Fg 'I WORLD BANK TECHNICAL PAPER NO. 51 6 WTP516 Work in progress October 2001 for public discussion Breathing Clean Considering tie Switch to Natural Gas Buses :~~~~~ lpIp FL COPY t-P-v' Recent World Bank Technical Papers No. 429 Gary McMahon, Jos6 Luis Evia, Alberto Pasc6-Font, and Jose Miguel Sanchez, An Environmental Study of Artisanal, Small, and Medium Mining in Bolivia, Chile, and Peru No. 430 Maria Dakolias, Court Performance around the World: A Co0nparative Perspective No. 431 Severin Kodderitzsch, Reforms in Albanian Agriculture: Assessing a Sector in Transition No. 432 Luiz Gabriel Azevedo, Musa Asad, and Larry D. Simpson, Management of Water Resources: Bulk Water Pricing in Brazil No. 433 Malcolm Rowat and Jose Astigarraga, Latin American Insolvency Systems: A Comparative Assessment No. 434 Csaba Csaki and John Nash, eds., Regional and International Trade Policy: Lessonsfor the EU Accession in the Rural Sector-World Bank/FAO Workshop, June 20-23, 1998 No. 435 lain Begg, EU Investment Grants Review No. 436 Roy Prosterman and Tim Hanstad, ed., Legal Impediments to Effective Rural Land Relations in Eastern Europe and Central Asia: A Comparative Perspective No. 437 Csaba Csaki, Michel Dabatisse, and Oskar Honisch, Food and Agriculture in the Czech Republic: Fromn a "Velvet" Trantsition to the Challenges of EU Accession No. 438 George J. Borjas, Economic Research on the Determinants of Immigration: Lessonsfor the European Union No. 439 Mustapha Nabli, Financial Integration, Vulnerabilities to Crisis, and EU Accession in Five Central European Countries No. 440 Robert Bruce, loannis Kessides, and Lothar Kneifel, Overcoming Obstacles to Liberalization of the Telecom Sector in Estonia, Poland, the Czech Republic, Slovenia, and Hungary: An Overview of Key Policy Concerns and Potential Initiatives to Facilitate the Transition Process No. 441 Bartlomiej Kaminski, Hungary: Foreign Trade Issues in the Context of Accession to the EU No. 442 Bartlomiej Kaminski, The Role of Foreign1 Direct Investment and Trade Policy in Poland's Accession to the European Union No. 443 Luc Lecuit, John Elder, Christian Hurtado, Francois Rantrua, Kamal Siblini, and Maurizia Tovo, DeMIStifying MIS: Guidelines for Management Iniformation Systems in Social Funds No. 444 Robert F. Townsend, Agricultural Incentives in Sub-Saharani Africa: Policy Challenges No. 445 lan Hill, Forest Management in Nepal: Economtiics of Ecology No. 446 Gordon Hughes and Magda Lovei, Economic Reform anid Environmental Performiianice in Tranisitionl Econolm1?ies No. 447 R. Maria Saleth and Ariel Dinar, Evaluating Water Institutions and Water Sector Performance No. 449 Keith Oblitas and J. Raymond Peter in association with Gautam Pingle, Hal]a M. Qaddumi, and Jayantha Perera, Transsferring Irrigation Management to Farmers in Andlhra Pradesh, India No. 450 Andres Rigo Sureda and Waleed Haider Malik, eds., judicial Challenges in the New Millenniiumn: Proceedings of the Second Summnit of the Ibero-Americani Supreme Courts No. 451 World Bank, Privatization of the Powet'r and Natural Gas Indilstries in Hungary and Kazakhstanl No. 452 Lev Freinkman, Daniel Treisman, and Stephen Titov, Subnational Budgeting in Russia: PreeMpting a Potential Crisis No. 453 Bartlomiej Kaminski and Michelle Riboud, Foreign Investment and Restructuring: The Evidenice fromil Hungaryt No. 454 Gordon Hughes and Julia Bucknall, Poland: Complying wvith EU Envirounmcntdl Legislature No. 455 Dale F. Gray, Assessment of Corporate Sector Valiue and Vulinerability: Links to Exchange Ratc and Financial Crises No. 456 Salman M.A. Salman, ed., Groundwater: Legal and Policy Perspectives: Proceedings of a World Banlk Seminar No. 457 Mary Canning, Peter Moock, and Timothy Heleniak, Reforming Educationi in the Regions of Russia No. 458 John Gray, Kazakhstan: A Review of Farmii Restructuring No. 459 Zvi Lerman and Csaba Csaki, Ukraine: Review of Farm Restructuring Experiences No. 460 Gloria La Cava and Rafaella Y. Nanetti, Albania: Filling the Vulnzerability Gap No. 461 Ayse Kudat, Stan Peabody, and Caglar Keyder, eds., Social Assessment and Agricultural Reform7 in Central Asia and ETurkey No. 462 T. Rand, J. Haukohl, and U. Marxen, Municipal Solid Waste Incinerationi: Requiremtents for a Successfuil Project No. 463 Stephen Foster, John Chilton, Marcus Moench, Franklin Cardy, and Manuel Schiffler, Groundwater in Rural Developmnent: Facing the Challenges of Supply and Resource Sustainability (List continues on the inside back cover) WORLD BANK TECHNICAL PAPER NO. 516 Breathing Clean Considering the Switch to Natural Gas Buses Masami Kojima The World Bank Washington, D.C Copyright ( 2001 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing October 2001 1 2 3 4 04 03 02 01 Technical Papers are published to communicate the results of the Bank's work to the development com- munity with the least possible delay. The typescript of this paper therefore has not been prepared in accor- dance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to mem- bers of its Board of Executive Directors or the countries they represent. The World Bank does not guaran- tee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this vol- ume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. The World Bank encourages dissemination of its work and will normally grant permission promptly. Permission to photocopy items for internal or personal use, for the internal or personal use of specific clients, or for educational classroom use, is granted by the World Bank, provided that the appropriate fee is paid directly to Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, U.S.A., telephone 978-750-8400, fax 978-750-4470. Please contact the Copyright Clearance Center before photocopying items. For permission to reprint individual articles or chapters, please fax your request with complete information to the Republication Department, Copyright Clearance Center, fax 978-750-4470. All other queries on rights and licenses should be addressed to the World Bank at the address above or faxed to 202-522-2422. ISBN: 0-8213-5040-4 ISSN: 0253-7494 Masami Kojima is a Senior Energy/Environment Specialist in the World Bank's Oil, Gas and Chemicals Department, Policy Division. Library of Congress Cataloging-in-Publication has been applied for. Contents Foreword v Abstract vi Acknowledgments vii Abbreviations and Acronyms viii Executive Summary 1 Natural Gas Vehicles: Economic and Technical Context 1 Considerations for Policymakers 2 A Social Choice 5 Chapter 1 Why Consider Natural Gas Vehicles? 7 Natural Gas Vehicles: Some Basics 9 Reasons for Switching Fuel to Natural Gas 13 Chapter 2 International Experience with Natural Gas Vehicles: Cases of Argentina and New Zealand 15 Argentina 15 Background 15 Lessons from Argentina 17 New Zealand 17 Background 17 Lessons from New Zealand 20 Other International Experiences 21 Role of Government 21 Potential Government Assistance 21 Designing Fuel Tax 22 iii iv Breathing Clean: Considering the Switch to Natural Gas Buses Chapter 3 Comparison of Natural Gas and Diesel Buses 27 Performance 27 Emissions 29 Fuel Quality 32 International Experience 32 United States 33 Australia 35 Canada 36 France 37 Transit Bus Industry in Developing Countries 37 Chapter 4 Looking to the Future 41 Annex A: Emissions from Diesel Vehicles 45 References 49 Boxes Box 1 An Example of the Economics of CNG Buses in the United States 34 Box 2 Phoenix Transit 36 Tables Table 1 Energy Content of Liquid and Gaseous Fuels 9 Table 2 International Natural Gas Vehicle Statistics 12 Table 3 Representative Fuel Prices 16 Table 4 Percent Market Share of Liquid and Gaseous Fuels 16 Table 5 Steps Taken by the Government of New Zealand 18 Table 6 Emissions Benefits of Replacing Diesel with CNG Vehicles 29 Table 7 Heavy-Duty Diesel Emission Standards (in g/kWh, with g/bhp-h in parentheses) 30 Table 8 Comparison of CNG and "Clean Diesel" Buses (g/km) 31 Figures Figure 1 Payback for Conversion from Fuel Cost Savings in Months 17 Figure Al Particulate Emissions from New Vehicles in the United States 46 Foreword T here is growing epidemiological evi- n many large cities of the world, the trans- dence that emissions from conventional port sector is a significant contributor to diesel vehicles are extremely harmful to _ deteriorating ambient air quality. One of public health. Against this backdrop, natural gas the most visible signs of urban air pollution is buses are attracting increasing attention in de- the black smoke coming out of the tailpipes of veloping country cities with serious air pollu- diesel buses. tion as policymakers explore alternatives to One option for effectively eliminating black conventional diesel buses. A number of devel- smoke is to use natural gas instead of diesel. As oping country governments have announced this report shows, evaluating the costs and ben- their intention to pursue the expansion of natu- efits of switching from diesel to natural gas for ral gas bus fleets aggressively, including Chile, use in buses raises a number of broader policy China, the Arab Republic of Egypt, India and issues, ranging from inter-fuel taxation to restruc- Indonesia. turing of the transit bus industry. Merely man- This report outlines technical, economic and dating natural gas buses, as some local policy issues that affect the success of natural governments have done without taking these gas bus programs in developing countries. The considerations into account, could endanger the worldwide experience with natural gas buses is success of the natural gas bus program, seri- limited, but there are a number of important ously tarnishing its image in the eyes of not only lessons to be learned in those countries where the stakeholders in the energy and transport policymakers have attached a high priority to sectors, but also of the public. the promotion of natural gas buses. We hope We hope that this report will help stimulate that these lessons will be studied and integrated further work and systematic data collection, and into air quality management plans as govern- ultimate assist policymakers to arrive at informed ments in developing countries consider the op- decisions about the viability of natural gas bus tion of switching from diesel to natural gas as a programs in their cities. fuel for buses. Rashad Kaldany Robert W. Bacon Director Manager, Policy Unit Oil, Gas and Chemicals Department Oil, Gas and Chemicals Department v Abstract T n response to emerging epidemiological evi- tion associated with the substitution of conven- dence of the toxicity of diesel vehicular tional diesel with natural gas for use in buses is E.emissions, there is growing interest in sub- worth the cost, then it needs to adopt policies stituting conventional diesel with much cleaner to encourage the switch to natural gas. These natural gas in cities where ambient concentra- policies might include emissions standards for tions of particulate matter are markedly higher buses, or fuel and vehicle taxes that reflect mar- than what is internationally considered accept- ginal social costs. In order to do so, the contri- able. This paper compares the performance of bution of exhaust emissions from buses to the natural gas and conventional diesel buses, and ambient concentrations of harmful pollutants outlines the barriers to the adoption of natural needs to be quantified so that associated health gas buses in developing countries. damage costs can be estimated-the benefits of In the absence of emissions standards that reducing emissions from buses must be higher effectively require natural gas, natural gas-fu- than incremental costs incurred. Further, success- eled buses are unlikely to be adopted because ful implementation of fuel switching requires that they are more expensive to operate relative to a number of additional conditions be met: suffi- diesel buses. This is partly because diesel is a cient incentives for natural gas bus fleet opera- very cheap fuel in most developing countries- tors, regulatory and administrative arrangements it is lightly taxed or may even be subsidized. in place to ensure the financial sustainability of Even if diesel were sufficiently taxed, however, transit operators who would be using natural it is not obvious that natural gas buses would be gas, large fleet operations converted to natural cheaper over their life cycle than diesel buses: gas to exploit economies of scale, proper regu- they cost more to purchase, are less fuel effi- latory framework including enforced safety and cient, and are often less reliable. performance standards, strong and long-term The above implies that the social case for re- commitment and involvement of the fleet man- placing diesel with natural gas as a fuel for buses agement, extensive training and education of rests on environmental grounds. If a local gov- mechanics and drivers, and regular preventive ernment decides that the reduction in air pollu- maintenance and prompt repairs. vi Acknowledgments M a asami Kojima of the World Bank's Oil, Natural Gas: An Option in Urban Transport Gas and Chemicals Department (Glo- Projects, held at the World Bank on 2-3 March bal Products Group) prepared this 2000. report under the guidance of Rashad Kaldany, The author thanks Robert Bacon of the Oil, Gas Director of the Oil, Gas and Chemicals Depart- and Chemicals Department, Maureen Cropper ment. of the Development Research Group, and Ken The sections in Chapter 2 on Argentina and Gwilliam of the Urban Development and Trans- New Zealand are based on the presentations port Department, all of the World Bank, for their made by Juan Carlos Francchia, President of the constructive comments; Paula Whitacre for Argentine Chamber for Natural Gas Vehicles, and editorial assistance; and Annie Go Dizon for Garth Harris, Secretary General of the Interna- desktop publishing. The conclusions and re- tional Association for Natural Gas Vehicles, re- commendations of this report are solely those spectively, at the Workshop on Compressed of the author. vii Abbreviations and Acronyms CARB California (Environmental Protection Agency) Air Resources Board CBD central business district CCC CNG Coordination Committee (in New Zealand) ¢/1 cents per liter CNG compressed natural gas CPCB Central Pollution Control Board (of India) CRT Continuously Regenerating Technology (for particulate traps) EPI'A EEnvironmental Protection Agency (in the United States) EPEFE European Programme on Emissions, Fuels and Engine Technologies EU European Union g/bhp-h grams per brake horsepower per hour g/km grams per kilometer g/kWh grams per kilowatt-hour ISO International Organization for Standardization kg kilograms km kilometers kWh kilowatt-hours LNG liquefied natural gas m 3 cubic meters mg/m3 milligrams per cubic meter VJ megajoules MTA Metropolitan Transit Authority NG natural gas NGV natural gas vehicles NOX oxides of nitrogen NPV net present value NY New York NZ$ New Zealand dollars OBD on-board diagnostics OECD Organisation for Economic Co-operation and Development OENI original equipment manufacturers PM(M particles smaller than 0.1 microns viii Abbreviations and Acronyms ix PMI,5 particles smaller thatn 2.3 mincrois PMI, particles smaller thani 10 (n1 rolis rpm revolutions per minute SAE Society of Autonmotive Ingitneers SCAQMI\D South (.oast Air ()uality Ni-anagcien t )District (f C alitornlla) SO oxides of sulfur US$ United States dollars USAkID United States Agecnv for Internalio(nial i)exelv(pmcnt WFIO World I ealtl ( )rg-a nizati' in w5t ppm parts per million hIv weighlt pg/m3 micrograms per cubic meter Executive Summary pidemiological evidence is emerging that NATURAL GAS VEHICLES: ECONOMIC ~-4 shows greater the toxicity of diesel ve- AND TECHNICAL CONTEXT hicular emissions than previously be- lieved. In response, there is growing interest in Experience with natural gas buses is limited substituting diesel with natural gas in cities where worldwide. One reason is the relative inter-fuel ambient concentrations of particulate matter are taxation policies adopted by most governments, much higher than what is internationally con- which make the end-user price of diesel lower sidered acceptable on health grounds. Are natu- than that of gasoline, and often more competi- ral gas vehicles an important component of the tive than natural gas. As a result, the majority of solution? This report gives an overview of the natural gas vehicles operating in the world to- issues that have to be considered when evaluat- day are converted from existing gasoline ve- ing natural gas as an alternative to diesel for use hicles. Argentina, which has the largest natural in transit buses. gas vehicle fleet in the world, has in fact no Transit buses constitute one of the cheapest natural gas buses in regular operation. In devel- forms of mass transit. Traditionally fueled by oping countries, diesel is seen as a social fuel diesel, they are also significant emitters of fine and is taxed little or even subsidized, making it particles, which are known to cause premature even more difficult to justify conversion to natural deaths and illnesses. Urban transit buses are high- gas on commercial grounds without large finan- usage vehicles that operate in heavily congested cial incentives. areas where air quality improvements and re- Environmental concerns drive the majority of ductions in public exposure to harmful air con- natural gas bus programs today. Another impor- taminants are critical. As such, they are good tant reason for turning to natural gas in trans- candidates for achieving emission reductions, port is diversification of energy sources. This and substituting natural gas for diesel is one way objective is more easily achieved by targeting of reducing emissions of fine particles and air- gasoline vehicles because of inter-fuel pricing. borne toxins dramatically. Particulate and air- The United States is a world leader in deploying borne toxin emissions from natural gas vehicles natural gas-fueled transit buses in cities with are very low but not nil; the principal source serious air pollution. Some Asian countries, such of particulate emissions is the combustion of as China, India and the Republic of Korea, are lubricant. Mtany natural gas buses in industrial also aggressively pursuing natural gas bus pro- countries are equipped with an oxidation cata- grams. Much technical progress has been made lvst which reduces some of these emissions in the heavy-duty natural gas vehicle sector since further. the early 1990s. Consistent reports show that 1 2 Breathing Clean: Considering the Switch to Natural Gas Buses natural gas buses manufactured in the early 1990s neers for technical support. Training is needed had not only a higher capital cost than their die- not only for proper maintenance and safe sel equivalents, but also were about 30 to 40 operation of vehicles, but also to dispel percent more expensive to maintain and were misperceptions and build the acceptance and less reliable (for example, as measured in terms commitment of the operators involved. In Sydney, of the mean time between in-service failures, Australia, for example, drivers had perceptions down to half that of diesel vehicles). The latest of lack of acceleration and poor drivability of model heavy-duty natural gas vehicles are much natural gas vehicles compared to diesel. Com- improved, although the engine technology still parison trials with diesel buses showed that the needs some refinements. drivers were confusing lack of noise from natu- Buses fueled by natural gas may be dual-fuel, ral gas buses with lack of acceleration. running on diesel and natural gas with the com- bustion of diesel used to ignite the natural gas, or dedicated, running entirely on natural gas. CONSIDERATIONS FOR POLICYMAKERS Because of the stop-and-start nature of urban buses, the substitution of diesel with natural gas Before embarking on natural gas bus programs, is limited in dual-fuel buses, and dedicated it is important to confirm, even if only order-of- single-fuel buses are recommended. Diesel en- magnitude figures are available, that contribu- gines, which are compression ignition based, are tions from diesel vehicle emissions indeed more difficult to convert to dedicated natural constitute a sizable fraction of ambient particu- gas engines, which are spark ignition based, than late concentrations. Wrong assumptions about gasoline engines. Thus, from the point of view which sources are responsible for air pollution of emissions reduction as well as overall perfor- can lead to choices of measures that are not mance, engines and vehicles provided by origi- cost-effective or do not have a measurable im- nal equipment manufacturers (OEM) are pact on air qualitv. If the relative contribution of generally accepted to be superior, even if more road traffic to pollution is actually small com- expensive, than converted vehicles, and the pared to other sources-such as refuse burning, majority of natural gas buses in industrial coun- emissions from cottage industries in the infor- tries are OEM vehicles. Natural gas buses are mal sector, combustion of biomass in house- cleaner, quieter, and have less vibrations and holds, and small diesel power generators odors than their conventional diesel equivalents. operated by shop owners placed on streets with The fuel economy of natural gas buses is lower many pedestrians-then aggressively targeting than that of diesel buses on an energy equiva- vehicle exhaust for reduction will almost cer- lent basis, by at least 10 to 15 percent and typi- tainly fail to improve air quality markedly. While cally even more. They have a shorter driving it is difficult to identify sources accurately, range, often less than two-thirds of diesel, so chemical analysis of particles and other analyti- that if refueling occurs only at depots, bus routes cal studies go a long way in providing a better may have to be managed differently. On the understanding of source contributions. whole the experience to date suggests that natu- In cities where the contribution of transport ral gas vehicles are less reliable than diesel ve- to the ambient concentrations of fine particulate hicles, although vehicle manufacturers are matter is deemed to be significant, replacing addressing this. One of the important compo- diesel