IS CLEAN ENOUGH - THE INFLUENCE OF ENVIRONMENTAL EXTERNALITIES ON MARKETS FOR FUEL-CELLS IN TRANSPORT

This paper explores the influence of environmental costs on the econom ic assessment of a novel energy conversion technology-fuel cells-in tr ansport applications. The situation of the fuel cell is investigated b y setting up a model of a fleet of urban buses, widely regarded as one of the earliest applications for these devices, for a time in the nea r future (5-10 years from now). Most cost parameters correspond to the present, except the assumed cost of the fuel cell of $300 per kilowat t, a value that has not been achieved today but that is believed possi ble in the future. The private cost for the fuel cell driven bus excee ds that of its diesel counterpart by between 23 and 33%, depending on the vehicle size. However, the fuel cell can become competitive throug h economies of scale in the chemical plant required to generate the hy drogen fuel. The inclusion of environmental externalities in the frame work of a social cost calculation fails to shift the balance unambiguo usly in favour of the fuel cell, in spite of the superior environmenta l performance offered by this technology. One reason is that a social cost calculation has to exclude transfer payments (taxes) which are su bstantial for conventional road fuel. Adopting the highest published v alues of external costs leads to the fuel cell bus emerging as the pre ferable option, with a social cost at between 89 and 95% of that of th e diesel. However, such a difference is not enough to convincingly mak e the case for the fuel cell. Therefore, if fuel cells are to enter th e transport market, they have to become more competitive in terms of p rivate costs alone. They cannot rely on the monetary evaluation of env ironmental externalities to make their case. Copyright (C) 1996 Elsevi er Science Ltd