CARB releases 2011 LCFS review report

By Kris Bevill | December 22, 2011

The California Air Resources Board has completed the first required formal review of the state’s Low Carbon Fuel Standard, a regulatory program that requires stakeholders to reduce the carbon intensity (CI) of fuels sold within its borders each year until reaching a 10 percent reduction by 2020.

While the program came into effect in 2010, this was the first year fuel producers and importers had to show a reduction in CI in order to comply with the regulation. The reduction was modest—just .25 percent—and CARB concluded that there has been no change in the state’s air quality since the program was implemented. In the report, CARB staff stressed that the program is “still in its infancy” and that the agency expects noticeable changes in future years. “…as the LCFS annual CI standards get more stringent, additional fuels will undergo the multimedia process, and investment will begin to flow more freely to ultra-low carbon fuel producers, so there will be impacts associated with the LCFS program - potentially positive or negative,” CARB said in the report. “Ongoing monitoring and assessment of emission impacts, as well as promotion of sustainability principles for air quality and other environmental concerns is necessary to protect against unintended negative outcomes.”

CARB does not intend to make any immediate changes to the policy, according to the report, which means that obligated parties will need to show a .5 percent reduction in the CI of their fuels in 2012. From there, the CI reduction requirements continue to increase by .5 percent annually until maxing out at 10 percent in 2020. To complete the review of the LCFS, CARB employed the assistance of a 39-member advisory panel consisting of state agency representatives, fuel providers, station owners, engine manufacturers and others. Many expressed concern that program compliance will become extremely difficult by 2014 if next-generation biofuels are not readily available. Because of this, panel members recommended the creation of a flexible compliance mechanism, but CARB declared in its final report that it will not evaluate an alternative compliance plan at this time and will instead reconsider the option at a later date.

 “Anybody who has crunched the numbers would agree that unless something changes, by 2014 it’s going to be very difficult for regulated parties to comply,” said Geoff Cooper, CARB advisory panel member and vice president of research and analysis for the Renewable Fuels Association. “What happens when fuels that regulated parties need aren’t available? CARB needs to think about that scenario and figure out ways to comply.”

At issue for Midwest ethanol producers in particular is the inclusion of indirect land use change (ILUC) in the methodology used by CARB to calculate a fuel’s CI. In the report, CARB said that while the inclusion of ILUC in its model could make it more difficult to harmonize the LCFS with other regional emissions programs that do not require ILUC calculations, it does not plan to alter its program at this time. It will also not consider any changes to the CI values on a set schedule, but rather will evaluate new information as it becomes available. “The model used by CARB to calculate indirect land use effect, GTAP, or Global Trade Analysis Project, has been under review and staff has been moving forward using a combination of recommendations from the various parties tasked with reviewing the model,” CARB said in the report.

Cooper, however, expressed skepticism that updates to the model would be made in a timely fashion. He noted that the creators of the GTAP model updated it earlier this year after determining that ethanol’s CI should be 14 as opposed to 30, but CARB has yet to implement those changes. If CARB fails to recognize the updated analyses, Cooper said it will become very difficult for Midwest ethanol producers to market their product in California. “It won’t be a viable compliance option unless something changes,” he said.

CARB is not required to complete another formal LCFS review until January 2015. In the meantime, the agency said it will continue to engage panel members and stakeholders to monitor the progress of the program.