IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v78y2015icp91-101.html
   My bibliography  Save this article

Why has the introduction of natural gas vehicles failed in Germany?—Lessons on the role of market failure in markets for alternative fuel vehicles

Author

Listed:
  • von Rosenstiel, Dirk Peters
  • Heuermann, Daniel F.
  • Hüsig, Stefan

Abstract

Despite private investments exceeding two billion Euros and tax incentives of more than 500 million Euros, the market share of natural gas vehicles (NGVs) in Germany has lagged far behind expectations and behind market developments in other countries. With total cost of ownership being on average lower for NGVs than for gasoline and diesel vehicles this raises the question of the existence of market failure in the German NGV-market. We use a case study approach where we combine quantitative data with insights from a multi-industry expert panel and in-depth interviews with experts from industry, government and civil society in order to examine whether and how different types of market failure contribute to the status quo in the German market for NGVs. We conclude that coordination failure in complementary markets, an artificially created monopoly of service stations at motorways, imperfect information, bounded consumer rationality, and principle-agent-problems are the most prominent market failures inhibiting the development of a functioning market for NGVs. Our results are instructive for the design of effective public policies and investor strategies aiming to create markets for alternative fuel vehicles.

Suggested Citation

  • von Rosenstiel, Dirk Peters & Heuermann, Daniel F. & Hüsig, Stefan, 2015. "Why has the introduction of natural gas vehicles failed in Germany?—Lessons on the role of market failure in markets for alternative fuel vehicles," Energy Policy, Elsevier, vol. 78(C), pages 91-101.
    • Handle: RePEc:eee:enepol:v:78:y:2015:i:c:p:91-101
    DOI: 10.1016/j.enpol.2014.12.022
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421514006879
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2014.12.022?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Vernon, David & Meier, Alan, 2012. "Identification and quantification of principal–agent problems affecting energy efficiency investments and use decisions in the trucking industry," Energy Policy, Elsevier, vol. 49(C), pages 266-273.
    2. Anita Gärling & John Thøgersen, 2001. "Marketing of electric vehicles," Business Strategy and the Environment, Wiley Blackwell, vol. 10(1), pages 53-65, January.
    3. Melaina, Marc & Bremson, Joel, 2008. "Refueling availability for alternative fuel vehicle markets: Sufficient urban station coverage," Energy Policy, Elsevier, vol. 36(8), pages 3223-3231, August.
    4. Collantes, Gustavo & Melaina, Marc W., 2011. "The co-evolution of alternative fuel infrastructure and vehicles: A study of the experience of Argentina with compressed natural gas," Energy Policy, Elsevier, vol. 39(2), pages 664-675, February.
    5. Douglas, Christopher C., 2010. "Do gasoline prices exhibit asymmetry? Not usually!," Energy Economics, Elsevier, vol. 32(4), pages 918-925, July.
    6. Richard H. Thaler & Amos Tversky & Daniel Kahneman & Alan Schwartz, 1997. "The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 647-661.
    7. Brownstone, David & Bunch, David S & Train, Kenneth, 1999. "Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles," Department of Economics, Working Paper Series qt45f996hh, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    8. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    9. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
    10. Mankiw, N. Gregory & Reis, Ricardo, 2010. "Imperfect Information and Aggregate Supply," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 5, pages 183-229, Elsevier.
    11. Paul R. Portney & Ian W.H. Parry & Howard K. Gruenspecht & Winston Harrington, 2003. "Policy Watch: The Economics of Fuel Economy Standards," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 203-217, Fall.
    12. Soren T. Anderson & Ian W. H. Parry & James M. Sallee & Carolyn Fischer, 2011. "Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 89-108, Winter.
    13. Brownstone, David & Bunch, David S. & Train, Kenneth, 2000. "Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles," Transportation Research Part B: Methodological, Elsevier, vol. 34(5), pages 315-338, June.
