Pro-biofuels study feeds debate over future of California fuel standards

A new study funded by alternative-fuel industry organizations claims that biofuels are advancing at a pace which will enable fuel suppliers to meet all stages of California’s Low-Carbon Fuel Standard (LCFS). This study is feeding the ongoing debate over the state’s regulation.
While the clean-fuel industries are touting the study as showing enough supply of alternative fuels and bankable credits will be available to provide regulated companies several options to meet the LCFS through 2020, oil industry representatives point out that the study glaringly fails to include any information about how much the fuels will cost and potential economic impacts to the state from those costs.
The study, titled “California’s Low Carbon Fuel Standard: Compliance Outlook for 2020,” was drafted by ICF International and prepared for the California Electric Transportation Coalition, National Biodiesel Board, California Natural Gas Vehicle Coalition, Advanced Biofuels Association, Ceres and Environmental Entrepreneurs, all advocates or investors in alternative fuels.
The study concluded that the alternative fuels market, “is evolving rapidly and in unforeseen ways, and the LCFS is driving investment in low carbon ethanol, biodiesel, renewable diesel and biogas.” The report notes the “immediate availability” of lower carbon biofuels such as biodiesel from corn oil, waste greases and animal fats; renewable diesel from tallow; and ethanol from molasses, and that the supplies will increase over the next few years.
In addition, increasing natural gas supplies and prices that are below diesel’s have renewed interest in natural gas in the transportation sector, the study says.
Although plug-in electric vehicles are being purchased by California drivers at merely modest rates, these cars are, “unexpectedly making contributions towards LCFS compliance in these early years of the program.”
Over-compliance in early years of the regulation, at least through 2016, “is critical, and a significant number of excess credits have already been generated,” the study notes. “Because of the way the LCFS compliance schedule is designed, over-compliance in early years is critical towards meeting compliance in later years,” such as in 2019 and 2020.
The diesel sector “will likely generate more than its fair share of credits,” the study says. “Forecasted diesel consumption in California indicates that diesel will generate about 20% of deficits in the LCFS program. However, fuels that substitute for diesel, including biodiesel, renewable diesel and natural gas, have the potential to generate 40-55% of LCFS credits.”
There is significant potential to blend biodiesel at lower levels with conventional diesel and generate a substantial number of LCFS credits, the study says.
Eileen Tutt, executive director of the California Electric Transportation Coalition, a coalition of utilities that advocate for electric vehicles, said in a June 13 press release that “The standard is doing exactly what it was designed to do — open the way for new fuels and technologies to compete fairly in the marketplace.”
But oil industry representatives are quick to point out that the study has nothing to say about the costs of the fuels and their impact to the state’s economy.
“The ICF study does not make any attempt to quantify the cost of compliance, which we believe could be enormous even if the LCFS were feasible,” says an oil industry source. “ICF continues to rely on forecasts of future fuel supplies that could be overly optimistic. Given the significant gap that exists today between what is required for LCFS compliance and what is available, we remain deeply concerned the LCFS is heading over a fuels cliff as early as 2015.”
(June 23, 2013)