with natural gas in transit buses could nents of a successful natural gas vehicle pro- contribute to a measurable improvement in air gram is extensive training of mechanics and quality. In these cases, the following observa- drivers, and the availability of qualified engi- tions from worldwide experience with natural Executive Summary 3 gas vehicles, and natural gas buses in particular, refueling stations may have to be established at are worth considering. a significant cost (bus fleet operators set up their own refueling stations in industrial countries), Existence of natural gas pipeline. The volume and many natural gas bus operators have found of gas consumed in the transport sector is not that maintenance costs are also higher. For a sufficient to justify the construction of natural natural gas vehicle program to be financially gas distribution pipelines even in large cities. sustainable in the long run, the incremental cost Without the existence of a network of pipelines must be recovered in the form of fuel cost sav- for other users of natural gas (industrial, com- ings, possibly supplemented by a large vehicle mercial or domestic), a viable natural gas ve- tax difference in favor of natural gas vehicles. hicle program would not be possible. The viability of a natural gas vehicle program therefore rests critically on the fuel and vehicle State of the transit bus industry. Transit bus taxation policy adopted by the government, the companies in many, if not most, developing first of which determines the relative prices of countries are cash-strapped. A large number of fuels. operators suffer from fare controls that have In industrial countries, tax is a large fraction made it very difficult to provide high-quality of the final price of liquid fuels, so that it can be service. The emergence of mini-buses in the in- adjusted to favor one fuel over another. Because formal sector-that is, buses in the hands of non- tax collection in general is more efficient, differ- corporate operators, illegal as well as legal-has entiated vehicle taxes-whereby diesel vehicles posed a serious threat to the survival of transit are taxed more than natural gas vehicles- buses, especially in the former Soviet Union and present a possible option for favoring natural Africa. Because traditional bus operators are of- gas. In most developing countries, gasoline car- ten cash-strapped, they do not maintain vehicles, ries a high tax rate, but diesel much less. If die- nor can they purchase more expensive natural sel is taxed little or even subsidized, it may not gas buses, provide extensive staff training on be possible to have an end-user price differ- this new technology, and accept the possibility ence between diesel and natural gas that is large of more repairs to deal with greater frequency enough to achieve a reasonable payback period of bus breakdowns, at least initially. High emis- without requiring other subsidies. Because tax sions from diesel buses are not merely due to collection in general is less efficient, differenti- the choice of fuel, but are often symptomatic of ated vehicle taxes may be difficult to implement. deeper problems in the transit bus industry in A number of factors need to be taken into developing countries, and these same problems account in designing fuel taxes, and they are may condemn natural gas bus programs to fail- described in some detail at the end of Chapter ure. If transit operators are in too weak a finan- 2. Briefly, cial position to switch to natural gas buses without some outside assistance, there should u Diesel is an intermediate good, and under a at the least be regulatory and administrative ar- narrow set of conditions, intermediate goods rangements in place to ensure the operators' fi- should not be taxed. These conditions, how- nancial sustainabilitv when they use natural gas. ever, are not met, especially in developing countries. Inter-fuel and vehicle taxation policy Jfavor- * Goods that are close substitutes should carry able to natural gas. Natural gas vehicles are more comparable tax rates. Gasoline and diesel (for expensive than vehicles powered by liquid fu- light-duty vehicles), natural gas and fuel oil els: vehicles are more expensive to purchase, (in industry and power generation), and natu- 4 Breathing Clean: Considering the Switch to Natural Gas Buses ral gas used in transport on one hand and gaso- Regulator' framework. One of the most im- line and automotive diesel on the other are portant roles of the government is to establish a all close substitutes, certainly in the long run. proper regulatory framework-in this case for * Fuel and vehicle taxes should reflect envi- the natural gas industry and the transport ronmental health risks caused by vehicles. sector-to eliminate market distortions as much Because diesel emissions are more harmful as possible, create a level playing field, ensure than gasoline, let alone natural gas, emissions, safe operations, and increasc efficiency and diesel vehicle owners operating in densely quality of service through competition. Interna- populated areas with serious air pollution tionally acceptable standards for gas cylinders, should be asked to pay more to reflect the refueling stations, gas dispensing units, conver- price that society pays in the form of medical sion kits, natural gas vehicle and engine manu- costs and productivity loss. However, fuel facture, garages and the quality of gas should taxes that are typically set at the national level be set. Equally important, an adequate monitor- do not target negative environmental exter- ing and inspection system to enforce these stan- nalities in urban areas well. dards has to be in place. The same applies to the transit bus industry. If poorly maintained Government subsidies. In most countries with diesel buses that are gross emitters are not forced successful natural gas bus programs, beginning to comply with emission standards, or worse, if with the United States, the government has pro- there are no em'ssion standards to comply with, vided significant subsidies. Subsidies were then the operating costs of diesel buses are ef- deemed necessary because the inter-fuel price fectively loxvered, making it difficult for cleaner differences were not sufficient to justify natural but more expensive natural gas buses to com- gas programs purely on economic grounds, par- pete with diesel buses. ticularly given that natural gas buses embody a relatively new technology with all the problems Economies of scale. In order for the operation that accompany any new technology. However, to be financially viable, a large number of buses unless government subsidies are consistently should be made to run on natural gas, ideally a maintained, the threat of the suspension of gov- whole depot at a time. U.S. and French case ernment subsidies discourages the growth of the studies seem to suggest that a fleet size of tens market. Providing heavy subsidies to "kick-start" of buses is desirable, preferably all located at the industry may also seriously distort the mar- one depot. This in turn may make conversion ket, while the withdrawal of subsidies after a to natural gas difficult in countries with a large few years on account of "having given the in- number of small operators, each owning two or dustry a chance," could lead to the collapse of three buses. the market. This occurred in New Zealand, where the new Labor Government withdrew all gov- Mandating natural gas / Emission standards. ernment support in the mid-1980s. In develop- Emission standards can be made so stringent ing countries, there are manv competing and that only gaseous fuel-powered vehicles, but not compelling claims on the government budget, conventional diesels, can meet them. For heavy- including provision of access to clean water, duty vehicles such as urban transit buses, this adequate health care, and universal primary would be tantamount to mandating natural gas. education. The relative merits of giving subsi- In the United States, the California Air Resources dies to the natural gas vehicle industry versus Board (CARB) is developing very tight emission other social needs should be carefully con- standards that conventional diesel cannot meet. sidered. In Delhi, India, the Supreme Court banned diesel Executive Summary 5 buses effective 2001. Such steps should be taken A SOCIAL CHOICE only if certain conditions are met: overwhelm- ing evidence that diesel vehicles contribute sig- To date, natural gas buses have been at a pri- nificantly to ambient concentrations of particulate vate economic disadvantage compared with die- matter (and oxides of nitrogen, NO., in cities sel buses unless supported by substantial where ozone is a serious problem and where favorable tax discrimination or subsidies. In the NO, reduction is believed to reduce ozone con- absence of emissions standards that effectively centrations); and the incremental cost of switch- require gaseous fuels, natural gas buses are un- ing to natural gas is greatly outweighed by the likely to be adopted because they are more health benefits accruing from lower emissions expensive to operate relative to diesel buses. of natural gas buses. As mentioned earlier, other This is partly because diesel is a very cheap important sources of fine particles, including the fuel in most developing countries-it is lightly informal sector and households, may also con- taxed or may even be subsidized. Even if die- tribute considerably to worsening air quality in sel were taxed much more, however, it is not developing country cities. obvious that natural buses would be cheaper over their life cycle than diesel buses: they Technology developments in industrial coun- cost more to purchase, are less fuel efficient, tries. The greatest competitor to the natural gas have a smaller range and are often less reliable. vehicle industry in industrial countries today is These observations suggest that the social case perhaps the advent of the so-called clean diesel for replacing diesel by natural gas in buses rests vehicle technology. Using ultra-low sulfur die- on environmental grounds. In particular, the use sel, these vehicles are equipped with catalyzed of natural gas by heavy-duty vehicles normally particulate traps and other advanced controls. fueled by diesel would not be suitable if the The future technology could include selective diversification of energy sources is the primary catalytic reduction or NO. adsorber traps for NO, objective. control. There are also advances made and Until such a time as clean diesel becomes breakthroughs announced in refinery process- widely available on the international market, ing technology, potentially making the produc- which is not expected for at least several more tion of ultra-low sulfur diesel much cheaper in years, most developing country cities will have the coming years. If these technologies currently to continue to grapple with a choice between under development are successfully commercial- conventional, polluting diesel versus potentially ized, the landscape for the clean diesel-natural much cleaner natural gas buses. If the govern- gas debate may dramatically change. At the same ment of a city decides that the reduction in air time, the science of assessing the impact of fine pollution associated with natural buses is worth particles on public health-more specifically the the cost, then it needs to adopt policies that role of particle size and chemical composition- would encourage the switch to natural gas: ei- and of measuring particles from vehicles and in ther emissions standards for buses, or fuel or the atmosphere by number and size rather than vehicle taxes that reflect marginal social costs. by mass (as is currently done) is rapidly evolv- Once the decision to switch to natural gas has ing. These developments will have a large im- been made, it is important to check if the condi- pact on the future of the natural gas vehicle tions for successful implementation of fuel industry in industrial countries, and will also af- switching are likely to be met: sufficient incen- fect the availability of natural gas vehicles in tives for natural gas bus fleet operators, the regu- developing countries in the foreseeable future. latory and administrative arrangements in place 6 Breathing Clean: Considei-ing the Switch to Natural Gas Buses to ensure the financial sLIsitainabiliiv of tianslio formance standards, strong and long-term com- operators who wotildl be tsing 8, LUral gas. largre mitment and involvement of the fleet manage- fleet operations convenerc to natUoal galS to Cx menit, cextcnsive traininlg and education of ploit economies of Scale, ptropCr regulator-y- mechanics and( drivers, and regular prcventive framework includinig enforced safet\ and per- maintenance and prompt repairs. Chapter 1 Why Consider Natural Gas Vehicles? U nder the right set of circumstances, mass duce particulate emissions for new vehicles dra- transit can offer greater sustainability matically, by ten-fold compared to the current and carrying capacity than private au- technology vehicles in the case of the United tomobiles. Transit buses constitute one of the States. Annex A presents a more detailed dis- cheapest forms of mass transit. As such, buses cussion of emissions from diesel vehicles and are the backbone of the motorized transport their effects. system in most cities in developing countries. In many developing country cities, the toxic- However, the sight of poorly maintained buses ity of diesel particulate emissions is of even belching out black smoke is all too common, greater concern-diesel particulate emission lev- tarnishing the image of public transport and pro- els are much higher than in industrial countries moting the perception that buses are the motor- on account of less advanced vehicle technol- ized transport mode of last resort. One of the ogy, poorer vehicle maintenance and poorer fuel most dramatic responses to the environmental quality, while the ambient concentrations of re- health impact of urban buses is the Indian spirable particulate matter (PM1,,, particles smaller Supreme Court's total ban, effective 2001, on than 10 microns) already far exceed internation- diesel buses in Delhi. Even in the United States, ally acceptable health-based standards. A large the California Air Resources Board (CARB) has number of studies have linked exposure to el- recently commented that current diesel buses evated levels of respirable particulate matter to usually emit more pollutants than if the bus rid- premature deaths, hospital admissions and acute ers drove alone in their cars (CARB 1999). and chronic illnesses. There is increasing evi- As the Delhi case illustrates, diesel emissions dence that the particle size also matters, with are under increasing attack based on emerging health effects worsening as the particle size de- epidemiological evidence. CARB identified par- creases. Because particles in vehicle exhaust are ticulate emissions from diesel-fueled engines as predominantly in the small, sub-micron range toxic air contaminants in August 1998 and and numerous, and they occur near ground level launched a diesel risk reduction program. The where people live and work, they cause much governments of industrial countries have re- greater human exposure in the immediate lo- sponded to the evidence by tightening diesel cality than do emissions from sources such as emission standards considerably. For example, power plants for which stacks are situated at the diesel emission standards to be implemented elevated levels and farther away from dense in phases in the United States beginning in 2006, population centers. Equally disturbing, the and in the European Union (EU) beginning in threshold level below which health effects are 2005 and further tightened in 2008, aim to re- not observable has not been identified, prompt- 7 8 Breathing Clean: Considering the Switch to Natural Gas Buses ing governments in industrial countries to im- future. Instead, the primary focus will remain pose increasingly tighter standards-including reducing particulate emissions, and the contri- the introduction of standards for PM25, particles bution of NOX to the ambient concentrations of smaller than 2.5 microns-and the World Health particulate matter is relatively small. Organization (WHO) to rescind its earlier health- Against this backdrop, natural gas (NG) has based guideline values for particulate matter (on been proposed as a much cleaner alternative to the grounds that no safe threshold level has been conventional diesel. Consisting primarily of defined). methane and other light hydrocarbons, natural Particles emitted directly from a source are gas does not contain hydrocarbons that form termed primary; particles that are formed within harmful emissions for the most part. In fact, the the atmosphere, mainly from the chemical oxi- principal source of particulate emissions from dation of atmospheric gases, are termed second- natural gas vehicles (NGVs) is the combustion ary. Diesel is especially prone to high levels of of lubricant. Many NGVs in commercial pro- small primary particulate emissions because die- duction already meet future particulate emis- sel is heavier than gasoline and hence more dif- sion specifications to be imposed in North ficult to burn. The contribution of traffic to small America and the EU during the latter half of particle emissions can be illustrated by taking this decade. Therefore, replacing heavy-duty an example from the United Kingdom: a recent diesel vehicles with natural gas equivalents is study (Airborne Particles Expert Group 1999) one option for reducing vehicular particulate concluded that in 1996, road traffic sources were emissions dramatically. responsible for only 25 percent of PM10 but for Urban transit buses are high usage vehicles 60 percent of PMO1 (particles smaller than 0.1 that operate in heavily congested areas where microns). Vehicle exhaust also includes two air quality improvements and reductions in sources of secondary particles, oxides of sulfur public exposure to harmful air contaminants are (SOD and of nitrogen (NO.). High levels of sul- critical. As such, they are good candidates for fur in diesel (for example, close to 1 percent as achieving both near-term and long-term emis- found in Jordan or Pakistan) would be expected sion reductions. That many transit buses are to contribute to significant secondary particle centrally kept and fueled makes the introduc- formation. NO., the other pollutant of concern tion of new technologies and alternative fuels found in diesel exhaust, similarly contributes to more efficient. In fact, natural gas vehicles are secondary particles. ideal for fleet operations, and the natural gas In contrast, the ambient concentrations of industry is concentrating on high fuel-use com- other pollutants that are elevated in industrial mercial vehicles such as transit buses, taxis, air- country cities, such as ozone, are typically lower port shuttles, refuse haulers and trucks in its in developing country cities. This is partly be- market strategy. cause of lesser use of gasoline vehicles, with This report gives an overview of the issues notable exceptions such as Mexico City and that have to be generally considered when evalu- Santiago de Chile that have serious ozone pol- ating natural gas as an alternative to diesel for lution. While there is a drive in industrial coun- use in transit buses. This chapter gives back- tries to limit NOX emissions, an ozone precursor, ground information on NGVs and associated to levels that can be achieved only by using infrastructure. Chapter 2 gives a broad overview emerging technologies that are not yet commer- of the development of the NGV industry in se- cialized, setting stringent NOx emission standards lect countries. Because the natural gas vehicle is not expected to become a priority in the ma- industry worldwide consists mostly of light-duty jority of developing countries in the foreseeable gasoline vehicles converted to run on natural Why Consider Natural Gas Vehicles? 9 gas, the discussion focuses primarily on this cat- gines have to be factored into these figures to egory of vehicles. Chapter 3 then turns to natu- arrive at vehicle fuel economy. In order to store ral gas buses, highlighting advantages and sufficient natural gas on board a vehicle to disadvantages over diesel, and drawing lessons achieve an adequate driving range, natural gas from international experience. Chapter 4 con- must be stored in high pressure tanks as com- cludes with observations and a summary of is- pressed natural gas (CNG) or as cryogenic liq- sues to consider in evaluating the option of uefied natural gas (LNG) in a highly insulated purchasing natural gas buses. dewar. The volumetric energy content of the various fuels as stored, expressed in megajoules (MJ) per liter, is shown in Table 1. The advan- NATURAL GAS VEHICLES: SOME BASICS tage of liquid fuels is clear. In the United States, the fuel tank volume of CNG and LNG buses Natural gas consists of the lightest hydrocarbons, are about five times and twice that of diesel (Watt inert gases (such as carbon dioxide), and negli- 2001). gible sulfur. The octane number of natural gas Natural gas as a transport fuel has a number can exceed the scale's maximum number of 120. of advantages over diesel: To quantify the quality of the natural gas, meth- ane number is used as one measure. It is an * Very low particulate emissions experimentally derived number correlating en- * Low emissions of airborne toxins gine performance and fuel composition, depen- * Negligible SO. emissions dent primarily on the content of methane and * More quiet operation, with less vibrations and higher hydrocarbons. Pure methane as the most less odors than the equivalent diesel engines. knock-resistant reference fuel is given a value of 100. Similar to the octane number for gaso- All of these benefits make NGVs especially line, a minimum methane number, which is a suitable in urban areas. In addition, life cycle function of engine technology, is needed to pre- analysis suggests greenhouse gas emission sav- vent engine knocking. The minimum methane ings relative to gasoline, and possibly small sav- numbers for the current technology heavy-duty, ings relative to diesel. advanced heavy-duty and light-duty vehicles are The disadvantages of natural gas include the about 80, 73 and 65, respectively (CARB 2001). following: Another parameter that characterizes the en- gine behavior is the Wobbe index. The Wobbe * Greater difficulty in distribution and storage index, having the units of energy per unit vol- * Shorter driving range ume, is a comparative measure of thermal en- * Greater weight of the fuel tank (gas cylinder) ergy flow through a given size orifice. If the Wobbe index remains constant, changes in gas Table 1. Energy Content of Liquid composition will not lead to a change in air-to- and Gaseous Fuels fuel ratio and hence gases with the same Wobbe Relative Relative index are interchangeable. Fuel Milliter to gasoline to diesel In terms of energy content, 1 kilogram (kg) Gasoline 32 1.0 0.9 of NG is equivalent to about 1.3 liters of gaso- Diesel 35 1.1 1.0 line and 1.2 liters of diesel. On a volume basis, CNGa 10 0.3 0.3 1 normal cubic meter (m3) of NG is equivalent LNG 19 0.6 0.5 to about 1.1 liters of gasoline and 1.0 liter of a. CNG stored at 200 bar. diesel. The relative energy efficiencies of en- Source: Maxwell and Jones 1995. 