LCFS: Part 1: Status Update Part 2: Analysis

Part 1: CURRENT STATUS OF LOW-CARBON FUEL STANDARD LEGISLATION

FEDERAL LEGISLATION:

According to the Congressional Research Service, the Low-Carbon Fuel Standard Act of 2009, introduced 3/30/2009, proposes the following:

• Amends the Clean Air Act to require the Administrator of the Environmental Protection Agency (EPA) to issue regulations that:

(1) determine the lifecycle greenhouse gas emissions of all transportation fuels;

(2) determine the fuel emission baseline (i.e., average lifecycle greenhouse gas emissions per unit of energy of all transportation fuels sold in the United States in 2005);

(3) apply to refineries, blenders, and importers of transportation fuels;

(4) ensure that, for 2014-2022, annual average lifecycle greenhouse gas emissions do not exceed the fuel emission baseline; and

(5) ensure that, for 2023 and thereafter, transportation fuel providers make specified reductions in the annual average lifecycle greenhouse gas emissions for transportation fuels sold in the United States.

• Grants the Administrator authority to waive emission reduction requirements of this Act to prevent economic or environmental harm.
• Requires the Administrator to study the environmental and resource conservation impacts of the regulations required by this Act and their effect on energy security.

STATE UPDATES:

On April 23, 2009, the California Air Resources Board (ARB/Board) approved the low-carbon fuel standard (LCFS) regulation. As part of the Board hearing, the Board approved Resolution 09-31 (Resolution). The Resolution includes a number of provisions related to ongoing work on the LCFS. One such provision relates to land use and indirect effect analysis of transportation fuels.

· The Board-approved Resolution reads: “BE IT FURTHER RESOLVED that the Board directs the Executive Officer to convene an expert workgroup to assist the Board in refining and improving the land use and indirect effect analysis of transportation fuels and return to the Board no later than January 1, 2011, with regulatory amendments or recommendations, if appropriate, on approaches to address issues identified."

· While California has adopted a low-carbon fuel standard, a number of Northeastern states are also looking at the idea, as is the Midwest. Several other states, including Minnesota and Wisconsin, are considering adopting a low-carbon fuel standard.

Part 2: ANALYSIS

· According to the hardly conservative New York Times, Green, Inc., "A low-carbon fuel standard is likely to do little to reduce global warming emissions and can even be counterproductive." This conclusion was based upon an academic paper entitled Greenhouse gas reductions under low-carbon fuel standards by Stephen Holland, Jonathan Hughes, and Christopher Knittel published in the highly-esteemed American Economic Journal: Economic Policy, 2009. The study found that the policy reduces consumption of high-carbon fuels like oil, but “increases low-carbon fuel production, possibly increasing net carbon emissions.”

· While a low-carbon fuel standard requires that the mix of transportation fuels sold to automobiles or trucks include only a limited percentage of carbon-intensive fuels, the idea is to cut carbon emissions from driving, since transportation accounts for more than a quarter of the country’s greenhouse gas emissions.

· The Holland, Hughes, Knittel Economic Journal article starkly concludes that a low-carbon fuel standard “cannot be efficient.”

· One problem with a low-carbon fuel standard is that it could be extremely costly. The research says that a 10 percent reduction in the carbon intensity of fuels could result in abatement costs ranging from $307 to $2,272 for each ton of carbon dioxide.

• That is roughly 100 to 700 times the price of carbon dioxide emissions allowances now traded in the Regional Greenhouse Gas Initiative, a program in 10 Northeastern states to combat global warming by cutting power plant emissions.

· A related problem is that rather than cutting fuel use across the board, such a fuel standard would encourage drivers to increase their consumption of “low-carbon fuels,” and thus theoretically increase the overall amount of fuel consumed.

· Stephen Holland, an assistant professor in the Department of Economics at the University of North Carolina at Greensboro and one of the study’s authors, cited an analogy of a child who eats two chocolate bars but no bananas, and is told he has to increase his banana consumption. The result is that he eats two bananas and two chocolate bars, which increases his overall calories.

· Similarly, the low-carbon fuel standard is “regulating the mix, but not the levels,” he said.

· The easiest way to cut carbon emissions from transportation is to cut the level and “not drive so much,” Mr. Holland said. “Carpool! Take public transportation! Leave the car at home.”

