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A Clean Fuel Standard

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A Clean Fuel Standard PUGET SOUND CLEAN AIR AGENCY A CLEAN FUEL STANDARD A POTENTIAL WAY TO REDUCE POLLUTION AND INVEST IN OUR FUTURE Report publication date: November 2018 More information: www.pscleanair.org/CleanFuelStandard OVERVIEW Transportation is the number one source of air and climate change-causing pollution in the Puget Sound region, accounting for over 40 percent of greenhouse gas (GHG) emissions into the atmosphere and the air we breathe. In 2016, the Puget Sound Clean Air Agency set a target for the region to reduce climate pollution by 50 percent below 1990 levels by 2030. The target was based on the Agency’s latest scientific analysis, and it aims to slow the mounting costs of climate change and reduce the growing risk of globally catastrophic events. In an analysis of several possible transportation actions that could move us toward this target, a Clean Fuel Standard showed the greatest potential to decrease transportation-related pollution. If adopted, a Clean Fuel Standard will reduce GHG emissions from transportation fuels using a flexible market-based approach that spurs technological innovation. A Clean Fuel Standard is a policy that economically favors lower carbon fuels, such as electricity and biofuels, but is neutral to the type of cleaner fuel used. It has the ability to transform and diversify the transportation fuel pool, decrease dependency on petroleum over the long-term, and increase predictability and consistency in the fuel market. WHO WE ARE The Puget Sound Clean Air Agency’s jurisdiction covers King, Kitsap, Pierce, and Snohomish counties. These four counties are home to more than 4.1 million people, over half the state’s population. We work to protect public health, improve neighborhood air quality, and reduce our region’s contribution to climate change. JOINING THE REST OF THE WEST COAST California, Oregon, and British Columbia have all adopted Clean Fuel Standards. Washington is the only state or province on the West Coast without a Clean Fuel Standard. Adopting a Clean Fuel Standard in the Puget Sound region will strengthen efforts to build an integrated West Coast market for low carbon fuels by creating synergy in implementation and enforcement that increases confidence for investors in low carbon alternative fuels. A larger clean fuel market will also stimulate increased demand. BENEFITS OF A CLEAN FUEL STANDARD The greatest strength of a Clean Fuel Standard is that it guarantees a certain amount of transportation GHG pollution reduction while allowing flexibility – the market decides which fuels best achieve results. The standard will require lower carbon fuels in the market and incentivize fuel producers to make fuels cleaner. The likely growth of locally-produced biofuels and the increase in electricity as a transportation fuel will keep more money spent on transportation fuels in Washington and accelerate the availability of these fuels. Another important benefit of a Clean Fuel Standard is the improvement to air quality and public health. A Clean Fuel Standard will lessen adverse health effects from air pollution, including the risk of heart and lung disease and cancer. Health benefits will be greatest for near-road communities – neighborhoods located next to major roadways – that are currently exposed to the highest levels of transportation pollution. These communities frequently have a greater proportion of their population facing socioeconomic or historic barriers to participation in clean air decisions and solutions, such as institutional and systemic racism, lower levels of income, and limited English language proficiency. HOW IT WORKS A Clean Fuel Standard sets a goal for reducing transportation GHGs by a certain amount over time. The standard establishes an annual carbon intensity target for transportation fuel that progresses to the ultimate reduction goal (for example, 10 percent carbon intensity reduction over 10 years). Each type of transportation fuel is assigned credits or deficits based on how its life-cycle carbon intensity compares to the target; the credit or deficit is proportional to how far the fuel is above or below the target. A Clean Fuel Standard would apply to most light, medium, and heavy-duty vehicle transportation fuel. Low carbon fuel producers and distributors can sell credits to offset the cost of producing WHAT IS LIFE-CYCLE CARBON INTENSITY? the fuel, enhancing technology, or building new infrastructure, such as electric Carbon intensity is the amount of total carbon vehicle charging stations. For example, generated from the type of fuel used. It transit agencies in California are earning includes direct and indirect effects, such as land approximately $9,000 a year in credit sales use changes that contribute