Public transit and alternative fuels – The costs associated with using biodiesel and CNG in comparison to diesel for U.S. public transit systems

This study addresses the dearth of research that examines the impacts of alternative fuel use on operational costs of public transit in the U.S. Specifically, the study examines the impact on operational costs of shifting diesel gallons to biodiesel or to compressed natural gas (CNG) for an unbalanced panel of 269 public transit systems in the U.S. from 2008 through 2012, using an econometric cost function approach. We find that shifting all diesel gallons to biodiesel results in operational cost increases ranging from 1 to 12 percent, with smaller cost increases being realized with increases in system size. Shifting all diesel gallons to CNG results in operational cost increases between 5 and 10 percent – again with smaller impacts for larger systems. These findings suggest that there are some economies of using biodiesel and CNG with large scale production. That is, the cost increases associated with increased fuel prices, decreased fuel economy, increased maintenance costs, and increased fueling costs associated with biodiesel and CNG are mitigated somewhat by large scale production. The findings of this study suggest that increased operational costs are an important consideration in policies aimed at encouraging the use of alternative fuels by U.S. public transit systems.