Building out alternative fuel retail infrastructure: Government fleet spillovers in E85

Abstract

One significant obstacle to meeting aggressive federal and state alternative fuel consumption targets is the relative scarcity of retail fueling stations that carry alternative fuels. Policies that encourage or mandate use of alternative fuel vehicles in government fleets, thereby increasing demand for such fuels, are one popular approach to stimulating further development of the alternative fuel retail infrastructure. I focus specifically on flex-fuel vehicles (FFVs) that burn E85, a combination of 85% ethanol and 15% gasoline, to study the impact of government fleet composition on retail alternative fuel infrastructure. Using data from six states in the Midwest that account for over 60% of US E85 stations, I show that government fleet adoption of FFVs leads to an increase in retail E85 stations. This finding persists when using instrumental variables techniques to address the endogeneity of government fleet FFV purchases. I also explore whether fuel station retail market structure has an effect on alternative fuel availability and find no evidence that the presence of stations affiliated with integrated gasoline producers has limited the availability of E85 at the market level. Finally, I examine how the effect of government FFVs on E85 availability varies by state and discuss the differing policy approaches that these states have taken. * 105 St. George St., Toronto, ON M5S 3E6. kenneth.corts@rotman.utoronto.ca. Trevor Tombe provided excellent research assistance. I thank

Fuel Subsidy Pass-Through and Market Structure: Evidence from the Renewable Fuel Standard

“…Our work contributes first to the literature studying market impacts of the RFS. Previous work has estimated demand for E85 and the role of policy in driving diffusion new alternative fuels (Corts, 2010;Anderson, 2012;Langer and McRae, 2014;Pouliot and Babcock, 2017). More recent empirical work has studied RIN cost drivers, as well as the effect of RIN prices on refiners' markups and profitability (Lade et al, 2016;Burkhardt, 2016).…”

Refueling Behavior of Flexible Fuel Vehicle Drivers in the Federal Fleet

“…Despite the suboptimal placement of some federal FFVs, the fact remains that EPAct 1992 has been successful at getting FFVs deployed throughout the federal fleet: 63% of the 174,469 federal FFVs were determined to have access to alternative fuel during FY 2012, a significant improvement from FY 2009, when only 54% had access. 4 Another noteworthy success comes from Corts (2010), who found that mandated government AFV acquisition programs in effect provide an incentive for retail station owners to invest in alternative fuel. He further concluded that "…a government fleet mandate is essentially a costless initiative that apparently yields sizable benefits in terms of stimulating E85 availability" (p.232), whereas the impact of private FFV ownership was much less important to stimulating E85 infrastructure development.…”

Comparative Analysis between Hydrous Ethanol and Gasoline C Pricing in Brazilian Retail Market

“…After 2011, policy decisions aimed at stabilizing inflation have strongly contributed to the loss of competitiveness of ethanol [18]. Some studies evaluates the hydrous ethanol as automotive fuel and its relation to the gasoline market regarding the issue of expanding the distribution network in US [19][20][21]. On the other hand, Brazil has a mature ethanol retail market, established since Pro-Álcool.…”