WHY ENERGY TRANSITIONS MATTER - A CASE-STUDY OF METHANOL

The 1990 Clean Air Act Amendments (CAAA) contain several new provision s governing emissions from motor vehicles. These provisions of the 199 0 CAAA will have a dramatic impact on the type of cars people drive ov er the coming decades. Given the high cost of achieving further reduct ions from automobiles, there has been increasing interest in exploring alternative fuels that improve environmental quality. One important c ontribution of this study is to highlight the importance of considerin g transition issues in assessing the cost of alternative fuels. A seco nd contribution of this paper is to demonstrate how the cost-effective ness of methanol and M85 depends on how a methanol-based strategy is i mplemented. The analysis of the costs and effectiveness of methanol an d gasoline leads to the following conclusions: (1) transition issues a re critical in evaluating the cost and cost-effectiveness of methanol- based fuels; (2) M85 and M100 are likely to be expensive relative to c onventional gasoline, particularly in the near term and short term; (3 ) cost-effectiveness varies dramatically by region, with Los Angeles a nd New York substantially better than Houston; and (4) widespread intr oduction of methanol is not likely to be a cost-effective approach for improving urban air quality.