Transportation represents almost 28 percent of the United States’ energy demand. Approximately 95 percent of U.S. transportation utilizes petroleum, the majority of which is imported. With significant domestic conventional gas resources, optimistic projections of unconventional natural gas resources, and the growing international liquefied natural gas (LNG) market, gas prices are expected to remain lower than oil. While natural gas currently provides approximately 24 percent of the United States’ energy consumption, there has been no significant growth in the natural gas vehicle market in the past fifteen years. Natural gas has comparative environmental advantages to gasoline and diesel, with lower CO2 emissions per mega joule of fuel consumption. A natural gas powered vehicle fleet could reduce the country’s fuel costs, dependence on imported fuel, and greenhouse gas emissions. To fully comprehend the future role of natural gas vehicles in the United States, all the major technological and market forces affecting the successful deployment of this vehicle technology must be analyzed interdependently under market and energy policy-regulated scenarios.

I investigate the potential role of natural gas in transportation using a computable general equilibrium (CGE) model of the global economy that is resolved for the US and other major countries and regions. To do so, I add a dedicated compressed natural gas (CNG) vehicle option to the Emissions Prediction and Policy Analysis (EPPA) Model as an option to the conventional internal combustion engine (ICE) vehicle. The model projects changing prices of fuel and other goods over time, given specification of resource availabilities. With the CNG vehicle specification I am able to evaluate the effect of the CNG option on transportation emissions, oil imports, natural gas use, and other economic indicators. I consider different policy scenarios for the future, including the adoption of a targeted emissions cap policy to see how that affects the competitiveness of CNG vehicles.

Several conclusions about the potential role of nature gas vehicles in the United States are drawn from this analysis. First, NG vehicles will reduce household transportation emissions in proportion to their share of the vehicle fleet. Second, stringent emissions policies will stimulate the penetration of natural gas vehicles, but high vehicle costs and infrastructure may hinder their deployment. There is a correlation between increased NG vehicle use and the reduction of oil imports. In the long term, development of cleaner alternative fuels with similar infrastructure to gasoline may hamper CNG vehicle growth.