Low-Carbon Fuel Standards in Other States and Regions

The previous blog entry described the “Low Carbon Fuel Standard” (LCFS) regulations that have been adopted by the State of California. In this entry, I’ll describe LCFS laws on the books or proposed in other states or regions, as well as a proposal to establish a national LCFS that would replace or modify the existing RFS. The website of the National LCFS Project at the University of California Davis is a useful resource on both the status of state regulations and the prospects for a national law, and that website was the source for a lot of the information presented below.

Oregon

Oregon appears to be the only U.S. state other than California to make a definitive move to adopt its own Low Carbon Fuel Standard, in proposed regulations that in the process of being finalized. In 2009, the Oregon legislature set a goal of reducing the average carbon intensity of Oregon’s transportation fuels by 10% over a 10-year period, and it authorized the state’s Environmental Quality Commission to develop low carbon fuel standards to achieve this goal. However, it appears that it was not until April 2012 that the state’s governor, John Kitzhaber, asked the Department of Environmental Quality (DEQ) to begin the rulemaking process for this program. DEQ solicited the input of potential regulated parties and other interested stakeholders on the design of the program and its estimated fiscal impacts, and the agency accepted formal written comments on the proposed rules. for review by the Environmental Quality Commission in December 2012.

The approach embodied in the draft rules focuses on decreasing the greenhouse gas emissions from fuels over time, through a two-stage program that would be phased in over a several-year timeframe. During an initial two-year period, fuel producers and importers would simply be required to report the lifecycle greenhouse gas emissions from the fuels they supply in Oregon, to allow DEQ to gather data and refine the program. Progressing to a second phase where fuel producers and importers would be required to take action to reduce GHG emissions would require approval by the legislature and the Environmental Quality Commission to take effect.

The draft rules were presented in a public meeting held December 6-7, 2012. At this meeting, the Environmental Quality Commission voted to move forward with the first phase, and require gasoline and diesel suppliers to begin reporting the carbon intensity of their fuels beginning in 2013. The state legislature would then have to decide whether to move to the second phase, which would be to require fuel producers and importers to achieve a 10% reduction in carbon intensity by 2025. However, the legislation as adopted in 2009 included a sunset date of 2015 for the program, and Governor Kitzhaber has reportedly decided that the state won’t implement these reductions unless the Legislature lifts the sunset date in its 2013 session. It has been reported that proponents of the legislation will make a lobbying effort in 2013 in favor of extending the program past this sunset date.

There is opposition to this program within the state. A group known as Oregonians for Sound Fuel Policy, a group of associations, businesses and organizations that represent heavy fuel-users, was formed shortly before the December 2012 EQB meeting, with the goal of opposing the LCFS policy. The members of this group are concerned that the policy will cause volatile fuel prices and create unnecessary government regulation, especially burdening small businesses. Other industry groups have been reported in the press to oppose the legislation as well.

Washington State

In May 2009, Washington Governor Christine Gregoire issued an Executive Order that directs the Washington Department of Ecology to assess whether the California LCFS or some variation would best meet Washington’s greenhouse gas emissions reduction targets. After a series of meetings in 2009 and 2010, a final report was released in February 2011. The LCFS considered in the report would be based on the goal of reducing transportation fuel carbon intensity 10% from 2007 levels by 2023, with reductions beginning in 2014. The report recommended that the program require only minimal reductions in the early years, followed by more aggressive goals as 2023 approached. No LCFS policy has been implemented, and the state has not yet decided how to proceed.

Northeast States for Coordinated Air Use Management

In 2009, the governors of 11 states (Delaware, Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont) signed a memorandum of understanding aimed at creating a regional LCFS plan to reduce the carbon intensity of transportation fuels by as much as 15% percent over a 10 to 15 year period. These states then formed a consortium, the Northeast States for Coordinated Air Use Management (NESCAUM), to lead the effort to develop a draft plan, including solicitation of stakeholder comments. NESCAUM issued a draft final report in August 2011, in which it considered adopting a plan similar to the California LCFS program. This draft plan says the states are considering a reduction target of between 5 and 15 percent over a period of 10 or 15 years, although the baseline for measuring reduction was still under consideration. The plan would also create a credit system for companies that produce or import fuels below the carbon intensity targets, which could include some liquid biofuels, electricity, hydrogen or natural gas. The calculation of carbon intensity would include upstream and indirect emissions as calculated by the GREET model, similar to the California program. However, there is nothing on the group’s website that is more recent than November 2011, and it is not clear whether this plan will progress in the near future.

