Energy, Greenhouse Gas, and Economic Implications of Natural Gas Trucks

Until recently, natural gas was an also-ran in the sweepstakes for changing the face of transportation in the United States, even though expanded reliance on natural gas vehicles (NGVs) holds the promise of reducing carbon emissions, reducing dependence on oil, and even lowering transportation costs. Recently, however, interest in natural gas as a transportation fuel has grown, as shale gas resources expanded and people became more interested in finding ways to reduce greenhouse gas (GHG) emissions. The purpose of this paper is to investigate the evidence for and against natural gas vehicles as a reasonable option to their closest alternatives, focusing primarily on heavy-duty natural gas (LNG) trucks compared to diesel trucks. This investigation is based on a literature review that covers energy use and GHG emissions and then two simulation analyses. The first simulation examines how various assumptions about investment costs, fuel price differentials, fuel economy, miles driven, discount rate, etc., can alter the private (as opposed to social) economic case for substituting new natural gas vehicles for their diesel-fueled counterparts. The second examines the case for natural gas trucks from the perspective of social welfare by estimating their social costs relative to diesel trucks and their cost-effectiveness with respect to oil and GHG reductions within the modeling framework of the National Energy Modeling System (NEMS), as modified by RFF into NEMS–RFF . Because the NEMS model (the 2009 version, including the stimulus package and a four year advance of new CAFE requirements to 2016) only incorporates NGVs by assumption, rather than through economic decisionmaking, we assume a given penetration rate of new vehicles into the fleet over the model’s horizon of 2030. We then track the effects of this penetration on GHG emissions, oil use, and other variables to make offline estimates of the social welfare costs, under various assumptions. As a final analysis, we run the NEMS–RFF model with enhanced gas shale resources taken from estimates from the Potential Gas Committee (PGC) (see Brown, Krupnick, and Walls 2009 for details). We conclude that LNG trucks can, under certain conditions, be a good deal for society in reducing oil and CO2 emissions with reasonably competitive cost-effectiveness, even without government subsidies or mandates. We also conclude that infrastructure issues may be less of a challenge than commonly thought because the interstate trucking industry is moving increasingly from a long-haul route structure to a “hub and spoke” structure—a development which could facilitate more judicious placement of LNG refueling stations and therefore make use of LNG trucks more prevalent.