EPA Foils Clean Fuel

By slowing the conversion of vehicles to CNG (Compressed Natural Gas) fuel The Environmental Protection Agency is causing needless nitrogen oxide, sulfur dioxide, particulate, and mercury air pollution. It might just as well be renamed the Environmental Destruction Agency.

The EPA has set up a system that adds thousands of dollars to the cost of converting a vehicle from gasoline or diesel oil to CNG, thus sapping a large proportion of the possible fuel cost savings (CNG costs about half as much at the pump) from those who are thinking of switching.

The EPA has done so through a complex set of regulations which apply differently to older and younger vehicles. Those converting an older vehicle must perform tests, pay fees and complete EPA paperwork which add about $4 to $5 thousand to the cost of the conversion. Those converting a newer vehicle must use an EPA certified kit, else the EPA cost is prohibitive.

The kit manufacturers don't seem to complain about the hundreds of thousands of dollars that it costs them to get a kit approved, even though the kit only applies to one model with one particular engine for one particular model year. They know that, in return for the fee, they will usually get a monopoly (see this Excel sheet) on conversions for that model, enabling them to recoup their costs by a high price to the customer.

Only about a quarter of the models with conversion kits have competing kits offered by different manufacturers.  When competition is introduced, the cost of conversions sometimes falls precipitously. For example, competition among Ford 250 pick-up truck conversion kits has brought down the cost of a conversion from about $12,000 to less than $9,000.

The EPA justifies its regulation of CNG by citing the letter, while ignoring the spirit, of the Clean Air Act. One paragraph in that act (42 U.S.C. §7522 (a)(3)) prohibits "tampering," such as removing the catalytic converter or diesel particulate filter from the exhaust system of a vehicle. Since the conversion process converts a gasoline or diesel fueled vehicle to a CNG using vehicle, no reasonable person would consider this to be "tampering." The unreasonableness of the EPA is a cynical abuse of power that it has exhibited in previous orders to restrict the use of fossil fuels whatever the cost to the economy.

Although this section of the Clean Air Act was designed to prevent air pollution, the EPA uses it to increase air pollution. To stop this process, Congress could simply insert a clause which reads: "This section does not apply to conversions of vehicles to a natural gas fuel."

Everybody with a gas stove in their house knows that natural gas burns cleanly. The following table, using U.S. government data reported by NaturalGas.org, shows that switching from oil fuels to natural gas significantly reduces sulfur dioxide, nitrogen oxides, particulates and mercury pollution. The only environmental disadvantage of natural gas burning is its slightly higher level of carbon monoxide emissions. The Department of Energy reports that CNG vehicles produce "20% to 45% less smog-producing pollutants" than their conventional fuel competitors.


Pounds of Emissions per Billion BTU of Energy Output

Pollutant

Oil

Natural Gas

Sulfur Dioxide

1122

1

Nitrogen Oxides

448

92

Particulates

84

7

Carbon Monoxide

33

40

Mercury

0.007

0.000

The EPA tries to justify the overall increase in pollution that its actions cause by correctly claiming that it is preventing instances in which conversions would increase pollution. In effect, it is pointing to individual trees that it was correct to destroy when it burned down the forest. This emphasis on isolated individual cases is evident on the EPA's own web page where it tries to justify its regulation of alternative fuel conversions. The EPA wrote:

Conversion to alternative fuels can be environmentally beneficial, but conversion does not necessarily reduce pollution. Manufacturers of EPA-compliant fuel conversion systems must demonstrate that the converted vehicle or engine meets the same standards as the original vehicle or engine, or, for older vehicles and engines, that emissions do not increase as a result of conversion.

The EPA is performing the important service of helping to prevent unsafe conversions. But the need for safety regulation could be met without costing thousands of dollars per vehicle. In fact, the CNG industry could itself set up safety standards which could be enforced through the annual vehicle inspections (by properly-trained mechanics) that are already required for all highway vehicles. Conversion kits that meet the safety standards could be certified as well.

It is an undeniable fact that the use of CNG in place of gasoline or diesel fuel benefits the environment. As long as it is economic to do so, consumers will shift from gasoline and diesel to CNG. But at current conversion prices it is often uneconomic to do so, partly because the EPA is jacking up the price of conversions through high fees, costly compliance, and by creating monopolies.  

By contrast, consider the fact that the federal government pays huge subsidies to manufacturers of hybrid and electric vehicles and gives a rebate of $7,500 to consumers of such vehicles. (California rebates an additional $2,500 to buyers of electric cars!) And who bears the burdens of these subsidies? You guessed it, taxpayers, including low-income taxpayers who drive fossil fueled vehicles. And while the environment is supposed to benefit, the environmental impacts of electricity generation mean that CNG vehicles often offer better air quality benefits than electric vehicles.

