A recent opinion piece in the Business Journal urged legislators in Olympia to adopt a clean fuel standard for economic and environmental reasons. However, based on the results of this fuel mandate in California and Oregon, also known as the low-carbon fuel standard (LCFS), many of those claims are not supported by actual data.
First, based on data from California and Oregon, an LCFS has
not lowered fuel costs. The goal of an LCFS is to reduce the carbon content of
gasoline and diesel fuels by either blending them with increasing amounts of
biofuels or through the purchase of compliance credits from suppliers of lower
carbon fuels or qualified entities such as transit agencies and electric
utilities.
While an LCFS is designed to have minimal cost impact
initially, compliance costs increase as the mandate becomes more stringent over
time. In California, according to agency data, the LCFS added about 1 cent per
gallon to the cost of gasoline in 2015. Currently, agency data shows the LCFS
is adding 24 cents per gallon and we estimate the added cost will likely
increase to more than 60 cents per gallon by 2030. These LCFS compliance cost
premiums are clearly documented in Oil Price Information Service (OPIS) spot
market reports.
Second, California’s LCFS is not the reason petroleum fuel
costs have gone down since the mandate was implemented. There are several
components that impact the price of petroleum fuel, with the cost of crude oil
being the most dominant. The price of crude oil produced on the Alaskan North
Slope — the primary source on the West Coast — has decreased by more than 50%
since 2011. Without the LCFS in place, petroleum fuel costs in California would
have fallen by a larger amount.
Third, environmental benefits from an LCFS are uncertain.
When attributing greenhouse gas (GHG) emissions to a state LCFS, it is
important to consider existing policies, blend mandates and interactions with
the federal Renewable Fuel Standard. The California Air Resources Board (CARB)
has recognized these challenges as part of their environmental analysis on the
2019 LCFS Amendments and reported that annual GHG emission reductions
attributable to LCFS have only been about 1% of total statewide emissions.
Furthermore, an LCFS is not an air quality program, so
meaningful health benefits from an LCFS are unlikely. CARB estimates that
California’s LCFS decreases annual nitrogen oxide emissions from the state’s
transportation sector by less than 1% and particulate matter by less than 2% —
two key pollutants that impact human health.
These environmental impact estimates do not take into
consideration emissions from “fuel shuffling” which occurs when transporting
fuels over long distances into and within the state to comply with the LCFS.
Our research has documented that changes in the fuel market supply due to an
LCFS as well as the additional transport required for feedstocks and finished
fuels also have impacts on greenhouse gas emissions and air quality, which must
be considered.
Lastly, an LCFS is unlikely to spur an expansive biofuel
industry in Washington with associated job creation. In California, for
instance, only 12% of liquid biofuel fuel pathways registered under LCFS —
including ethanol, biodiesel and renewable diesel — come from in-state
production facilities. The vast majority of biofuel production facilities are
located in the Midwest due to close proximity of appropriate feedstocks and
friendlier business climates.
Accounting for other alternative transportation fuels like
natural gas, electricity and propane, only 20% of fuel production facilities
are located in California. These fuels face their own set of challenges like
deployment of accompanying vehicle technologies and infrastructure
availability.
In considering whether to adopt an LCFS in Washington,
actual data from California and Oregon — the only two states with this fuel
mandate — provide important insight on whether an LCFS would be effective in
reducing GHG emissions or providing other benefits in the state.
