Low Carbon Fuel Standard

The Obama Administration and its environmental allies have long been enamored with the concept of a federal low carbon fuel standard (LCFS). The non-partisan Congressional Research Service defines a LCFS as requiring the reduction of GHG emissions associated with transportation through a decrease in the carbon content of transportation fuel. A LCFS would require manufacturers of gasoline, diesel and heating oil destined for sale in the United States to lower the carbon levels of those fuels. LCFS proponents want fuel manufacturers to find and use less carbon intensive alternatives such as cellulosic ethanol. They hold this position despite the fact that the commercial availability of cellulosic ethanol and other advanced biofuels that are low in carbon intensity is currently negligible. For this reason, several studies have cautioned that a range of adverse economic consequences (higher fuel costs, job losses, reliance on foreign energy sources) would result from a LCFS mandate.

Owing to concerns over costs, only three states are either implementing (California) or are actively considering (Oregon and Washington) implementing a LCFS. Since enactment of California’s LCFS, within AB32, Tesoro has complied with the State’s version of the LCFS while maintaining reservations over the efficacy of the program and the resulting increased energy costs for California consumers. At the federal level, the US Environmental Protection Agency claims it has sufficient legal authority under the Clean Air Act to mandate a LCFS via regulation. A Congress under Democratic control in 2009, when considering climate legislation, decided not to include a federal LCFS within that package. Acknowledging the reality of an economy still struggling to emerge from a devastating recession, many policymakers are understandably leery of further driving up gasoline and home heating oil costs via unknown initiatives such as a LCFS.

Proponents of a LCFS view it as a means of fostering alternative fuel sources and technologies even if it comes at considerably higher cost to consumers. The scope and duration of that additional cost on American consumers remains an open question, although most comprehensive studies of this issue clearly suggest significant financial burdens will accompany a mandated LCFS.

Tesoro believes that any program designed to reduce the carbon content of transportation fuel must take into account both the current availability of alternative fuels and the actual climate consequences that come with the mandate. Notably, recent research has credibly linked the corn ethanol mandate to increases in net carbon emissions, the loss of pristine lands, and the further endangerment of threatened species.


Ethanol Investigation: The Secret, Dirty Cost Of Obama’s Green Power Push

By DINA CAPPIELLO and MATT APUZZO 11/12/13 02:32 AM ET EST

Five million acres of land set aside for conservation — more than Yellowstone, Everglades and Yosemite National Parks combined — have vanished on Obama’s watch.

Landowners filled in wetlands. They plowed into pristine prairies, releasing carbon dioxide that had been locked in the soil.

Sprayers pumped out billions of pounds of fertilizer, some of which seeped into drinking water, contaminated rivers and worsened the huge dead zone in the Gulf of Mexico where marine life can’t survive.

The consequences are so severe that environmentalists and many scientists have now rejected corn-based ethanol as bad environmental policy.”


The volume of alternative fuels and number of unconventional vehicles that a LCFS mandate require simply do not exist and cannot be conjured into being by government edict. For example, 96 percent of Californians’ vehicles are powered by gasoline. Cellulosic ethanol remains technologically out of reach at commercial levels and other advanced biofuels are yet to emerge in sufficient quantities so as to be impactful.

Outside the obvious concerns arising from a mandated fuel that is virtually non-existent, vehicular technologies are also challenging. For example, electric vehicles (EVs) remain expensive and have limited range. Hydrogen fuel cell vehicles are also prohibitively costly and largely unavailable due to their limited geographic release. Natural gas vehicles are also high-priced, and are generally used only in commercial fleets. The end-use infrastructure for any of these approaches is virtually non-existent. None are sufficiently available to make a meaningful contribution toward LCFS compliance in the near term, if ever. Additionally, state and federal policymakers are increasingly concerned that alternatively-fueled vehicles are not contributing a fair share of highway and mass transit operations and maintenance, as they escape payment of fuel taxes. Notably, the roads upon which they operate depend upon the federal Highway Trust Fund (in large measure paid for by gasoline and diesel taxes), which is will be insolvent by this August.

Even assuming LCFS implementation, the attendant costs could inflict a crippling blow to consumers and the economy. A Charles River Associates study found that under a federal LCFS, between 2.3 and 4.5 million American jobs would be lost with gasoline and diesel prices potentially increasing by 170 percent over 10 years (e.g., to $6.38 per gallon).1 While low-carbon fuel standards are often touted as painless, expert analysis and real-world experience with alternative-fuel vehicles suggest a less-rosy story. A LCFS could easily drive gasoline, diesel and home heating oil prices higher, extinguish millions of jobs, and stifle America’s economic recovery. In addition to these negative consequences, a LCFS could increase carbon emissions by millions of tons annually. While some would mandate European-like fuel prices through a LCFS or other means to suppress fuel demand, most Americans are unlikely to be happy about it – or afford it (e.g., $8.21/per gallon of premium in Germany and $9.04/per gallon in Italy in late May, 2014).

Tesoro believes that market-based solutions that allow for realistic assessments of available technologies are more likely to lead to the development of viable alternative fuels and ultimately, to actual carbon emission reductions. Tesoro opposes the enactment or promulgation of a federal, regional, or a patchwork of state LCFS requirements.

 

State LCFS News and Analysis:

California

Inside EPA (Subscription Required) – California Cites Air Act Power In High Court Bid To Uphold Landmark LCFS

Enter Stage Right – Should California dictate US energy policies?

Law 360 – 21 States Urge High Court To Scrap Calif. Fuel Restrictions

 

Oregon

The Oregonian – Cover Oregon in your gas tank: Editorial

 

Washington State

Secure Our Fuels – The Inslee-Steyer Climate Plan?