A low-carbon fuel standard (LCFS) is an emissions trading rule designed to reduce the average carbon intensity of transportation fuels in a given jurisdiction, as compared to conventional petroleum fuels, such as gasoline and diesel. The most common methods for reducing transportation carbon emissions are supplying electricity to electric vehicles, supplying hydrogen fuel to fuel cell vehicles and blending biofuels, such as ethanol, biodiesel, renewable diesel, and renewable natural gas into fossil fuels. The main purpose of a low-carbon fuel standard is to decrease carbon dioxide emissions associated with vehicles powered by various types of internal combustion engines while also considering the entire life cycle ("well to wheels"), in order to reduce the carbon footprint of transportation.
The first low-carbon fuel standard mandate in the world was enacted by California in 2007, with specific eligibility criteria defined by the California Air Resources Board (CARB) in April 2009 but taking effect in January 2011. Similar legislation was approved in British Columbia in April 2008, and by European Union which proposed its legislation in January 2007 and which was adopted in December 2008. The United Kingdom is implementing its Renewable Transport Fuel Obligation Program, which also applies the concept of low-carbon fuels.
Several bills have been proposed in the United States for similar low-carbon fuel regulation at a national level but with less stringent standards than California. As of early 2010 none have been approved. The U.S. Environmental Protection Agency (EPA) issued its final rule regarding the expanded Renewable Fuel Standard (RFS2) for 2010 and beyond on February 3, 2010. This ruling, as mandated by the Energy Independence and Security Act of 2007 (EISA), included direct emissions and significant indirect emissions from land use changes.
California Low-Carbon Fuel Standard
Californian Governor Arnold Schwarzenegger issued Executive Order S-1-07 on January 19, 2007, to enact a low-carbon fuel standard (LCFS). The LCFS requires oil refineries and distributors to ensure that the mix of fuel they sell in the Californian market meets the established declining targets for greenhouse gas (GHG) emissions measured in CO2-equivalent grams per unit of fuel energy sold for transport purposes. The LCFS directive calls for a reduction of at least 10 percent in the carbon intensity of California's transportation fuels by 2020. These reductions include not only tailpipe emissions but also all other associated emissions from production, distribution and use of transport fuels within the state. Therefore, California LCFS considers the fuel's full life cycle, also known as the "well to wheels" or "seed to wheels" efficiency of transport fuels. The standard is also aimed to reduce the state's dependence on petroleum, create a market for clean transportation technology, and stimulate the production and use of alternative, low-carbon fuels in California. There have been efforts to change the intensity measurement model from the CARB GREET model to the Argonne GREET model in order to more fully capture the carbon intensity impact of the fuels.
The LCFS is a mix of command and control regulation and emissions trading, as it will use market-based mechanisms that allow providers to choose how they will reduce emissions while responding to consumer demand. Some believe that oil companies could opt for several actions to comply. For example, they state that refiners and producers could improve the efficiency of the refineries and upstream production, or may purchase and blend more low-carbon ethanol into gasoline products, or purchase credits from electric utilities supplying low carbon electrons to electric passenger vehicles, or diversifying and selling low carbon hydrogen for use by vehicles as a product, or any new strategy as the standard is being designed. The California Global Warming Solutions Act of 2006 authorized the establishment of emissions trading in California, with rules to be adopted by 2010, and taking effect no later than January 2012.
Regulatory proceedings
In accordance to the California Global Warming Solutions Act of 2006 and the Governor's Directive, the California Air Resources Board is the agency responsible for developing the "Low-Carbon Fuel Standard Program", and it was directed to initiate the regulatory proceedings to establish and implement the LCFS." CARB identified the LCFS as an early action item with a regulation to be adopted and implemented by 2010. Also Executive Order S-1-07 ordered the California Environmental Protection Agency to coordinate activities between the University of California, the California Energy Commission and other state agencies to develop and propose a draft compliance schedule to meet the 2020 target.
As mandated by the Executive Order, a University of California team, led by Daniel Sperling of UC Davis and the late Alexander E. Farrell (UC Berkeley), developed two reports that established the technical feasibility of an LCFS, proposed the methodology to calculate the full life cycle GHG emissions from all fuels sold in the state, identified technical and policy issues, and provided a number of specific recommendations, thus providing an initial framework for the development of CARB's LCFS. This study was presented by Governor Schwarzenegger in May 2007 and they were the backbone of CARB's initial efforts to develop the LCFS, even though not all of the specific recommendations were incorporated in the final LCFS staff's proposed regulation.
