CNG is an example of alternative gaseous fuel whose market development
requires supply infrastructure (pipelines), refuelling stations and alternative
vehicles to exist at the same time, which is known as the ‘‘chicken and egg
dilemma’’. In this chapter, a case study of limited or locally nonexistent market
development for CNG in an Italian frontier region is analyzed and a mixed integer
non linear programming model is introduced to evaluate the effect of incentive
measures envisaged by the regional government to foster refuelling station
development. It is found that, taking an entrepreneurs’ perspective of maximizing
profits, even with substantial capital grants investors are more likely to choose
higher demand areas, in spite of fiercer competition, rather than areas without
stations. Subsidies should be more specifically targeted to critical areas to be
efficient.
