Institute of Transportation Studies University of California Davis

Institute of Transportation Studies University of California, Davis Low Carbon Fuel Standard in California … and EU, US, China? Daniel Sperling Professor and Director UC Davis September 7, 2007

California (and others) set ambitious targets The 2020 target (~25% cut) is established by both Governor and Legislature.

LCFS is One Possible Strategy to Reduce Oil Use and GHG Emissions in Transport Sector • More Efficient Vehicles • Less Vehicle Use • Low Carbon Fuels

Other Fuel-Related Strategies to Reduce Oil Use and GHGs • Carbon tax § Equal across all sectors? § Not effective for transport fuels • Subsidies and Mandates § Difficult for government to make correct decisions • Renewable Fuel Standard § Simpler than LCFS but does not target GHGs • Intensity standard (LCFS) § Energy providers have flexibility to pick winners § Provides a scientifically-based framework to guide decisions

Governor Schwarzenegger Signing LCFS • Adopted by California in June 2007 • Under serious consideration by US government, other states in US, and Europe (and Japan is beginning to consider it)

Principles underlying LCFS • Provide durable framework for orchestrating near and long term transition to low-carbon alternative fuels § Send consistent signals to industry and consumers to reduce GHGs • Stimulate technological innovation • Use performance standard, with tightening over time • Government does not pick winners (or losers!) § Provides industry with flexibility in how they respond • Use lifecycle approach • Rely on measurable data as much as possible • Be consistent/compatible with other states, US, EU, Japan, China, others • Start slowly (to allow for institution learning)

Key Features of California LCFS • 10% reduction in GHGs by 2020 • “Carbon” intensity measured on lifecycle basis § Global warming intensity, measured in g. CO 2 e/MJ § Includes CO 2 and other GHGs § Adjusted for drivetrain efficiency: Gasoline = 1. 0 by definition, Diesel = 0. 78, Electricity = 0. 20, H 2 = 0. 47 (proposed) • Point of regulation is oil refineries (and oil importers) • Performance standard (no ‘picking winners’) • Over-compliance creates credits that can be traded or banked • Could be implemented in addition to tax or cap

How to Comply? 1. Improve energy efficiency or lower upstream CO 2 emissions (eg, eliminate flaring) 2. Blend in fuels with lower carbon intensity (eg, biofuels) 3. Sell fuels with low carbon intensity (e. g. electricity) 4. Buy credits from other fuel providers

Default Values for Fuels 1. Assign a lifecycle GHG default value to all fuel paths § Default value is conservative (but better than worst case) § Government defines default values 2. Fuel suppliers who beat the default value get extra credit, but must provide documentation

Based on “Source-to-Wheel” Emissions

Key Clean Alternative Fuel Options for Vehicles V FC Hybrid ’s -in lug P ls Bi o e fu Hydrogen

Potential for Huge GHG Reductions GHGs per km, Relative to Gasoline-Powered ICE, Full Energy Cycle Fuel/Feedstock % Change Fuel cells, hydrogen with solar or nuclear Biofuels from cellulose Electric vehicles with natural gas Diesel from petroleum Natural gas vehicle Electric vehicles with coal-electricity Gasoline from conventional oil Fuel cells, hydrogen from coal Gasoline from coal -90 -60 -20 -10 to -80 to -40 to -10 to +20 0 -50 to +50 0 to +100 Actual impacts could vary considerably. These estimates reflect a large number of assumptions and should be treated as illustrative. Adapted from GREET, Farrell, and Delucchi

Illustrative defaults for California (examples) • Fuel default § Gasoline, diesel, ethanol, biodiesel, natural gas, electricity • Feedstock default § Gasoline: conventional oil, heavy oil, tar sands, coal § Diesel: conventional oil, heavy oil, tar sands, coal § Ethanol: U. S. corn, Brazilian sugar, U. S. switchgrass § Electricity: California average, California marginal • Feedstock & processing default § Gasoline: conventional oil, conventional oil with CCS, heavy oil with cogeneration, tar sands with nuclear process heat, etc. § Ethanol: U. S. corn pre-2000 wet mill, U. S. 2004 natural gas dry mill, Brazilian sugar, U. S. switchgrass, etc. § Electricity: coal, nuclear, natural gas, hydropower

How to Account for Electricity (battery EVs, Plug-in EVs, and E-bikes)? • Assign GHG rating based on source of electricity • Calculate credits based on number, type, and usage of BEVs, PHEVs, and E-bikes

LCFS is Cost-Effective Policy • Stimulates technological innovation and investment § Current technologies were not developed to reduce carbon intensity • Many technologies will compete to lower costs • Credit trading minimizes costs.

Related Sustainability Issues To Consider • Air and water quality • Soil erosion • Habitat loss and biodiversity California LCFS: To require fuel suppliers to submit a report of sustainability impacts

Next for California Research, rule-making, model refinement and protocols • 2007 -08 – Specific rules adopted • January 2010 – LCFS regulations take effect • 2020 – 10% target must be met • 2020+ – More aggressive standards (20% in 2030? )

Key Questions/Challenges for China (and California) • Point of regulation? Oil refineries? • Intensity target? 10% in 2020? • Need to specify lifecycle GHG emissions for fuel paths § Some uncertainty about emissions associated with biofuels (especially from land use conversion) • Include fuels used in planes and ships? • Favor domestic fuels (for example, coal-based fuels)? • Who can buy and sell credits? § Only fuel providers? Car makers? Anyone? • Which other policies would be most effective in combination with LCFS? • How should LCFS interface with other regulations and government policies? • How should LCFS interface with other countries?

This is Hugely Important Yes, there is uncertainty. Yes, there is some complexity. Yes, more research is needed. But… this is the most important policy initiative in transportation fuels, perhaps ever (in the US)! It is a durable and flexible framework for guiding investments and the transition to alternative fuels. We need to make this work.