The California Low Carbon Fuel Standard John D. Courtis August 10-12, 2009 Why LCFS Large GHG Reductions Required to Meet 2020 Target and 2050 Goal 700 -169 MMT 600 500 -341 MMT 400 300 200 100 GHG Emissions (MMTCO2e) GHG Emissions 0 1990 2000 2004 2020 2050 Transportation Emissions are Large and Increasing LCFS Framework • Governor Schwarzenegger established the LCFS in January 2007 • UC completed analysis for LCFS feasibility in 2007 • ARB identified LCFS as AB 32 discrete early action measure in June 2007 • Board approved LCFS on April 2009 • Final adoption LCFS on December 2009 Overview • Regulatory requirements • Importance of lifecycle analysis and results • Economic impacts • Current activities LCFS Requirements Regulated Parties • Petroleum and biofuels providers are the ‘regulated parties’ • Providers of other fuels that meet 2020 or earlier levels must ‘opt in’ to earn credits: – Electricity – Hydrogen – Natural Gas LCFS Standards • Require a 10 percent reduction in fuel carbon intensity(CI) by 2020; baseline 2010 – Apply to fuel (fossil+biofuel) mix – Separate standards for gasoline and diesel • ARB has established CI values for most fuels and will establish CI values for other potential fuels. The LCFS Compliance Schedule Compliance and Enforcement Requirements • Regulated parties required to report quarterly and annually • Enforcement includes records review, field inspections, and audits and penalties • ARB is developing a software tool for fuel carbon reporting and credit tracking LCFS Flexibility: Market-Driven Compliance • Supply a mix of fuels with average carbon intensity(over a year) equal to the standard • Allows purchased or banked credits to be used to meet the standard • Allows companies to generate their own CI values (certain criteria must be met) LCFS Benefits Benefits: Pavley and LCFS Reverse GHG Trend 250 GHG Transportation Trends 225 Pavley Pavley & LCFS 200 175 GHG (MMT) 150 125 2005 2010 2015 2020 LCFS: Benefits • Reduces GHG in California by 16 MMT in 2020; total GHG benefits 23 MMT • No significant adverse impacts • Co-Benefits: Potential reductions in criteria pollutants with advance vehicles • Encourages technology innovation and sets stage for future GHG reduction LCFS: Impact on Fuels • Increase use of: – Low carbon corn or sugarcane ethanol – Cellulosic ethanol – Renewable diesel and biodiesel – Electricity, hydrogen, natural gas • And decrease the use of: – Petroleum – High carbon biofuels Importance of Lifecycle Analysis Estimating CI for LCFS • Use lifecycle analysis for GHG emissions from all facets of fuel production, distribution, and use • Selected methodological approach: – Part 1: Direct effects • Use CA GREET – Part 2: Land Use Change effects (or iLUC) • Use GTAP for estimating effects of land use change Gasoline: Direct Effects (CA GREET) 73 g/MJ 7 14 g/MJ g/MJ 1 g/MJ 1 g/MJ Oil Well Refinery Vehicle Transportation Transportation Gasoline 96 g/MJ Corn Ethanol: Direct and LUC Effects (CA GREET+GTAP) Emissions 36 38 are g/MJ g/MJ Offset 3 g/MJ Corn Field 2 g/MJ Bio-Refinery Vehicles Transportation Transportation Blend with gasoline 30 g/MJ -12 g/MJ Land Use Corn Ethanol Change 97 g/MJ GTAP Co-products GTAP Results: Land Conversion (per Bgal biofuel production increase) 500 Corn Ethanol Sugarcane 400 300 ROW 200 ROW ROW Brazil 100 ROW U.S. Brazil Land ConvertedLand (1000's ha) U.S. 0 Forest Pasture Forest Pasture Range of LUC Carbon Intensity Values for Corn Ethanol Searchinger et.al. ARB Upper Bound ARB Proposed Value ARB Lower Bound RFA 0 25 50 75 100 125 LUC Carbon Intensity (gCO2e/MJ) Carbon Intensity of Tomorrow’s Fuels Indirect 110 Baseline Direct 100 90 80 2020 Goal 70 60 50 40 30 20 Carbon Intensity (CO2e/MJ) 10 0 Gasoline High CI Sugarcane Low CI Soybean Cellulosic Cellulosic Electricity Hydrogen Corn Ethanol Corn Biodiesel Ethanol Ethanol Ethanol Ethanol (non-food (Waste) crop) Status of LUC Analysis • Completed LUC analysis for corn ethanol and Brazilian sugarcane ethanol • Work in progress – Soy biodiesel: preliminary results Sept. 2009 – Cellulosic ethanol: later this year LCFS Treats All Fuels Fairly • Land use change contributes to carbon intensity of certain biofuels • ARB have not identified any significant indirect effects from non-biofuels, though research is ongoing • Open process; results and assumptions shared with stakeholders Economic Impacts • Cost-of-compliance basis • Overall savings estimated for 2010-2020 • Impact dependent on crude prices and production costs of alternative fuels • Recognized uncertainties could result in slight costs Federal Fuel Volumes 35 30 Advanced Renewables Corn Ethanol 25 20 15 10 Volume (billion gallons) 5 0 2010 2012 2014 2016 2018 2020 Federal Renewable Fuels Standard • Mandates volumes of biofuels with less focus on carbon intensity – Existing corn ethanol, no improvement – New corn facilities, 20% reduction – Other biofuels, at least 50% reduction – Cellulosic biofuels, 60% reduction • Reduces GHGs nationwide by 3 percent LCFS Current Activities Current Activities • Finalize the regulation – Incorporate specific regulatory amendments • Applicability, definitions, reporting, credits & deficits, etc – Include additional fuel pathways • Brazilian sugarcane changes, LNG, digesters, LFG, etc – Workshops – Prepare FSOR and submit to OAL – Expected final approval-end 2009 • Develop Compliance and Reporting Tool Current Activities (cont.) • Prepare guidance document to streamline the approval process for new pathways • Create an expert workgroup to refine and improve land use and indirect effects analysis (report to the Board by end 2009) – Land use effects of biofuels, indirect effects of other fuels, GREET issues, comparative modeling aproaches, etc Current Activities (cont.) • Evaluate electric vehicle issues in LCFS – Third party charging, alternatives to metering, credits for off-road (forklifts, etc.) • Create best practices guidance for siting biorefineries • Establish the details of LCFS credit trading program • Workplan on sustainability Current Activities (cont.) • Coordinate with regional, national, and international groups • Create an advisory panel; regulatory review 2012, 2015 Summary • LCFS is on track – 2010(reporting year), 2011 (compliance year) • Very Optimistic – Significant interest from 1st generation biofuel producers to improve CI – Working with 2nd,3rd generation biofuel producers to define CI for new fuel pathways .