California’sLow Carbon Fuel Standard
Overview of theProposed Regulation
March 16, 2009
California Environmental Protection AgencyCalifornia Environmental Protection Agency
Air Resources BoardAir Resources Board
James GoldsteneExecutive Officer
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Why Do We Need To Act?
Climate change is real
The Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment (2007) was definitive but understates impacts
Temperature rise and climate impacts occurring faster than expected
Recent scientific findings show sea level rise by 2100 is underestimated
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Magnitude of the Challenge
AB 32 requires a return to 1990 greenhouse gas (GHG) emission levels by 2020
ARB Emissions Inventory
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1990 2000 2004 2020 2050
Year
Mil
lio
n M
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ic T
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s
(CO
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1990 Emission Baseline
169 MMT CO2e Reduction
80% Reduction 341 MMT CO2e
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GHG Emission Sources
Emissions
By Sector
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Transportation GHG Reductions
AB 1493 Vehicles
LCFS
Regional Strategies9%
Vehicle Efficiency Measures
11%
53%
27%
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Origin of LCFS
First fuel carbon standard in the world
Established by Executive Order S-01-07 in January 2007
Identified as an early action measure under AB 32 in June 2007
ARB legal authority for vehicle fuel standards has existed since 1975
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Goals of LCFS
Achieve at least a 10% reduction in average fuel carbon intensity by 2020
Contribute about 16 MMT CO2e to meet California’s GHG reduction goals by 2020
Reduce petroleum dependency
Create pathway to much higher long-term GHG reductions
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What is a Low Carbon Fuel?
Transparent to motorists: works in today’s vehicles and fueling facilities
Typical fuels include:– Gasoline blended with low-carbon ethanol– Diesel blended with biodiesel or renewable
diesel– Natural gas or biogas– Electricity used in an electric or plug-in electric
vehicle– Hydrogen used in a fuel cell vehicle
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LCFS: The Essential Facts
Gradual reduction in the carbon content of conventional gasoline and diesel
Cost of fuel production is closely linked to cost of petroleum, but is projected to be lower over time
Expands the market for renewable fuels like ethanol and biodiesel
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LCFS Key Attributes
Establishes stable investment environment for low carbon conventional and emerging fuels
Requires lifecycle analysis of fuels’ GHG emissions, including indirect land use changes (ILUC)
Performance standard – does not mandate any specific fuel, formulation or blend for compliance
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LCFS Benefits
Creates durable framework for near and long term transition to low carbon fuels
Encourages technology innovation in both fuel and vehicle development
Establishes a model that can be used for regional or national standards
California’sLow Carbon Fuel Standard
Program DetailsMarch 16, 2009
California Environmental Protection AgencyCalifornia Environmental Protection Agency
Air Resources BoardAir Resources Board
Bob Fletcher, ChiefStationary Source Division
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LCFS Mechanics
Baseline fuel carbon “intensity” is that of 2010 gasoline and diesel fuel
Carbon intensity (CI) represents the GHG emissions per unit of energy
Fuel producers required to achieve a 10 percent reduction in the carbon intensity for both gasoline and diesel fuel by 2020
Reduction is gradual and weighted toward later compliance years
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Implementation Schedule
Compliance Schedule from 2010 to 2020 for Gasoline or Gasoline Substitutes
80.082.084.086.088.090.092.094.096.098.0
2010
2011
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2016
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2018
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2020
Year
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How is Compliance Determined?
Compliance based on system of determining annual credits and deficits
Fuels with lower carbon intensity than the standard generate credits
Fuels with higher carbon intensity that the standard generate deficits
Annually, credits must equal or exceed deficits
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What are the Compliance Options?
Regulation is market-based and allows the following compliance options to lower cost and provide flexibility:
Provide low carbon fuel(s) Use banked credits Use purchased credits Use any combination of the above
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Who Must Comply?