1 0 Breathing Clean: Considering the Switch to Natural Gas Buses * Longer refueling time, especially if using a cylinders currently used commercially increases slow fill refueling system the fuel consumption of NGVs, and potentially * Backfire in the inlet manifold (which occurs accelerates the tire and brake wear. The extra when hot gas from the cylinder escapes into space taken by the fuel tank is a concern espe- the inlet manifold and ignites the mixture). cially in smaller vehicles such as taxis (in which the trunk space is reduced), but much less so Natural gas can be distributed economically for larger vehicles such as transit buses, although in a city only by pipeline. Further, the amount of the extra weight reduces the passenger carrying natural gas used in transport is not sufficient to capacity. justify the construction of a pipeline network During refueling, natural gas has to be com- even in large cities, so that unless pipelines are pressed to a pressure in the neighborhood of already in place or are planned for other uses of 200 bar, typically requiring about 0.2-0.3 kilo- natural gas (such as for industrial and domestic watt hours (kWh) of energy per cubic meter of purposes), NGV programs are not viable. Ballpark gas. Refueling is one of the least safe moments figures help to illustrate this point. In the year 2000, in the use of natural gas as a transport fuel. In a CNG and LNG vehicles consumed 385 million m3 recent example from Delhi, a car converted to of natural gas in total in the United States. In run on CNG exploded during refueling as the comparison, a 500-megawatt power plant oper- gas cylinder failed, injuring five people (Auto- ating 5,000 hours a year (57 percent utilization) motive Environment Analyst 2001). The cause at 50 percent efficiency consumes about 500 was quickly identified to be the poor quality of million m3 of gas. That is to say, one 500-mega- the gas cylinder. watt power plant consumes more natural gas than There are two types of NG refueling systems: all NGVs in the United States put together. fast fill and slow fill. A fast fill takes only a few Because the price of natural gas has to be minutes. A slow fill costs less to set up but takes very low for it to be competitive with liquid fu- half an hour or more to fill a tank. However, a els (see below), a cheap source of natural gas is slow fill can be carried out at night when ve- needed. A country with domestic production of hicles are not being operated, and gets more natural gas is a much more likely candidate for gas into the tank than a fast fill. In a slow fill, a a natural gas vehicle market than a gas-import- second short filling can be done easily to com- ing country. Storage of natural gas on board a plete the first filling. In Poitiers, France, fast fill- vehicle is costly because it can be stored only as ing was found to result in 15 to 20 percent CNG at about 200 bar (200 times the atmospheric under-fill. Any under-filling reduces the driving pressure) and ambient temperature, or as a liq- range of the vehicle further. In the United States, uid (LNG) at -162°C at 2 to 6 bar. LNG vehicles typical costs for establishing a refueling station are much less common than CNG vehicles. for 200 buses is of the order of US$0.35 million In order to store a reasonable amount of gas for diesel, US$0.95 million for LNG and US$2.7 at 200 bar, large fuel tanks with thick walls are million for CNG (WX"att 2001). needed, resulting in extra weight added to the Because natural gas is lighter than air, it will vehicle. The use of composite materials can re- not lie along the ground if it leaks, and is thus duce the tank weight considerably, but at a safer in an accident. LNG, on the other hand, higher cost. One area of research is the storage forms a liquid pool when spilt. Large accumula- of natural gas at relatively low pressures by tions of natural gas vapor can occur, resulting in means of adsorption of hydrocarbon molecules fire or explosion if an ignition source is nearby. onto a structure with a large surface area, such Parking CNG vehicles in an enclosed building as activated carbon. The extra weight of the gas can become a problem if any system leakage is Why Consider Natural Gas Vehicles? 11 present. LNG poses an even greater safety threat. (1) Bi-fuel, where the vehicle can run either Appropriate roof venting is necessary to ensure on natural gas or gasoline that natural gas exits the building. Garages for (2) Dual-fuel, where the vehicle runs either NGVs must be designed with good ventilation on diesel only or diesel and natural gas, at the ceiling level. with the combustion of diesel used to The numbers of NGVs and refueling stations ignite the natural gas are shown in Table 2. Over 1.5 million vehicles (3) Dedicated, which runs entirely on natu- run on natural gas worldwide, fueling at more ral gas. than four thousand refueling stations. The larg- est NGV market is Argentina, followed by Italy, All three types can be manufactured from the Pakistan and the United States. Close to half of start to use natural gas by original equipment total NGVs in the world are in Argentina. Most manufacturers (OENM), or converted from vehicles NGVs are light-duty vehicles converted from originally manufactured to run on gasoline or gasoline. The number of NGVs in India has in- diesel only. Either way, there is an incremental creased substantially since information was sup- cost relative to vehicles using conventional liq- plied in August 2000, on account of the Supreme uid fuels. From the point of view of minimizing Court decision affecting Delhi. By mid-2001, emissions, OEM vehicles (that is, vehicles that there were close to 40,000 NGVs in Delhi alone are manufactured as NGVs at the factory level) (CPCB 2001). The United States has the largest are considered more suitable than converted number of refueling stations, with more than ones, but their higher prices may make it diffi- twelve hundred. cult to deploy them on a large scale in develop- When launching a NGV program, one logisti- ing countries. In 1998, 43 OEMs around the world cal problem is the balance between the number produced NGVs, and 11 heavy-duty engine of NGVs and refueling stations. Any imbalance- manufacturers produced NG engines. Conver- either in the form of over-supply of refueling sion of vehicles in poor condition, as well as stations or a disproportionately greater number poor conversions, are two of the most serious of vehicles relative to refueling capacity-would potential problems in developing country cities, result in either very low returns for refueling and could even defeat the purpose of switching station owners, tarnishing the image of the NGV to NG. Impco Technologies, a major supplier of industry in the eyes of investors, or long queues fuel and electronic control systems for natural for vehicle drivers, tarnishing the industry's pub- gas to OEMs, estimates that 50 to 70 percent of lic image. Fleet operators with high usage ve- vehicles being converted in developing coun- hicles may choose to set up their own refueling tries will fail a good pre-conversion inspection stations. This is typically the case with transit (Impco Technologies 2000). bus operators in industrial countries that estab- Because CNG vehicles are more expensive lish filling stations at bus depots. In this case, to purchase than vehicles powered by liquid fu- economies of scale become an important con- els, for the NGV program to be financially sus- sideration, since there is a minimum number tainable in the long run, the incremental cost of vehicles that such a filling station should must be recovered in the form of lower operat- serve to be economic. For NG bus fleet op- ing and maintenance costs. The lower cost in erators, there are also economies of scale in turn typically has to come from a much lower staff training, fuel purchase, vehicle maintenance price of fuel per distance traveled. The viability and service (such as having a service contract of a NGV program therefore rests critically on for the entire fleet). inter-fuel pricing, and more specifically, the fuel There are three types of NGVs: taxation policy adopted by the government, 1 2 Breathing Clean: Considering the Switch to Natural Gas Buses Table 2. International Natural Gas Vehicle Statistics Country Vehicles Refueling stations Information as of Argentina 668,480 923 May 01 Italy 370,000 355 Mar 01 Pakistan 200,000 200 Jun 01 United States 102,430 1,250 Jan 01 Brazil 80,000 131 Mar 01 China 36,000 70 Jan 00 Venezuela, Republica Bolivariana de 33,586 150 Jun 01 Russian Federation 30,000 202 Sep 00 Egypt, Arab Republic of 24,115 45 Jan 01 Canada 20,505 222 Aug 00 New Zealand 12,000 100 Aug 00 Germany 10,000 146 Jan 01 Colombia 10,000 28 May 01 India 10,000 11 Aug 00 Japan 8,053 138 Jul 01 Bolivia 6,000 17 May 01 France 4,550 105 Oct 00 Trinidad and Tobago 4,000 12 May 01 Malaysia 3,700 18 Oct 00 Indonesia 3,000 12 Aug 00 Australia 2,000 12 Nov 00 Chile 2,000 7 May 01 Sweden 1,500 25 Mar 00 Bangladesh 1,000 5 Aug 00 Great Britain 835 18 Aug 00 Iran, Islamic Republic of 800 2 Aug 00 Netherlands 574 27 Aug 00 Spain 300 6 Aug 00 Belgium 300 5 Aug 00 Mexico 300 2 May 01 Switzerland 270 14 Aug 00 Korea, Republic of 245 3 Jul 01 Turkey 189 3 Aug 00 Thailand 184 1 Mar 01 Austria 83 5 Aug 00 Ireland 81 2 Sep 00 Cuba 45 1 Feb 01 Finland 34 5 Aug 00 Czech Republic 30 11 Aug 00 Nigeria 28 2 Aug 00 Luxembourg 25 5 Aug 00 Poland 20 4 Aug 00 Norway 18 3 Aug 00 Taiwan (China) 6 1 Nov 00 Denmark 5 1 Aug 00 Korea, Democratic People's Republic of 4 1 Aug 00 Total 1,645,705 4,317 Source: International Association for Natural Gas Vehicles, http://www.iangv.org/html/ngv/stats.html#1 Why Consider Natural Gas Vehicles? 1 3 which determines the relative prices of fuels. In as well as the Supreme Court decision in Delhi, Argentina, for example, the retail price of CNG India. If exhaust emission reduction is the pri- has been historically about one-third of the price mary reason, then dual fuel transit buses do not of premium gasoline. As a result, car owners achieve the objective all that well, because the who switched from gasoline to natural gas real- stop-and-start nature of the urban bus driving ized 65 percent savings in fuel cost relative to cycle means that the substitution of diesel by premium gasoline from the beginning of the natural gas is limited. natural gas vehicle program in 1985, rising to 70 The second reason is diversification of en- percent savings in 1999. In industrial countries, ergy sources. This has in fact been the historical tax is a large fraction of the final price of liquid reason for switching to natural gas. Worldwide fuels, so it can be adjusted to favor one fuel natural gas reserves are more abundant than oil over another. In 1999, tax on gasoline consti- reserves, giving greater potential to the use of tuted 67 percent, and that on diesel 59 percent, natural gas. In 2000, the ratio of proven reserves of consumer prices in the countries of the to production of natural gas was estimated to Organisation for Economic Co-operation and be 62 years, and that of oil 38 years (bp 2001). Development (OECD) (Bacon 2001). This is also A country that imports oil, but has an abundant the case in most developing countries with re- supply of natural gas, may find it particularly spect to gasoline, but much less so with diesel. attractive to consider natural gas as a transport As a result, the retail price of diesel has histori- fuel in order to reduce its oil import bills. cally been one-half that of gasoline or even lower Bangladesh and Indonesia (where crude oil pro- in countries such as Argentina, India, Indonesia duction will cease in less than a decade at the and Sri Lanka. current rate but abundant supplies of natural Natural gas has a much higher auto-ignition gas remain) cite this as the reason for wanting temperature than gasoline and diesel, making it to promote NGVs. There are also other ways of safer but also unsuitable for compression igni- using natural gas in transport, such as conver- tion, which is used in diesel-fueled vehicles. Most sion of natural gas to synthetic fuels (including NG vehicles are conversions of existing liquid super-clean diesel, designated by the U.S. gov- fuel vehicles. In the case of gasoline (spark ig- ernment as an alternative fuel in 2000) or to nition) engines, the conversions are generally methanol or dimethyl ether. In New Zealand bi-fuel. The conversion from diesel (compres- where the government aggressively promoted a sion ignition) to NG is not straightforward. The NGV program after the oil price shock of the two main options are dedicated, involving con- early 1980s, the country's own natural gas re- version to spark-ignition, and dual-fuel, entail- sources were used not only directly as a trans- ing co-existence of two fuel injection systems port fuel but also as a feedstock for making and adding to the complexity of the engine. synthetic fuels in the 1980s. The production of synthetic fuels from natural gas-which is not yet economic at the current world price of crude REASONS FOR SWITCHING FUEL oil and available technologies for converting TO NATURAL GAS natural gas to liquid fuels-has been commer- cially carried out and continues in South Africa There are two principal reasons for switching to and Malaysia today. natural gas. One is the significantly lower exhaust There are cases of oil-importing countries emissions, especially of particulate matter. This with indigenous natural gas reserves where is the primary reason for the government's pro- switching to natural gas is not necessarily motion of natural gas buses in the United States, financially favorable. Pakistan illustrates this 1 4 Breathing Clean: Considering the Switch to Natural Gas Buses point. In Pakistan, as in the rest of South Asia, production). Because of Pakistan's inter-fuel diesel has historically been priced at one-half pricing, natural gas has displaced only gasoline that of gasoline. As a result, it is not unconmmon and not diesel-it is much more attractive for to see light-duty gasoline vehicles converted to vehicle owners to switch from gasoline to natu- diesel. Partly as a result of this pricing policy, ral gas than from diesel to natural gas-worsen- the consumption of gasoline is less than a fifth ing the supply-demand imbalance and forcing of that of diesel. While Pakistan imports the bulk the refineries (which are financially supported of its diesel, it has recently become a net ex- by the government to some extent) to export porter of naphtha (which is used in gasoline even more naphtha at a loss. Chapter 2 International Experience with Natural Gas Vehicles: Cases of Argentina and New Zealand T he worldwide population of natural gas to free up more oil for exports (oil is easier to vehicles grew at an annual rate of about export than natural gas) and to increase fuel taxes 5 perccnt between 1994 and 2000. Dur- on liquid fuels without provoking widespread ing this period, the number of NGVs grew from public protests by offering low price CNG as an 250,000 to 620,000 in Argentina, the largest NGV automotive fuel. By then, an extensive network market, corresponding to an annual growth rate of natural gas pipelines reached most cities. of 16 percent. The growth in Italy, which had To start the program, two refueling stations the same number of vehicles as Argentina in were established and a few government vehicles 1994, was slower, increasing from 250,000 to and taxis were converted from gasoline to natu- 320,000. In other countries, the NGV popula- ral gas. Because of the domestic economic situ- tion declined, including New Zealand-once one ation, no subsidies could be offered to "get the of the largest N(JV markets in the world-and program off the ground." The incentive for the newly independent states of the former So- switching to CNG was the very large price dif- viet Union. This chapter reviews the factors af- ference between gasoline and CNG, ensuring fecting the growth or decline of NGV markets 65 percent savings in fuel cost by switching from through twvo case studies, Argentina (Francchia premium gasoline to CNG. 2000) and New Zealand (Harris 2000). While the Safety, quality and other standards were de- NGV market in both of these countries has fo- veloped and enforced by the regulatory authori- cused exclusivelv on converting existing gaso- ties for gas cylinders, conversion kits, conversion line vehicles to run on natural gas, general workshops, compressors, dispensers, installation lessons can be learned to understand the natu- procedures and so on. Internationally well- ral gas bus industry. known certification agencies carried out the cer- tification. In the late 1980s, the government began to ARGENTINA increase the retail price of diesel, aiming in the long run to substitute diesel with natural gas. Background The primary objective of the Liquid Fuels Sub- stitution Program was in fact the substitution of Argentina is endowed with both oil and natural diesel by natural gas in public transport vehicles. gas. At the end of 200(0, the ratio of proven re- The fiscal policy changes needed to achieve this serves to production was 10 vears for oil and 20 substitution, however, were not implemented. The years for natural gas (bp 2001). The Liquid Fu- retail prices from recent years are shown in Table els Substitution Program was launched in 1984 3. Diesel has historically been and continues to 15 1 6 Breathing Clean: Considering the Switch to Natural Gas Buses Table 3. Representative Fuel Prices Premium gasoline Diesel Natural gas (US$11iter) (US$11iter) (US$1m3) Date Total Tax component Total Tax component Total Tax component May 1994 0.751 0.369 0.269 0.033 0.256 0.095 December 1998 0.906 0.588 0.403 0.180 0.311 0.106 December 1999 1.044 0.608 0.499 0.211 0.331 0.082 Source: Francchia 2000. be comparable to CNG in price. After taking km a year. Assuming a vehicle purchase price engine efficiency into account, the price of die- difference of US$22,000 and fuel prices as of sel was lower than that of CNG in May 1994, December 1999, it takes 59 months to recover comparable to that of CNG in December 1998, the incremental vehicle cost based on fuel cost and rose above that of CNG only in December savings, or close to five years. The fuel prices as 1999, so that diesel has actively competed with of December 1998 would have increased the CNG in the light-duty vehicle market to replace payback period to 29 years, considerably be- gasoline. Half of new taxis in Argentina are yond the useful life of the vehicle. diesel-powered. One of the difficulties in launching a NGV The evolution of the market shares of differ- program is balancing the numbers of NGVs and ent fuels in the 1990s is given in Table 4. The refueling stations. Inadequate refueling infra- market share of gasoline steadily declined, that structure was partly responsible for conversion of CNG increased until 1997, and that of diesel back to gasoline from CNG in Bangladesh in fluctuated until 1997 after which it saw a marked the 1990s, and long queues at CNG refueling increase at the expense primarily of gasoline, stations in Delhi are a significant source of dis- but also of CNG. satisfaction among vehicle drivers today. In Between 1985 and 1999, direct investment in Argentina, the NGV market has been developed the NGVr market totaled US$1.5 billion. The con- exclusively by the private sector, with many play- verted vehicles operate as bi-fuel vehicles. In ers entering the NGV market-refueling; manu- the early years of the NGV program, it took less facture of compressors, dispensers and gas than two years to pay back the vehicle conver- cylinders; and manufacture and installation of sion. The number of months it takes to pay back conversion kits. In setting up the refueling in- the conversion cost of US$1,200 as a function of frastructure, those who had not been previously annual kilometers (km) traveled for the premium involved in the fuel retail business opened CNG gasoline and CNG prices effective December refueling stations, as did oil companies. The pay- 1999 is shown in Figure 1. Today, the NGV in- back period for an independent operator of a dustry generates US$0.65 billion worth of busi- refueling station was approximately three years ness per year. About 1.5 billion m3 of natural gas is sold annually as a transport fuel, approxi- Table 4. Percent Market Share of Liquid matelv equal to the amount of gas consumed in and Gaseous Fuels three 500-megawatt power plants. The number Year Gasoline Diesel CNG of vehicles converted has stabilized at about 1990 42 56 2 5,000 a month. 