California’s LCFS Requirements-Gas Prices, A Political Lightning Rod
California’s LCFS (Low Carbon Fuel Standard), implemented by CARB (California Air Resources Board), in 2011 has been one of the main driving forces behind the development of low carbon intensity biofuels. For California, the results have been outstanding. CARB estimates that the LCFS standard has removed 320 million metric tons of carbon dioxide from gas and diesel since 2011. But with the new rules for LCFS, a political maelstrom has taken hold surrounding the potential for higher gas prices.
New CARB LCFS requirements for biofuels
One of the CARB decisions requires automakers to sell only cars producing zero emissions by 2035. It also increased the target for reducing carbon intensity in the transportation sector by 30% (from 20%) in 2030,
Another key factor is a new limitation on credits awarded for fuel created from virgin oil feedstocks, such as palm oil. This puts more emphasis on waste oil feedstocks (used cooking oil for example) which have a much lower carbon intensity than virgin oil feedstocks.
The problem with palm oil is two fold: one, harvesting of palm oil causes deforestation which exacerbates climate change and depletes food production. Secondly, countries like China have been mixing palm oil in with used cooking oil to claim the higher credits available for biodiesel produced from waste cooking oil. 80% of “waste oil” used for biofuels in the EU is imported into the European Union. 60% of that oil comes from China. The EU is investigating fraud in used cooking oil imports as much of those imports appear to be adulterated palm oil.
Together, these changes to LCFS rules help reduce emissions and mitigate climate change but do they increase gas prices?
The Lightning Rod-Consumer Gas Prices
California’s gas prices are among the highest in the nation. On the heels of an election where the cost of living was a crucial issue, politicians are very reluctant to support regulations which some people believe will increase prices at the pump. While gas prices are nearly impossible to forecast, some suggest that gas prices might increase by $0.47 per gallon as a result of the new LCFS targets/rules.
This has brought Congressional representatives to the forefront saying that middle and lower income consumers will bear the brunt of the cost of the new rules.
“Members on both sides of the aisle in California’s state assembly have warned that higher gas prices could hurt their constituents. Nearly 13,000 residents signed a petition led by Republicans in the State Senate that urged regulators to postpone the vote on the amendments” wrote Kate Selig in the NY Times.
Inflation affects everyone, but disproportionately the lower and middle income citizens. Prices and inflation are sometimes considered to be a third rail of American politics, along with Medicare and Social Security.
Leaders of the CA legislature promise to review these decisions by CARB in January 2025.
Criticism by Environmental Advocates
Not all environmentalists are on-board with the new rules either. Some say that the rules put much more emphasis on the production of biofuels rather than electric vehicles, the latter of which they consider more environmentally friendly.
Much of biofuel production comes from crops (soybeans for example) that are grown for that purpose. Environmentalists say that the LCFS carbon intensity scoring does not adequately account for the cost of utilizing land to grow crops for biofuel production which could instead be used to produce food.
Putting more emphasis on biofuels, say environmentalists, means diverting land from growing food (soybeans) or causing deforestation (palm oil). They fear that waste oil can never account for a significant portion of biofuel feedstocks which means more virgin oil feedstock use.
The Political Bottom Line
California’s LCFS rule changes are fraught with peril for politicians, oil companies, farmers and environmentalists.
Politicians fear the election fallout if the result is higher gas prices. Environmentalists fear climate damage from overuse of virgin feedstocks if waste oil quantities are insufficient. They prefer electric vehicles. Farmers fear the financial impact if there are reduced subsidies due to less emphasis on feedstocks such as soybeans. Oil companies fear the uncertainty of the value of credits amidst the changes to LCFS and the potential for higher costs to comply with the new fuel targets.
Climate change is the new third rail of politics.