Public consultation process During 2008 and until the April 2009 LCFS ruling, CARB published in its website all technical reports prepared by its staff and collaborators regarding the definition and calculations related to the proposed LCFS regulation, conducted 16 public workshops, and also submitted its studies for external peer review. See activities listed throughout the page with links to the reports, and records of public activities. Before the April 23, 2009 ruling, the Board held a 45-day public hearing that received 229 comments, 21 of which were presented during the Board Hearing. All letters and attachments are posted for public view of this site.
Controversy about indirect land use impacts
Among relevant and controversial comments submitted to CARB as public letters, on June 24, 2008, a group of 27 scientists and researchers from a number of universities and national laboratories, expressed their concerns arguing that there "is not enough hard empirical data to base any sound policy regulation in regards to the indirect impacts of renewable biofuels production. The field is relative new, especially when compared to the vast knowledge base present in fossil fuel production, and the limited analyses are driven by assumptions that sometimes lack robust empirical validation." With a similar opposing position, on October 23, 2008, a letter submitted to CARB by the New Fuels Alliance, representing more than two-dozen advanced biofuel companies, researchers and investors, questioned the Board intention to include indirect land use change (ILUC). In another public letter just before the ruling meeting, more than 170 scientists and economists sent a letter to CARB, urging it to account for GHG emissions from indirect land use change for biofuels and all other transportation fuels. They argued that "...there are uncertainties inherent in estimating the magnitude of indirect land use emissions from biofuels, but assigning a value of zero is clearly not supported by the science."
2009 Ruling
On April 23, 2009, CARB approved the specific rules and carbon intensity reference values for the LCFS that will go into effect on January 1, 2011. The technical proposal was approved without modifications by a 9–1 vote, to set the 2020 maximum carbon intensity reference value for gasoline to 86 grams of carbon dioxide equivalent released per megajoule of energy produced. One standard was established for gasoline and the alternative fuels that can replace it, and a second similar standard is set for diesel fuel and its replacements. The regulation is based on an average declining standard of carbon intensity that is expected to achieve 16 million metric tons of greenhouse gas emission reductions by 2020. CARB expects the new generation of fuels to come from the development of technology that uses cellulosic ethanol from algae, wood, agricultural waste such as straw and switchgrass, and also natural gas from municipal solid waste. They also expect the standard to drive the availability of plug-in hybrid, battery electric and fuel-cell powered cars while promoting investment in infrastructure for electric charging stations and hydrogen fueling stations.
The ruling is controversial. Representatives of the US ethanol industry complained that this rule overstates the environmental effects of corn ethanol, and also criticized the inclusion of indirect effects of land-use changes as an unfair penalty to home-made corn ethanol because deforestation in the developing world is being tied to US ethanol production. The initial reference value set for 2011 for LCFS means that Mid-west corn ethanol will not meet the California standard unless current carbon intensity is reduced. Oil industry representatives complained that there is a cost associated to the new standard, as the LCFS will limit the use of corn ethanol blended in gasoline, thus leaving oil refiners with few available and viable options, such as sugarcane ethanol from Brazil, but this option means paying costly U.S. import tariffs. CARB officials and environmentalists reject such scenario because they think there will be plenty of time and economic incentive to developed inexpensive biofuels, hydrogen-based fuels, even ethanol from such cellulosic materials, or new ways to make ethanol out of corn with a smaller carbon footprint.
Brazilian ethanol producers (UNICA), though they welcomed the ruling as they consider their sugarcane ethanol have passed a critical test and expect their biofuel to enter the California market in the future, UNICA also urged CARB to update the data and assumptions used, which according to them, is excessively penalizing their ethanol and is not reflecting the technology and agricultural practices currently in use in Brazil. UNICA disagreed with the assertion that indirect land-use changes can be accurately calculated with the current methodologies. Canadian officials also complained the standard could become an entry barrier to their Alberta oil sands, as producers will have to significantly reduce their emissions or purchase expensive credits from alternative energy producers in order for their non-conventional oil to be sold in California. They complained that the measure could be discriminating against Canadian oil sands crude as a high carbon intensity crude oil, while other heavy crude oils from other sources were not evaluated by CARB's studies.
The only Board member who voted against the ruling explained that he had "hard time accepting the fact that we’re going to ignore the comments of 125 scientists", referring to the letter submitted by a group of scientists questioning the indirect land use change penalty. "They said the model was not good enough... to use at this time as a component part of such an historic new standard." CARB adopted only one main amendment to the staff proposal to bolster the standard review process, moving up the expected date of an expert working group to report on indirect land use change from January 2012 to January 2011. This change is expected to provide for a thoroughly review of the specific penalty for indirect land use change and correct it if possible. The CARB staff is also expected to report back to the Board on indirect impacts of other fuel pathways before the commencement of the standard in 2011.