1993 40 55 In contrast to gasoline vehicles, the econom- 1995 37 57 6 ics for converting diesel vehicles to NG are much 1997 35 58 7 less favorable even for intensively driven ve- 1999 29 65 6 hicles. Take, for example, a bus driving 120,000 Source: Francchia 2000. International Experience with Natural Gas Vehicles 1 7 Figure 1. Payback for Conversion from Fuel Cost Savings in Months Payback in months 50 - 40- 30- 20- \ 0 20,000 40,000 60,000 80,000 100,000 Kilometers traveled per year Source: Francchia 2000 and author's calculations. in the 1990s. By establishing dual fuel stations fueled. A review of inter-fuel taxation policy as (selling both liquid fuels and CNG), oil compa- well as vehicle tax policy would be needed if nies went around the regulation prohibiting the growth of the automotive diesel market is to refueling stations to be set up within 2 km of be halted in the coming years. each other. Lessons from Argentina NEW ZEALAND The NGV program in Argentina is the most suc- Background cessful in the world, measured in terms of NGV population. This program has focused almost New Zealand was a world leader in CNG ve- exclusively on converting existing gasoline ve- hicles in the middle of the 1980s. The sale of hicles to CNG, taking advantage of the large price natural gas as CNG peaked in 1985 at close to difference between the two fuels. The large price 150 million m3 a year. Between 1979 and 1985, difference in turn is provided by the fuel tax the number of NGVs doubled every year. By structure. Aside from this indirect support, the 1986, CNG represented one-tenth of the fuel used government has given no subsidies in the form by spark ignition engine vehicles (that is, gaso- of financial incentives to the CNG industry, mak- line engine vehicles) in the North Island-the ing the CNG program viable in the long run. only island where natural gas is available. The CNG industry in Argentina today is export- The oil crisis of the 1970s affected New ing ISO 9000 certified compression and dispens- Zealand, which was importing nearly all of its ing equipment, gas cylinders and conversion kits transport fuels, prompting the government to to other countries in Latin America and Asia. At seek alternative forms of energy. A major off- the same time, the program has made no dent shore gas field had been discovered in 1969. in the automotive diesel market, which is be- While the field was developed for power gen- ginning to threaten the CNG market. Heavy-duty eration, it became apparent by the late 1970s public transport vehicles remain entirely diesel that demand for power was well below the fore- 1 8 Breathing Clean: Considering the Switch to Natural Gas Buses casted levels, requiring much less gas than origi- which time both the CNG program and the rmnn- nallv envisaged even though the government istry were well established. had already signed a take-or-pay agreement. The The government also began to offer financial government therefore evaluated CNG as an al- incentives for vehicle conversion and refueling ternative use of natural gas, and concluded that stations in the form of NZ$200 grants for con- substitution of gasoline by CNG would help version kits, 25 percent grants for mechanical address two economic problems: balance of equipment in refueling stations and loans for payments and unemployment. Urban air pollu- refueling stations. The government mounted tion was not a consideration in the government's programs for the implementation of the NGV decision to launch a NGV program at the time. program: providing training, establishing stan- The government sponsored extensive inves- dards for vehicle conversion and refueling sta- tigations into the impact of adopting CNG as a tions, and mounting public awareness transport fuel starting in 1974. Based on the find- campaigns. A major boost to the CNG industry ings and recommendations, the government in was the decision of the government to require 1979 set a target of 150,000 CNG vehicles by its own fleet to convert to CNG. Within a year, 1985, subsequently revised to 200,000 by 1990. refueling stations became grossly overloaded, Additional recommendations for the use of natu- and half-hour queues were common. A list of ral gas included the construction of a synthetic steps taken by the government is summarized gasoline plant and a chemical methanol plant, in Table 5. both using natural gas as the feedstock. At the By the middle of 1980, it became clear that a time, there were about 100 gas utility vehicles price differential of 50 percent between gaso- using CNG and only two refueling stations in line and CNG was not sufficient to achieve the New Zealand. Few people had technical exper- conversion target set by the government. At the tise. The Ministry of Energy was formed in 1978, same time, various technical problems arose, in and it was not in a strong administrative posi- some cases giving rise to extremely adverse tion to coordinate the implementation of the publicity. The rate of conversion fluctuated er- CNG program in 1979. In response, the govern- ratically. A rapid market survey conducted at ment established the CNG Coordination Com- the end of 1980 convinced the government that mittee (CCC) to coordinate efforts within the further incentives were needed. The package of government and the private sector. The Ministry incentives, announced at the end of 1980, in- of Energy became the lead agency in 1981, by cluded accelerated depreciation for vehicle Table 5. Steps Taken by the Government of New Zealand Year Action 1978 Funding of research and development for evaluating CNG. 1979 Formulation and acceptance of the implementation plan. Setting of targets and incentives. Establishment of CNG Coordination Committee. 1979-1985 Establishment of regulations and standards, and infrastructure for inspection. Various promotional and marketing activities. Conversion of government vehicle fleet to CNG. 1979 onwards Training programs for installers. 1980 Market survey. Modification of incentives. 1980 onwards Funding of engine and related research. 1981 Market survey. 1982 Modification of incentives. 1983 1 00 percent government loans for vehicle conversions. 1984 Market survey. Modification of incentives. Election of new Labor Government. 1985 Target and incentives abandoned by the new Labor Government. Source: Harris 2000, International Experience with Natural Gas Vehicles 1 9 conversions (then costing about NZ$1,000 per gressed, and some were unforeseen (for ex- vehicle) and changed rules for the 25 percent ample, the maximum cylinder filling pressure refueling station grant. There was an immedi- set in 1979 proved to be too low and was later ate response, with the rate of conversion nearly raised). Much of the original technology was doubling between the latter half of 1980 and imported, especially from Italy and the United the first half of 1981. Additional surveys were States. The constraints faced by New Zealand conducted in 1981 and 1984 to determine the included the fact that there was (and is) no ve- appropriate level of financial incentives hicle manufacturing capacitv but only vehicle needed. assembly, nor does New Zealand possess an The above incentive schemes were followed industry to manufacture major items of CNG in 1982 by the introduction of industry-funded equipment. CNG vouchers entitling voucher holders to NZ$300 of free CNG, and in 1983 a 100 percent Institutional. The CNG program was at first government loan for vehicle conversions took greeted with skepticism, if not outright opposi- the place of the accelerated depreciation pro- tion. Against this setting, the chair and execu- gram described above. Between July 1984 and tive officer of the CCC effectively became the October 1985, the price of CNG was about 40 to product champions. The CCC had an influence 50 percent that of gasoline on an energy equiva- on almost all the major government decisions lent basis. During that period, the rate of con- related to CNG except the financial incentives. version rose sharply, fell, and rose sharply again, The role of the CCC was initially to lead and challenging the ability of the industry to under- cajole various agencies, and after greater accep- take high quality conversions. By 1985, over tance of CNG and cooperation, to promote and 100,000 CNG conversion kits had been sold, market the product. The CCC had no formal le- nearly all converting gasoline to CNG. Few die- gal or administrative status. It relied on persua- sel vehicles were converted. The gross income sion at the beginning. In time, the Ministry of of the CNG industry in 1984 was approximately Energy and the industry gave weight to the sug- NZ$84 million (US$49 million) and net foreign gestions made by the CCC. exchange savings amounted to NZ$30 million Setting standards for vehicle conversion and (US$17 million). Between 1979 and 1985, the refueling stations became a key activity within net cost to the government of the various incen- the Standards Association of New Zealand. Ac- tive schemes and loans was in excess of NZ$20 ceptance of gas cylinders manufactured in Italy million (or about NZ$200 per vehicle), in addi- by the Dangerous Goods Inspector of the De- tion to administrative costs such as research and partment of Labor required extensive translation development, promotion and servicing of com- and interpretation of the Italian cylinder design mittees. rules. Establishing training courses for mechan- A number of implementation issues arose and ics needed action by the Motor Industry Train- were handled with varying degree of success. ing Board and the Department of Education. The New Zealand Energy Research and Development Technical. A wide range of technical issues Committee, a government agency, provided key related to vehicle conversion and refueling sta- inputs from the outset. It funded the original tions were investigated and handled. Some were technology assessment in 1978 and prepared known from the beginning and required inves- the implementation plan in 1979. It funded sev- tigation followed by a decision, such as setting eral research projects, especially those directed the maximum cylinder filling pressure. Others at how CNG vehicle engines in New Zealand arose as experience with CNG vehicles pro- performed. 20 Breathing Clean: Considering the Switch to Natural Gas Buses A small number of government personnel in- for conversion and refueling stations. From 1985, volved with CNG in the beginning stayed with conversions rapidly declined to almost zero and implementation and provided continuity, greatly the consumption of CNG fell gradually as exist- assisting with progress of the program. Their ing CNG vehicles ended their normal useful life, principal interest was to ensure that New Zealand as did the number of refueling stations. A little had a viable alternative to gasoline as a trans- over 10,000 CNG vehicles remained in the na- port fuel. In addition, a small number of people tional fleet in the year 2000, a significant de- from private sector firms had a similar determi- cline from the peak of 110,000. nation to make CNG a success because of the potential profits the CNG business could bring Lessons from New Zealand to their firms. The success of the CNG program can be said to be due in large part to the efforts The CNG program in New Zealand developed of these key government and private sector against the backdrop of very high international people. oil prices following the Iranian revolution and an indigenous supply of natural gas with de- Economic. It goes without saying that, given mand not matching the amount that the govern- enough incentives, vehicle owners will switch ment had agreed to "take or pay." In response, to CNG. The government of New Zealand intro- the government of New Zealand took the lead duced a number of financial incentives that per- in promoting the CNG vehicle program aggres- suaded vehicle owners and businesses to convert sively. It sponsored research, prepared the imple- vehicles and construct refueling stations. The mentation plan, and coordinated the entire price difference between gasoline and CNG was program. Most important, it provided generous adequate to give a payback period of 18 months financial incentives, so that the number of CNG on the investment for vehicle owners spending vehicles doubled every year, seriously stretch- in excess of NZ$35 per week on gasoline at the ing the ability of the industry to cope. The in- time. The industry-funded CNG voucher scheme dustry was so preoccupied with meeting the provided an additional incentive. The capital cost demand for conversion that quality at times be- of conversion was covered by a 100 percent came a secondary priority, resulting in a poor government loan. Government grants and loans perception of CNG vehicles in some quarters. helped establish refueling stations. When the new Labor Government began to The market survey conducted jointly by the deregulate the economy, withdrawing support government and the private sector found that for the CNG industry in the form of financial the quality of vehicle conversions had not been incentives, the market essentially died. A CNG good, pointing to a need for quality assurance program that relies heavily on government sub- and warranty for vehicle owners. In fact, CNG sidies, as in New Zealand, is not likely to be was seen as a second-rate fuel used only be- sustainable in the long run. Inter-fuel pricing in cause it cost less than gasoline. Vehicle owners New Zealand today suggests that the world oil considering conversion weighed the problems price must rise above US$30 per barrel before and disadvantages of CNG vehicles against the CNG becomes commercially viable without gov- much lower fuel price. Refueling was not seen ernment support. The New Zealand experience as a major problem because 450 refueling sta- suggests that the price of CNG should be no tions had been established by 1984. more than half of the retail price of gasoline it is The new Labor Government elected in 1984 substituting. Further, if the CNG price is 30 per- adopted an economnic policy of deregulation and cent of the gasoline price, no direct support is liberalization, withdrawing the incentives offered necessary, but at 50 percent some government International Experience with Natural Gas Vehicles 21 support in the form of financial incentives is In Chile, where tests for converting to CNG believed to be needed. have been carried out with taxi fleets, the con- versions failed because of a poor choice of af- termarket gasoline-to-CNG conversions; the OTHER INTERNATIONAL EXPERIENCES option of a fully factory-built CNG car would have been more satisfactory. It is very impor- Before the 1990s, many countries turned to natu- tant, when retrofitting existing vehicles, to carry ral gas as a means of achieving greater energy out conversion properly, ensuring customer sat- self-sufficiency, security of supply or lower fuel isfaction as well as achieving the expected emis- import bills. Environmental advantages of NGVs, sions reductions. especially relative to diesel, began to play a The greatest barrier to the expansion of the prominent role in the 1990s. When gasoline ve- NGV market has been the high cost of refueling hicles were converted to natural gas, an unpleas- stations, vehicle conversion, and OEM vehicles. ant surprise in industrial countries was that In North America and the EU, successful con- emission tests showed that converted vehicles versions have been difficult and costly because were more polluting than recent model-year OEM vehicles are generally recognized to be gasoline counterparts. What emerged is that necessary to ensure minimal emissions. As a newer vehicles equipped with electronic emis- result, NGVs have been confined mostly to high- sions control packages were less amenable to a usage vehicles. successful aftermarket conversion. In fact, the most advanced commercially available gasoline engine vehicles today are extremely clean and ROLE OF GOVERNMENT NGVs have no obvious emissions advantage over them. However, NGVs do produce lower green- The cases of Argentina and New Zealand high- house gas emissions over the vehicle's life cycle, light a number of issues related to the role of a which is an increasingly important consider- government in launching and sustaining a NGV ation given the rising contribution of the trans- program, and that of government support in port sector to overall greenhouse gas emissions particular. The government can assist in a num- in most countries. In contrast, with older ve- ber of ways. hicles, or in markets where manufacturers are not required to provide sophisticated elec- Potential Government Assistance tronic and emissions controls, or where leaded gasoline is still extensively used, the conver- u Establishing a proper regulatory framework is sion to natural gas can provide immediate emis- one of the principal roles of the government. sions improvement. One clear-cut example is The government should ensure that there is a the conversion of gasoline vehicles running on level playing field, players are encouraged to leaded gasoline to CNG in Pakistan: CNG con- increase efficiency and quality of service and tains no lead, so switching from leaded gasoline products through competition, and monitor- to CNG eliminates lead emissions. As for diesel, ing and enforcement of regulations and stan- particulate emissions from NGVs are much lower dards are adequate. than those of conventional diesel, often by a * Establishing safety and performance stan- factor of ten or more. Only the so-called clean dards is another important government func- diesel with sophisticated after-exhaust treatment tion. Both Argentina and New Zealand moved technology and ultra-low sulfur diesel can be- quickly to address this aspect, although the gin to match the emission levels of their natural maintenance of performance standards was gas equivalents. less than satisfactory in the latter. 22 Breathing Clean: Considering the Switch to Natural Gas Buses * Adopting an inter-fuel taxation policy favor- few years. Heavy subsidies may also lead to able to automotive natural gas is necessary if serious market distortions, such as over-sup- the NGV program is to be viable and sustain- ply of refueling stations. able on a commercial basis. In Argentina, * Providing non-monetar; incentives is another gasoline is so heavily taxed that CNG is com- option. Examples include reduced frequency mercially competitive. In neither country has of required emissions inspection tests or the diesel been taxed to the extent necessary to right to drive a CNG vehicle in high-occu- promote conversion from diesel to CNG. In pancy vehicle lanes or on days when other New Zealand, one of the key incentives for vehicles are not permitted (as in cities that conversion came from government subsidies, ban vehicle usage on certain days to reduce so that when the subsidies were withdrawn, air pollution). Such incentives alone would inter-fuel price differences alone could not not induce vehicle owners to switch to natu- sustain the CNG program. A further question ral gas, but coupled with other incentives is the extent to which the retail prices should (most importantly fuel cost savings), they differ. For a given payback period, high-us- could play a useful role. age vehicles need a smaller price difference * Mandating contersion to natural gas is not a than lower-mileage vehicles. If all vehicles step that should be taken lightly, especially if including private passenger cars are targeted financial and logistical (fueling and driving for conversion, the price difference required range) burdens are anticipated to be great on would be much greater than if only high-us- vehicle owners. The Supreme Court decision age commercial vehicles such as taxis and imposed in Delhi for buses is one example. delivery vans are targeted. The New Zealand government's decision to * Providing subsidies was the policy aggressively convert government fleets to CNG in one pursued by the government of New Zealand. sense falls under this category. An indirect In the early days of a NGV program, the in- way of mandating conversion is to set emis- fant industry argument may justify subsidies. sion standards that can be met only by NGVs. For example, to break the logjam in which In the United States, the South Coast Air Qual- car owners wait for adequate refueling infra- ity Management District (SCAQ_MD) in Cali- structure before investing in a fuel switch, fornia has recently banned diesel buses in while business enterprises wait for a sufficient favor of NG and other alternative fuel cngines. number of converted vehicles before invest- * Acting as a champion is a consideration for ing in refueling stations, the government may the government, especially in the early days consider subsidizing startup costs. However, of the NGV program. The govern-ment can as the case of New Zealand demonstrates, large publicize the benefits of NGVs, perhaps us- subsidies are unlikely to be sustainable in the ing prominent senior officials to reinforce the long run, threatening the survival of the NGV message. It is equally important for the pri- program. In the words of Robert Cumming vate sector to assume this role. who spoke on behalf of the International As- sociation for Natural Gas Vehicles in Mexico Designing Fuel Tax City in 1997, "Governments that believe that all they need is a two- to three-year kickstart The issue of inter-fuel taxation is a complex one are wasting their time and money" (Cumming and is beyond the scope of this report. IHlow- 1997). It would be preferable to provide mod- ever, a few general principles from tax theory est but consistent support over a long period may be outlined here. To devise an optimal tax of time than large subsidies that are reduced scheme, which would enable the government significantly or withdrawn altogether after a to raise sufficient revenues while minimizing the International Experience with Natural Gas Vehicles 23 loss of consumers' welfare from the higher prices All these trends argue for taxing diesel even they would have to pay because of the taxes, when it is an intermediate good. That gasoline the following rule is often taken as the starting and diesel are substitutes in the light-duty ve- point: if a certain set of conditions are met', hicle category is a particularly strong argument then no intermediate goods should be taxed, for making their tax levels comparable, or else and the tax rates on final consumption goods the fuel that is taxed less (almost universally die- should be inversely proportional to their own sel) will be consumed more, eroding the tax price elasticities of demand. Thus, if consumers base and requiring