As has been publicly argued about for the past several years, the largest controversy surrounding low-carbon fuel standards involves ethanol, and in particular how to compute the carbon cost of corn ethanol (the issue at hand in California).

· Mr. Holland, who said that ethanol was the primary fuel involved in the study, said that he used a range of assumptions about ethanol, but that since the study had gone to press, he had taken the view that corn ethanol was more carbon-intensive than the paper had accounted for.

· Finally, a low-carbon fuel standard would disallow the importing of Canadian crude from Alberta, making Minnesota and much of the upper Midwest more dependent on crude from political enemies in the Middle East. With all the economic worries our globalized economy confronts each day, deriving oil from our friendly neighbor to the north seems both prudent and reliable.

Business Organizes Fight Opposing Waxman Markey

"Those who do not stand up for their own rights will certainly lose them" (theCommonSenseCurmudgeon@blogspot.com).

Despite being a summer dominated by heated public involvement and media coverage of the national health care debate, and relatively cool temperatures for the Upper Midwest, the National Association of Manufacturers (NAM) and the National Association of Independent Businesses (NAIB) have been planning and now have launched a multi-state campaign designed to influence Senate debate of Waxman Markey.

Together with state manufacturing associations in Michigan, Indiana, Missouri, Nebraska, North Dakota, Ohio, and Virginia, this powerful business coalition is encouraging small business owners and the public to make sure their collective voices are heard on the devastating economic impact of Waxman Markey on the national economy.

The national advertisement portion of the "Speak Out" campaign will run through September 4 and will include television, radio and the Internet.

Their early August-announced Study of the Economic Impacts of Waxman Markey conducted by NAM and the American Council of Capital Formation (ACCF) produced the following five key findings:

1. cumulative loss in GDP up to $3.1 trillion (2012-2030);

2. employment losses up to 2.4 million jobs in 2030;

3. residential electricity price increases up to 50% by 2030;

4. per gallon gasoline price increases up to 26% by 2030; AND

5. the manufacturing sector would absorb 55-66% of the jobs lost

NAM and NAIB are urging the public to lobby their Senators to oppose any climate legislation that damages job creation or raises consumer and business costs.

Considering the unemployment rate increases and stagnating incomes during the great recession that began in 2006, sounds like good advice to me.

Secretary of State Clinton's State Department Signs Off on Pipeline in Minnesota

http://www.eenews.net/features/documents/2009/08/21/document_cw_01.pdf

On August 20, Secretary of State Hillary Clinton’s State Department took a major step to ensure Minnesota and the Upper Midwest’s energy security by approving the construction of the Alberta Clipper pipeline from Alberta, Canada, through Minnesota to Superior, Wisconsin.

Indicating that there “is no indication” that the pipeline will worsen the impacts of climate change, the State Department has now removed the final barrier for the continued construction of the 1,000-mile Alberta Clipper pipeline.

Despite a predictable negative reaction from reactionary elements in the environmental community and assurances by President Obama that new technologies for processing the oil sands are on the way, the anti-gasoline lobby threatened lawsuits.

It is interesting to note that a real crack seems to be developing between President Obama’s administration and many environmental groups. The President, Secretary of State Hillary Clinton, and her State Department seem to have decided that energy security and good-paying, ready-to-go pipeline jobs matter in the environmental equation. Good for them.

A State Department analysis (see link below) says the pipeline will help prevent China and other countries from buying Canadian crude, a product valuable to the United States because it is derived without the security complications associated with Middle Eastern nations. So, Minnesota, the Upper Midwest, and the United States benefit and some of our Middle Eastern enemies lose. Sounds logical to me, and I am hardly a military hawk but I am loyal to my country. It is one of my many biases. We are not perfect but this is our country and we have to look out for our collective interests because Middle Eastern oil producers will not!

According to Enbridge Inc., a Canadian oil company, the pipeline will allow them to increase its U.S.-bound flow of oil sands crude by 450,000 barrels a day, beginning next year. Additional pumping stations could be added in the future at "very low cost" to increase the daily flow to 800,000 barrels, the company says.

Next week, part II on oil sands.

Does Waxman-Markey Put U.S. Energy Security at Risk?

One of the arguments that proponents of a cap-and-trade program make is that we need to develop more homegrown sources of energy in order to increase our energy security. They believe a cap-and-trade program will create incentives to produce more renewable energy in the United States by increasing the price of traditional fuels.

