On July 12, 2010, the members of the New England Governor’s Conference and five eastern Canadian Provincial Premiers approved a resolution to study the use of a low-carbon fuel standard (LCFS) to reduce greenhouse gas (“GHG”) intensity of emissions from the use of transportation fuels. Oregon, Washington, Maryland, and Pennsylvania may also be evaluating a LCFS. This study is likely to examine the advantages and disadvantages of the California LCFS, the only current U.S. regulation of this type. The California LCFS requires at least a 10 percent decrease in the carbon intensity of California’s transportation fuels by 2020, based on the lifecycle emissions associated with the fuel (referred to as “well head to wheels” emissions).
The LCFS creates a disincentive to purchase fuels that have high carbon intensity (i.e., fuels that use more energy over the entire lifecycle of the production of the fuel, which is the case with fuels derived from oil sands). Charles River Associates (an economic consulting firm retained by the Consumer Energy Alliance) concluded that a required 10-percent reduction in carbon intensity over 10 years would increase the cost of transportation fuels within 5 years by 30 to 80%, which in turn causes increases in the cost of most goods (Economic and Energy Impacts Resulting from a National Low Carbon Fuel Standard, available here). Current and reasonably foreseeable fuel technology cannot meet a 10 percent target, since the time frame is too short to make such fundamental changes to the transportation infrastructure. Charles River Associates concludes that this policy, in effect, “rations gasoline until the required improvement in emissions per gallon is met.”
In June, a federal district court denied California’s motion to dismiss industry group claims that the LCFS rule frustrates the full effectiveness of federal law and violates the U.S. Constitution’s Commerce Clause (see National Petrochemicals & Refiners Association et al. v. James Goldstene, Cas. No. CV-F-09-2334 LIO DLB (E.D. CA, June 16, 2010), available here).
With no easy solutions in sight, the oil sands debate is expected to continue.
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