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October 5, 2007

UC Berkeley

The Low Carbon Fuel The Low Carbon Fuel StandardStandard

Dan Skopec

Climate & Energy Consulting

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Transportation is a Major Transportation is a Major Source of Greenhouse Gas Source of Greenhouse Gas

EmissionsEmissions

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World’s First Greenhouse World’s First Greenhouse Gas Fuel Standard Gas Fuel Standard

• In January 2007, Gov. Schwarzenegger established the LCFS by Executive Order.

• The LCFS is a statewide goal to reduce the carbon intensity of California’s transportation fuels by at least 10 percent by 2020.

• Goal will be accomplished by establishing a Low Carbon Fuel Standard (“LCFS”) for transportation fuels sold in California.

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Principles of the LCFSPrinciples of the LCFS

• Requires fuel providers to decrease carbon intensity of average annual fuel sales

• Intensity Standard – gCO2e/mj

• Standard measured on a lifecycle analysis• Flexible compliance -allows averaging,

banking and trading• Fuel Neutral – no mandates. Fuel providers

will choose which fuels to sell and in what volumes

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Rationale for the LCFSRationale for the LCFS

• A statewide cap-and-trade system alone unlikely to create a large enough price signal to induce sufficient, timely investments in new fuel and vehicle technologies

• LCFS creates a substantial, certain market for low carbon fuels and a stable investment environment

• Benefits versus Renewable Fuel Standard• More flexible since it includes electricity,

hydrogen, natural gas, etc, rather than just biofuels• Ensures greenhouse gas reductions• Penalizes the use of high carbon, fossil fuels (coal

to liquids, tar sands)

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Benefits of LCFSBenefits of LCFS

• Less Gasoline Consumption: Displace 20% of gasoline consumption

• Larger renewable fuels market: Expand California’s alternative fuels markets by 3 to 5 times, while reducing GHG emissions

• More alternative fuel and hybrid vehicles: 7 million advanced technology vehicles, more than 20 times current level

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Alternative Fuels are Alternative Fuels are Not CreatedNot Created Equal Equal

-10

0

10

20

30

40

50

60

1

lbs C

O2

/gal

ga

so

lin

e e

qu

iva

len

t

FT (Coal)

Gasoline (Shale)

Gasoline (Tar Sands)

FT (Coal CCD)

Gasoline

Ethanol (Corn Coal)

Ethanol (Today)

Ethanol (Corn NG)

Biodiesel

Ethanol (Corn Biomass)

Ethanol (Cellulose)

Ethanol (Corn Biomass CCD)

Ethanol (Cellulose CCD)

Source: NRDCSource: NRDC

Note: This illustration does not include all low carbon fuels, such as hydrogen or electricity

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““Well to Wheels” Analysis – Well to Wheels” Analysis – Ethanol ExampleEthanol Example

ProcessProcess

• ARB established LCFS as an early action item

• UC Team published two part analysis on technical feasibility and policy issues

• ARB begins regulatory process• ARB workgroups established

- Lifecycle analysis

- Compliance & enforcement- Policy & regulatory developments- Environmental & economic

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TimelineTimeline

• 2007-08 – ARB holds workshops

• Early 2008 – Draft regulatory language

• Fall 2008 – Staff complete reg. package

• End of 2008 – Reg. package to Board

• 2010 – Implementation begins04/19/23 10

Policy Issues Policy Issues

• Sustainability/Land use• LCA modeling: accuracy; better data• Default values & opt-in• Upstream oil production• Interaction w/ larger cap and trade• Harmonization w/ US EPA and EU• Harmonization w/ vehicle policies

(Pavley)

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Congressional Action Congressional Action

• Senate bill is RFS on Steriods• From 7.5 billion gallons/year

mandate to 36 billion gallons by 2022• Carve out for advanced biofuels• Massive subsidies for production and

distribution infrastructure• A one-sided policy that doesn’t

address global warming and will have other adverse impacts

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