The EPA claims to be so concerned about the global-warming effects of carbon dioxide emissions that they have been closing down many of the low-cost coal fired power plants that are providing inexpensive electricity to households and businesses. If the EPA were consistent it would be encouraging CNG vehicles, which emit just 71% of oil's carbon dioxide per BTU.

And pollution is only a minor reason to justify encouraging the switch to CNG. The huge increase in America's proved natural gas reserves over recent years, shown in the graph below, if used as a motor fuel would more than make it possible for America to end its import of foreign oil:


Fortunately, the several thousands of dollars that the EPA adds to the cost of each conversion is not holding back conversion of buses and large trucks to CNG, due to the huge amount of fuel those vehicles use. The rapid expansion of this part of the CNG market will continue to make CNG filling stations ever more available. HE System Technologies expects 3.4% of our trucks and 12.7% of our buses to be powered by CNG by 2018.

Even though natural gas costs about 4 times as much in China as the United States, China is cleaning our clock when it comes to CNG vehicle growth. In the United States the rate of growth is about 12-19% annually. In China, it is closer to 48%. According to Seeking Alpha blogger Michael Fitzsimmons:

Deployment of natural gas vehicles ("NGVs") in China is soaring. According to a Citi report, the number of NGVs in China grew by 48% in 2012 to reach 1.48 million vehicles. China could be on a path to become the world's largest NGV market according to Lux Research, a company specializing in research on advanced technologies. Lux predicts China could see annual sales of 540,000 NGVs by 2015; India would sit at second place with about 250,000.

The switch of many American vehicles to CNG, both through conversions and through new vehicle purchases, will eventually make it possible for the United States to be totally energy independent in motor fuel. American incomes will grow by the amount that we then spend at home instead of sending abroad to buy oil. And those Americans earning the new incomes will spend a large proportion on American goods and services. The result will have what economists call a "multiplier" effect upon American income.

Congress, in the interest of the economy and American jobs, should limit the powers of the EPA. By simply making a very small change in the Clean Air Act, Congress could help clean up the air while increasing American incomes, making America more energy independent, and speeding up American economic growth.

The authors maintain a blog at www.idealtaxes.com and co-authored the 2008 book, Trading Away Our Future. Dr. Howard Richman teaches economics online. Dr. Jesse Richman is Associate Professor of Political Science at Old Dominion University. Dr. Raymond Richman is a professor emeritus at the U. of Pittsburgh and received his economics doctorate from the U. of Chicago.

By slowing the conversion of vehicles to CNG (Compressed Natural Gas) fuel The Environmental Protection Agency is causing needless nitrogen oxide, sulfur dioxide, particulate, and mercury air pollution. It might just as well be renamed the Environmental Destruction Agency.

The EPA has set up a system that adds thousands of dollars to the cost of converting a vehicle from gasoline or diesel oil to CNG, thus sapping a large proportion of the possible fuel cost savings (CNG costs about half as much at the pump) from those who are thinking of switching.

The EPA has done so through a complex set of regulations which apply differently to older and younger vehicles. Those converting an older vehicle must perform tests, pay fees and complete EPA paperwork which add about $4 to $5 thousand to the cost of the conversion. Those converting a newer vehicle must use an EPA certified kit, else the EPA cost is prohibitive.

The kit manufacturers don't seem to complain about the hundreds of thousands of dollars that it costs them to get a kit approved, even though the kit only applies to one model with one particular engine for one particular model year. They know that, in return for the fee, they will usually get a monopoly (see this Excel sheet) on conversions for that model, enabling them to recoup their costs by a high price to the customer.

Only about a quarter of the models with conversion kits have competing kits offered by different manufacturers.  When competition is introduced, the cost of conversions sometimes falls precipitously. For example, competition among Ford 250 pick-up truck conversion kits has brought down the cost of a conversion from about $12,000 to less than $9,000.

The EPA justifies its regulation of CNG by citing the letter, while ignoring the spirit, of the Clean Air Act. One paragraph in that act (42 U.S.C. §7522 (a)(3)) prohibits "tampering," such as removing the catalytic converter or diesel particulate filter from the exhaust system of a vehicle. Since the conversion process converts a gasoline or diesel fueled vehicle to a CNG using vehicle, no reasonable person would consider this to be "tampering." The unreasonableness of the EPA is a cynical abuse of power that it has exhibited in previous orders to restrict the use of fossil fuels whatever the cost to the economy.

Although this section of the Clean Air Act was designed to prevent air pollution, the EPA uses it to increase air pollution. To stop this process, Congress could simply insert a clause which reads: "This section does not apply to conversions of vehicles to a natural gas fuel."

