Lifecycle Greenhouse Gas Emissions due to Increased Biofuel Production Methods and Approaches to Account for Lifecycle Greenhouse Gas Emissions from Biofuels Production Over Time Peer Review Report July 31, 2009 Prepared by: ICF International Table of Contents Introduction ...............................................................................................................................................I-1 Background of Peer Review and Overview of Results .........................................................................I-2 Peer Reviewer Responses to Charge Questions.....................................................................................1 Preliminary Remarks ...............................................................................................................................1 I. Overall Approach to Treatment of Lifecycle GHG Emissions over Time .....................................4 A. Framing the Issues................................................................................................................4 Charge Questions 1 and 2 .......................................................................................................4 II. Time Frame(s) for Accounting ..........................................................................................................5 A. Conceptual Description of Time Frame(s) for Lifecycle GHG Analysis ..........................5 Charge Questions 1, 1a, 1b, and 2..........................................................................................5 B. Determination of Project Time Frame(s).............................................................................6 Charge Question 1...................................................................................................................6 Charge Question 1a and 1a(i)..................................................................................................7 Charge Question 1b, 1b(i), and 1b(ii) ......................................................................................7 C. Determination of Impact Time Frame..................................................................................8 Charge Question 1...................................................................................................................8 Charge Question 2...................................................................................................................9 Charge Question 3...................................................................................................................9 Charge Question 4.................................................................................................................10 Charge Question 5 and 5a.....................................................................................................11 D. Accounting for Lifecycle GHG Emissions after the Project Time Frame ......................11 Charge Question 1.................................................................................................................11 Charge Question 2.................................................................................................................12 Charge Question 3.................................................................................................................13 III. Valuation of Future GHG Emissions ..............................................................................................13 A. Conceptual Issues...............................................................................................................13 Charge Question 1 and 1a.....................................................................................................13 Charge Question 2.................................................................................................................15 Charge Question 2a...............................................................................................................15 Charge Question 2b...............................................................................................................16 Charge Question 3.................................................................................................................16 B. Choice of Discount Rate.....................................................................................................17 Charge Question 1.................................................................................................................17 Charge Question 2.................................................................................................................17 Charge Question 3.................................................................................................................17 C. Appropriate Metrics for Evaluation of Lifecycle GHG Emissions Over Time ...............18 Charge Question 1.................................................................................................................18 Charge Question 2.................................................................................................................19 Charge Question 3.................................................................................................................19 i IV. Other Methodological Considerations ...........................................................................................20 A. Scenario Analysis ...............................................................................................................20 Charge Question 1.................................................................................................................20 Charge Question 2.................................................................................................................21 Charge Question 3.................................................................................................................21 Additional Comments Associated with Section IV ......................................................................21 Appendix A: Timing Peer Review Charge Questions.......................................................................... A-1 Appendix B: Dr. Joseph Fargione Response to Charge Questions .................................................. B-1 Appendix C: Mr. Ralph Heimlich Response to Charge Questions..................................................... C-1 Appendix D: Dr. Elizabeth Marshall Response to Charge Questions ............................................... D-1 Appendix E: Dr. Jeremy Martin Response to Charge Questions....................................................... E-1 Appendix F: Dr. Kenneth R. Richards Response to Charge Questions.............................................F-1 Appendix G: Curricula Vitae of Selected Peer Reviewers ..................................................................G-1 ii Introduction Background of Timing of Emissions Analysis The United States Environmental Protection Agency (EPA) has undertaken a lifecycle assessment of the greenhouse gas (GHG) emissions associated with increased renewable fuels production as part of the proposed revisions to the National Renewable Fuel Standard (RFS) program. The Energy Independence and Security Act of 2007 (EISA) set the first-ever mandatory lifecycle GHG reduction thresholds for renewable fuel categories. The Act requires EPA to conduct a broad lifecycle analysis of expanded biofuel use, including emissions associated with indirect land use changes. Several new pieces of analysis were developed to support this lifecycle assessment. A key component of the analysis is the issue of timing of GHG emissions and reductions. GHG emissions associated with gasoline or diesel are likely to be released over a short period of time, whereas GHG emissions from biofuels production may continue for a much longer period of time. The peer review detailed in this report looks at EPA’s methods and approaches for discounting emissions over time to ensure comparability of biofuels to other fuels. Evidence suggests that biofuel-induced land use change produces significant near-term GHG emissions, with displacement of petroleum by biofuels over subsequent years in effect “paying back” earlier land-conversion impacts. Therefore, it is critical to select an appropriate time horizon over which to analyze emissions and apply a proper discount rate to value near-term versus longer-term emissions. EPA highlights two options. Option one assumes a 30-year time period for assessing future GHG emission impacts and equally values all emission impacts regardless of time emitted (a 0% discount rate). Option two assesses emission impacts over a 100-year time period and discounts future emissions at 2% annually. Additional variations of the time period and discount rate are discussed in the proposed rule and peer review charge questions. This peer review focuses on time frames and discount rates proposed by EPA, appropriate criteria to select those parameters, and subsequent questions. I-1 Background of Peer Review and Overview of Results From May to July 2009, EPA arranged for several peer reviews to be conducted regarding aspects of its revisions to the RFS. Each of these reviews focused on the projection of emissions from indirect land use changes associated with increased fuel production as specified by EISA 2007. ICF International, an independent third-party contractor, coordinated the peer reviews and adhered to EPA’s “Peer Review Handbook “(3rd Edition). The peer review summarized here focuses