The California Low Carbon Fuel Standard

Jon scooped me on this last night because I got home so late from the all-day meeting of the Air Resources Board that adopted the LCFS. I was there because my team at Berkeley (with another group at Davis and a subcontract to Purdue) did a large part of the supporting research for this innovative program, so I got to give a five-minute talk about our work at the beginning and then sit up front with the ARB staff in case of questions from the board, through ninety commenters during the public hearing part and an hour or so of board discussion. A nine-hour day of democracy in action.

As a piece of climate policy, the LCFS is far from perfect and especially far from “the solution”: if the whole world implemented the 10% reduction in transportation fuel greenhouse gas intensity it requires, it would be less than 3% of the way to climate stabilization. But it’s a good piece of political work, likely to be quite influential on governments in the US and elsewhere, and overall something to celebrate.

The LCFS in simplest form requires transportation fuel to release 10% less greenhouse gas per unit of energy provided from 2012 to 2022. This initially looked like an enormous gift to the biofuels industry, especially the corn ethanol industry; two years ago it was widely believed that the main compliance path for this program would be blending more and more corn ethanol into gasoline. Biofuels are essentially a solar collector system that captures carbon dioxide from the air, peels off the oxygen using the sun’s energy, and releases the carbon when the fuel is burned, so the only global warming expected from them was from production processes like driving a diesel tractor across the cornfield, hauling the corn to a biorefinery, and distilling ethanol from the beer yeast makes from corn mush. For comparison (these values vary a little with production processes), these “direct” emissions from corn ethanol are 50-70 grams of CO2 equivalent per megajoule and gasoline emissions are 95.

A little more than a year ago, the first estimate of so called “indirect land use change” (LUC) emissions was published. By far the most interesting angle on biofuels policy, that has taken us a year to understand properly and measure, this effect occurs when biofuels are grown on land that would otherwise grow food. To divert corn, for example, from cattle feed and corn flakes, biofuels producers have to outbid the food industry for it, and the resulting increase in price starts a series of dominoes falling through the world food markets. One effect is a reduction of food consumption – for example eating less meat, which frees up a lot of corn – another is conversion of soybean land to corn. By the time these dominoes stop falling, someone is cutting down a patch of rain forest in northern Brazil to put cattle on it, because his ranch was planted with soybeans.

Converting forest and pasture to cultivation releases a very large puff of carbon dioxide into the atmosphere from fire and decay of the plants on them, large enough to make biofuels that compete with food for land look much less attractive on a global warming basis that they looked without LUC. For example, using our economic modeling, the ARB will add about 28 grams for LUC to the direct emissions from corn ethanol under its current regulatory scheme (this is much less than the original LUC estimate, from Tim Searchinger and his colleagues; it’s going to be a lively few years in the land use modeling community).

I need to note that biofuel is not the same as ethanol or corn ethanol especially with respect to LUC effects. Biofuels made from algae growing in the ocean or in a tank in the desert, or from wastes like forest thinnings or solid waste diverted from a landfill, do not cause LUC discharges; biofuels made from crops with very high yields, like so-called “cellulosic ethanol” where the whole plant is converted to fuel by technologies currently approaching economic practicality, will have much lower LUC than biofuels from seeds.

ARB’s LUC numbers for different biofuels (such as sugar cane ethanol from Brazil and soybean biodiesel) have been by far the most controversial aspect of the LCFS, variously attacked by the biofuels industry as being (i) too uncertain to use at all (ii) too high. I think the most important element in the board’s vote yesterday was to accept a rule that incorporated indirect land use change discharge as a consequential element of the regulatory process, and it’s to the board’s credit (and Governor Schwarzenegger’s) that it stood up to a very vigorous lobbying campaign to turn the LCFS into an ethanol subsidy by using a value of zero for LUC. ARB staff (a very earnest, professional, and competent bunch, by the way: your tax dollars are well spent on this crowd) was instructed to pursue further research on the LUC phenomenon, and the numbers will probably change as the science progresses. My own view is that the LUC numbers in the current rule are too low by about half for some fairly technical reasons having to do with the fact that LUC occurs at the beginning of the fuel production period, the number of years corn ethanol will be used as vehicle fuel, and the effects on food prices and consumption of crop-based biofuel expansion; watch this space for further details.

Two reflections on the larger politics of this event. First, I was dismayed by the willingness of LCFS advocates to slough over its economic costs, a powerful seduction for well-meaning people trying to save the planet and not scare people over what it will take. If low-carbon transportation fuels were really cheaper than petroleum, we would be using them already, and the same principle applies to all the things we are going to have to do to get the other 97%. Good environmental policy is not free or cheap; it’s expensive and worth it and should be presented that way. We will pay more for gasoline, but we will make out like bandits when we avoid putting Florida and Bangla Desh under water; if we learn to drive less, we will enjoy a lot of other non-climate benefits as well.

Second, we (the global warming science and policy community) tripped on the LUC phenomenon in the context of biofuels, but I think it will be seen as something larger and more interesting. Recall that it’s caused when something competes with food for land, and biofuels are not the only thing that does this. Bulding suburban housing on farmland, for example, has the same LUC discharge on a per-acre basis, and land use policy generally should start to recognize this climate effect along with the other costs of our bad housing habits.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.