Removing Barriers to the Market Penetration of Methanol Fuels

Gao ID: RCED-84-36 October 27, 1983

In response to a congressional request, GAO identified and assessed the barriers to methanol's market penetration as a transportation fuel and suggested possible government actions, short of expensive subsidies, which might eliminate or diminish market impediments.

Methanol has not emerged as a major transportation fuel because large investments are necessary to bring sufficient fuel and vehicles to the national retail level, and prospective return on investment has been inadequate to convince fuel producers and auto manufacturers to enter the market. Auto manufacturers are unwilling to produce cars designed to run on methanol fuels until the fuel is widely available at the retail level, and methanol producers are unwilling to invest in a fuel that has few customers. To help create a demand for methanol fuels or vehicles, the Environmental Protection Agency (EPA) could provide a blanket waiver for fuel blends within certain limits and develop appropriate emission standards in anticipation of market development. In addition, EPA and the Department of Transportation could establish an equivalency factor to allow the comparison of the fuel economy of methanol with that of gasoline or diesel fuels. The government might also cooperate with private product testing associations to develop appropriate standards for the production, storage, and use of methanol. Allowable producers' cooperation could be defined in consultation with the Department of Justice to minimize the chance of formal antitrust actions. Converting the federal motor vehicle fleet to methanol fuels might have a positive psychological effect. However, the development of a market for methanol fuel may not reduce U.S. reliance on imported energy in the short term, because foreign producers of methanol may enjoy a significant price advantage.

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