LCFS "Red Flags" Don't Hold Up Under Scrutiny

As a scientist working on clean fuel policies, I spend much of my time working to protect our environment, health, and economy from the negative, unintended consequences from petroleum use.   

My colleagues at NRDC and the broader environmental community are focused on implementing solutions that will move America toward truly sustainable fuel sources and away from petroleum that harms our air, and “first generation” biofuels that compete with food production.  In fact, we’ve been working on policies to ensure biofuels are done right to protect our economy and our environment—growing more jobs, more food, and more truly low-carbon fuel. (see here and here and here).  

That’s why I have to respectfully disagree with Assemblyman Mike Gatto’s take on California’s Low Carbon Fuel Standard in his recent Op-Ed for the LA Times. The policy he takes aim at is actually helping reduce pressure on rainforests and food prices – the very issues he expresses concern about.

Unfortunately, many of the arguments against the standard are the same discredited ones that groups like the Western States Petroleum Association and the Chevron-funded lobbying group “Fueling California”  both continue to spread in order to delay and weaken California’s climate and clean air programs.  Many of these same claims were analyzed over three years of regulatory development, scores of public workshops, and review by scientists and expert work groups.

Let’s look at the facts.

The LCFS will help reduce food prices, not raise them:  The oil industry perpetuates the false claim that only food-based crops like corn and sugarcane ethanol qualify under the LCFS.  In reality, the standard discourages crops that compete with food production – and provides additional value to farmers who sell non-food crops like straw and husks into the biofuels market.[1] This accounting for the land use impacts – and resulting food impacts - is one of the primary reasons why the corn ethanol lobby actually filed a lawsuit against the LCFS claiming they are disadvantaged by the standard.

Even agricultural researchers at the International Food Policy Research Institute – together with four other universities and a national lab – have concluded that the LCFS reduces international land use impacts and will lower food prices.[2] This means the LCFS reduces pressure on expansion into lands like rainforests.

The irony is that the oil industry, prior to the LCFS, has grown to become a relatively large investor in fuels that can compete with food, such as corn ethanol and sugarcane ethanol.[3] Over the past decade these fuels have been traded between the U.S. and Brazil for a variety of economic reasons.[4] This trade flow has increased recently due, in part, to Congress eliminating ethanol subsidies and removing tariffs on imports of sugarcane ethanol.

While the LCFS won’t prevent this trade, the good news is that it will help oil companies and first-generation biofuel producers alike become part of the solution by switching to non-food feedstocks. Companies like DuPont and EdenIQ based in Visalia, California are helping transition existing biorefineries - including companies in California - to do just that through available “bolt-on” technologies.[5]  Without the LCFS, the fuels industry would have little incentive to do such, exacerbating the very problem that Gatto is concerned about.

Increased investments mean more jobs. The oil industry claims that it can’t invest in clean energy and create jobs at the same time. But there are many examples where this is happening already. Companies across the fuels industry are producing fuels from biogas, commercializing advanced biofuel facilities using non-food feedstocks, installing electric vehicle charging stations and renewable fuel pumps, and even reducing emissions from oil production. The LCFS is encouraging these types of investments and projects.

We can’t afford to delay this transition to cleaner fuels. Last year alone, Californians spent $70 billion for gasoline and diesel. Over $40 billion of this left the state and went to oil companies and other oil production countries.[6] What if some of our dollars were reinvested in homegrown, sustainable energy sources?

Already, the state is home to 24 of the nation’s 74 advanced biofuel producers. An analysis by Environmental Entrepreneurs (E2) demonstrates that between 18,000 and 48,000 jobs in the advanced biofuels industry could result from federal and state clean fuel standards nationally.[7]  This doesn’t count the job growth from investments in clean electric transportation, natural gas vehicles, or projects to improve and clean up California’s refineries and crude oil production facilities.

Fuels are getting dirtier, not cleaner. Unfortunately, the dirty little secret is that California’s oil industry has gotten dirtier over the past five years, not cleaner. Petroleum refineries are utilizing increasingly dirtier energy sources like Canadian tar sands. For example, Chevron invested $15 billion in one such tar sands project alone in Alberta, Canada. Just a small fraction of those investments here in California could go a long way to producing cleaner fuels or reinvested to improve the environmental performance, efficiency, and safety at refineries. As my colleague Diane Bailey cites, the use of dirtier, higher sulfur grades of crude oil at Chevron's Richmond refinery is likely to have accelerated corrosion in the piping, playing a role in last August’s fire that sent fifteen thousand people into Bay-Area hospitals.

