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California Adopts First Low-Carbon Fuel Standard

Beveridge & Diamond, P.C., April 30, 2009

The California Air Resources Board (“CARB”) adopted the world’s first low-carbon fuel standard (“LCFS”) on April 23, expressly taking into account any indirect land use changes associated with a fuel in assessing its lifecycle greenhouse gas (“GHG”) emissions.  Using CARB’s analysis, in what may influence both the U.S. Environmental Protection Agency’s (“EPA’s”) long-delayed regulations under the federal Renewable Fuel Standard program and a growing number of other renewable fuel initiatives around the world, the “carbon intensity” of most corn ethanol is considered comparable to, if not greater than, that of conventional gasoline. 

The LCFS, including the full CARB staff report, is available at: http://www.arb.ca.gov/fuels/lcfs/030409lcfs_isor_vol1.pdf.  For more information about the California LCFS, the federal Renewable Fuel Standard or other new fuels initiatives, please contact Russ LaMotte (rlamotte@bdlaw.com) or Alan Sachs (asachs@bdlaw.com).

A.     Considering Indirect Land Use Changes as a Component of Carbon Intensity

The California LCFS aims to cut vehicle GHG emissions across the state by 10 percent over the next 10 years and achieve 16 million tons of GHG emission reductions by 2020.  To reach these goals, the LCFS uses a credit-trading system effectively requiring that all motor vehicle transportation fuel provided in the California market meet an average declining standard of carbon intensity.  Fuel providers must demonstrate that the mix of fuels they supply meet the LCFS intensity standards for each annual compliance period.

The LCFS’s carbon intensity standards were determined using a lifecycle emissions analysis that takes into account both the direct effects of producing and using fuels (such as farming practices, harvesting and transportation of the crop, fuel used in the production process, and transport, distribution, and combustion of the fuel), as well as indirect effects – including land use changes abroad – that may be associated with a particular fuel. 

Reflecting EPA’s own difficulty developing a methodology to quantify lifecycle GHG emissions from renewable fuels (see Beveridge & Diamond, P.C. “Renewable Fuel Standard Program Update: EPA Misses December 2008 Deadline, While EU Approves New Renewable Fuel Mandates With GHG Requirements,” available at: http://bdlaw.com/news-458.html), CARB has acknowledged both the lack of scientific consensus concerning the magnitude of land use change emissions associated with renewable fuels, and the continuing development of methodologies to estimate these emissions. 

While promising to continue its own investigation of these issues through discussion with stakeholders and analysis of new data, CARB still identified land use changes as a “significant source of additional GHG emissions” that “must be included in LCFS fuel carbon intensities.”  An expert panel has now been tasked with compiling and analyzing data over the next 18 months that could be used to modify the LCFS’s indirect land use methodology.

In light of the relatively high carbon intensity of corn ethanol when indirect land use changes are considered under its current analysis, CARB anticipates that the new generation of LCFS-qualifying fuels will come from the development of technology that uses algae, wood, agricultural waste such as straw, common invasive weeds such as switchgrass, and municipal solid waste.  The LCFS carbon intensity requirements are intended to become effective in 2011, although  regulated parties must begin meeting the standard’s reporting requirements in 2010.

B.    Other Developing Low Carbon Fuel Initiatives 

The analysis used by CARB in the LCFS is likely to inform EPA policy as it continues to develop its federal Renewable Fuel Standard (“RFS”) regulations, which remain unproposed more than four months after the December 19, 2008 statutory deadline for their finalization.  The White House Office of Management and Budget reportedly completed its review of EPA’s draft RFS regulations on April 29, clearing the way for EPA’s publication of its proposal for public comment.  There are also efforts in Congress to include a federal Low Carbon Fuel Standard as part of wider energy or climate change legislation.    

Among additional low carbon fuel standards now under development that may be influenced by California’s LCFS:

  • The eleven Northeast and Mid-Atlantic states making up the Regional Greenhouse Gas Initiative (“RGGI”) have committed to developing their own regional low carbon fuel standard;
  • Two Canadian provinces, British Columbia and Ontario, have pledged to match California’s LCFS; and
  • The European Union recently adopted a requirement that transportation fuels achieve a lifecycle GHG reduction of at least six percent below 2010 levels by 2020.  The European Commission is developing its own methodology to measure GHG emissions associated with indirect land use changes related to biofuels production.
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