higher tax rates elsewhere are likely to cut back consumption markedly in to collect the same amount of money. response to a price increase (as in the case of Yet another consideration in designing tax is certain luxury goods), that item should not be equity-items that the poor consume dispropor- taxed much, but if consumers are likely to con- tionately more than the rich as a share of their tinue to consume only slightly less on account total expenditures (such as food) should be taxed of the price increase (as in the case of such staple less than the above "inverse elasticity" rule would food items as rice or maize), then the item should imply so as to lessen the tax burden on the poor. be taxed relatively more. Under these conditions, Conversely, for goods consumed more by the because diesel used in freight and passenger rich than the poor, such as gasoline, the tax rate transport, industry, and agriculture is an inter- should be higher. Where the impact of an in- mediate good, diesel for these purposes should crease in the price of diesel on household ex- not be taxed. penditures has been studied, the effects have However, the above conditions are not safis- been found to be regressive-that is to say, the fied: total expenditures of poor households rise more in percentage terms than those of the rich when * Vehicles in cities cause congestion, diesel the price of diesel is raised-although the mag- emissions are harmful to public health, and nitude of the impact is not large, remaining of all vehicles, but heavy-duty vehicles consum- the order of a couple of percentage points. This ing diesel in particular, damage roads, so that would argue somewhat for not raising the tax there is an external cost associated with the on diesel as much as the above factors might use of diesel (for productivity loss due to con- suggest. This is one reason why some govern- gestion, additional healthcare costs and ex- ments view diesel as a "social" fuel, limiting tax penditures for road maintenance) on diesel compared to gasoline, which is seen * Diesel and gasoline are substitutes for light- as a fuel for the rich, since only better-off fami- duty vehicles in the long run so that taxing lies can afford to purchase motorized vehicles. diesel little and gasoline much more would Nevertheless, the equity argument alone would result in an automotive fuel switch out of gaso- not justify keeping the end-user price of diesel line to diesel at half that of gasoline as seen in a number of * In many developing countries not all final countries. goods can be taxed, so that taxes on petro- Natural gas used in the transport sector is no leum products, which are relatively easy to different than liquid fuels from the point of view collect, become an important source of gov- of tax theory with one exception: the environ- ernment finance, especially in low income mental externality is lower relative to old tech- countries nology gasoline vehicles, and considerably lower * A number of markets in developing countries with respect to conventional diesel. To set the have distortions that impede perfect or even tax level capturing externalities would require a near-perfect competition. knowledge of contributions of vehicles with 24 Breathing Clean: Considering the Switch to Natural Gas Buses different fuels to the overall air and noise pollu- difficult to regulate and control for emissions. tion, and health and other damages associated These issues point to the complexity of setting with each fuel. This level of information is sel- fuel and vehicle taxes in such a way to mini- dom, if ever, available in most developing coun- mize distortions and maximize welfare. try cities. Another reason cited for consideration in set- It is important to note that the incremental ting inter-fuel taxation is balance of payments tax adjustment to deal with the externality should for countries that have indigenous sources of be applied to that good only-there is no rea- natural gas and that import crude or refined prod- son to tax complements more heavily or sub- ucts. However, if the exchange rate is fully de- stitutes less heavily independent of their own termined by market forces so that it reflects polluting characteristics. In the case of fuel opportunity costs, there is no reason to differ- taxes, this means that government should tax entiate taxes to save imports. A related issue is diesel more, and not lower the rate of tax on diversification of energy sources so as to mini- natural gas. Further, additional considerations in- mize the impact of possible future price hikes. clude other externalities associated with NGVs- This may justify differentiated taxation to a de- congestion and damage to roads (which would gree, although not so much as to give incen- increase because NGVs are heavier)-as well as tives to sxvitch entirely from liquid fuels to NG. the fact that natural gas and liquid fuels are close Given that diesel is taxed little or even subsi- substitutes. Subsidized natural gas is made avail- dized in many developing countries, conversion able in a number of countries. A prime example from diesel to natural gas would become eco- is natural gas sold to the fertilizer industry. It is nomic only if diesel itself or diesel vehicles are important to have market-based natural gas pric- taxed much more. While there may be a num- ing rather than government-determined below- ber of good reasons why the retail price of die- market pricing for the long term viability of the sel relative to gasoline should be raised in the NGV program. Subsidizing natural gas (that is long run, there would nevertheless be a signifi- to say, selling it below cost) to promote its use cant impact on other uses of diesel-in rail trans- in the transport sector, a position promoted by port, agriculture, and industry, for example. One some, ignores these widely accepted principles way of addressing this is to give rebates on the of optimal tax theory. diesel tax to industrial and agricultural users of Another important point is that fuel taxation diesel. In any event, promotion of NGVs is un- is a poor proxy for an efficient externality charge, likely to play a dominant role in determining because air pollution or congestion is a highly diesel taxation. In practice, a combination of a localized phenomenon, while fuel tax is usually number of instruments are likely to be needed set at a national level. From the point of view of to achieve multiple objectives, including taxing taxing environmental health damages, emissions items that cause negative externalities; more in densely populated areas need to be taxed, uniform taxes across different fuels that are sub- which a tax on diesel does not capture well. stitutes; tax rebates to industrial users of fuels; The option of heavily taxing urban buses fueled higher taxes on diesel vehicles, particularly those by conventional diesel, which may be more tar- used primarily in intracity transport; and targeted geted, invites other problems: buses are often subsidies for the poor to compensate for higher the transport mode used by the poor, while a expenditures resulting from increased taxes, to heavy tax on diesel buses would result in higher mention a few. bus fares; and such a vehicle tax scheme may Because gasoline is already taxed much more also eliminate transit buses altogether in favor in most developing countries, if CNG has any of numerous mini-buses, which may be more chance of success on a commercial basis, it is as International Experience with Natural Gas Vehicles 25 a gasoline substitute. A large price difference If the tax difference between CNG and gaso- between gasoline and CNG is currently achieved line is to be widened at all, it would probably by taxing CNG much less. Several issues need make sense to target high-usage vehicles only. to be considered in this case: Leakage-diversion of CNG to users not tar- geted by the government-is unlikely to be a * If gasoline is effectively the sole source of tax serious concern for two reasons. First, unlike revenue from refined products (because all liquid fuels, natural gas is much more diffi- other fuels are taxed little or subsidized), the cult to transport, so that diversion to non-au- government may not welcome a successful tomotive users from refueling stations would CNG program whereby consumers shift from not be simple. Second, since the tax scheme relatively heavily taxed gasoline to essentially would target the price difference between untaxed CNG. This would be particularly a CNG and gasoline to be at the level that would concern in low-income countries where tax make conversion to CNG financially attrac- revenue from hydrocarbons accounts for a tive only for high-usage vehicle owners, lower significant fraction of the government's total mileage vehicle owners would not benefit tax take. from converting to CNG to take advantage of * If the CNG program is so successful that a the price difference. sizable portion of the gasoline market is re- placed by CNG while the automotive diesel market is untouched, the resulting product NOTE slate (with a very low gasoline-to-diesel ra- tio) will be difficult to manage for countries 1. The conditions are that the economy is per- with refineries. fectly competitive, so that tax changes will be passed * If taxing CNG little does not provide suffi- on fully to consumers; there are no externalities as- cient financial incentives for conversion, the sociated with the consumed goods (such as air pol- government might consider increasing the tax lution or congestion); all consumers are identical; all on gasoline further (which in turn could fur- final consumption goods can be taxed; and the items ther reduce the gasoline-to-diesel ratio for taxed at different rates are not substitutable (such as demand), or reducing the tax on CNG, or both. butter and margarine). Chapter 3 Comparison of Natural Gas and Diesel Buses T he conventional diesel engine is very eration for developing countries is the emissions energy efficient and reliable. One of the and performance characteristics of vehicles as goals of heavy-duty NGVs is to have they age, especially in countries that have poor diesel-like efficiency and reliability. There are cultural acceptance of regular maintenance. This consistent reports that the performance of the information is not widely available for NGVs, as generation of NG buses from the early 1990s many published studies have measured emis- was less than satisfactory. The latest model sions from relatively new vehicles. heavy-duty NGVs are much improved, but the engine technology still needs sorre refinements. Comparison of heavy-duty NG and diesel ve- PERFORMANCE hicles is made difficult by the fact that both are evolving technologies. In the area of energy ef- There are two types of engines, compression ficiency and reliability, conventional diesel ve- ignition and spark ignition. All diesel engine hicles have reached a mature stage and the vehicles have compression ignition, while gaso- majority of the current development efforts fo- line and dedicated NGVs have spark ignition. cus on reducing exhaust emissions. NGVs start Compression ignition engines rely on self-igni- with an inherently lower emissions base, and tion upon injection into hot, high pressure com- development efforts have focused just as much pressed air, and enjoy a number of advantages on improving its fuel economy and reliability. over spark ignition engines, which ignite a ho- In comparing NG and conventional fuel ve- mogeneous and compressed pre-mixed mixture hicles, it is important to clarify what is being of fuel and air with a spark. These advantages compared. Comparing the state-of-the-art NGVs include lower fuel consumption, longer life and with conventional diesels, or vice versa, could safer operation. Compression ignition engines favor one over the other. While comparison of run "lean," or at a high air-to-fuel ratio, so that the latest NG and diesel technologies may be of combustion occurs in the presence of excess primary interest in North America, EU and other air. In contrast, spark ignition engines typically industrial regions of the world, this comparison run "stoichiometric," meaning that the air-to-fuel may not be relevant to policy discussions in ratio is adjusted so that the amount of oxygen in developing countries. Unfortunately, nearly all the air is exactly that needed to combust all hy- published data are from industrial countries, drocarbons in gasoline. Vehicles with three-way making it difficult to draw conclusions for de- catalytic converters must use a stoichiometric veloping countries. Another important consid- mixture. The compression ratios of diesel engines 27 28 Breathing Clean: Considering the Switch to Natural Gas Buses at 15-to-i to 20-to-1 are much higher than those operation, however, has higher NO. and meth- of gasoline engines at 8-to-1 to 10-to-1. Com- ane emissions, is more sensitive to gas compo- pression ignition engines do not have throttle, sition variations, and can also lead to faster thereby reducing pumping losses. The lean-burn erosion of the spark-plug electrodes, needing characteristics, the lack of a throttle and a high replacement as frequently as 300 hours (Nylund engine compression ratio help to increase the and Lawson 2000) as opposed to a durability of efficiency of a diesel engine, leading to supe- 48,000 km required in the United States for gaso- rior fuel economy. Because dedicated NGVs have line engines. to use spark ignition, all these advantages of The maximum efficiency of a NG engine is diesel engines have to be sacrificed to some some 10-15 percent lower than that of a good extent, although the high octane number of natu- diesel engine. In practice, the difference may ral gas compensates for some of the engine com- be even greater. The energy consumption of a pression ratio loss in going from compression heavy-duty vehicle is estimated to increase, in to spark ignition in the case of OEM vehicles. most applications, by 20-35 percent after con- Dual-fuel NGVs use a compression ignition. version from diesel to natural gas. (Nylund and Compression ignition engine components are Lawson 2000). Old conversion technologies de- typically more robust than corresponding spark crease fuel economy by as much as 25-40 per- ignition engine components, increasing engine cent. The fall in fuel economy arises from lower life before overhaul or replacement significantly. compression ratios and throttling losses of NGV The lean burn characteristics of diesel engines engines, and the additional weight of gas cylin- provide cooler exhaust temperatures, helping to ders for fuel storage. The thermal efficiency is decrease engine wear. Because compression 39 percent for a typical lean burn NG engine. ignition engines do not have ignition systems, As a comparison, new truck and bus diesel en- there are no spark plugs or other ignition sys- gines in the EU achieve thermal efficiencies of tem components to clean and replace. However, around 46 percent. the high pressure fuel injection system does re- The driving range of NG buses is smaller than quire maintenance, that of diesel buses. There is a trade-off between There are two options for the air-to-fuel mix- cylinder weight and the desired range: the lower ture ratio of heavy-duty NG vehicles: lean or the cylinder weight for a given material of con- stoichiometric. Cummins-the world's largest struction, the higher the fuel economy, but also designer and manufacturer of diesel engines the lower the range. The driving range of CNG which also offers the most widely fitted propri- buses is often less than two-thirds of diesel buses. etary CNG engines in Europe-is committed to In the United States, driving ranges are of the lean burn NG engine technology for fuel order of 400 km for CNG and over 650 km for economy reasons. Others, such as Fiat-Iveco, diesel buses. This has presented problems to have been developing stoichiometric NG units. some bus operators who have had to arrange In industrial countries, heavy-duty NGVs oper- mid-day fueling (Montgomery County Transit, ate either with stoichiometric mixtures and three- Maryland) and take other steps to ensure that way catalysts, or with lean mixtures and buses do not run out of fuel. (Greater Cleveland oxidation catalysts. Stoichiometric units enable Regional Transit Authority in Ohio reports that reducing emissions to extremely low levels and NG buses have suffered out-of-fuel problems.) give better drivability. The benefits of operating Similarly, TransAdelaide in Adelaide, South Aus- in the lean-burn mode include greater engine tralia, found that the range of NG buses was 11 durability, higher fuel economy and higher hours against their daily shifts of 15 hours, re- power output if turbocharging is used. Lean-burn quiring the organization of mid-shift refueling. Comparison of Natural Gas and Diesel Buses 29 Diesel buses could complete the shift without Table 6. Emissions Benefits of Replacing refueling. In contrast, buses for the Bangkok Alass Diesel with CNG Vehicles Transit Organization in Thailand travel about 220 Fuel Co NOx PM km a day on two routes, so that the driving range is not a critical issue. Diesel 2.4 g/km 21 g/km 0.38 g/km CNG 0.4 g/km 8.9 g/km 0.012 g/km % reduction 84 58 97 EMISSIONS Note: Diesel engines certified to the 1997 U.S. federal emission stan- dards. The numbers are averages of three vehicles in each fuel cat- egory. All were equipped with oxidation catalysts except one CNG bus. The most visible and familiar emission from die- Source: Frailey and others 2000. sel engines is the smoke trail produced when the vehicle operates under load. Consisting of solid particles and liquid droplets, smoke from dramatic. The emission characteristics of dual- diesel engines can be blue-white or gray-black fuel vehicles depend in part on the extent to in color. Blue smoke is typically caused by the which diesel is substituted by natural gas over combustion of lubricant found in the combus- the engine operation range. As mentioned in tion chamber due to poor piston ring sealing or Chapter 1, the stop-and-start nature of urban valve guide wear. NGN7s are also a source of transit buses limits the amount of natural gas particulate emissions, although at a much lower substituting diesel, significantly reducing the level. White smoke is generated when the cotn- environmental advantage of switching to natu- bustion temperature during fuel injection is too ral gas. low, which happens typically during transient It is important to bear in mind that emission operation when starting, especially during cold levels are a function of a number of parameters- weather or at high altitudes. White smoke can engine, after-exhaust treatment technology, the also be produced when the injection timing is "reference" fuel quality (the quality of the fuel overly retarded or when the compression ratio to be used in the tests) and driving cycles. En- is too low. Gray-black smoke, consisting of car- gines that have been optimized to give low bon particles, is generated when the engine is emissions at steady-state do not necessarily have operating at or near full load and too much fuel low emissions in transient (meaning continually is injected or when the air intake is partially varying speed) driving cycles, which are more obstructed (for example, if the air filter is dirty). representative of real life service. This has led Gray-black smoke results from poor maintenance the EU to require a new transient test cycle start- of air filters and fuel injectors, or from improper ing with the Euro III emissions regulations. Un- adjustment of the fuel injection pump. Exces- like light-duty vehicles where the entire vehicle sive smoke from diesel engines usually suggests is driven on a chassis dynamometer for emis- a loss in thermal efficiency, power output and sion certification, heavy-duty vehicles are tested fuel economy (Maxwell and Jones 1995). by running engines in engine dynamometers. Dedicated NGVs can enjoy a considerable Transient engine testing is very expensive to carry exhaust emissions advantage over conventional out, and for this reason the EU and Japan have diesel engine vehicles. In particular, visible been using only steady-state testing for emis- smoke is virtually eliminated. A comparison of sions certification of heavy-duty vehicles. In the emission test results of comparable diesel and United States, a transient cycle has been used dedicated CNG buses is shown in Table 6. The for heavy-duty engines since 1985. reductions in emissions in going from conven- The importance of driving cycles was high- tional diesel to dedicated OENI CNG buses are hghted in a recent court case in the United States 30 Breathing Clean: Considering the Switch to Natural Gas Buses concerning charges of "cycle beating." A num- dramatic reductions in diesel sulfur. The need ber of diesel vehicle manufacturers were accused for what is known as ultra-low-sulfur or sulfur- of carefully optimizing the emissions control free diesel arises from the deactivating impact exactly under the conditions that matched the of sulfur on state-of-the-art exhaust control tech- specified test driving cycle. Outside of the test nologies. Compliance with Tier 2 in North conditions, the vehicle would be configured to America requires a sulfur reduction to 15 parts maximize fuel economy rather than emissions per million by weight (wt ppm). The EU is re- control in real-life driving, resulting in much quiring a reduction to 50 wt ppm by 2005, and higher emissions. All the engine makers were is seriously considering a 2011 deadline for lim- fined heavily for contravening the spirit, if not iting maximum sulfur in diesel to 10 wt ppm the letter, of U.S. emissions legislation. sulfur in all diesel. Finland, Sweden and Ger- Governments in North America and the EU many are already granting tax incentives to in- are in the process of introducing much tighter troduce diesel with 10 wt ppm. In all developing emission standards for vehicles, including heavy- countries, the level of sulfur in diesel is much duty diesel vehicles, to be fully enforced by the higher than that in ultra-low sulfur diesel. Only end of this decade. The so-called Tier 2 emis- a handful of countries, such as