    14. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
    15. Greene, David L., 2011. "Uncertainty, loss aversion, and markets for energy efficiency," Energy Economics, Elsevier, vol. 33(4), pages 608-616, July.
    16. Portney, Paul R. & Parry, Ian W.H. & Gruenspecht, Howard K. & Harrington, Winston, 2003. "The Economics of Fuel Economy Standards," Discussion Papers 10863, Resources for the Future.
    17. Creutzig, Felix & McGlynn, Emily & Minx, Jan & Edenhofer, Ottmar, 2011. "Climate policies for road transport revisited (I): Evaluation of the current framework," Energy Policy, Elsevier, vol. 39(5), pages 2396-2406, May.
    18. Kleijnen, Mirella & Lee, Nick & Wetzels, Martin, 2009. "An exploration of consumer resistance to innovation and its antecedents," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 344-357, June.
    19. H. Peyton Young, 2009. "Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning," American Economic Review, American Economic Association, vol. 99(5), pages 1899-1924, December.
    20. Turrentine, Thomas S. & Kurani, Kenneth S., 2007. "Car buyers and fuel economy?," Energy Policy, Elsevier, vol. 35(2), pages 1213-1223, February.
    21. Tran, Martino & Banister, David & Bishop, Justin D.K. & McCulloch, Malcolm D., 2013. "Simulating early adoption of alternative fuel vehicles for sustainability," Technological Forecasting and Social Change, Elsevier, vol. 80(5), pages 865-875.
    22. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    23. Sandén, Björn A. & Hillman, Karl M., 2011. "A framework for analysis of multi-mode interaction among technologies with examples from the history of alternative transport fuels in Sweden," Research Policy, Elsevier, vol. 40(3), pages 403-414, April.
    24. Yeh, Sonia, 2007. "An empirical analysis on the adoption of alternative fuel vehicles: The case of natural gas vehicles," Energy Policy, Elsevier, vol. 35(11), pages 5865-5875, November.
    25. Turrentine, Tom & Kurani, Kenneth S, 2007. "Car buyers and fuel economy?," Institute of Transportation Studies, Working Paper Series qt56x845v4, Institute of Transportation Studies, UC Davis.
    26. Greene, David L, 1998. "Why CAFE worked," Energy Policy, Elsevier, vol. 26(8), pages 595-613, July.
    27. Yeh, Sonia, 2007. "An empirical analysis on the adoption of alternative fuel vehicles:The case of natural gas vehicles," Institute of Transportation Studies, Working Paper Series qt2k09h787, Institute of Transportation Studies, UC Davis.
    28. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    29. Ian W. H. Parry & Margaret Walls & Winston Harrington, 2007. "Automobile Externalities and Policies," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 373-399, June.
    30. Eppstein, Margaret J. & Grover, David K. & Marshall, Jeffrey S. & Rizzo, Donna M., 2011. "An agent-based model to study market penetration of plug-in hybrid electric vehicles," Energy Policy, Elsevier, vol. 39(6), pages 3789-3802, June.
    31. Yeh, Sonia, 2007. "An empirical analysis on the adoption of alternative fuel vehicles:The case of natural gas vehicles," Institute of Transportation Studies, Working Paper Series qt92h7g194, Institute of Transportation Studies, UC Davis.
    32. Ziegler, Andreas, 2012. "Individual characteristics and stated preferences for alternative energy sources and propulsion technologies in vehicles: A discrete choice analysis for Germany," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(8), pages 1372-1385.
    33. Melaina, Marc W & Bremson, Joel, 2008. "Refueling Availability for Alternative Fuel Vehicle Markets: Sufficient Urban Station Coverage," Institute of Transportation Studies, Working Paper Series qt8ng1g4rf, Institute of Transportation Studies, UC Davis.
    34. Ozaki, Ritsuko & Sevastyanova, Katerina, 2011. "Going hybrid: An analysis of consumer purchase motivations," Energy Policy, Elsevier, vol. 39(5), pages 2217-2227, May.
