California Adopts Controversial Low Carbon Fuel Standard Intended to Serve as Model for the Nation
By: TODD J. GUERRERO & SCOTT J. DORFMAN
May 15, 2009
On April 23, the California Air Resources Board (CARB) approved the historic and also controversial Low Carbon Fuels Standard (LCFS), which aims for a 10 percent reduction in greenhouse gas emissions from transportation fuels used within the state by 2020. Supporters believe that the regulation will serve as a model for other states and possibly for the nation in crafting transportation fuel GHG legislation. The LCFS, which will become mandatory in 2011, has been praised by environmentalists for its ambitious goal of reducing GHGs, but has been criticized by biofuels advocates who believe that it will unfairly restrict the utilization of traditional biofuels, particularly corn‑based ethanol, the country’s single largest renewable fuel. The LCFS implements Governor Arnold Schwarzenegger’s 2007 executive order that called upon California to move towards lower-carbon fuels. CARB said it hopes that the adoption of the LCFS will spur growth in alternative-fuel transportation vehicles, such as those that run on hydrogen, electricity, and cellulosic ethanol.
The central criticism of the LCFS is the regulation’s use of a “lifecycle emissions” measurement standard. Lifecycle emissions measurements are intended to take into account not only the GHGs that are emitted from the vehicle’s tailpipe, but also GHGs released at all stages in the fuel’s creation, including the growth of feedstock and transportation to the end user. The LCFS also attempts to take into account indirect land use changes, meaning, for instance, the effects of clearing existing land to grow biofuels feedstocks, even land in other states and countries. The indirect land use measurement is premised on a theory that use of corn-based ethanol and other traditional biofuels leads to a reduction in farmland for food production and that necessitates the clearing of forests and other carbon-capturing land into arable farmland for growing food. Industry advocates argue that the model on which the indirect land use changes are measured is flawed, and only retard, not encourage, the development of alternative or advanced biofuels.
The LCFS is also controversial because CARB did not mandate an indirect land use change for petroleum and similar fossil-fuel based transportation fuels. One CARB member said that petroleum does not have the same indirect land use effect as does corn-based ethanol, a contention disputed by ethanol advocates. Also, oil industry advocates worry that early stage compliance may be difficult, and that any uncertainty could cause supply disruptions in the state and a significant spike in gasoline and diesel prices.
It remains to be seen what effect the LCFS will have on the traditional biofuels industry, or whether the LCFS will achieve its ambitious GHG reduction goals. The LCFS is likely to severely penalize corn‑based ethanol, however, the LCFS debate in California seems to have focused other states and the nation on the goal of reducing transportation fuel-related GHG emissions. In January, 11 Northeastern states signed a letter of agreement to work towards a regional low carbon fuels standard. Once the state consortium agrees upon a standard, governors of each state will have the opportunity to consider implementation on a state-by-state basis. In total, 14 states representing 40 percent of the U.S. population are currently considering some type of LCFS standard. And, Congress is currently debating a comprehensive energy bill that may include a national low-carbon fuel standard.
Biofuels companies need to know how their fuels will be classified under the lifecycle emissions standard, and how the classification might affect each company’s ability to sell to the California market. Already, parties have raised questions about the legality, including the constitutionality, of the standard.