Mexico and Thai- sion standards for heavy-duty vehicles, which land, have a sulfur limit of 500 wt ppm, still a w.vill be phased in beginning with the 2007 model level too high to meet Tier 2 or Euro IV and V year (that is, in the autumn of 2006) in the United emission standards. Several developing coun- States, will lower particulate and NO, emission tries have a diesel sulfur limit as high as 10,000 levels by 90 and 95 percent, respectively. The wt ppm (or 1 percent by weight). Deploying EU is introducing progressively tighter standards clean diesel vehicles would require not only in 2005 and 2008. The evolution of standards manufacturing or importing the best available for new heavy-duty diesel vehicles is shown in technology vehicles, but also either importing Table 7. The limits are shown both in grams per ultra-low sulfur diesel or investing heavily in kilowatt-hour (g/kWh) and grams per brake refinery modifications to reduce sulfur in diesel horsepower per hour (g/bhp-h) for the U.S. stan- drastically. Massive refinery investment to lower dards, the latter being the original numbers. Tier diesel sulfur is unlikely to be a high priority in 2 emission standards in particular are sufficiently the near future, especially in countries that have stringent that it is not immediately obvious that a policy of maintaining a low retail price of diesel. NGVs will have significant emissions advantages NGVs may be equipped with an oxidation over the so-called "clean" diesel. catalyst to oxidize (that is, burn completely) re- The clean diesel technology, however, re- sidual carbon monoxide and hydrocarbons, such quires not only advanced and sophisticated ve- as lubricant but also methane. Methane is ther- hicle technology and emissions controls, but also modynamically the most difficult hydrocarbon Table 7. Heavy-Duty Diesel Emission Standards (in glkWh, with glbhp-h in parentheses) USA USA USA Tier 2 Euro I Euro /I1 Euro IV Euro V Pollutant 1990 1998 2007+ 1993 2000a 2005a 2008a Particulate matter 0.80 (0.6) 0.13 (0.10) 0.013(0.01) 0.36 0.16 0.03 0.03 NO, 8.0 (6.0) 5.4 (4.0) 0.27 (0.20) 8.0 5.0 3.5 2.0 Hydrocarbons 1.7 (1.3) 1.7 (1.3) 0.19 (0.14)b 1.1 0.78b 0.552 0.55b a. European transient cycle. b. Non-methane hydrocarbons. Source: http://www.dieseinet.com/standards.html. Comparison of Natural Gas and Diesel Buses 31 to oxidize and requires a specialized catalyst, curtailed aftermarket alternative fuel conversions but catalvst deactivation has been a problem. in North America. Sulfur based odorant (tetrahvdrothiophene) at Stringent Euro IV and XT and Tier 2 emission 10-15 milligrams per cubic meter (mg/m3) can standards that may require particulate traps and have a detrimental effect on oxidation catalyst a (not yet commercially available) "lean deNO " conversion efficiencv. Because methane is in- catalyst system for reducing NOy mav possibly ert, its release is essentiallv harmless from the work in favor of CNG vehicles. Depending on point of view of local air pollution, but methane future technological developments, these factors is a powerful greenhouse gas. Whilc U.S. emis- may make natural gas competitive in North sions regulations distinguish between methane America and the EU. and non-methane hvdrocarbons, those for light- Recently, emissions data were obtained on duty vehicles in the EU do not, posing an addi- CNG buses (1996, 1998 and 1999 model year) tional challenge to the manufacturers of NGVs. equipped with oxidation catalysts and diesel As mentioned earlier, particulate emissions buses (1999 model year) fueled by ultra-low from NGVs originate primarily from the lubri- sulfur diesel containing 30 wt ppm sulfur and cant; excessive oil consumption could lead to equipped with Johnson Matthey's Continuously non-negligible particulate emissions from NGVs. Regenerating Technology (CRT"',) filter system An oxidation catalyst can lowver particulate emis- for reducing particulate emissions. The results sions some. Although not yet a concern in most from the central business district (CBD) and New developing countrv cities, it is worth noting that York (NY) bus cycles are shown in Table 8. CNG a NG engine that is not optimized can have much buses had an advantage over diesel for NO, but higher NO emissions than a conventional die- not for particulate emissions. The much higher sel engine. The reported NO\ cemission of cur- hydrocarbon emissions of CNG buses are due rent heavy-duty NG engines varies from 0.5 to primarily to greater methane release. CNG buses 3.5 g/kXXWh. Multi-point fuel injection and closed- were also found to have higher carbonyl emis- loop control svstems are instrumental in assur- sions. The data in Table 8 should be interpreted ing low emissions in transient driving. with caution, however, since the measurements Conversion of MIercedes buses to NG in Brazil were taken at three different test sites. is reported to have resulted in higher emissions It would be useful to reinforce the observa- of a number of pollutants. tion about gasoline vehicle emissions. Absent By 2004, on-board diagnostic (OBD) moni- catalytic converters, switching from gasoline to tors will have to be active on all fuels in the a gaseous fuel often meant reduced exhaust United States. OBD svstems, which monitor emissions. Today, advanced technology gaso- emission control components for any malfunc- line vehicles with three-way catalysts are so clean tion or deterioration that cause an excess in emission limits, alert the driver of the need for Table 8. Comparison of CNG and "Clean repair via a dashboard light when the diagnos- Diesel" Buses (g/km) tic system has detected a problem. In 2005, Eu- CBD cycle NY bus cycle ropean OBD compliancc w,vill bu rcquired on Pollutant CNG Diesel CNG Diesel alternative fuels. This could be a major impedi- ment to the groxvth of alternative fuel vehicles. Particulate matter 0.011 0.015 0.044 0.023 OBD calibration is very expensive, and each NO, 15 16 32 45 engine tvpe has to be calibrated. If the number Total hydrocarbons 10 0.01 42 0.038 of vehicles sold is small, the cost of calibration Source: 2001, Interim report: Emissions Resultsfrom Clean Diesel be econoically mortize. Certiication Demonstration Program with CRTTM1 Particulate Filter at New York cannot be economicallv amortizcl. Certification City Transit, http:/Iwww.epa gov/oms/retirofitVdocumentsI and OBD II (generation tw,o) issues have severely ny_crt_presentation.pdf. 32 Breathing Clean: Considering the Switch to Natural Gas Buses that the fuel itself (that is, whether liquid or gas) INTERNATIONAL EXPERIENCE plays a minor role, especially for the regulated emissions. Under these circumstances, convert- The international experience with NG bus ing an advanced gasoline vehicle to gaseous fuel operation is limited compared to other types could even increase rather than decrease of vehicles. The world leader is the United States, emissions. where 80 transit authorities operated some 3,500 NG transit buses in over half of the 50 states as of January 2000 (Watt 2001). Over a quarter of FUEL QUALITY the transit authorities had 50 or more NG buses. In Delhi, India, some 1,600 NG buses were in The quality of the fuel affects emissions and operation by mid-2001 (CPCB 2001). Another vehicle performance. In the case of diesel, the leader is China, with over 1,300 NO transit buses need to lower sulfur for clean diesel technology in Beijing alone. Other countries with over 200 has been noted. Natural gas quality may vary NG transit buses in operation include Australia with the proportion of light hydrocarbons in the (492 buses), Canada (367), France (350), Swe- gas (especially methane), water, oil and dust. den (320), Japan (259) and Germany (220 in The quality of natural gas in the United States is 1996). The Republic of Korea has an ambitious typically consistently high, with a methane con- plan to put 5,000 NG transit buses in circulation tent of 95 or even 98 percent not unusual. Even in eight cities for the 2002 WVorld Soccer Cup. so, Sun Metro, the public transportation author- Interestingly, two world leaders in the NGV ity of El Paso, Texas, selected LNG for its natu- market, Argentina and Italy, have few NG tran- ral gas-fueled mass transit fleet because the sit buses: Italy has about 170, and Argentina has natural gas quality could not be guaranteed at none operating regularly. 98 percent methane. In Europe, natural gas qual- Among other developing countries, the United ity is more erratic, in particular the methane States Agency for International Development content of U.K. supplies. This is said to be add- (USAID) has provided funds to purchase a num- ing to the difficulties of meeting future emis- ber of NG transit buses to combat air pollution sions standards in the EU. in Cairo, Egypt. Fifty-seven new dedicated NG If a mechanical fuel metering system without buses operated in Egypt in early 2001. The gov- any kind of feedback control is used, the en- ernment of Indonesia announced recently that gine has to be tuned for a specific gas. To com- all new buses and taxis will need to be pow- pensate for even small changes in gas ered by CNG. The regulations will be introduced composition, a closed-loop fuel metering sys- first in Jakarta and surrounding cities. Most of tem with an exhaust gas oxygen sensor is Jakarta's 10 million inhabitants rely on buses for needed. transport. No timetable has been proposed for The NG bus program in Bangkok, Thailand, the implementation of the regulations. The gov- encountered problems initially on account of the ernment of Thailand wants to replace 10 per- methane content varying from 60 to 85 percent. cent of total oil use in the transport sector with More specifically, the buses manufactured by natural gas in the next five years through a pro- MAN with Lambda 1 technology experienced gram estimated to cost 959 million baht (US$23 operational problems. Today, blending is used million). The extent to which NG buses will be to reduce the amount of gas quality variation. promoted is not yet clear. As a result, the variation of the methane content A detailed description of the international ex- has been narrowed to between 72 and 83 per- perience with NG transit buses can be found in cent. Watt (2001). Several countries where substan- Comparison of Natural Gas and Diesel Buses 33 tive data are available are discussed briefly The capital cost of NG transit buses is 10 to below. 25 percent higher than their diesel equivalents, which cost upwards of US$200,000, resulting in United States a cost increase of up to US$50,000 per bus. Re- fueling, maintenance and bus storage infrastruc- The United States has the most extensive expe- ture is also expensive. Different transit authorities rience with urban natural gas buses. As of Janu- report significantly different incremental oper- ary 2000, an estimated 44,300 transit buses ating costs. Two examples illustrate this point. operated in the United States, of which 3,535 In the first case, two northern California public were reported to be fueled by natural gas, CNG transit agencies that replaced old diesel buses as well as LNG. NG buses accounted for 18 per- with new CNG buses in 1994 conducted a three- cent of new bus orders and 28 percent of po- year study. The agencies found that the incre- tential orders. The principal driving force for mental capital cost of bus purchase (excluding switching to NG in the United States is low emis- the incremental cost of establishing the CNG sions, and hence NG buses are deployed in cit- infrastructure) was recovered in about seven ies with serious air pollution. All full-size transit years (Finley and Daly 1999). In the second case, bus manufacturers in the United States offer NG the Los Angeles County Metropolitan Transpor- buses. There are 1,200 CNG and close to 70 LNG tation Authority, which operates the largest fleet refueling stations throughout the country, with of NG buses in the country, reports that the fuel over 70 stations serving transit bus fleets. cost for NG buses per distance traveled has been The federal government heavily subsidizes the 27 percent higher than diesel when compres- purchase of transit buses, and transit bus fleets sion costs are taken into account and that NG do not have to rely entirely on local funding. buses have had a much greater defect rate. Sev- For example, the Federal Transit Administration eral other agencies have reported higher oper- subsidizes up to 83 percent of the cost of a new ating costs for NG buses; some have decided NG transit bus. Air quality funds offset most of to stay with natural gas despite the economic the differential capital and some of the infrastruc- disincentives purely on environmental ture costs. The federal government supports grounds. One has concluded that NGVs are as NGVs by imposing lower highway tax on CNG reliable as gasoline vehicles in light-duty applica- and LNG: highway taxes are 6.3 U.S. cents per tions, but are inferior to diesel in heavy-duty liter (¢/l) for diesel, 4.7 ¢/l for gasoline, 3.0 e/l applications, and recommended a moratorium for LNG and 1.5 W/I of gasoline equivalent for on further expansion of the NG bus program CNG. The federal government also gives grants but continuation with light-duty CNG vehicle of up to US$50,000 per heavy-duty vehicle and purchase. up to US$100,000 per refueling station, and al- Fleet operators found it particularly difficult lows tax deductions for NG vehicle owners. Some to recover the incremental costs of mounting a 32 state governments support NGVs through tax NG bus program in the early days of NG buses, credits, grants and other incentive schemes. In when they experienced many mechanical and one of the most successful CNG/LNG transit bus other problems. Comments submitted by the programs, run by Sun Metro in Texas, the pay- American Public Transit Association to the De- back period for the cost of switching from diesel partment of Energy in July 1998 highlighted these to NG (including fueling infrastructure) before concerns. The key issues to be overcome to in- government grants is said to be 4.5 years, re- crease the presence of transit NG buses in the duced to 0.9 years after receiving grants.' market were said to be: 34 Breathing Clean: Considering the Switch to Natural Gas Buses * higher capital and startup costs: bus purchase, Recent announcements to purchase CNG fueling station, training for maintenance and buses include that by the New York City Metro- operators, garage retrofit politan Transportation Authority (MTA), which * higher operating costs: fuel station mainte- plans to expand CNG bus operations between nance, bus maintenance (lower engine reli- 2000 and 2004 by adding 300 more CNG buses ability, reduced brake life, more expensive to the fleet and converting 2 depots to CNG. parts due to lower volumes), fuel costs, re- During the same period, the MTA also plans to duced range. retire all two-stroke engine diesel buses by 2003 and adopt clean diesel technology for 3,500 Box 1 shows an example calculation illustrat- buses by retrofitting them with catalyzed par- ing the inter-fuel price difference needed to make ticulate trap filters. The MTA's experience with conversion from diesel to CNG economic. CNG buses between 1995 and 2000 was not all NG bus programs experienced some setbacks positive, however. CNG buses were found to be in the 1990s, attributed to the cost and reliability only 50 to 75 percent as reliable as diesel buses, problems of the early generations of buses. Some although the difference is narrowing. CNG buses cities reversed their plans to purchase NG buses. were also found to be 40 percent less energy- There are consistent reports that the generation efficient in urban service and significantly more of NG buses from the early 1990s were not only expensive to operate (Department of Buses more expensive to purchase than their diesel 2000). equivalents, but also were about 30 to 40 per- CARB is a strong proponent of NG transit cent more expensive to maintain and had con- buses. It is developing a proposal for low-emis- siderably reduced reliability (such as shorter sion transit buses that includes a particulate mean distance between in-service failures and emission standard of 0.00 (that is to say, less higher defect rate with parts). than 0.005) g/bhp-h and a NO. standard of 0.1 Box 1. An Example of the Economics of CNG Buses in the United States What is the price difference between diesel and * The cost of natural gas before compression is natural gas needed to make fuel switching eco- US$0.40 per gallon diesel equivalent. nomic for a fleet operator? The following example gives order-of-magnitude estimates. The net present value (NPV) of this NG bus pro- The assumptions made in this example are given gram was calculated over a time period of 20 years below. at a discount rate of 8 percent. The NPV became positive at a diesel price of US$0.88 per gallon, or • There are 100 buses in the fleet. more than twice the price of CNG. If the incremen- * Each bus travels 80,000 km a year. tal cost of NG bus purchase is assumed to be * The fuel economy falls by 1 5 percent upon US$30,000 per bus, then the break-even diesel price switching to natural gas. falls to US$0.81, still remaining above twice the * The refueling station costs US$750,000 to es- price of CNG. In reality, if the life of a bus is shorter tablish and US$30,000 annually to maintain. than 20 years (typical life of diesel buses is taken as * Electricity costs $0.08/kWh. 12-15 years in economic calculations), the break- * An additional $350,000 is required for building even price would be even higher. modifications. * The incremental cost of NG buses is US$40,000 Source: King and Hutton 2000. per bus. Comparison of Natural Gas and Diesel Buses 35 g/bhp-h by 2008-2012. Originally designed to * A large number of buses should be made mandate alternative fuel technology including to run on natural gas to take advantage of natural gas, the current proposal gives flexibil- economies of scale, ideally at least a whole ity by not dictating the choice of fuel. However, depot. the current clean diesel technology cannot meet * Long-term commitment, support and active these emission standards, so that a technologi- involvement by management are crucial. cal breakthrough followed by successful com- * Financial capability must be in place. mercialization will be needed if diesel technology * Extensive training of drivers and mechanics (as opposed to diesel-electric hybrid technol- must be undertaken, and qualified and expe- ogy) is to be used. California's SCAQMD ap- rienced engineers made available to provide proved regulations in June 2000 that mandated competent support for smooth operation and fleet operators with more than 15 buses to use maintenance, as well as to ensure safety. Hav- non-petroleum alternative fuels, effectively ban- ing trained operators and maintenance staff ning clean-diesel technology. A recent survey who can catch and report problems or by CARB has shown, however, that outside of changes in the buses while in operation and the SCAQMD, 17 of 22 northern California tran- during preventive maintenance is very impor- sit agencies have chosen the clean diesel path, tant (Box 2). including virtually the entire San Francisco Bay * Government mandates/regulations alone are area. insufficient, and incentives are needed to The experience with transit NG bus opera- encourage conversion from diesel to natural tors in the United States seems to suggest the gas. In the United States, grants are available following lessons: from the federal and state governments to switch to natural gas. * If the overall operating and maintenance costs * The fleet operators should recognize that there are higher for NG buses, there is no hope of will be additional costs and inconvenience recovering the incremental cost of bus pur- during transition. Some have had to struggle chase and establishing the NG infrastructure. with more frequent breakdowns requiring The operating and maintenance costs can be repairs for a number of years. higher for a combination of reasons-signifi- * No significant regulatory hurdles should have cantly lower fuel economy for NG, insufficient to be overcome. price difference between natural gas and die- sel, frequent breakdowns by NG buses, and Australia fewer kilometers traveled on account of in- creased downtime and shorter driving range The Government of Australia has introduced a (making management of bus routes difficult number of measures to support alternative fu- in some cases if buses are refueled only at their els. The package of federal government programs depots). In a 1999 document, CARB concludes providing a strong incentive to switch to alter- that even after overcoming these problems to native fuels, especially natural gas, include a considerable extent, operating costs of new NG fleets in the future are estimated to be * CNG Infrastructure Program providing fund- slightly higher than that of new diesel fleets, ing up to 50 percent of the cost of installing and the capital costs for NG fleets-initial bus in excess of 20 public refueling facilities purchase price and the refueling and facility * Alternative Fuels Conversion Program fund- modification costs-will continue to be higher ing up to 50 percent of the additional cost of than that for diesel fleets (CARB 1999). conversion or purchase of new NGVs with a 36 Breathing Clean: Considering the Switch to Natural Gas Buses Box 2. Phoenix Transit observe and report changes in the buses while in operation and during preventive Phoenix Transit in Arizona operates 411 buses, of maintenance. The next challenge is to have which 157 are fueled by LNG. The LNG buses are of bus manufacturers and component manu- 1998, 1999 and 2000 model year vintages equipped facturers working in partnership with the with catalytic converters. They travel about 80,000 service and maintenance contractors. The km a year, averaging fuel economy of about 0.80 bus, bus fueling system, refueling system, km per liter diesel equivalent, compared to diesel transmission and engine have all been a buses achieving 1.3 km per liter. Carbon monoxide challenge but the problems have not kept and non-methane hydrocarbon emission levels are the buses out of service and each