Review of California’s Low Carbon Fuel Standard shows shifts in fuel use

The latest progress report on California’s Low Carbon Fuel Standard (LCFS) shows a small increase in use of alternative transportation fuels, which include biofuels and electricity. Among alternative fuels, the report finds a decrease in ethanol made from corn and an increase in biodiesel made from waste materials.

“Status Review of California’s Low Carbon Fuel Standard, January 2014 Issue” finds that in 2013 the LCFS played a stronger role in incentivizing the use of biofuels from a variety of sources, including corn oil, canola, and biodiesel and renewable diesel from waste. It also finds slight increases in the use of electricity for transportation under the program, and that fuel suppliers in the program have generated excess credits.

Adopted by the California Air Resources Board (ARB) in 2009, the LCFS requires transportation fuel providers such as oil companies and refiners to gradually reduce the carbon intensity of their fuel by at least 10 percent by 2020. The state began implementing the rule in 2011.

The status review is authored by UC Davis Institute of Transportation Studies (ITS-Davis) research engineer Sonia Yeh and assistant project scientist Julie Witcover.

“One of the values of this periodic series of reports is that we can analyze trends over time,” says Yeh.

Among the findings in this status review are the following:

  • Fuel suppliers in the program generated excess LCFS credits, beyond what was required, in every quarter since the program was initiated.
  • While overall biofuel volume remained relatively constant since 2011, the contribution to LCFS credits of ethanol made primarily from corn or grain mixes decreased, while biodiesel and renewable diesel credits increased dramatically in 2013.
  • An increasing share and volume of biofuel LCFS credits came from the use of waste-based fuels, which garnered higher premiums from the LCFS than from the federal Renewable Fuel Standard (RFS2) in late 2013 due to their low LCFS carbon intensity ratings, higher LCFS credit prices and declining premiums from the RFS2.
  • Ethanol made from sugarcane or molasses contributed to a total of 5 percent of biofuel volume between 2011 and the first six months of 2013. In the same period, soy biodiesel contributed 0.3 percent of biofuel volume.
  • Reported electricity use for transportation increased almost four-fold from 2011 through the first half of 2013.
  • LCFS credit prices have increased since 2012, rising to about $80/credit in October and November 2013, and ending 2013 at about $50/credit in December.

Like the previous status reviews, published in Spring 2013 and November 2012, this data-rich report on LCFS compliance, fuel use, and credit markets includes a special topic. This issue’s special topic summarizes the results of an October 2013 UC Davis paper that examines ARB’s LCFS cost-containment proposals. It finds that cost-containment mechanisms, such as a cap on credit prices, may play an important role in limiting high credit prices and program costs, thereby safeguarding the LCFS credit market and the LCFS program itself.

The status report is funded through a research contract with ARB and the ITS-Davis NextSTEPS research program.

Read the full paper at: http://www.its.ucdavis.edu/research/publications/publication-detail/?pub_id=2008

Contributed by ITS-Davis.

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