to greenhouse for each electric bus in their fleets. California’s gas emissions, and includes the complete life- largest clean fuel sources for credits are cycle of the fuel pathway (often called “wells to ethanol, renewable diesel, biodiesel, wheels”) from production to transportation to electricity, and renewable natural gas. consumption. To meet the target, regulated entities that Carbon intensity is a way to measure and provide higher carbon fuels, like petroleum compare different fuels’ impact on climate refiners and importers, could take a number of change. actions that include improving the efficiency of their extraction, refining, and distribution processes; modifying crude production methods to capture and sequester carbon; blending low carbon biofuels into the fuel they sell; and buying credits generated by low carbon fuel providers. POTENTIAL REGULATED AND OPT-IN PARTIES A Clean Fuel Standard applies to transportation fuel that is provided for sale in the region. Regulated parties are typically importers and producers of fuels such as gasoline, diesel, ethanol, and biodiesel. Providers of fuels with a carbon intensity lower than the target for the gasoline or diesel are typically eligible to ‘opt in’ to the policy if they want to generate and sell credits. Examples include entities who can claim electricity credits (electric utilities, transit providers, or businesses that own electric vehicle charging stations) and producers of biofuel. The graph above illustrates the range of carbon intensities by fuel type based on direct tailpipe carbon emissions and indirect emissions included in the life-cycle calculation. For example, current certified biodiesel and renewable diesel fuel pathways range from 10 to 75 gCO2e/MJ based on variations in feedstock types, origin, raw material production processing efficiencies, and transportation. California currently has 494 certified fuel pathways with assigned carbon intensity scores. CERTAINTY OF SUCCESS A Clean Fuel Standard has a high potential to reduce greenhouse gas emissions and improve air quality. Since adoption in California, low carbon fuel use has increased and surpassed projections. Collectively, regulated and opt-in parties have over-complied with the standard’s targets and exceeded expectations. California initiated a Low Carbon Fuel Standard in 2010 and has since achieved approximately four percent reduction in the carbon intensity of transportation fuels. The California Air Resources Board recently increased their target to a 20 percent reduction in carbon intensity of fuels by 2030. California’s standard has created an economically favorable market for low carbon fuels and has spurred technological innovation in meeting climate change goals. It addresses market failures that have blocked investments in low carbon alternatives to petroleum. The fuel mix in California is diversifying and the percentage of alternative fuel is increasing. A Clean Fuel Standard can feasibly be met using existing fuels that are currently in production. CHANGES AND ECONOMIC IMPACTS TO EXPECT A Clean Fuel Standard will: • Increase availability of low carbon fuels. • Increase in-state production of low carbon fuels, which can increase in-state agricultural value. • Reduce crude fossil fuels imported to the state, which means more fuel spending stays in-state. FUEL PRICES Gasoline and diesel prices are anticipated to increase modestly over time with a Clean Fuel Standard; an analysis for the proposed 2014 Washington state Clean Fuel Standard estimated maximum increases of 13 and 14 cents respectively for gasoline and diesel at full implementation of the program (after a full decade of implementation and 10 percent carbon intensity reduction). Fuel price impacts in the earlier years of a Clean Fuel Standard are substantially less. For instance, Oregon is seeing less than a penny increase in gasoline cost at the pump in their third year of implementing the policy. Fuel prices fluctuate greatly due primarily to the price of crude oil on the international market, leaving gas and diesel users vulnerable to price swings. In the past year alone, the price at the pump increased approximately 50 cents, sending more of our money out of the state, without any benefit to air quality, state economy, or climate. The current price of gas covers the cost of producing and distributing gasoline, but it does not reflect the costs that gasoline consumption imposes on society in the form of health impacts and climate change. If the Agency decides to conduct rulemaking for a Clean Fuel Standard, cost control mechanisms such as credit price ceilings will be considered and potentially included in program design. Existing Clean Fuel Standard states like California and Oregon have explored and implemented cost control mechanisms to limit impacts
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