prob- a little lower than for a diesel engine of the same lem as it occurs is being resolved to make age; NOX at idle is significantly higher, and NOx un- the bus better. der load is considerably lower, than diesel. Data on The bottom line is training, training and particulate emissions are not available. There have more training. PhoenixTransit initially met been no significant differences in road call incidents resistance from the operators, mechanics, between diesel and LNG buses of the same age. fuelers, and subsequently the union. They The views of Phoenix Transit about how they trained everybody from top management have managed the transition to LNG underscore to bus washers. A little 'LNG 101' goes a the importance of training and winning the sup- long way, provided you have the answers port of every person in the organization: to conciliate the resistance." "The main challenge is to have trained Source: Watt 2001. operators and maintenance staff that can gross vehicle weight of over 3.5 tons (which ers in Sydney, Australia, spoke of lack of accel- include urban transit buses) eration and poor drivability of natural gas ve- * Diesel and Alternative Fuels Grants Scheme hicles compared to diesel. Comparison trials with ensuring that the fuel price advantage of natu- diesel buses showed that the drivers were con- ral gas over diesel is maintained fusing lack of noise from natural gas buses with * Alternative Fuels Grants Scheme applying ex- lack of acceleration. CNG buses are about clusively to urban buses and offering a grant US$20,000 more expensive than their diesel of 12.1 Australian cents per cubic meter of counterparts. The Scania NG buses purchased natural gas, improving the price advantage by Sydney Buses have given a payback period of NG over diesel by approximately 10 per- of about seven years. cent. Canada The response to NG buses in Australia from fleet owners has been positive on the whole, The CNG program in Canada was launched in certainly much more so than in Canada (see 1983 with a series of economic incentives. A below). Many achieved economic savings rela- payback period of about two years was deemed tive to diesel. Emissions advantages of CNG necessary to encourage owners to switch to NG, buses have been demonstrated time and again. and the federal government, some provincial Reliability has been a problem, as well as back- governments and the natural gas utilities devel- firing. Vehicle manufactures have worked closely oped incentive packages. The environmental with fleet operators and given considerable tech- advantages of CNG did not become a factor until nical support. The importance of training and about 1992. The use of NG buses has been education of drivers was highlighted when driv- motivated primarily by consideration for emis- Comparison of Natural Gas and Diesel Buses 37 sions improvement. While Canada was active in more. Fleet managers report that they are gen- the development and use of NG buses in the erally satisfied with NG buses. No significant early 1990s, the purchase rate declined consid- maintenance or operational problems have been erably in 1998 and has come virtually to a halt, encountered. Operation during cold periods has in sharp contrast to the NG transit bus market in been somewhat problematic, necessitating a wait the United States. The difference between the of 15 to 20 minutes before the engine functions two North American countries is attributed to properly and upgrades to reduce the number of the lack of equivalent Canadian and provincial breakdowns. A survey conducted in May 2000 government policies regarding the need to im- found that 90 percent of passengers believed prove air quality. Two major NG bus operators that NG buses improved air quality, and 96 per- in Canada-Coast Mountain Bus Company and cent stated that NG buses are superior to diesel the Toronto Transit Commission-are express- buses. ing concerns about the operational problems The government lowered taxes on gas for NG and maintenance costs of NG buses and have buses between 1998 and 1999 by giving a tax been reported as being inclined to switch out exemption for 24,000 m3 per year per bus. Dur- from natural gas to other alternative fuels. This ing the same period, the market price of diesel perception of NG buses is believed to arise increased, and in addition the government in- from the disappointing performance of the creased taxation on diesel. In Poitiers, the break- buses purchased in the early 1990s. Some NG even point relative to diesel was achieved for a buses in Canada have even been converted fleet operator when the monthly gas consump- back to diesel. tion reached 45,000 m3, or for 16 buses driving One unintended consequence of operating more than 4,700 km per month. new NG buses and older diesel buses in paral- lel is the increased use of diesel buses on ac- Transit Bus Industry in count of the higher downtime and lower Developing Countries passenger carrying capacity of NG buses, as Coast Mountain Bus Company in British Colum- Any assessment of fuel switching for transit buses bia has found. Although the company achieved in developing countries must take into account fuel cost savings of 47 percent in 1999, the sav- the evolving public transport sector in the indi- ings were offset altogether by the 49 percent vidual countries. Transit bus companies in many, higher operating costs. if not most, developing countries are cash- strapped. A large number of operators suffer from France fare controls that have made it very difficult to provide high-quality service. The emergence of One new bus out of three is fueled by natural mini-buses in the informal sector-that is, buses gas in France today. A quarter of all new buses in the hands of non-corporate operators, illegal ordered are NC buses, selected primarily for as well as legal-has posed a serious threat to environmental reasons. The NG buses are "low the survival of transit buses, especially in the floor" with composite material cylinders located former Soviet Union and Africa. Where they in the roof. The buses travel about 40,000 km a operate illegally, these informal sector buses save year on urban routes. Most filling stations use costs by minimizing payments to the govern- slow fill. NG buses cost about US$28,000 to ment in the form of taxes and license fees. In US$35,000 more than their diesel counterparts. some parts of Central Asia, the tax paid by tradi- The financial break-even point relative to diesel tional (formal sector) bus operators is estimated is generally achieved for fleets of 20 buses or to be an order of magnitude higher than that 38 Breathing Clean: Considering the Switch to Natural Gas Buses paid by informal operators, giving a consider- in the transit bus industry in developing coun- able advantage to the latter. Because informal tries, and these same problems may condemn sector buses are in the hands of a large number NG bus programs to failure even if inter-fuel of owners, even when they operate legally, thev pricing is adjusted to favor NG much more at may be more difficult to bring under control for the expense of diesel. While mini-buses have a the purpose of monitoring and enforcing regu- proper role to play, large transit buses are ideal lations (such as vehicle registration, and safety for segregated busways in congested situations and emission standards). where the reservation of wvell-functioning rights- As governments attempt to reduce emissions of-way for buses is oftcn the only affordable from buses, they must face that traditional bus solution for mass transit. They are also the road operators are cash-strapped, in part because of vehicle of choicc where passenger volumes are fare controls, and have little money left to main- high and public transport vehicles constitute a tain their vehicles properly, and that bus opera- high percentage of traffic in congested or near- tors in the informal sector are difficult to regulate. congested streets. In part because they are cash-strapped, bus op- Some governments, such as the United States erators do not maintain vehicles, resulting in high and Australia, have offered considerable finan- emissions as manifested by black smoke belch- cial incentive packages to promote NG transit ing out of diesel buses. For the same reason, buses. Especially when these incentive packages they would not be in a position to purchase have been combined with tough emissions regu- more expensive NG buses, provide extensive lations, NG bus programs have been successful. staff training on this new technology, and ac- However, the level of subsidies offered in these cept the possibility of more repairs to deal with countries are unlikely to be sustainable in de- greater frequency of bus breakdowns, at least veloping countries. initially. That even U.S. bus operators have faced Experience in developing countries with NG considerable mechanical challenges with NG transit buses is limited. The extent to which ex- buses, resulting in higher operating costs in a perience and lessons-especially with respect number of cases, is a cause for concern, espe- to mechanical reliability, drivability, maintenance cially given the much smaller number of techni- and other issues-from industrial countries can cally qualified mechanics to service NGVs in be transferred is not clear. The NG buses now developing countries. In the informal sector, bus being purchased in industrial countries are all operators are not likely to own a large number OEM buses, costing some USS20,0)0 to of vehicles. Even if they are operating legally, US$50,000 more than their diesel counterparts, they are not likely to be able to exploit econo- up to as much as USS300,0O0 per bus. Most de- mies of scale in maintenance, training and refu- veloping countries pay US$100,000 or less for eling, making it difficult to switch to NG. each bus. Rcliability and increased repair fre- Under the current circumstances, the transit quency have been one of the major issues in bus industry in a number of countries is not sus- the past, even with GETM NG buses. The data tainable in the long run-fare control will even- needed to establish \vhether NG buses offered tually have to be lifted to bring in new types of at dramatically lower prices in developing coun- service, or else the formal sector may disappear tries such as China have comparable, more, or altogether and be replaced by the informal sec- fewer operational and maintenance problems tor. That is to say, high emissions from diesel will become available on1v in a few years' time. buses are not merely because of the choice of Finally, there is the question of what hap- fuel, but are symptomatic of deeper problems pens to NG buses if they are neglected as much Comparison of Natural Gas and Diesel Buses 39 as conventional diesel buses in developing closely as developing country cities launch NG countries. This is an interesting question for bus programs. cities such as Delhi, which has mandated con- version from diesel to NG. How the poor cul- tural acceptance of, as well as inability to pay NOTE for, regular maintenance affects the life of the NG bus, its fuel economy, frequency of com- 1. However, this analysis by Sun MIetro has been plete breakdown (so that it cannot be oper- criticized for not comparing like with like, and there- ated on the road), and emissions is an fore projecting more favorable economics for NG important question that should be monitored buses (Watt 2001). Chapter 4 Looking to the Future T his report has shown that NGVs are a ture of the NGV industry and market in indus- relatively new and rapidly evolving tech- trial countries. The environmental concerns di- nology. As such, while there are useful recting research and development in the auto lessons to be learned from other countries' ex- industry in industrial countries are not the same perience, some of them may no longer be di- as those in developing countries. Severe NO. rectly applicable-for example, experience emissions control, which is not yet a priority in relating to the poor performance of NG buses most developing country cities, presents a sig- manufactured in the early 1990s compared to nificant technical challenge to vehicle manufac- those manufactured more recently. turers in industrial countries who have turned To date, NG buses have been at a private to sophisticated technical solutions based on economic disadvantage compared with diesel ultra-low sulfur diesel (preferably below 10 wt buses unless supported by substantial favorable ppm sulfur). For controlling particulate emis- tax discrimination or subsidies. In the absence sions, catalyzed particulate traps appear to be of emissions standards that effectively require successful in reducing emissions dramatically, gaseous fuels, natural gas buses are unlikely to but they too require ultra-low sulfur diesel. be adopted because they are more expensive to Cummins cited quirks of Euro III emission stan- operate relative to diesel buses. This is partly dards (including the limit on exhaust methane) because diesel is a very cheap fuel in most de- and subsequent certification test cycles as the veloping countries-it is lightly taxed or may primary reasons for its earlier decision to with- even be subsidized. Even if diesel were taxed draw its natural gas engines from the European much more, however, it is not obvious that CNG market when Euro III truck and bus emissions buses would be cheaper over their life cycle legislation was originally scheduled to come into than diesel buses: they cost more to purchase, force for all new vehicles in October 20011. That are less fuel efficient, have a smaller range and is to say, the evolution of the NGV market and are often less reliable. These observations sug- manufacturing industry in industrial countries is gest that the social case for replacing diesel by influenced to a significant extent by consider- CNG in buses rests on environmental grounds. ations that are often not priority issues in devel- In particular, the use of natural gas by heavy- oping countries. And yet because the bulk of duty vehicles normally fueled by diesel would product development occurs in industrial coun- not be suitable if the diversification of energy tries, what happens there will have an impact sources is the primary objective. on the availability of NGVs in developing coun- Developments in the clean diesel technology tries in the foreseeable future. To take an ex- are expected to have a direct impact on the fu- treme scenario, if the NGV industry in industrial 41 42 Breathing Clean: Considering the Switch to Natural Gas Buses countries were to die (for example, as a result ing change in emissions over the remaining of clean diesel replacing natural gas), it could life of the bus (also using net of tax fuel and become much more difficult for developing vehicle prices). country cities to implement a NG bus program. A closely related factor is developments in The first is applicable to the case where a the refining industry. More specifically, given new bus purchase is being considered, and the the future mandated reductions in sulfur in die- second to the case of converting existing diesel sel, there has been extensive research and de- buses (which is not normally recommended). velopment to lower the cost of diesel These calculations would give an idea of how hydrodesulfurization technologies. Break- the options compare on economic grounds. throughs have been announced and demon- Repeating the above calculations using gross of strated at the pilot scale, including the tax fuel and vehicle prices would indicate how announcement of a novel sulfur extraction tech- much more fleet operators would have to bear nology that could radically reduce the cost of to achieve target emission levels. By making both diesel and gasoline desulfurization while assumptions about exhaust emission factors, it efficiently saturating aromatics and boosting ce- would also be possible to compute a cost per tane-the cost of virtually eliminating sulfur in ton of particulate matter reduced, although this high-sulfur diesel is estimated to be on the or- might be misleading in view of the fact that other der of 0.7 U.S. cents per liter (Hart's Diesel Fuel pollutants are being reduced at the same time. News 2001). Successful commercialization of Many unknowns in the above calculations in- such processing technologies could dramatically troduce large uncertainties in the final results. alter the landscape for the clean diesel-natural The relative operating costs of diesel and NG gas debate. buses have been reported to vary over a wide However, until such a time as "cheap" clean range, even in the United States where data col- diesel becomes widely available worldwide, lection has been rigorous. Little is known about which is not expected for at least several more the experience of converting existing diesel years, most developing country cities will con- buses to CNG, other than that such conversions tinue to grapple with a choice between conven- typically do not make happy customers. The tional, polluting diesel versus potentially much reliability of CNG buses in developing countries cleaner natural gas buses. If the government of is one of the greatest unknowns. However, car- a city decides that the reduction in air pollution rying out calculations using the most optimistic associated with CNG buses is worth the cost, as well as more pessimistic assumptions could then it needs to adopt policies that would en- give order-of-magnitude estimates. For example, courage the switch to CNG: either emissions stan- if even the most optimistic of assumptions can- dards for buses, or fuel or vehicle taxes that not justify CNG buses, then switching to CNG is reflect marginal social costs. unlikely to be sustainable. The type of analysis that could be carried out An added consideration is the cash-strapped to determine whether CNG buses should replace state of the transit bus industry in developing conventional diesel buses would include countries. Lack of an adequate operating bud- get is one of the reasons for the poor mainte- * comparing the lifecycle costs and emissions nance of diesel buses, resulting in gross of a new conventional diesel bus and a CNG emissions. Since operating NG buses incurs bus, using a net of tax price for diesel fuel, higher upfront costs-for purchasing buses, set- CNG and their respective vehicles, or ting up refueling stations and training mechan- * comparing the cost of retrofitting a diesel bus ics and drivers-transit bus fleet operators in with a CNG engine and estimating the result- poor financial condition are not in a position to Looking to the Future 43 take on a NV bus program successfully. While the primary reason for the bus operators' poor lack of proper maintenance may not necessarily financial state, how much would the fares lead to black smoke emitted by tailpipes in the need to rise before the financial health of the case of NG buses, it could easily result in more operators is recovered? If fares are to be raised, frequent breakdowns and other operational are there provisions to protect low-income problems, as well as higher emissions of other bus riders who may not have alternatives? pollutants that may become an issue in the long * Is automotive diesel priced much above natu- run. NG buses tend to be less reliable than their ral gas for transport? If not, switching to natu- diesel equivalents even in the best of circum- ral gas will not be economic, and hence not stances. Reports of continual operational prob- commercially sustainable in the long run. Are lems with NG buses are certain to invite a there pricing distortions today that may be backlash from bus operators, seriously harming corrected in the future, and that may have an the future of the NGV industry. Some of the more adverse impact on relative prices of the two negative experiences in developing countries fuels (for example, a heavy subsidy for natu- include that in Jakarta, Indonesia, where of the ral gas)? If so, economic calculations should 40 dedicated CNG buses, only 20 are operating be based on long-run marginal cost of natu- owing to maintenance problems. ral gas rather than the current low price. Is Lastly, because natural gas buses have higher the price difference between natural gas and upfront costs that require some type of govern- diesel (possibly combined with higher vehicle ment support (for example, in the form of higher tax on diesel vehicles) adequate for recover- diesel fuel or vehicle taxes) to recover, and hence ing the incremental costs? Is the payback pe- emissions reductions from switching to natural riod reasonable? Does the government have gas come at a price, this cost for reducing par- a plan to support the price difference in times ticulate emissions should be compared to that of falling international price of diesel and ris- for other sources-for example, industry, house- ing price of natural gas? holds and the informal sector. In order to make * Is emissions reduction in transport, and more this comparison, the contributions of various specifically targeting buses, likely to be cost- sources to ambient concentrations have to be effective compared to emissions reductions in understood. While it is difficult to identify sources other sectors? If, on the contrary, informal accurately, chemical analysis of particles and refuse burning, combustion of biomass in ur- other analytical studies go a long way in provid- ban households, wood and coal burning in ing a better understanding of source contribu- cottage industries in the informal sector, and tions. At the same time, such numerical findings two-stroke engine gasoline motorcycles and need to be tempered by the growing evidence three-wheelers turn out to contribute the that diesel particulate emissions are indeed very majority of ambient concentrations of particu- toxic, and exhaust emissions fall predominantly late matter, targeting diesel buses aggressively in the particle size range that seems to have the will not reduce particulate air pollution most health impact (namely below 1 micron). markedly. In summary, the following are some of the * How will large-scale substitution away from questions that should be posed in considering gasoline to NG affect the government's