But you can’t improve what you ignore, and the LCFS program is helping prevent current petroleum fuels from getting worse by accounting accurately for those emissions.  If the outcome of California’s LCFS was just to trade one dirty crude oil source for another that would be a bad outcome. But regulatory modifications made over a year ago ended the potential for simply swapping to comply, as a result of a year of public workshops and meetings.

Today, the LCFS provides incentives and more flexibility for oil companies to actually clean up their own emissions through investing in projects like solar thermal, carbon capture and storage, and switching to renewable-based energy inputs. Technology companies are already working with the oil industry to do exactly this. 

Fuel Diversity Is Good for Consumers. Since 2006, families and businesses have endured approximately 32 gasoline price spikes. While the oil industry lobby is quick to blame environmental regulations, the reality is that jumps in global crude oil prices were responsible 64% of the time. Of the rest, refinery accidents and equipment failures accounted for 20%, planned refinery shut-downs for maintenance 6%, and seasonal and holiday driving demand 10% of the time. 

But the outlook for consumers under the LCFS is bright. Diversifying California’s fuel sources can mean more predictability for motorists at the pump.[8] Today, driving on clean electricity is the equivalent of driving on just over a dollar a gallon while natural gas fuel users are paying about half the cost of diesel fuel users. Advanced biofuels – when produced at commercial scale – are also expected to be cost-competitive with gasoline and diesel.[9]

We should tread carefully when enacting new policies to ensure they don’t create more problems than they solve. Fortunately, the LCFS has been analyzed, reviewed by scientists including land use change experts and agricultural economists, and adjusted when needed, to ensure it helps California’s efforts to move into a clean energy economy. Companies today are proving you can find ways to produce fuels that have beneficial effects in terms of food, land, and our economy.

[1] Biofuel producers pursuing feedstocks that avoid competition with food production and do not contribute to the detriment of natural ecosystems will have little or no land use effects.. As CARB cites in a guidance document, this could include the use of feedstocks that are grown on abandoned, degraded farmland which could increase soil sequestration, crop residues, sustainably harvested wood and forest residues, grown using double and mixed cropping, or municipal and industrial waste streams. See CARB (2009b)¸ Establishing new fuel pathways under the California Low Carbon Fuel Standard: Procedures and Guidelines for Regulated Parties, Draft, August 4 2009, citing Tilman, David, Robert Socolow, Jonathon A. foley, Jason Hill, Eric Larson, Lee Lynd, Stephen Pacala, John Reilly, Tim Searchinger, Chris Somerville, and Robert Williams. “Beneficial Biofuels—The Food, Energy, and Environment Trilemma.” Science 325:270-271. July 17, 2009.   

[2] http://nationallcfsproject.ucdavis.edu/files/pdf/energy-policy-journal-submission-jepo-s-11-02619.pdf; http://nationallcfsproject.ucdavis.edu/files/pdf/2012-07-nlcfs-technical-analysis-report.pdf

[3] http://www.businessweek.com/articles/2012-05-10/big-oils-big-in-biofuels; While renewable fuel investments represent less than 1% of overall industry investments over the past five years, several significant investments have been made by BP, Shell, and Valero in sugarcane ethanol and corn ethanol. Publically available investment data can be obtained from Bloomberg New Energy Finance investment reports, oil company reports and announcements, and media articles.

[4] http://www.ers.usda.gov/media/126865/bio02.pdf

[5] http://www.technologyreview.com/view/507621/making-cellulosic-ethanol-at-sugar-cane-plants/; http://investors.dupont.com/phoenix.zhtml?c=73320&p=irol-newsArticle&ID=1145300&highlight=

[6] These figures are estimated based on NRDC’s analysis of weekly figures from U.S. Energy Information Administration on gasoline, diesel, and crude oil prices; California’s Board of Equalization, and California Energy Commission data on petroleum imports and exports.

[7] http://www.e2.org/ext/doc/E2AdvancedBiofuelMarketReport2012.pdf

[8] http://switchboard.nrdc.org/blogs/mbaumhefner/what_if_you_could_choose_your.html

[9] http://switchboard.nrdc.org/blogs/smui/industrys_exhorbitant_cost_cla.html