A new report from The Energy and Resources Institute (TERI) argues that India should embrace a mix of CNG, LNG, and biogas alongside electric vehicles to hit net-zero goals. The study suggests that given the current power grid, CNG currently offers a lower environmental footprint than EVs. This perspective could shift how investors view companies in the energy, city gas distribution, and automotive sectors as policy priorities evolve.
A comprehensive lifecycle analysis from The Energy and Resources Institute (TERI) challenges the idea that electric vehicles (EVs) are the only solution for India’s energy transition. By examining the full life of vehicles—from manufacturing to disposal—the study suggests that the environmental benefits of electric cars depend heavily on how clean the country's power grid is. For now, the report finds that vehicles running on Compressed Natural Gas (CNG) often have a smaller environmental footprint across several segments in India compared to EVs.
Segmented Energy Strategy
The report pushes for a strategy that uses different fuels for different types of transport. It acknowledges that EVs are highly efficient and cost-effective for two-wheelers and three-wheelers, which are increasingly common in India. However, for commercial transport, the study advocates for a more practical approach. It identifies CNG as the most viable option for taxis, buses, and light commercial vehicles because the fueling infrastructure is already well-established. For heavy, long-distance freight, the report highlights Liquid Natural Gas (LNG) as a superior alternative to batteries, as it allows for larger payloads and faster refueling, which are currently significant limitations for electric heavy trucks.
Policy Changes and Investor Context
To make this multi-fuel future a reality, the researchers are calling for a National Fuel Policy that moves away from fragmented, fuel-specific decisions. A major suggestion is to bring natural gas under the Goods and Services Tax (GST) framework. Currently, natural gas remains outside the GST, meaning it is subject to inconsistent state-level value-added taxes (VAT). Bringing it under GST could provide price stability and predictability, which is often a key concern for long-term private investment in energy infrastructure.
For investors, this research highlights a shift in how to view energy and auto stocks. Companies involved in the City Gas Distribution (CGD) business, which handle the supply and infrastructure for CNG and LNG, may find support if policy moves toward a broader fuel basket. Similarly, automotive manufacturers that balance their product mix between EVs and gas-powered engines might be better positioned for a gradual transition. However, investors should be aware that the success of this plan depends on government policy execution, such as the actual timeline for GST inclusion and the speed at which LNG highways and charging corridors are built.
Looking Ahead
The report emphasizes that true sustainability requires a three-pronged effort: cleaner power generation, better battery recycling programs, and the wider use of local energy sources like biogas. By utilizing existing CNG pipelines, biogas can help turn agricultural waste into usable energy. As India moves toward its 2070 net-zero targets, the market will likely track how these policy recommendations influence actual government action. The key monitorable for investors will be any concrete steps by the government to harmonize tax structures for gas and the pace of infrastructure spending on LNG corridors compared to EV charging networks.