fi- the choice of fuel for transit buses. nances? Assuming the price of diesel is be- low the price of gasoline, setting the tax * What is the financial position of the transit rate on NG that makes it economically at- bus operators? If they are cash-strapped, is tractive to switch from diesel to NG will this because distortions in the policy frame- make it even more attractive to switch from work need to be corrected? If fare control is gasoline to NG. Will a successful NGV pro- 44 Breathing Clean: Considering the Switch to Natural Gas Buses gram require adjustments to inter-fuel taxa- The decision to switch from diesel to natural tion later on, making NG less attractive? Will gas for use in buses is not straightforward. At a there be serious imbalances in petroleum minimum, the regulatory and administrative ar- product consumption patterns, such as a very rangements should be in place to ensure the low gasoline-to-diesel ratio? Such imbalances financial sustainability of transit operators who may not be a problem for a country that im- would be using natural gas, and vehicle taxes ports nearly all of its fuel demand, but they should reflect marginal social costs of health would constrain the ability of refineries to damage from air pollution. If these conditions remain profitable. are satisfied, cities in countries with abundant * Are subsidies (such as capital subsidies pro- supplies of domestic gas, gas pipelines already vided by the U.S. government) needed to jus- in place, and with transport emissions contrib- tify conversion to natural gas on economic uting substantially to serious urban air pollution grounds? If diesel tax is not raised, should may consider this fuel option. The conditions CNG buses even be considered? Is there room outlined above would present a serious chal- for subsidies as the United States has pro- lenge even in industrial country cities, and cer- vided for capital? If so, based on order-of- tainly in nearly all developing country cities. magnitude calculations, does it appear that The temptation to mandate NG buses under the benefits of switching to natural gas in terms the circumstances may be strong, but mandat- of health impacts justify the subsidies? Or can ing what would otherwise be commercially un- the government save more lives and reduce sustainable in the long run cannot be a viable illnesses by using the same amount of money solution. If municipal governments are serious elsewhere, such as on clean water or health about wanting to promote NG for transit buses, care? If subsidies seem justified, is the gov- broader issues facing the public transport sec- ernment committed to providing subsidies in tor, such as examination of the fare structure the long run to avoid the repeat of the New and how to create a level playing field for all Zealand NGV experience? bus operators including regulation of informal • Is the regulatory framework for NGVs in place, sector buses, will need to be addressed. Once including safety regulations and standards for transit bus operators are on their way to a more equipment? Is there an adequate monitoring sound financial footing, the question of how best and enforcement mechanism? to recover the incremental cost of switching to * Is the quality of natural gas consistent and NG-such as fiscal incentives reserved only for does it meet minimal requirements for vehicles, fleet operators so as not to increase the fiscal or does it tend to fluctuate over a wide range burden on the government-may be explored. so that certain vehicle technologies may not Lastly, as a growing number of developing coun- be used without processing the gas further try cities experiment with NG buses, systematic (such as by blending)? collection and exchange of information could * How many buses could be converted to natu- be invaluable in guiding policymakers as they ral gas at one depot? Is there a sufficient num- consider this new fuel system. ber to exploit economies of scale? * Is there a realistic and workable plan to train maintenance staff and drivers? Are there NOTE enough qualified trainers and engineers to support the program? 1. In January 2001, the EU decided to delay imple- * Are the transit fleet managers considering JNG mentation of Euro III rules for gas engines by two vears. In response, Cummins has put on hold its de- buses very much committed to the fuel switch cision to withdraw from the European gas engine and ready to get involved themselves? market. Annex A Emissions from Diesel Vehicles T he pollutants of concern found in load. This suggests that diesel particulate emis- diesel exhaust are particulate matter, sions are especially harmful to public health-a oxides of nitrogen (NO.) and hydro- matter for concern, since the consumption of carbon toxins such as polynuclear aromatics. diesel far exceeds that of gasoline in many de- Primary particles are emitted directly by vehicles; veloping countries. secondary particles, in contrast, are formed from A series of extensive studies, mainly in the the chemical oxidation of atmospheric gases. United States, has shown clear associations be- Oxides of sulfur (SO_) and of nitrogen (NOD tween small changes in a wide range of health are precursors for secondary particles; reducing indicators-mortality, hospital admissions, emer- sulfur in diesel lowers the amount of sulfate- gency room visits, time off school or work, res- based particles. NO is in addition an ozone pre- piratory symptoms, exacerbation of asthma and cursor. Ozone pollution is not yet a serious changes in lung function-and ambient particu- problem in most developing country cities, but late concentrations. Of the various health indi- ambient concentrations of ozone and NO. are cators, the measurement of mortality has been on the rise. particularly well studied. The actual adverse There is a growing consensus that diesel ex- impact of fine particulate matter on public health haust poses a cancer risk. The advisory board to may be considerably greater in developing coun- the U.S. National Toxicology Program has rec- tries than existing data indicate: most studies have ommended that diesel exhaust particles be listed been carried out on urban populations in indus- as "reasonably anticipated to be a human car- trial countries who receive high-quality medical cinogen." The California Air Resources Board care and who do not spend as much time out- (CARB) has officially recognized that some ele- doors as some segments of the population in ments of emissions from diesel engines are car- developing countries do. cinogens. CARB, in fact, points to several studies Historically, carbonaceous contributions to that have shown that the cancer risk from diesel diesel particulate emissions have far exceeded particles is greater than the risk from all other sulfate contributions. Figure Al shows the re- identified toxic air contaminants combined. Japa- duction in the carbon soot and organics portion nese scientists claim that they have found 3- of particulate matter that was achieved by im- nitrobenzanthrone to be one of the most proving heavy-duty diesel engine design be- carcinogenic substances ever discovered; emis- tween 1988 and 1994 in the United States. The sions of 3-nitrobenzanthrone increase markedly sulfate portion is due to sulfur found in diesel when a diesel engine is operating under high and lubricant. In 1988, carbon soot and organics 45 46 Breathing Clean: Considering the Switch to Natural Gas Buses Figure Al. Particulate Emissions from New objective of which was to identifv measures for Vehicles in the United States improving urban air quality based on sound sci- g/bhp-hr ence and cost-effectiveness as primary criteria. EPEFE found that the relationships between ve- hicle and fuel technologies were complex, so 0.5 - that those measures that reduced emissions from 0.4 - light-duty vehicles sometimes increased emis- sions from heavy-duty vehicles, and vice versa. 0.3 - For example, reducing diesel density decreased 0.2 - _ - NO emissions from heavy-duty diesel engines, but increased NOX from light-duty engines. Some 0.1 measures were effective for all diesel engines 0 tested: decreasing polynuclear aromatics in die- 1988 1991 1994 1994 sel reduced NOx and particulate emissions, and 0.25% 0.25% 0.25% 0.25% increasing cetane number decreased hydrocar- sulfur sulfur sulfur sulfur bon and carbon monoxide emissions, from both heavy- and light-dutv vehicles. However, increas- ing cetane number increased particulate emis- - Sulfate sions from light-duty vehicles. Overall, the Source: McCarthy 1994. following measures were found to decrease par- ticulate emissions: constituted the majority of particulate emissions. u reducing density for light-duty engines As a result of steady refinements in the engine * reducing polynuclear aromatics for both light- technology, the sulfate contribution was greater and heavy-duty engines than the carbonaceous contribution by 1994. The * decreasing the temperature at which 95 engine manufacturers would not have been able percent of diesel evaporates, for light-duty to meet the 1994 particulate emission limit of engines. 0.1 grams per brakehorse power per hour (g/ bhp-hr) without reducing sulfur in diesel from The health impact of diesel emissions appears 0.25 percent to 0.05 percent. Therefore, the de- to be especially serious for those close to the cision of the U.S. Environmental Protection sources of emissions, such as school children Agency (EPA) to lower the limit on sulfur in die- riding buses, traffic police and vehicle riders sel to 0.05 percent for the 1994 model year was following diesel vehicles. As a striking example, justified and should serve as a model for future one study in Los Angeles, United States, found regulatory action-vehicle technology and fuel that concentrations of elemental carbon (which quality improvements should be consistent and constitutes a relatively high fraction of diesel coordinated. particulate emissions) inside vehicles with win- Certain fuel parameters have been linked to dows closed were about 5 micrograms per cu- diesel emissions. One of the most extensive stud- bic meters (gg/m3) without any vehicles in front; ies conducted to date is the European 15 .tg/m3 when following a diesel truck with a Programme on Emissions, Fuels and Engine high, vertical exhaust pipe or a diesel passenger Technologies (EPEFE). Representing an unprec- car; 50 jtg/M3 when following a diesel truck with edented collaboration between the European a low exhaust pipe; and as high as 130 pg/m3 motor and oil industries, EPEFE was undertaken when following an urban transit bus making fre- as part of the European auto-oil program, the quent stops (Fruin and others 2000). These con- Annex A: Emissions from Diesel Vehicles 47 centrations would be expected to be even higher For dramatic reductions of particulate emis- in developing countries where emission levels sions, catalyzed particulate filters and continu- are generally higher than in California. ously regenerating particulate traps have been While there are growing concerns about the shown to be effective. A continuouslv regener- environmental health risks of conventional die- ating particulate trap can reduce particle num- sel vehicles as studies continue to shed new light ber counts by one to two orders of magnitude on the adverse health impact of particulate emis- as well as the mass of particles. To use these sions, the markedly higher efficiency of diesel particulate filters, however, ultra-low sulfur is engines compared to gasoline has made diesel needed for durability. In response, the European popular. For example, in Europe, one out of Commission proposed during the first half of every three cars sold in 2001 is forecast to be 2001 that sulfur-free diesel (meaning diesel with diesel-fueled. The EU and the United States have sulfur below 0.001 percent by weight, or 10 parts steadily tightened emission standards, requiring per million) be made available in all EU coun- engine modifications as well as diesel quality tries by 2005. improvements. The challenge facing vehicle In the United States, in-use diesel vehicles are manufacturers is the trade-off between NO, and tested for smoke opacity in eight states. The U.S. particulate emissions: measures that reduce the EPA has not mandated opacity tests for diesel peak flame temperature, such as injection tim- vehicles because of concerns about correlation ing retard, decrease NO_ emissions but increase between opacity measurements and particulate particulate emissions that arise from incomplete emissions. While loaded dynamometer tests are combustion, and hence fuel consumption. reasonably correlated with mass particulate emis- Oxidation catalysts are used to reduce gas- sions to a degree, lowering smoke opacity does eous hydrocarbons and the soluble organic frac- not necessarily guarantee a reduction in particu- tion of particles in the diesel exhaust. Oxidation late emissions, and vice versa. The correlation catalysts are especially effective for two-stroke between opacity measurements under snap ac- engine diesel vehicles. In the Urban Bus Retro- celeration1 (which is the test used even in the fit/Rebuild Program finalized by the U.S. EPA in United States) on one hand and mass particu- 1993, oxidation catalysts are extensively used to late emissions during transient operation is much reduce particulate emissions. The program is him- weaker. This poses a considerable challenge for ited to 1993 and earlier model-year urban buses designing an effective diesel vehicle inspection operating in metropolitan areas and applies at and maintenance program. the time of engine rebuild or replacement. A key aspect of the program is the certification of retrofit/rebuilt equipment, which often includes NOTE an oxidation catalyst as one of the components. The use of oxidation catalysts calls for low (but 1. The vehicle engine, with the transmission in not necessarily ultra-low) sulfur diesel, namely neutral, is accelerated at full throttle from a raised diesel with a sulfur content of 0.05 percent or idle revolutions per minute (rpm) to a maximum gov- lower. erned rpm. I References Airborne Particles Expert Group. 1999. "Source http://www.epa.gov/OMS/retrofit/docu- Apportionment of Airborne Particulate Matter ments/nyc_2.pdf in the United Kingdom," http://www.aeat.co.uk/ Finley, Bruce E. and Tracy A. Daly. 1999. "A netcen/airqual/reports/home.html#reports Three Year Comparison of Natural Gas and Die- Automotive Environment Analyst. 2001. "CNG sel Transit Buses," SAE Technical Paper Series, car explodes," No. 76, May. 1999-01-3738. Warrendale, Pennsylvania. bp. 2001. bp Statistical Review of World Energy Frailey, Mike, Paul Norton, Nigel N. Clark and June 2001, June, http://www.bp.com/centres/ Donald W Lyons. 2000. "An Evaluation of energy/index.asp Natural Gas versus Diesel in Medium-Duty Bacon, Robert W 2001. "Oil Product Taxes." Buses," SAE Technical Paper Series, 2000-01- Forthcoming in Viewpoint, World Bank, Wash- 2822. Warrendale, Pennsylvania. ington, D.C. Francchia, Juan Carlos. 2000. "An Overview of CARB (California Air Resources Board). 1999. the Argentine NGV Experience," presentation "Proposal for Cleaner Transit Buses," http:// made at the Workshop on Compressed Natu- www.arb.ca.gov/msprog/mailouts/msc9928/ ral Gas, 2-3 March, Washington, D.C. msc9928a.doc Fruin, S.A., S.P. Hui, P.L Jenkins and C. Rodes. CARB (California Air Resources Board). 2001. 2000. "Fine Particle and Black Carbon Con- "Public Meeting to Discuss Motor Vehicle CNG centrations inside Vehicles," presentation Fuel Specifications," http://www.arb.ca.gov/ made at the 10th Annual Conference of the fuels/altfuels/meeting/2001/0307arbp.pdf International Society of Exposure Analysis, CPCB (Central Pollution Control Board). 2001. Monterey, California, October 25. "Vehicular Pollution Control in Delhi: Initia- Harris, Garth. 2000. "Compressed Natural Gas tives and Impacts." August, Delhi, India. in New Zealand," presentation made at the Cumming, Robert. 1997. "Vehiculos A Gas Natu- Workshop on Compressed Natural Gas, 2-3 ral: Estado Actual Y Perspectivas," presenta- March, Washington, D.C. tion made at the Seminario Internacional, Hart's Diesel Fuel News. 2001. "Sinclair/Bechtel/ Mexico City, 11-12 September. SulphCo Evaluation Indicates Huge Cost Re- Department of Buses. 2000. "NYTC Clean Fuel duction for Fuels Desulfurization," Vol. 5, No. Bus Programs," presentation made at the 6, March 19. Washington Metropolitan Area Transit Author- Impco Technologies. 2000. "Alternative Fuels ity Alternative Fuels Workshop, 6 July 2000, Presentation to the World Bank," presenta- 49 50 Breathing Clean: Considering the Switch to Natural Gas Buses tion made at the Workshop on Compressed Petroleum Refiners Association National Fu- Natural Gas, 2-3 March, Washington, D.C. els and Lubricants Meeting, 3-4 November, King, Thomas A. and Mark B. Hutton. 2000. "Eco- Houston, Texas. nomic, Environmental, and Technical Aspects Nylund, Nils-Olof and Alex Lawson. 2000. "Ex- of Public Transit NGVs," presentation made haust Emissions from Natural Gas Vehicles: at the Workshop on Compressed Natural Gas, Issues related to engine performance, exhaust 2-3 March, Washington, D.C. emissions and environmental impacts," report Maxwell, Timothy T. and Jones, Jesse C. 1995. prepared for the IANGV Technical Commit- Ch. 5, "Conversion of Compression Ignition tee, 31 March, http://www.iangvorg/html/ Engines." In Alternative Fuels: Emissions, Eco- sources / sources/reports / emissions. html nomics and Performance. Society of Automo- Watt, Glen M. 2001. "Natural Gas Vehicle Transit tive Engineers, Inc., Warrendale, Pennsylvania. Bus Fleets: The Current International Experi- McCarthy, Christopher I. 1994. "Update on the ence," IANGV Review Paper, http:// Effect of Government Regulations on Diesel www.iangv.org/html/sources/sources/re- Fuels," presentation made at the 1994 National ports/iangv_.bus_report.pdf Recent World Bank Technical Papers (continued) No. 465 Csaba Csaki and Zvi Lerman, eds., Structural Change in the Farming Sectors in Central and Eastern Europe: Lessonisfor EU Accession-Second World Bank! FAO Workshop, Junle 27-29, 1999 No. 466 Barbara Nunberg, Readyfor Europe: Public Administrationl Reform and European Union Accession in Cenitral and Eastern Eutrope No. 467 Quentin T. Wodon with contributions from Robert Ayres, Matias Barenstein, Norman Hicks, Kihoon Lee, William Maloney, Pia Peeters, Corinne Siaens, and Shlomo Yitzhaki, Poverty and Policy in Latin America and the Caribbean No. 469 Laurian Unnevehr and Nancy Hirschhorn, Food Safety Issues in the Developing World No. 470 Alberto Valdes, ed., Agricultural Support Policies in Transitioll Economiies No. 471 Brian Pinto, Vladimir Drebentsov, and Alexander Morozov, Dismantlinig Ruissia's Nonpayments System: Creating Conditions for Growth No. 472 Jit B. S. Gill, A Diagnostic Franmewvorkfor Revenue Adminiistrationl No. 473 Esen Ulgenerk and Leila Zlaoui, From Transitiont to Accession: Developing Stable and Com petitive Financial Markets in Bulgaria No. 474 loannis N. Kessides, ed., Hungary: A Regulatoriy a'ad Structural Review of Selected Infrastructuire Sectors No. 475 Csaba Csaki, Zvi Lerman, and Sergey Sotnikov, Farmi Sector Restructuring in Belarns: Progress anid Constraints No. 476 Katherine Terrell, Czechi RepXublic: Labor Market Report No. 481 Csaba Csaki, John Nash, Achim Fock, and Holger Kray, Food anid Agricultlure in Bulgaria: The Challenzge of Preparinigfor EU Accessioni No. 482 Peter Havlik, Trade and Cost Competitivencss in the Czech Republic, Hungary, Poland, and Slovenia No. 483 Mojmir Mrak, Communal Infrastru ctu(re in Slovenia: Survey of Inzestmiienlt Needs anid Policies Ainlied at Encouraging Private Sector Participation No. 484 Csaba Csaki and Laura Tuck, Rural Development Strategy: Easterni Europe anzd Central Asia No. 488 Nina Bubnova, Goverance Impact on Private Investment No. 489 Tim Schwarz and David Satola, Telecoitmmillycationis Legislationi in Transitiofnal and Developing Econiomies No. 490 Jesko Hentschel and Radha Seshagiri, The City Poverty Assessmtienit: A Prilmier No. 491 Daniel Miiller-Jentsch, The Development of Electricityi Markets in the Euro-Mediterranecani Area No. 492 Tuntivate Voravate, Douglas E Barnes, and V. Susan Bogach, Assessinig Marketsfor Rrnewcable Energy in Rutral Areas of Nortlnvestern China No. 496 Jerry Lebo and Dieter Schelling, Desip7 aLdt1 Appraisal of Ruiral Transport Infrastructure: Ensuring Basic Access fo)r Ruiral Communuities No. 497 Julian A. Lampietti, Anthony A. Kolb, Sumila Gulyani, and Vahram Avenesyan, Lltility Pricing and.1 fhe Poor: Lessons fromn Armenia No. 498 Gillian Perkins and Ruslan Yemtsov, Armnenia: Restr-iicturinig to Suistain ULniversal Gcncral Education No. 499 Rogrigo A. Chaves, Susana Sanchez, Saul Schor, and Emil Tesliuc, Finan7cial Markets, Credit Contstrainits, aIid Iln hestmen t in Ritral Romlalnia No. 500 Zvi Lerman and Karen Brooks, Tuirkmnciistanl: An Asscssmizenit of Lefasehold-Based Farm Restructuring No. 501 Aldo Baietti, Private Inifrastrulctutre in East Asia: Lessonis Learnied in tht Aftermath of thze Crisis No. 505 Ali Hashimn and Bill Allan, Treasunlj Referenice Model No. 506 Omer Gokcekus, Nick Manning, Ranjana Mukherjee, and Raj Nallari, Institutional Env,iromnnint anod Public Officials Pcrformance in Guyana No. 507 Ranjana Mukherjee, Omer Gokcekus, Nick Manning, and l'ierre Landell-Mills, Baiigladesli: The Experience and Perceptions of Puli1ic Officials No. 509 World Bank, Kosovo: Economiic and Social Reforims for Peace auid Reconiciliation No. 510 Anatoly Vinokur, Joana Godinho, Christopher Dye, Nico Nagelkerke, The TB anid 1lIVIAIDS Epidemiics in the Russiaii Fdcration No. 512 Geremia Palomba, Milan Vodopivec, Financing, Efficiency, anld Equity in Albaniaii Education No. -513 Thomas O'Brien, Christian Filipov, The Currenit Regulatoril Franiewvork Governing Businiess ini Bulgaria No. 514 Carmela Martin, Francisco J. Velazquez, Bernard Funck, Eluropeani 7lntegration1 anid liiconiie Convergence: Lessons for Cenltrai andai Eastern European Countries THE WORLD BANK 1818 H Street, N.W Washington, D.C. 20433 USA Telephone: 202-477-1234 Facsimile: 202-477-6391 Internet: www.worldbank.org E-mail: feedback@worldbank.org ISBN 0-8213-5040-4