Fueling energy without subsidies

May 7, 2012 |

By Tabby Waqar
Research Assistant, The Methanol Institute

There are several different types of subsidies which include direct financial transfers like loans, depletion allowances and preferential tax treatments like the farm credit subsidy and the Alternative Fuel Vehicle Refueling Property Credit.  The government grants subsidies to, either, stabilize the economy and encourage increased production, or both. However, over time, subsidies can undermine the private and public investment in the energy sector by impeding innovation.

Methanol is one example. In liquid fuel markets, eyes turn to ethanol, which, until recently, was heavily subsidized and continues to be mandated.  Methanol as a fuel has the ability to reduce our dependence on foreign oil and improve our environment without the backing of any type of subsidies. Methanol is a mature energy source, an efficient and clean burning fuel, which has been around for a long time. Methanol is low-cost and environmentally friendly compared to other available fuels.  And, once again, a key point is that methanol does not need a subsidy to secure its supply. The recent low natural gas rates in the United States will themselves ensure adequate domestic supply that will ultimately reduce import dependency on foreign sources of energy.

With an already-thriving methanol industry, no taxpayer money is needed to reap the benefits of the environmentally friendly use of methanol. When burned as a fuel, methanol cuts emissions of nitrogen oxides and volatile organic compounds that form ground-level ozone or “smog.”  Methanol is much less reactive than gasoline in the atmosphere, with the only toxic component of the emissions being formaldehyde, as compared to dozens of carcinogenic components of gasoline emissions, which also contains formaldehyde.

The use of heated catalytic converters has shown that methanol-fueled auto emissions meet and exceed California’s stringent Ultra Low Emission Vehicle (ULEV) emission targets for formaldehyde.   Methanol fuel also does not contain the toxic BTEX additives found in gasoline  – benzene, toluene, ethylbenzene, and xylenes.  These compounds are highly carcinogenic, do not readily biodegrade in the environment, and are capable of contaminating groundwater supplies.

Furthermore, opening up the market to methanol as a fuel will result in several economic benefits along with employment and social benefits, which are important and necessary to improve the current state of our economy.  Not only will methanol’s use as a fuel open up and stimulate the fuel sector by creating jobs but it will also save consumers money at the pump. When compared to gasoline on an energy equivalent basis – as methanol contains less BTUs per gallon than regular gasoline – M-85 still offers the best value at today’s pump prices.

Methanol currently sells for about $1.13  per gallon as a commodity, meaning the current pump price for M-85 would be just $1.87 per gallon including all applicable taxes and retail mark-up.   On a gasoline equivalent basis (adjusting for methanol’s lower energy content that requires 1.74 gallons of M-85 to provide the same energy content or range as a gallon of gasoline), the price of methanol delivered to the consumer would be $3.29 per gallon.  According to AAA, the average pump price for regular gasoline is currently $3.76 per gallon, while the energy adjusted price for E-85 is still $4.23 per gallon.

The use of methanol as a transportation fuel is able to provide all of the benefits that the government attempts to guarantee by providing subsidizes in the energy market, including the security of supply; environmental improvement; economic, employment,  and social benefits.

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