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Widespread NGV Adoption Tied to Incentives, Study Finds

More local and state governments and businesses are adding natural gas vehicles (NGV) to their fleets, thanks to financial incentives adopted by municipal planning or air quality agencies, according to a study conducted by Emisstar LLC and commissioned by NGV America, which promotes vehicles powered by natural gas or hydrogen.

Emisstar Principal Glenn Goldstein said, "Our aim with this study was to analyze existing incentive-based emissions reduction approaches nationwide, and to recommend how a regional NGV financial incentive program could be developed and implemented in the New York area."

NGV America noted that regional and local governments and private fleets operating in the New York metropolitan area are facing mounting pressures to address harmful air contaminants and greenhouse gas emissions, especially those from mobile sources such as diesel-powered trucks, transit buses, utility/contractor and delivery vehicles.

"Municipalities and agencies throughout the New York region are working hard to comply with evolving emissions reduction mandates and are actively seeking ways to cost-effectively replace their aging diesel vehicle fleets with alternative-fueled models," said NGV America President Rich Kolodziej.

Kolodziej cited the New York townships of Smithtown and Brookhaven as examples of local municipalities that have implemented a 100% natural gas fuel standard for their contracted refuse hauling fleets, in cooperation with project partners Clean Energy Fuels Corp. and National Grid. "In both cases, financial grants, subsidies and rebates for natural gas vehicle purchases were major factors in the success of the towns' fleet emission reduction efforts," he said.

The acceptance of NGVs as a clean alternative for transportation has grown over the last year. Last summer T. Boone Pickens unveiled an energy plan that he said could reduce America's dependence on foreign oil by more than one-third within 10 years by shifting the national energy mix toward domestic renewable sources and using more natural gas as a transportation fuel (see NGI, July 14, 2008).

This past spring House Reps. Dan Boren (D-OK), John Larson (D-CT) and John Sullivan (R-OK) introduced bipartisan legislation (HR 1835) that would expand and extend tax incentives promoting the use of natural gas as a transportation fuel (see NGI, April 6). The legislation would extend for 18 years three existing tax credits for natural gas used as a vehicle fuel; the purchase of NGVs; and property credit for NGV refueling stations. The tax credits, which have been in place since 2006, are scheduled to expire late this year or at the end of 2010.

Last week bipartisan legislation was offered in the Senate that seeks to extend and expand federal tax credits for NGVs and refueling infrastructure (see related story).

The credits, which would be extended by 10 years, would equal as much as 80% of the additional cost of an NGV over a conventional gasoline-fueled vehicle, and would be capped at $12,500 for passenger cars and light trucks and at up to $64,000 for heavier-duty vehicles.

And for the first time, the bill would make all bi-fuel vehicles, which use natural gas, eligible for a tax credit equal to 50% of the additional cost over that of a conventional vehicle. It also increases the refueling property tax credit to $100,000 from $50,000 per station.

Emisstar's report found there is a large, currently unsatisfied demand for alternative-fueled vehicles in the New York region. "Addressing this $90 million backlog by replacing diesel vehicles with NGVs would dramatically curtail harmful emissions. With this approach, we estimate that total reduction of air contaminants would approach 6,000 tons annually," Emisstar said.

The Emisstar report suggests a specific framework for a regional natural gas program that would offer incentives for the replacement of Class 6 through Class 8 diesel-fueled vehicles with new vehicles powered by natural gas. The report provides detailed recommendations regarding administrative processes and program criteria including vehicle eligibility, scrapping requirements, funding sources and thresholds based on emissions reduced. The recommendations were based upon interviews of stakeholders in the public and private sector, as well as an analysis of existing emission reduction incentive programs, including the Texas Emissions Reduction Plan and California's Carl Moyer Air Quality Standards Attainment Program.

"The study results demonstrate the feasibility of implementing a voluntary natural gas vehicle incentive program that is attractive to business and public interest alike," Goldstein said.

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