    35. John Mikler, 2012. "The price is right? The limitations of market mechanisms in encouraging low carbon mobility," Local Economy, London South Bank University, vol. 27(7), pages 722-731, November.
    36. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    37. Richard B. Howarth & Alan H. Sanstad, 1995. "Discount Rates And Energy Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 101-109, July.
    38. Vanessa Oltra & Maïder Saint Jean, 2009. "Sectoral systems of environmental innovation: an application to the French automotive industry," Post-Print hal-00274413, HAL.
    39. Graus, Wina & Worrell, Ernst, 2008. "The principal-agent problem and transport energy use: Case study of company lease cars in the Netherlands," Energy Policy, Elsevier, vol. 36(10), pages 3745-3753, October.
    40. Tobias Wiesenthal & Guillaume Leduc & J. Köhler & Wolfgang Schade & Burkhard Schade, 2010. "Research of the EU automotive industry into low-carbon vehicles and the role of public intervention," JRC Working Papers JRC58727, Joint Research Centre (Seville site).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Roberto Murano & Natascia Maisano & Roberta Selvaggi & Gioacchino Pappalardo & Biagio Pecorino, 2021. "Critical Issues and Opportunities for Producing Biomethane in Italy," Energies, MDPI, vol. 14(9), pages 1-14, April.
    2. Shafiei, Ehsan & Davidsdottir, Brynhildur & Leaver, Jonathan & Stefansson, Hlynur & Asgeirsson, Eyjolfur Ingi, 2015. "Comparative analysis of hydrogen, biofuels and electricity transitional pathways to sustainable transport in a renewable-based energy system," Energy, Elsevier, vol. 83(C), pages 614-627.
    3. Miroslav Stefanov, 2018. "Features of Compressed Natural Gas Physical Distribution: A Bulgarian Case Study," Logistics, MDPI, vol. 2(3), pages 1-21, September.
    4. Girma T. Chala & Abd Rashid Abd Aziz & Ftwi Y. Hagos, 2018. "Natural Gas Engine Technologies: Challenges and Energy Sustainability Issue," Energies, MDPI, vol. 11(11), pages 1-44, October.
    5. Larizzatti Zacharias, Luis Guilherme & Antunes Costa de Andrade, Ana Clara & Guichet, Xavier & Mouette, Dominique & Peyerl, Drielli, 2022. "Natural gas as a vehicular fuel in Brazil: Barriers and lessons to learn," Energy Policy, Elsevier, vol. 167(C).
    6. Jose J. Soto & Victor Cantillo & Julian Arellana, 2018. "Incentivizing alternative fuel vehicles: the influence of transport policies, attitudes and perceptions," Transportation, Springer, vol. 45(6), pages 1721-1753, November.
    7. Goulding, D. & Fitzpatrick, D. & O'Connor, R. & Browne, J.D. & Power, N.M., 2019. "Introducing gaseous transport fuel to Ireland: A strategic infrastructure framework," Renewable Energy, Elsevier, vol. 136(C), pages 548-557.
    8. Linzenich, Anika & Arning, Katrin & Bongartz, Dominik & Mitsos, Alexander & Ziefle, Martina, 2019. "What fuels the adoption of alternative fuels? Examining preferences of German car drivers for fuel innovations," Applied Energy, Elsevier, vol. 249(C), pages 222-236.
    9. Ogden, Joan & Jaffe, Amy Myers & Scheitrum, Daniel & McDonald, Zane & Miller, Marshall, 2018. "Natural gas as a bridge to hydrogen transportation fuel: Insights from the literature," Energy Policy, Elsevier, vol. 115(C), pages 317-329.
    10. Korberg, Andrei David & Skov, Iva Ridjan & Mathiesen, Brian Vad, 2020. "The role of biogas and biogas-derived fuels in a 100% renewable energy system in Denmark," Energy, Elsevier, vol. 199(C).
