Regulations Helping Build California Clean Fuels Market
There’s always a risk in being the first – in forging ahead without following someone else’s footsteps. California took on that challenge six years ago, adopting the country’s first low carbon fuel standard (LCFS). Today, however, the risks are receding and the rewards are becoming increasingly clear – for consumers, businesses, and the climate. That cinematic notion of “if you build it, they will come,” is holding true for California’s bet that providing a clear market signal for businesses and investors would spur action; we are now seeing significantly increased investment and innovation in a variety of clean fuels.
A new report, produced by Ceres and a coalition of industry partners, highlights just how rapidly California companies are developing diverse new, low-carbon fuel options to meet LCFS requirements. Based on an analysis by the independent consulting firm ICF International, the report found that the market-oriented, technology-neutral fuel standard, launched in 2009, is already achieving its goal of encouraging technological innovation through private investment – and that the standard’s goal of cutting carbon in fuels by 10 percent by 2020 is indeed feasible.
The standard provides several options for compliance, including adding more low-carbon fuels to fuel formulas, reducing the carbon intensity of fuels by improving production techniques, and purchasing credits from other producers and fuel suppliers, such as providers of clean electricity used to fuel electric vehicles. The report concluded that this market based, flexible approach is working well.
The report found that the clean fuels market is developing rapidly, and that the standard is driving investment in a variety of alternative fuels, including low carbon ethanol, biodiesel, renewable diesel and biogas. The standard is also driving innovation in production techniques, such as cogeneration in production facilities, and feedstock switching, to help reduce carbon intensity.
This month’s findings follow other recent accolades for California’s LCFS, which is being watched closely by other states. For instance, National Biodiesel Board and California Biodiesel Alliance recently predicted that California’s biodiesel industry will triple in size in the next few years with major new investments and new jobs in many of the state’s most economically disadvantaged areas.
In April, a report by the Institute of Transportation Studies at the University of California, Davis, found that low carbon transportation fuels have already displaced roughly 2.14 billion gallons of gasoline and 77 million gasoline gallon equivalents of diesel – with a pollution-fighting effect equal to removing 500,000 vehicles from the road.
Since transportation accounts for 40 percent of California’s greenhouse gas emissions, these results are hugely important in tackling climate change and helping California build its clean-energy economy.
The merits of LCFS are increasingly clear. The obvious message for forward-thinking entrepreneurs and investors is that they’d be wise to seize this moment to enter this new and growing market. The U.S. Congress should also take note: it’s time to follow California’s footsteps, and give us a national fuel standard.
Carol Lee Rawn is Director of the Transportation Program at Ceres.