1986-10-01

Necessary Incentives for a Methanol Fuel Market 861572

Incentives that induce vehicle and fuel suppliers and consumers to risk investment are necessary for a new methanol motor fuel market. History shows price advantage alone isn't enough to start a new motor fuel. Convenience, operating reputation and resale value must prove competitive with gasoline, and total incentives must be at the right level. Beyond start-up risks, incentives must compensate for system cost penalties over gasoline, and long-term supply concerns. Not all methanol's advantages accrue to the market risk-takers, and market incentives that are available are limited. The flexible fuel vehicle reduces incentives needed by reducing start-up risks, but does not eliminate system cost and fuel supply concerns for assured start-up and transition to dedicated vehicles. Mandates or a purchase/auction system to increase incentives are preferable to direct subsidies. Gasoline disincentives are also effective.

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