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Natural Gas Cars: Let
the Market Decide
By Romina Boccia
With gas prices unbearably high and driving season approaching,
Americans are easy prey for those who promise to ease their pains at
the pump. This makes it high season for politicians and their cronies
seeking taxpayer-financed support of alternative fuels. While President
Obama favors electric cars, preferably run on solar and wind energy,
other interest groups are eagerly pursuing handouts for vehicles fueled
by natural gas.
Americans should be wary of any special interest group claiming that a
helping of taxpayer money will pave the way to a better energy future,
regardless of what source is on the table that day.
Today, oil dominates in the US transportation sector. Ninety-four
percent of all transportation is fueled by oil, whereas natural gas and
renewable sources are responsible for only three percent each.
Fifty-one percent of all oil consumed in the United States is imported
from nations such as Canada, Mexico, Saudi Arabia, Venezuela, and
others, leading many to worry about US foreign oil dependence.
A long list of Presidents, going all the way back to President Nixon,
has promised to liberate the American people from foreign oil
dependence. President Obama follows in their footsteps. Leaving aside
the question of whether oil self-sufficiency is as desirable a goal as
politicians make it out to be, thus far none of them succeeded in
meeting that goal. Nonetheless, the pursuit of oil independence, in
conjunction with promises of lower carbon emissions and lower costs,
have justified taxpayer-financed support for favored industries, which
have consistently failed to live up to their hype.
The ethanol trifecta is the prime example of energy policy gone wrong.
Three decades of federal subsidies, trade protection, and, most
recently, mandated ethanol blending, have still failed to produce a
measurable impact on our foreign oil dependence. Worse yet, America’s
ethanol policy costs taxpayers about 6 billion in direct subsidies
every year, while also imposing indirect costs from converting gas
stations and car engines to handle the ethanol, by damaging engines and
fuel lines, and because ethanol-blended gasoline allows us to drive
fewer miles than pure gasoline, forcing Americans to burn more fuel
than necessary to go the same distance as before. Far from reducing our
CO2 emissions, ethanol production has been found to actually increase
emissions.
The natural gas industry is now making the all-too familiar claim that
natural gas is the abundant, domestic fuel of the future, which will
reduce our dependence on foreign oil, lower prices at the pump, and
reduce CO2 emissions. All that’s needed to enter this new era of
Fahrvergnügen (driving enjoyment) is for the government to provide
generous incentives for the production, purchase, and use of natural
gas vehicles, as well as funding for further research and development.
Legislation now before Congress seeks to advance the natural gas wish
list (The Natural Gas Act of 2011) by providing special tax breaks for
the industry. In particular, the act would extend the existing 50 cent
a gallon alternative fuel tax credit through 2016; it would make all
new dedicated natural gas vehicles (bi- fuel included) eligible for a
credit equal to 80 percent of costs up to a $64,000 cap; it would also
create a new production tax credit tax of up to $4,000 per vehicle,
while making manufacturers eligible for a total of $200 million in tax
credits.
Supporters of the bill claim that these incentives should be a
no-brainer for Americans. As one industry cheerleader, who owns a Honda
Civic GX fueled by natural gas, proclaimed, “I fuel it in my garage at
night and it’s less than a $1 a gallon and you’re getting ready to pay
$4 a gallon.”
If running cars on natural gas is such a great deal, why then is the
technology in such dire need of generous taxpayer handouts? In order to
find out whether natural gas is the silver bullet to our transportation
needs, we have to allow the market to do what it does best: direct
scarce resources towards their most highly valued uses. If natural gas
vehicles are indeed as economically competitive as supporters claim,
vehicle manufacturers and consumers will make the switch without
taxpayer support.
Instead of spending money on legislative battles, those with genuine
confidence in the viability of natural gas as transportation fuel would
invest in commercializing the technology directly. Sadly, when
government tries to determine winners in energy, politics—not
economics— distributes profits, and American taxpayers end up the
losers.
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