Alternative Motor Fuels and Vehicles

The transportation sector accounts for roughly two thirds of the nation's petroleum consumption and one quarter of the total U.S. energy use. Several steps have been taken during the last 25 years either to reduce petroleum consumption or to increase fuel diversity in the transportation sector, including tax incentives, mandates for alternative fuel vehicles, and laws to promote automobile fuel efficiency. This testimony discusses the extent of alternative fuel vehicle acquisition and fuel use, some of the barriers inhibiting greater use of alternative fuels and vehicles, and the federal tax incentives used to promote the use of alternative motor fuels and vehicles. So far, alternative fuels and vehicles have not made much of a dent in the conventional fuel and vehicle dominance of the U.S. vehicle fleet, primarily because of fundamental economic obstacles, such as the relatively low price of oil, insufficient availability of alternative fuel refueling infrastructure, and the relatively high cost of some alternative fuel vehicles. As GAO reported in February 2000 (RCED-00-59), any significant increase in the use of alternative motor fuels and vehicles by the general public will depend on the following two factors: (1) a dramatic and sustained increase in the price of gasoline and (2) very large incentives, far above the current levels, to reduce the cost of using alternative fuels and vehicles. Depending on what happens to conventional fuel prices, these incentives would likely need to be maintained for some time--at least until the number of vehicles reaches the level necessary to support an economically sustainable infrastructure.