environmental benefits of natural gas will increase the use of NGVs in the European market – benefitting consumers and the environment.

Compressed Natural Gas Filling Station

Dr. Christian Growitsch is the Director of Applied Research and a member of the Management Board at the Institute of Energy Economics at the University of Cologne
Hannah Schwind is a Research Associate at the Institute of Energy Economics at the University of Cologne

 

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