    11. D’Adamo, Idiano & Falcone, Pasquale Marcello & Huisingh, Donald & Morone, Piergiuseppe, 2021. "A circular economy model based on biomethane: What are the opportunities for the municipality of Rome and beyond?," Renewable Energy, Elsevier, vol. 163(C), pages 1660-1672.
    12. Ravigné, E. & Da Costa, P., 2021. "Economic and environmental performances of natural gas for heavy trucks: A case study on the French automotive industry supply chain," Energy Policy, Elsevier, vol. 149(C).
    13. Pintér, Gábor, 2024. "The development of global power-to-methane potentials between 2000 and 2020: A comparative overview of international projects," Applied Energy, Elsevier, vol. 353(PA).
    14. Rodrigues Teixeira, Ana Carolina & Machado, Pedro Gerber & Borges, Raquel Rocha & Felipe Brito, Thiago Luis & Moutinho dos Santos, Edmilson & Mouette, Dominique, 2021. "The use of liquefied natural gas as an alternative fuel in freight transport – Evidence from a driver's point of view," Energy Policy, Elsevier, vol. 149(C).
    15. Imran Khan, Muhammad, 2017. "Policy options for the sustainable development of natural gas as transportation fuel," Energy Policy, Elsevier, vol. 110(C), pages 126-136.
    16. Vytautas Palevičius & Askoldas Podviezko & Henrikas Sivilevičius & Olegas Prentkovskis, 2018. "Decision-Aiding Evaluation of Public Infrastructure for Electric Vehicles in Cities and Resorts of Lithuania," Sustainability, MDPI, vol. 10(4), pages 1-17, March.
    17. Horschig, Thomas & Adams, Paul W.R. & Röder, Mirjam & Thornley, Patricia & Thrän, Daniela, 2016. "Reasonable potential for GHG savings by anaerobic biomethane in Germany and UK derived from economic and ecological analyses," Applied Energy, Elsevier, vol. 184(C), pages 840-852.
    18. Hidetada Higashi, 2017. "Does " Driving Range " really matter?," Working Papers hal-01670912, HAL.
    19. Sofia Dahlgren & Jonas Ammenberg, 2022. "Environmental Considerations Regarding Freight Transport among Buyers of Transport Services in Sweden," Sustainability, MDPI, vol. 14(18), pages 1-19, September.
    20. Christian Thiel & Andreea Julea & Beatriz Acosta Iborra & Nerea De Miguel Echevarria & Emanuela Peduzzi & Enrico Pisoni & Jonatan J. Gómez Vilchez & Jette Krause, 2019. "Assessing the Impacts of Electric Vehicle Recharging Infrastructure Deployment Efforts in the European Union," Energies, MDPI, vol. 12(12), pages 1-23, June.
    21. Hao, Han & Liu, Zongwei & Zhao, Fuquan & Li, Weiqi, 2016. "Natural gas as vehicle fuel in China: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 521-533.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Petschnig, Martin & Heidenreich, Sven & Spieth, Patrick, 2014. "Innovative alternatives take action – Investigating determinants of alternative fuel vehicle adoption," Transportation Research Part A: Policy and Practice, Elsevier, vol. 61(C), pages 68-83.
    2. Sierzchula, William & Bakker, Sjoerd & Maat, Kees & van Wee, Bert, 2014. "The influence of financial incentives and other socio-economic factors on electric vehicle adoption," Energy Policy, Elsevier, vol. 68(C), pages 183-194.
    3. Wolinetz, Michael & Axsen, Jonn, 2017. "How policy can build the plug-in electric vehicle market: Insights from the REspondent-based Preference And Constraints (REPAC) model," Technological Forecasting and Social Change, Elsevier, vol. 117(C), pages 238-250.
