Abstract
The 1990 Clean Air Act Amendments (CAAA) contain several new provisions governing emissions from motor vehicles. These provisions of the 1990 CAAA will have a dramatic impact on the type of cars people drive over the coming decades. Given the high cost of achieving further reductions from automobiles, there has been increasing interest in exploring alternative fuels that improve environmental quality. One important contribution of this study is to highlight the importance of considering transition issues in assessing the cost of alternative fuels. A second contribution of this paper is to demonstrate how the cost-effectiveness of methanol and M85 depends on how a methanol-based strategy is implemented. The analysis of the costs and effectiveness of methanol and gasoline leads to the following conclusions: (1) transition issues are critical in evaluating the cost and cost-effectiveness of methanol-based fuels; (2) M85 and M100 are likely to be expensive relative to conventional gasoline, particularly in the near term and short term; (3) cost-effectiveness varies dramatically by region, with Los Angeles and New York substantially better than Houston; and (4) widespread introduction of methanol is not likely to be a cost-effective approach for improving urban air quality.
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Mr. Hahn is a Resident Scholar at the American Enterprise Institute and an Adjunct Professor of Economics at Carnegie Mellon University. Mr. Borick was a Research Assistant at the American Enterprise Institute at the time this paper was written. Several people contributed to this paper. First and foremost, we would like to thank Armistead Russell for help in characterizing vehicle emissions. In addition, we would like to thank Jeff Alson, Vann Bussman, Alex Cristofaro, Mark DeLuchi, Carmen Difiglio, Alan Dunker, Art Fraas, John Heller, Bruce Henning, Russell Jones, Walt Kreucher, Alan Krupnick, Tom Lareau, William Leney, Ben Massell, Alan Mawdsley, Al McGartland, Greg McRae, Bob Oglesby, Dan Sperling, Brian Sullivan, Dan Townsend, Margaret Walls, Douglas Youngblood, Marty Zimmerman, and Don Zinger. This paper represents the views of the authors and does not necessarily reflect the views of any individuals or institutions with which the authors are affiliated.
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Hahn, R.W., Borick, M.S. Why energy transitions matter: A case study of methanol. J Regul Econ 9, 133–155 (1996). https://doi.org/10.1007/BF00240367
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DOI: https://doi.org/10.1007/BF00240367