Everybody with a gas stove in their house knows that natural gas burns cleanly. The following table, using U.S. government data reported by NaturalGas.org, shows that switching from oil fuels to natural gas significantly reduces sulfur dioxide, nitrogen oxides, particulates and mercury pollution. The only environmental disadvantage of natural gas burning is its slightly higher level of carbon monoxide emissions. The Department of Energy reports that CNG vehicles produce "20% to 45% less smog-producing pollutants" than their conventional fuel competitors.


Pounds of Emissions per Billion BTU of Energy Output

Pollutant

Oil

Natural Gas

Sulfur Dioxide

1122

1

Nitrogen Oxides

448

92

Particulates

84

7

Carbon Monoxide

33

40

Mercury

0.007

0.000

The EPA tries to justify the overall increase in pollution that its actions cause by correctly claiming that it is preventing instances in which conversions would increase pollution. In effect, it is pointing to individual trees that it was correct to destroy when it burned down the forest. This emphasis on isolated individual cases is evident on the EPA's own web page where it tries to justify its regulation of alternative fuel conversions. The EPA wrote:

Conversion to alternative fuels can be environmentally beneficial, but conversion does not necessarily reduce pollution. Manufacturers of EPA-compliant fuel conversion systems must demonstrate that the converted vehicle or engine meets the same standards as the original vehicle or engine, or, for older vehicles and engines, that emissions do not increase as a result of conversion.

The EPA is performing the important service of helping to prevent unsafe conversions. But the need for safety regulation could be met without costing thousands of dollars per vehicle. In fact, the CNG industry could itself set up safety standards which could be enforced through the annual vehicle inspections (by properly-trained mechanics) that are already required for all highway vehicles. Conversion kits that meet the safety standards could be certified as well.

It is an undeniable fact that the use of CNG in place of gasoline or diesel fuel benefits the environment. As long as it is economic to do so, consumers will shift from gasoline and diesel to CNG. But at current conversion prices it is often uneconomic to do so, partly because the EPA is jacking up the price of conversions through high fees, costly compliance, and by creating monopolies.  

By contrast, consider the fact that the federal government pays huge subsidies to manufacturers of hybrid and electric vehicles and gives a rebate of $7,500 to consumers of such vehicles. (California rebates an additional $2,500 to buyers of electric cars!) And who bears the burdens of these subsidies? You guessed it, taxpayers, including low-income taxpayers who drive fossil fueled vehicles. And while the environment is supposed to benefit, the environmental impacts of electricity generation mean that CNG vehicles often offer better air quality benefits than electric vehicles.

The EPA claims to be so concerned about the global-warming effects of carbon dioxide emissions that they have been closing down many of the low-cost coal fired power plants that are providing inexpensive electricity to households and businesses. If the EPA were consistent it would be encouraging CNG vehicles, which emit just 71% of oil's carbon dioxide per BTU.

And pollution is only a minor reason to justify encouraging the switch to CNG. The huge increase in America's proved natural gas reserves over recent years, shown in the graph below, if used as a motor fuel would more than make it possible for America to end its import of foreign oil:


Fortunately, the several thousands of dollars that the EPA adds to the cost of each conversion is not holding back conversion of buses and large trucks to CNG, due to the huge amount of fuel those vehicles use. The rapid expansion of this part of the CNG market will continue to make CNG filling stations ever more available. HE System Technologies expects 3.4% of our trucks and 12.7% of our buses to be powered by CNG by 2018.

Even though natural gas costs about 4 times as much in China as the United States, China is cleaning our clock when it comes to CNG vehicle growth. In the United States the rate of growth is about 12-19% annually. In China, it is closer to 48%. According to Seeking Alpha blogger Michael Fitzsimmons:

Deployment of natural gas vehicles ("NGVs") in China is soaring. According to a Citi report, the number of NGVs in China grew by 48% in 2012 to reach 1.48 million vehicles. China could be on a path to become the world's largest NGV market according to Lux Research, a company specializing in research on advanced technologies. Lux predicts China could see annual sales of 540,000 NGVs by 2015; India would sit at second place with about 250,000.

The switch of many American vehicles to CNG, both through conversions and through new vehicle purchases, will eventually make it possible for the United States to be totally energy independent in motor fuel. American incomes will grow by the amount that we then spend at home instead of sending abroad to buy oil. And those Americans earning the new incomes will spend a large proportion on American goods and services. The result will have what economists call a "multiplier" effect upon American income.

Congress, in the interest of the economy and American jobs, should limit the powers of the EPA. By simply making a very small change in the Clean Air Act, Congress could help clean up the air while increasing American incomes, making America more energy independent, and speeding up American economic growth.

The authors maintain a blog at www.idealtaxes.com and co-authored the 2008 book, Trading Away Our Future. Dr. Howard Richman teaches economics online. Dr. Jesse Richman is Associate Professor of Political Science at Old Dominion University. Dr. Raymond Richman is a professor emeritus at the U. of Pittsburgh and received his economics doctorate from the U. of Chicago.

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