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

Dirk Peters von Rosenstiel, Daniel Heuermann and Stefan Hüsig
Authors registered in the RePEc Author Service: Stefan Huesig

Energy Policy, 2015, vol. 78, issue C, 91-101

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.

Keywords: Market failure; Alternative fuels; Natural gas vehicles (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:78:y:2015:i:c:p:91-101

DOI: 10.1016/j.enpol.2014.12.022

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