There is no question that projected energy growth over the next 30 years will require us to develop numerous sources of energy – both traditional and alternative sources. But it appears Waxman-Markey will create incentives that could actually make us less energy secure in the near term.

The legislation makes the U.S. refining industry responsible for both their facility emissions and the emissions from the end-use of their products – vehicle combustion. Together, facility and vehicle emissions account for approximately 40 percent of total U.S. greenhouse gas emissions. However, the legislation only grants the refining industry two percent of the free emissions permits that will be distributed under the bill.

This significant gap between the emissions U.S. refiners are responsible for under the legislation and the free emissions permits they will be awarded means the refining industry will have to buy permits from other industries in order to be in compliance. Refiners from overseas will only need permits for vehicle emissions, not the emissions from their refineries. This will give them a competitive advantage.

The result is that the bill could create incentives for U.S. refiners to import more gasoline and diesel fuel from abroad and produce less here at home. As the article below points out, that could lead to idled refining capacity or the outright closure of U.S. refineries due to the cost advantage overseas refiners will have. As refining capacity is moved overseas to countries with little or no environmental standards, carbon emissions will rise causing global greenhouse gas emissions to increase.

Are our memories really this short? Just four years ago, following hurricanes Rita and Katrina, politicians were clamoring for more refining capacity to protect against supply disruptions and price volatility. Now Congress passes legislation that could result in increased reliance on imported gasoline and diesel fuel which increases the risk of – you guessed it – supply disruptions and price volatility.

This is yet another example of why a climate change policy must be crafted as part of a global agreement.

“Big Oil’s Answer to Carbon Law May Be Fuel Imports,” Bloomberg News, June 26, 2009
http://www.bloomberg.com/apps/news?pid=20601109&sid=avLVPogS6lh0

Climate & Health Care: When Solutions Become the Problems

My dad had a saying, “Don’t let today’s solutions become tomorrow’s problems.” His point: know what you’re doing and don’t do anything to make matters worse.

As Congress sputters on the President’s health care and climate initiatives, I thought about dad’s advice but concluded that to be applicable to the President’s situation there needs to be a corollary: “don’t let the solution become today’s problem.”

There are a lot of similarities between health care and climate initiatives. Both are major, “changing-life-as-we-know-it” initiatives affecting all Americans with a lot of very complicated moving pieces and competing interests.

Candidly, I agree with President Obama that America should do something to address greenhouse gas emissions (GHGs) and the rising costs of health care.

The problem is that the President’s solutions have become problems and, perhaps, even bigger problems then the problems they are designed to solve. One reason is that the President and Democratic Congressional leaders are trying to convince us that their solutions are cost-free and easy. This just doesn’t pass the laugh test. Americans are used to their political leaders stretching reality, but that stretch has to be within the realm of common sense credibility. And, it’s just not credible to say that we can reduce GHGs without increasing the cost of energy or that health care coverage can be expanded without increasing the amount of money government takes from us.

Another reason the President’s solutions have become the problem is their complexity. The President’s climate and health care initiatives are both mammoth pieces of legislation that most people haven’t read, let alone understand what they do or how they will do it. Obviously, some will lose; some will win; and some will win and lose at the same time. Americans don’t need to know everything about every piece of legislation and are used to (and willing to) make these kinds of trade-offs. But, we need to understand the broad themes and how they are likely to affect us. Unfortunately, the size and complexity of the initiatives prevent such understanding, leaving him unacceptably saying, “trust us, we’re the government, we know what we’re doing and we’re here to help.” No wonder the thinking, swing members of the Congress are balking.

The third reason his solutions have become the problem is the speed he is pushing them. Again, I turn to one of dad’s sayings: “If you don’t have time to do it right the first time, why do you think you’ll have time to fix it the second time?” It was his version of “haste makes waste.” The President wants to make major changes to three of the biggest sectors of the economy (energy, health care and financial services) in less than 12 months. That’s fast; too fast…it’s turned the solution into the problem.

For many, most, the President has won the argument that climate and health care are problems that deserve solutions. But his solutions have become problems. His best course is to slow things down, skinny the bills and focus on improving one or two high leverage elements in each topic and make sure the substance of the efforts match the low-cost rhetoric. For energy, that means focusing on promoting more renewables, enhancing our energy efficiency efforts, and growing the nuclear industry. As for climate? These first items will make a big dent in emissions. In the meantime, spend the intervening time getting an international GHGs reduction agreement and think through how to implement a cap-and-trade program and the other regulatory tools…perhaps a Blue Ribbon Task Force could be convened.