    4. Wilmsmeier, Gordon & Kreuzer, Fabian Maximilian, 2014. "Energy efficiency and mobility: A roadmap towards a greener economy in Latin America and the Caribbean," Documentos de Proyectos 37148, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Lee, Yongseung & Kim, Chongman & Shin, Juneseuk, 2016. "A hybrid electric vehicle market penetration model to identify the best policy mix: A consumer ownership cycle approach," Applied Energy, Elsevier, vol. 184(C), pages 438-449.
    6. Sehatpour, Mohammad-Hadi & Kazemi, Aliyeh & Sehatpour, Hesam-eddin, 2017. "Evaluation of alternative fuels for light-duty vehicles in Iran using a multi-criteria approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 295-310.
    7. Perrels, Adriaan & Tuovinen, Tarja, 2012. "The Effectiveness of Differentiation of the Finnish Car Purchase Tax according to Carbon Dioxide Emission Performance," Research Reports 168, VATT Institute for Economic Research.
    8. Green, Erin H. & Skerlos, Steven J. & Winebrake, James J., 2014. "Increasing electric vehicle policy efficiency and effectiveness by reducing mainstream market bias," Energy Policy, Elsevier, vol. 65(C), pages 562-566.
    9. Nithin Isaac & Akshay Kumar Saha, 2022. "Predicting Vehicle Refuelling Trips through Generalised Poisson Modelling," Energies, MDPI, vol. 15(18), pages 1-18, September.
    10. Kelley, Scott & Kuby, Michael, 2013. "On the way or around the corner? Observed refueling choices of alternative-fuel drivers in Southern California," Journal of Transport Geography, Elsevier, vol. 33(C), pages 258-267.
    11. Zhang, Yong & Yu, Yifeng & Zou, Bai, 2011. "Analyzing public awareness and acceptance of alternative fuel vehicles in China: The case of EV," Energy Policy, Elsevier, vol. 39(11), pages 7015-7024.
    12. Imran Khan, Muhammad, 2017. "Policy options for the sustainable development of natural gas as transportation fuel," Energy Policy, Elsevier, vol. 110(C), pages 126-136.
    13. Collantes, Gustavo & Melaina, Marc W., 2011. "The co-evolution of alternative fuel infrastructure and vehicles: A study of the experience of Argentina with compressed natural gas," Energy Policy, Elsevier, vol. 39(2), pages 664-675, February.
    14. Kumar Shalender & Naman Sharma, 2021. "Using extended theory of planned behaviour (TPB) to predict adoption intention of electric vehicles in India," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(1), pages 665-681, January.
    15. Yan, Xiaoyu & Crookes, Roy J., 2009. "Reduction potentials of energy demand and GHG emissions in China's road transport sector," Energy Policy, Elsevier, vol. 37(2), pages 658-668, February.
    16. Tesemma, Tewodros, 2023. "Encouraging adoption of fuel-efficient vehicles – A policy reform evaluation from Ethiopia," Working Papers in Economics 838, University of Gothenburg, Department of Economics.
    17. Girma T. Chala & Abd Rashid Abd Aziz & Ftwi Y. Hagos, 2018. "Natural Gas Engine Technologies: Challenges and Energy Sustainability Issue," Energies, MDPI, vol. 11(11), pages 1-44, October.
    18. Jose J. Soto & Victor Cantillo & Julian Arellana, 2018. "Incentivizing alternative fuel vehicles: the influence of transport policies, attitudes and perceptions," Transportation, Springer, vol. 45(6), pages 1721-1753, November.
    19. Shanyong Wang & Jin Fan & Dingtao Zhao & Shu Yang & Yuanguang Fu, 2016. "Predicting consumers’ intention to adopt hybrid electric vehicles: using an extended version of the theory of planned behavior model," Transportation, Springer, vol. 43(1), pages 123-143, January.
    20. Alberini, Anna & Di Cosmo, Valeria & Bigano, Andrea, 2019. "How are fuel efficient cars priced? Evidence from eight EU countries," Energy Policy, Elsevier, vol. 134(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:78:y:2015:i:c:p:91-101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.