California voters to determine future of LCFS

By Kris Bevill | October 14, 2010
Posted Nov. 1, 2010

Environmental groups and transportation fuel manufacturers nationwide will be keeping a watchful eye on the results of California's mid-term elections Nov. 2. On the ballot is a proposition that could effectively halt most of the state's efforts to reduce greenhouse gas (GHG emissions) by implementing measures to promote renewable resources and lower carbon fuels.

Proposition 23 is the result of a petitioning effort led by petroleum refiners who oppose California's Assembly Bill 32. Established by the state legislation in 2006, AB 32 set a target to reduce the state's GHG emissions to 1990 levels by 2020. The California Air Resources Board (CARB) is charged with implementing a scoping plan to achieve this goal. The plan includes such controversial regulations as a cap and trade program and a low carbon fuel standard (LCFS) for vehicles. Some smaller measures have already been adopted but others, such as the LCFS and cap and trade, are still under development. The bill requires all measures to be adopted by Jan. 1 and go into effect by Jan. 1, 2012.

A "yes" vote on Proposition 23 means the voter agrees to suspend implementation of AB 32 until state unemployment is at 5.5 percent or lower for 12 months. According to California's legislative analysis, published in the state's voter information guide, there have been only three periods of time since 1970 when California's unemployment rate was at or below 5.5 percent for 12 consecutive months. Unemployment was above 12 percent for the first half of 2010 and the state's economic forecasts predict that unemployment will remain above 8 percent for the next five years. "Given these factors, it appears likely that AB 32 would remain suspended for many years," the analysis stated.

If Proposition 23 passes, cap and trade regulations as well as LCFS would likely be suspended. Additionally, a proposed measure to require electricity providers to use renewable sources such as wind and solar power for at least 33 percent of their supply would also be suspended.

Proponents of Proposition 23 say implementation of AB 32 will result in lost jobs and increasing energy costs for consumers. Opponents argue that delaying AB 32 would result in job loss and would also increase pollution. Somewhere in the middle is California's ethanol industry. Cap and trade and the LCFS have the potential to affect ethanol producers in California as well as Midwest producers who are importing product into the state, but those effects may be a few years from becoming reality. Matt Schmitt, founder and developer of Pixley, Calif.-based Calgren Renewable Fuels LLC, said he doesn't think Proposition 23 will pass and, if it does, it may not matter to ethanol producers. "As far as what's happening now in the industry, I don't see much change at all," he said. The first few years of the LCFS require modest reductions in GHG emissions, he said, so there won't be many adjustments required at most production facilities. Also, the E10 mandate will stand, so supply and demand for ethanol will be maintained. "The refiners in California have to use ethanol," Schmitt said. "They have to meet clean air requirements. They're not going to Brazil to get it because there isn't any available and it's more expensive than the Midwest."