Drive for low carbon fuels standard has cost, logic hurdles to overcome

The Governor’s Office has made no secret that it wants, through legislation or executive order, a low carbon fuels standard (LCFS) in Washington. The goal of an LCFS is to reduce the carbon intensity of automotive fuel. This would likely be achieved by blending more biofuels in our gasoline.

The current cost projections for an LCFS program are all over the map. The governor has not revealed a specific proposal, but has insisted the cost will be low – perhaps just 2 cents by 2020 and 10 cents by 2026, according an Inslee-ordered study. A previous study for the state Climate Legislative & Executive Workgroup estimated the cost would land between 93 cents and $1.17 per gallon.

California has already implemented an LCFS program, but it has not gone smoothly. Adequate supplies of biofuels remain a serious challenge and will only become more so as the state nears its 2020 goals. The carbon intensity of current biofuels is too low to meet those near-future standards, and despite the predictions of many (including Inslee, who predicted it would be widely available by 2011), cellulosic ethanol is a long way off from mass production.

An LCFS is an odd strategy to pursue, for a few reasons. For one, it’s one of the least cost-effective ways to reduce carbon. And if the Inslee Administration proposes a cap-and-trade system, which Inslee has indicated he prefers over a straight-up carbon tax, then an LCFS on top of a cap-and-trade system would add nothing to carbon reductions, except additional cost. The two policies drive at the same goal, with an LCFS merely an added cost on top.

Todd Myers of the Washington Policy Center put it this way:

“Adding an LCFS [on top of a cap-and-trade system] removes flexibility, saying ‘we want you to meet the goal by using this particular approach whether or not that works for you.’ It does not increase total reductions because the cap stays the same. It simply requires everyone to meet the same carbon reduction goal in a more restrictive way. Even worse, the LCFS is one of the worst possible ways to reduce emissions, as the report to the Governor’s climate workgroup shows.

Combining these policies, as Inslee wants and the Pacific Coast agreement requires, compounds these problems. The combination does nothing to increase emission reduction but does increase the cost of achieving those reductions. It is the worst of both worlds.”

The governor has tried to dampen opposition to an LCFS by promising that any proposal will be subject to economic analysis and that any price increase in gas will be small. The only trouble is, there is no such thing as a low-cost LCFS that is also effective at reducing carbon. An LCFS is cheap, or it is effective at reducing carbon, but it cannot be both. That’s even more true in our present reality, in which cellulosic ethanol is not cheap, abundant, or easy to make. So many hopes and assumptions around an LCFS, including California’s program, rely on that changing faster than is likely.

Leaders in Olympia need to think carefully about how an LCFS fits into the state’s carbon reduction goals, if the cost is affordable, and if it is cost-effective versus other methods to reduce carbon. They also need to take into account how an LCFS affects the prospects of a transportation package, which is critical to the state’s economic health. Asking voters to increase the gas tax to pay for important projects is one thing. Asking them to raise the price of fuel to help prop up biofuels producers, with little environmental benefit, is another.
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.