Providers of most transportation fuels are ‘regulated parties’ under the LCFS
Providers of fuels that already meet 2020 levels are not regulated but may ‘opt in’ to earn credits:– Electricity– Hydrogen & hydrogen blends– Some fossil CNG– Biogas CNG and LNG
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How is CI Determined?
Table of default carbon intensity values provided based on ‘fuel pathway’ emissions:– Origin of feedstock– Production/processing emissions– Transportation/distribution emissions– Vehicle emissions– Indirect effects
Regulated parties may propose alternative pathways for ARB’s approval
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What are Indirect Effects?
Indirect effects result in additional GHG emissions that are not addressed in the “direct pathways”
Analysis of indirect land use change (ILUC) from biofuel production identified as significant
No other indirect effect identified that would substantially affect the LCFS framework
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“Indirect” Land Use Effects
Indirect Land Use Effect:– Increased corn produced to meet demand
for ethanol, thus displacing soybeans; – non-ag land (native grasslands/forests)
converted to soybean production to meet demand
Impact:– GHG emissions increase because native
grasslands/forests sequester more carbon than agricultural land
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No ILUC Effect
Alternative fuel will likely have little or no ILUC impact when it:
Is not derived from crops
Is derived from crops grown on marginal ag lands or otherwise fallow farm land
Is derived from waste
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Compliance Scenarios
Standards can be achieved by:
Increasing volumes of liquid biofuels: California ethanol, cellulosic ethanol, sugarcane ethanol, biodiesel, renewable diesel
Increasing number of flexible-fueled vehicles using E-85
Increasing number of plug-in hybrid, battery electric, and fuel cell vehicles
Increasing number of CNG heavy-duty vehicles
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LCFS Compliance & Enforcement
ARB will provide software tools for fuel carbon reporting and credit tracking by early 2010
Regulated parties will electronically report specified information quarterly and credit balances annually
Enforcement includes electronic reconciliation, records review, field inspections, audits and penalties, if necessary
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Environmental Analysis
Total of 16 MMTCO2e reduction in 2020, based on tank-to-wheel carbon intensities
Represents about 10% of reductions necessary to meet AB 32 Scoping Plan goals
No significant environmental impact identified from the use of alternative fuels
Overall reductions in criteria pollutant emissions may occur with transition to non combustion-powered vehicle technologies such as electric, hybrid-electric, and hydrogen fuel cell vehicles
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Biofuel Production Facilities
Environmental analysis considers possible impacts from 24 new biofuel facilities
Number of facilities based on assessment of potentially available biomass feedstocks
Mitigation required due to local permitting and CEQA requirements
ARB staff committed to develop best practices guidance for local use
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Economic Analysis
Net cost of producing vehicle fuels is expected to be slightly lower over 10 years
Capital cost effect is gradual, incremental and tracks federal renewable fuel requirements
Impact on producers will vary depending on carbon reduction investment strategy
Market will seek most cost-efficient fuel over time
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Relationship to Clean Vehicle Program
Low and very-low carbon fuel providers may opt-in to generate credits
Credits may be sold and revenue used to expand clean fuel facilities or provide vehicle incentives
Double credits may be provided to LCFS and ZEV program to incent both lower carbon fuels and cleaner vehicles
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LCFS Public Outreach
ARB has held 15 public workshops and 200 stakeholder meetings in developing the regulation
Received over 200 public comment letters
Next public workshop is on March 27th
Proposed regulation and all supporting documentation available online at:
http://www.arb.ca.gov/fuels/lcfs/lcfs.htm#new
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LCFS Complements Federal RFS2
Federal RFS2:– Mandates large volumes of biofuels, including low-
carbon biofuels– Promotes technology innovation and advanced
biofuels– Achieves only 30% reduction in CI by 2020
ARB supports regional/federal LCFS to promote greater GHG reductions
LCFS designed to complement federal RFS2
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Summary
LCFS needed to reach California’s GHG reduction goals for transportation
LCFS provides framework for transition to sustainable alternative fuels
Innovation is the key to low-carbon advanced biofuels
Low-carbon renewable fuels play important role
