Low-Carbon Fuels Done Right

California this week approved a low-carbon fuel standard requiring transportation fuels to be 10 percent lower in greenhouse gas emissions by 2020, a landmark decision that will accelerate the introduction of even more planet-friendly biofuels into the mix.

The California Air Resources Board’s approval of the new standard is in direct alignment with the Center for American Progress’ call for a low-carbon fuel standard to reduce lifecycle emissions from transportation fuels by 10 percent by 2020. Currently, the transportation sector accounts for 40 percent of California’s greenhouse gas emissions. The California Air Resources Board predicts that enactment of the low-carbon measure will account for 9 percent of the state’s goal to cut greenhouse gas emissions by 2020 and reduce California’s dependence on oil by 20 percent.

The California low carbon fuel standard, however, is not designed to operate in isolation. In combination with an economy-wide carbon cap-and-trade program endorsed by the Obama administration and now under debate in Congress—the American Clean Energy Security Act introduced by Reps. Henry Waxman (D-CA) and Edward Markey (D-MA)—and the recently enacted American Recovery and Reinvestment Act—or the “stimulus act”—the new California low-carbon fuel standard will drive fuel efficiency and the production of cleaner cars, green jobs, and reductions in greenhouse gas emissions.

Why? Because under the new California low-carbon fuel standard, or LCFS, fuel refiners, distributors, and blenders are required to improve the “greenhouse gas intensity” of their fuels starting in 2011. The “greenhouse gas intensity” of fuels is determined by assessing the average amount of greenhouse gases emitted by the fuel relative to the energy the fuel produces. As the fuels are evaluated, a so-called lifecycle approach is utilized so that emissions are taken into account at every stage in the production, delivery, and distribution process of the fuel.

The new California LCFS will create a greater role for the next generation of advanced biofuels in diversifying our energy needs. President Obama’s energy and environmental agenda calls for the establishment of national low-carbon fuel standard. As a nation, we must move forward on biofuels in a more innovative and efficient manner. The LCFS is a step toward rewarding the performance characteristics of advanced biofuels—those produced in more environmentally friendly ways using hardy feedstocks such as switchgrass and miscanthus, even algae—and not simply a standard based on the sheer volume of production levels. An LCFS that is based increasingly on greenhouse gas intensity rather than volume will contribute to a technologically neutral standard where the market, and not the government, picks the best fuels to achieve our clean-energy and greenhouse gas reduction goals.

Importantly, the California Air Resources Board recognizes that the science and methodologies used in the LCFS evaluation process are evolving and will require constant improvement and updating as more information on the greenhouse gas emissions of various fuels and feedstocks become available. The board has indicated its commitment to incorporating the latest scientific data into its greenhouse gas intensity assessments while performing constant reviews and updates of its standards. They should be held to this commitment.

The reason: More scientific research and study is needed to further our knowledge and recognition of the effects of improvements in soil management, crop yields, and indirect land use of all potential crop-based fuel feedstocks, including traditional corn-based ethanol. Legitimate concerns regarding the need for more scientific data to constantly inform the LCFS have been expressed by the existing biofuels industry and must be taken into account.

A low-carbon fuel standard, acting in combination with a market-based carbon cap-and-trade program alongside other measures to limit greenhouse gas emissions will reduce emissions in a manner that allows new low-carbon fuels to be developed and delivered to consumers at reduced cost. A carbon cap and LCFS will act together to reduce greenhouse gas emissions and reinforce a predictable price signal that will drive innovation and investment to produce cleaner fuels, vehicles, better jobs, and more renewable energy.

A market-based carbon cap-and-trade program also will provide incentives to discourage overall transportation emissions from rising if drivers choose to drive more on low-carbon fuels. Significantly, the American Clean Energy Security Act now before Congress also adopts a similar integrated approach that combines a national low-carbon fuel standard, increased fuel-efficiency standards, promotion of renewable energy, and a cap-and-trade system and other mechanisms—all of them working together to encourage clean energy, greener jobs, and reductions in greenhouse gas emissions.

The United States must build on the goals and performance incentives of the LCFS, and strive to produce advanced biofuels that deliver measurable lifecycle greenhouse gas reductions and adhere to certifiable environmental, and land use safeguards.

Biofuels that are part of the solution include cellulosic ethanol—which is less energy-intensive and can be made from agricultural plants and waste—or dedicated crops such as switchgrass, miscanthus, or even non-crops such as algae. Another key source for biofuels with low lifecycle greenhouse gas emissions is municipal waste, which is largely untapped today.

Algae, though, is a good example of possible next-generation biofuels. Biocrude from algae and other advanced biofuels have shown recent promise in small-scale testing and production. Algae has tremendous potential due to its capacity to capture significant quantities of carbon, be grown on non-arable land using salt water rather than fresh water, deliver high bioenergy yields compared with other plants, and provide secondary products such as animal feed.

Nonetheless, numerous questions remain regarding algae’s scalability, reproductive growth, and cost. In order to accurately assess the true cost and viability of algae and other advanced biofuels, we need to bring them to commercial scale as rapidly as possible. The current Renewable Fuel Standard, incorporated into the American Clean Energy and Security Act, calls for 100 million gallons of advanced biofuels in 2010, 1 billion gallons in 2013, and 21 billion gallons by 2022. These targets will simply not be met without a redoubling of efforts to coordinate the research, development, and deployment of sustainable advanced biofuels production among all federal, state, and private sector actors. California’s action this week will help speed that process.

The United States boasts a strong foundation on which to build a low-carbon fuel future. Existing energy and farm legislation contains numerous programs that can further this effort, including the Biomass Crop Assistance Program and several existing grant programs. The American Recovery and Reinvestment Act will provide $800 million to the Department of Energy’s biomass program to fund conversion of biomass to biofuels technologies, and $6 billion in loan guarantees for the development of renewable energy systems, including “leading edge biofuel projects” that reduce lifecycle greenhouse gas emissions and are commercially viable. The $6 billion in loan guarantees will leverage and support upwards of $60 billion in project loans from the private sector and other sources.

California’s approval of a low-carbon fuel standard is a significant step toward ensuring all of these investments pay off immediately down the road, delivering all Americans a clean-energy future and reducing our nation’s dependence on oil. What’s more, the new California standard is not static—it will evolve to reflect the latest scientific knowledge and constantly strive to find the best means to provide incentives to reduce greenhouse gas emissions. In combination with a market-based carbon cap-and-trade system, this new low-carbon fuel standard provides an important tool to improve efficiency, lower energy costs, create jobs, and curb global warming pollution.

Jake Caldwell is Director of Policy for Agriculture, Trade and Energy at the Center for American Progress. To read more of his analysis and reports, please go to the Energy and Environment page of our website.