THE AFV CREDIT PROGRAM AND ITS ROLE IN FUTURE AFV MARKET DEVELOPMENT

The Energy Policy Act of 1992 (EPACT) requires that fleet operators th roughout the country begin purchasing alternative fuel vehicles (AFVs) . In EPACT, Congress also established an AFV credit program, which use s market forces to provide flexibility to regulated entities. Under th e credit program, regulated fleet operators can obtain credits for pur chasing more AFVs than required; fleet operators can then sell these c redits to other fleet operators who choose to purchase fewer AFVs than required. Because of network effects inherent in AFV markets, the cre dit program may allow AFVs to 'cluster' about urban hubs. This paper e xplores future AFV market development in light of the AFV credit progr am and the network effects of the AFV market. (C) 1997 Elsevier Scienc e Ltd.