Economics of a Hydrogen Bus Transportation System: Case Study Using an After Tax Analysis Model

Abstract

:Because of global warming, governments worldwide are taking actions to reduce green house gases in transportation systems such as bus fleets. All involved aspire to make these changes in an economically efficient manner. This article provides an after tax economic model to help determine pricing (fares), the level of subsidies, the impact of carbon credits, and financial leverage options. Most approaches to compare new technologies use before tax analyses like societal life cycle costs. Most industry analyses use an after tax analysis approach. This article describes and compares both techniques. To illustrate the proposed after tax analysis transportation model, a carbon free bus system fueled by hydrogen is used with data extracted from published sources. Major conclusions are that a carbon credit (from Cap & Trade or carbon tax) provides some economic gain, but does not meet the economic criteria established. Borrowing funds (e.g., using financial leverage) for the capital costs significantly increases the rate of return and could attract investors; however, increased borrowing increases the financial risk and this risk needs to be moderated via risk mitigation strategies (default insurance, etc.). Other financing options need to be explored.

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