Midwestern States

In December 2010, the Midwestern Governors Association (MGA) Low Carbon Fuel Policy (LCFP) Advisory Group issued a policy paper outlining what a possible Midwestern state low-carbon fuel standard could look like. The advisory group included participants from the oil industry, environmental community, biofuels industry, utility industry, and auto industry, and represented a wide spectrum of views on the direction Midwestern fuel policy should take. The MGA report recommended a federal LCFP as opposed to a patchwork of state policies, but given uncertainty with federal policy, a regional approach was viewed as the next best option. This policy paper did not propose the adoption of an LCFP per se, and the report made clear that some members of the Advisory Group did not favor such a regional policy. It appears that the MGA did not pursue such an approach, and instead the group issued a report in February 2012 with more traditional policy recommendations for promoting biofuel development and use in the region (e.g. supporting the federal RFS, promoting the use of E15 ethanol, etc.). No low-carbon fuel policy has been implemented in the Midwest region, and it is up to member states to determine what action to take next.

LCFS Explored for Minnesota

A study recently published by the Political Economy Research Institute at UMass Amherst examines some of the economic impacts of establishing a low carbon fuel standard (LCFS) in Minnesota. The study, titled “The Employment Impacts of a Low-Carbon Fuel Standard for Minnesota,” found that enacting a LCFS in Minnesota could create nearly 32,500 jobs when analyzed through 2025, and that this was the best of the three options analyzed for job creation in the state’s ethanol and biodiesel industries. The LCFS option was projected to lead to creation of 6 new corn ethanol plants and 10 cellulosic ethanol plants in the state by 2025. I don’t know whether this report has led to any significant interest within the Minnesota state government in adopting a state LCFS.

British Columbia, Canada

British Columbia is the only Canadian province to adopt a low carbon fuel regulation. The Renewable and Low Carbon Fuel Requirements Regulation (RLCFRR), which took effect in January 2010, is intended to reduce British Columbia’s reliance on non-renewable fuels, help reduce the environmental impact of transportation fuels and contribute to a low-carbon economy. The RLCFRR provides a regulatory framework to enable the province to set benchmarks for the amount of renewable fuel in B.C.’s transportation fuel blends, reduce the carbon intensity of transportation fuels and meet its commitment to adopt a low-carbon fuel standard. The province’s overall goal is to lower provincial greenhouse gas (GHG) emissions by 33% by 2020. The RLCFRR has two major requirements: the Renewable Fuel Requirement, requiring 5% renewable content in gasoline beginning in 2010 and 4% renewable content for diesel in 2012 onward (originally 5% but revised downward in February 2012); and the Low Carbon Fuel Requirement, which requires a 10% reduction in carbon intensity by 2020.

A National LCFS?

In 2010, the National LCFS Project was launched to study the potential implementation of a national Low Carbon Fuel Standard for the United States. The project was funded by the Energy Foundation and the William and Flora Hewlett Foundation. The participating researchers were from Oak Ridge National Laboratory, University of California, University of Illinois, University of Maine, Carnegie Mellon University, and the International Food Policy Research Institute. This group published two final reports in July 2012, one analyzing policy aspects of a national LCFS, the other focusing on technical aspects.

The group distinguished a national LCFS from provisions now in place under the RFS. Most importantly, rather than having the limited number of rigidly defined categories under the RFS, an LCFS system would resemble the California regulations in establishing carbon intensity values for all fuels, and basing the target GHG reductions on this continuum of carbon intensities rather than on mandates for the specified categories of fuel. Another advantage of an LCFS is that unlike the RFS it could apply to all transportation fuels, not simply biofuels, and therefore promote overall GHG reductions across the entire transportation sector, possibly promoting innovation in reducing carbon intensity of fossil fuels. Among the group’s recommendations was the option of amending the RFS to incorporate principles of an LCFS, rather than replacing the RFS wholesale.

It is too early to assess or predict the possible impact of this group’s recommendations so soon after release of its reports, but it is hard to see the necessary consensus develop in Congress in the near future to adopt a new regulatory framework such as this, particularly in view of the significant concerns about the RFS and its approach to promoting renewable fuels that are developing in Congress.

D. Glass Associates, Inc. is a consulting company specializing in government and regulatory affairs support for renewable fuels and industrial biotechnology. David Glass, Ph.D. is a veteran of over thirty years in the biotechnology industry, with expertise in industrial biotechnology regulatory affairs, U.S. and international renewable fuels regulation, patents, technology licensing, and market and technology assessments. Dr. Glass also serves as director of regulatory affairs for Joule Unlimited Technologies, Inc. More information on D. Glass Associates’ regulatory affairs consulting capabilities, and copies of some of Dr. Glass’s prior presentations on biofuels and biotechnology regulation, are available at www.slideshare.net/djglass99 and at www.dglassassociates.com. The views expressed in this blog are those of Dr. Glass and D. Glass Associates and do not represent the views of Joule Unlimited Technologies, Inc. or any other organization with which Dr. Glass is affiliated. Please visit our other blog, Biofuel Policy Watch.

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