Mostly cheers for California’s plan to extend low-carbon fuel standard

Source: Debra Kahn, E&E News reporter • Posted: Tuesday, May 1, 2018

Oil companies, automakers and alternative fuel producers are all finding something to like in proposed changes to California’s low-carbon fuel standard.

The California Air Resources Board (ARB) is preparing to extend the program through 2030, with additional emissions cuts aimed at ultimately reducing the carbon intensity of fuels sold in-state by 20 percent. The low-carbon fuel standard (LCFS) program, in place since 2011, sets an average carbon content for fuels that declines annually. To stay below that standard, companies need to either change the balance of fuels they sell or buy credits to offset high-emitting fuels.

In addition to ratcheting down the compliance curve — which currently ends in 2020 at 10 percent below a 2010 baseline — the state is looking at new sources of fuels to generate credits, including alternative jet fuel. It’s also planning to add a new methodology to encourage companies to deploy carbon capture and sequestration, as well as make it easier to generate credits from electric vehicles, in part by allowing extra credit for electric vehicle chargers that shift their time of charging to when renewables are most available.

While many oil companies still oppose the program’s overall schedule of emissions cuts, they are praising the inclusion of a way to generate credits from carbon capture and sequestration, which could be an additional profit-maker when coupled with enhanced oil recovery. But they are also pushing regulators to ease requirements for monitoring, arguing that it’s arbitrary to hold projects to the same 100-year time frame as forest sequestration projects.

“CCS and forestry are not similar sequestration methods by any criteria,” Chevron Corp. fuels regulatory manager Nick Economides wrote in comments filed last week.

The board also sought to satisfy both automakers and electric utilities that want control over credits generated from electric vehicle charging. Utilities currently collect rebates based on residential charging data and disburse the proceeds to EV owners, in amounts ranging from $200 to $599.

Automakers, including Ford Motor Co. and Tesla Inc., are seeking to hand out the rebates at the dealership in order to boost sales. They argue that the utilities’ programs dilute the effect of the incentives. “[C]onsumers are rarely aware that these benefits exist when they are making EV purchase decisions, and the programs are too fragmented and time-consuming to explain for automakers to confidently promote them at the point of sale,” Tesla said in comments filed last week.

Regulators agreed and directed agency staff to work on a proposal to allow point-of-sale rebates but still allow the utilities to administer some. “It’s against the whole mission and goals of the LCFS to do it the way it’s being done now,” said ARB member Dan Sperling. “Clearly the electric utilities should get first shot at it. … Maybe impose a timeframe.”

Ethanol producers are also coming out in favor of the program, in a shift from their stance a few years ago. The Renewable Fuels Association was initially wary that the regulations gave its products too-high carbon scores, but ethanol has ended up generating about 45 percent of credits under the program so far.

A trade group official also highlighted the regulatory certainty of California’s program relative to the federal renewable fuel standard (RFS), which has been subject to the whims of the Trump administration. Earlier this month, Trump said he would increase ethanol blending requirements for gasoline, but EPA has also been handing out exemptions from the requirements for some of the nation’s biggest petroleum companies (Greenwire, April 17).

“It seems like there’s less risk that something could go wrong with the LCFS, whereas with the RFS, gosh — it seems like every day we’ve got a new headline coming out about some new clandestine, secret effort to undermine the RFS,” Renewable Fuels Association Executive Vice President Geoff Cooper said in an interview.

ARB plans to take a final vote to approve the amendments this fall.