John D. CourtisOctober 20-21, 2009

The CaliforniaLow Carbon Fuel Standard

Why LCFS

Transportation Sector is Important

• Significant reductions are needed to achieve 2020 target and 2050 goal

• GHG emissions from transportation are large and increasing

Large GHG Reductions Required

0

100

200

300

400

500

600

700

1990 2000 2004 2020 2050

GH

G E

mis

sion

s (M

MTC

O2e

) -169MMT

-341MMT

Transportation Emissions Increasing

LCFS Established by the Governor

• Governor Schwarzenegger established the LCFS in January 2007

• ARB identified LCFS as AB 32 discrete early action measure in June 2007

• Board approved LCFS on April 23, 2009– Directed the staff to make changes/additions

• The LCFS will become law by Jan. 1, 2009

Overview

• What are the regulatory requirements

• Lifecycle analysis

• Results

• Next steps

What are the LCFS Requirements

Regulated Parties?

• Petroleum and biofuels providers are the ‘regulated parties’

• Providers of other fuels that meet 2020 levels must ‘opt in’ to earn credits:– Electricity– Hydrogen – Natural Gas

LCFS Requirements

• Requires a 10 percent reduction in the carbon intensity(CI) by 2020; baseline 2006– Applies to (fossil fuel+biofuel) mix– Separate standards for Gasoline and Diesel– Other fuels allowed to opt-in

• ARB has established CI values for some fuels and will establish CI values for other potential fuels.

The LCFS Compliance Schedule

Compliance and Enforcement Requirements

• ARB to provide software tools for fuel carbon reporting and credit tracking (under development)

• Regulated parties required to report quarterly and annually

• Enforcement includes records review, field inspections, audits, and penalties

LCFS Flexibility (Market-Driven Compliance)

• Supply a mix of fuels with average carbon intensity(over a year) equal to the standard

• Allow the use of purchased or banked credits to meet the standard

• Allow companies to generate their own CI values or the tailoring (adjustment) of CI to specific processes (certain criteria must be met)

Benefits

LCFS Benefits

• Reduces 16 MMT GHG emissions from the transportation sector by 2020

• Creates durable framework for near and long term transition to low carbon fuels

• Encourages technology innovation

• Establishes a model for regional and national standards

• Sets stage for future reductions

Benefits: Pavley and LCFS Reverse GHG Trend

125

150

175

200

225

250

2005 2010 2015 2020

GH

G (M

MT)

GHG Transportation Trends

Pavley

Pavley & LCFS

LCFS: Impact on Fuels

• Increase use of:– Low carbon corn or sugarcane ethanol– Cellulosic ethanol– Renewable diesel and biodiesel– Electricity, hydrogen, natural gas

• And decrease the use of:– Petroleum– High carbon biofuels

Importance of Lifecycle Analysis

Lifecycle Analysis Basis for LCFS

• Lifecycle analysis considers the GHG emissions from all facets of fuel production, distribution, and use

• Methodological approach

– Direct effects: CA GREET

– Land Use Change effects (or iLUC)

• GTAP for land use change

• External analysis to estimate GHG impacts

Direct Effects: Fuel Lifecycle – Gasoline(CA GREET)

73 g/MJ

Vehicle

Gasoline Gasoline 96 g/MJ96 g/MJ

Transportation

7 g/MJ

Oil Well1 g/MJ

14 g/MJ

Refinery1 g/MJ

Transportation

Complete Fuel Lifecycle – Corn Ethanol(CA GREET+GTAP)

Corn Ethanol 97 g/MJ

Vehicles

Emissionsare

Offset

Corn Field

36 g/MJ

2 g/MJ

Transportation

Co-products

3 g/MJ

Blend with gasoline

Bio-Refinery

38 g/MJ

-12 g/MJ

Transportation

30 g/MJ

Land Use Change

GTAP

Determining LUC Carbon Intensity(GTAP+ external)

IncreasedBiofuel

Demand

AdditionalLand

Converted

AdditionalGHG

Emissions

LUCCarbon

Intensity

GTAPEconomicModeling

ApplyEmissionFactors

TimeAccounting

LCFS Treats All Fuels Fairly

• Land use change contributes to carbon intensity of certain biofuels

• Staff have not identified any significant indirect effects from non-biofuels, though research is ongoing

• Open process; results and assumptions shared with stakeholders

Results

Fuel pathways completed

• For gasoline and fuels substitute for gasoline– 13 corn ethanol, 3 sugarcane ethanol, 4 CNG, 9

LNG, 2 electricity, 5 hydrogen

• For diesel and fuels substitute for diesel– 2 biodiesel, 2 renewable diesel, 4 CNG, 9 LNG, 2

electricity, 5 hydrogen

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80

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120

140C

arbo

n In

tens

ity (g

CO

2e/M

J)

Gasoline

Carbon Intensities of Gasoline and Ethanol

Gasoline

Sugarcane Ethanol Corn Ethanol Hi CI Corn Ethanol Low CI

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10

20

30

40

50

60

70

80

90

100C

arbo

n In

tens

ity (g

CO

2e/M

J)

Diesel

Carbon Intensities of Diesel and Biodiesel

Diesel

Tallow Renewable Diesel

UCO Biodiesel

Soybean Biodiesel and Renewable Diesel

?

Pending iLUC

?

Next Steps

Next steps

• Establish an expert workgroup to evaluate issues on LUC and report to the Board by 2011. Formal review by 2012 and 2015.

• Continue to work on additional fuel pathways

• Prepare a guidance document on the evaluation process for additional pathways

Next Steps

• Create a work plan to evaluate

sustainability criteria (by end of 2009)

• Establish the details of reporting and

credit trading program

• Coordinate with regional, national, and

international groups

Expert Workgroup: Overall Structure

Facilitator

ARB Staff Lead

Core Workgroup[20 members]

C DBAWorking Subgroups

08/05/2009

Potential Topics for Evaluation

• Land Use Change Effects of Biofuels– GTAP: Elasticity values, yield changes, land resolution, co-

products, impacts on food consumption– Other: Yield changes over time, time accounting, emission

factors

• Effects of Other Fuels– Land use effects, secondary effects in the energy market

• GREET– Fertilizer use, water use, co-products

• Comparative Modeling Approaches– FAPRI-FASOM, other approaches

Expert Workgroup Meetings

• Bimonthly meetings (at least)– If appropriate, additional working subgroup meetings

• All meetings will be public– Meetings will be webcast when possible

• Meeting summaries will be published for public view

08/05/2009

Summary

• LCFS reduces emissions from transportation fuels by 10% by 2020

• Emissions from land use changes are real, and positive

• LCFS complements goals set forth by federal mandates

• LCFS is structured so program can extend beyond 2020

• Significant stakeholders interest in improving and establishing new pathways

Thank you

jcourtis@arb.ca.gov