You want "Scientific Truth" on Biofuels?....

Many of the environmental and agricultural special interests and advocates who supported corn ethanol and the development of other annual-crop-ethanol forgot to carefully examine the externalities of their idealism and/or greed. They seem to be always invoking the veil of "scientific truth." Well here is some scientific truth for all to carefully examine. Maybe this scientific truth will set them free and teach all an important intellectual lesson. Scientific "truth" is dynamic, not static, or based upon political and/or economic expediency!


Science 17 July 2009:ol. 325. no. 5938, pp. 270 - 271DOI: 10.1126/science.1177970
Policy Forum

http://www.sciencemag.org/current.dtl for the full article

Energy: Abstract

Beneficial Biofuels—The Food, Energy, and Environment Trilemma
David Tilman,1,* Robert Socolow,2 Jonathan A. Foley,3 Jason Hill,3 Eric Larson,4 Lee Lynd,5 Stephen Pacala,6 John Reilly,7 Tim Searchinger,8 Chris Somerville,9 Robert Williams4
1 Department of Ecology, Evolution, and Behavior, University of Minnesota, St. Paul, MN 55108, USA.2 Mechanical and Aerospace Engineering, Princeton University, Princeton, NJ 08544, USA.3 Institute on the Environment, University of Minnesota, St. Paul, MN 55108, USA.4 Princeton Environmental Institute, Princeton University, Princeton, NJ 08544, USA.5 Thayer School of Engineering, Dartmouth College, Hanover, NH 03755, USA.6 Department of Ecology and Evolutionary Biology, Princeton University, Princeton, NJ 08544, USA.7 Center for Energy and Environmental Policy Research, MIT, Cambridge, MA 02142, USA.8 Woodrow Wilson School, Princeton University, Princeton, NJ 08544, USA.9 Energy Biosciences Institute, University of California Berkeley, Berkeley, CA 94720, USA.
* To whom correspondence should be addressed: tilman@umn.edu

Recent analyses of the energy and greenhouse-gas performance of alternative biofuels have ignited a controversy that may be best resolved by applying two simple principles. In a world seeking solutions to its energy, environmental, and food challenges, society cannot afford to miss out on the global greenhouse-gas emission reductions and the local environmental and societal benefits when biofuels are done right. However, society also cannot accept the undesirable impacts of biofuels done wrong.

Biofuels done right can be produced in substantial quantities (1). However, they must be derived from feedstocks produced with much lower life-cycle greenhouse-gas emissions than traditional fossil fuels and with little or no competition with food production (see figure, below). Feedstocks in this category include, but may not be limited to, the following:

The best biofuels. The search for beneficial biofuels should focus on sustainable biomass feedstocks that neither compete with food crops nor directly or indirectly cause land-clearing and that offer advantages in reducing greenhouse-gas emissions. Perennials grown on degraded formerly agricultural land, municipal and industrial sold waste, crop and forestry residues, and double or mixed crops offer great potential. The best biofuels make good substitutes for fossil energy. A recent analysis suggests that more than 500 million tons of such feedstocks could be produced annually in the United States (1).
CREDIT: M. TWOMBLY/SCIENCE

Rolling Stone and Me

It isn't that often that I read Rolling Stone Magazine and even less often that I agree with any of its positions. But Matt Taibbi's recent article on Goldman Sachs made me laugh because a year or more ago, I started to see the mortgage plot being recreated with cap and trade climate change policy. Most people thought that it was a wild conspiracy theory though few said anything. But last week Goldman demonstrated, once again, its resilience announcing huge profits. So far, no one has questioned where those profits were generated---at taxpayer’s expense---in the worst recession since 1929.

Taibbi excoriates Goldman Sachs for its role in the Internet, oil and housing bubbles, and then identifies their next great scheme.

“And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.”

It is time American’s realize that it's always about the money now and forever. It is one of the great weaknesses of human nature---greed, which, when mixed with the capitalist spirit, too often leads down the same debauched road. Making matters even more amusing is how often the committed advocates are used/manipulated by the powers that be to make buckets of money while ruining the economy.