Conference Board of Canada report sees benefits in transitioning heavy vehicles to natural gas

OTTAWA, Ont. — A new Conference Board of Canada report, issued today, suggests natural gas is a viable fuel for he trucking industry, despite higher up-front costs to install the necessary technology.

The report indicates fuel savings of up to $150,000 per truck – about twice the cost of the upcharge to natural gas – can be achieved over a 10-year period when switching from diesel fuel to natural gas. The report acknowledges, however, that “nearly half of these savings are in the form of fuel tax savings, as natural gas is currently exempt from the equivalent of a road diesel excise tax.”

“Our models indicate that while the capital costs are high, the savings from lower fuel costs make natural gas an economically viable fuel for the trucking sector,” said Vijay Gill, co-author of the report, entitled Cheap Enough? Making the Switch From Diesel Fuel to Natural Gas. “Trucking firms could reap significant net benefits in operating costs while also reducing their environmental impact.”

The report focused primarily on liquefied natural gas (LNG), since it outperforms compressed natural gas (CNG) in terms of range. Historically, the report indicates, natural gas has traded at about half the price of crude oil and the gap has widened and continues to grow.

The report acknowledges that natural gas does contribute to greenhouse gas emissions, but it is still “cleaner” than diesel. In fact, the report concludes GHG would be reduced by as much as 50 tonnes per year for every truck.

The potential for a road tax to be slapped on natural gas if the trucking industry makes the transition remains a concern.

“Uncertainty over whether natural gas could lose its tax exemption compounds the disincentive created by the high capital cost of converting to natural gas engines,” the report says.

It calls on federal and provincial governments to state their plans for taxation.

“Clarity from federal and provincial governments – sooner rather than later – would help carriers and energy infrastructure providers make informed investment decisions,” the report says.

The lack of fueling infrastructure also remains a deterrent for truck fleets.

Still, the report concludes the benefits of transitioning to natural gas are still there, despite the headwinds.

“While carriers willing to convert their fleets to natural gas face significant capital costs and continuing risks related to relative fuel prices, availability of fueling infrastructure, and tax policy, they could reap significant net benefits in operating costs while also reducing their environmental impact,” the report concludes.

You can download the full report here.

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