BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 278
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: gatto
VERSION: 6/17/13
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: June 25, 2013
SUBJECT:
Low carbon fuel regulations and policies
DESCRIPTION:
This bill directs the California Air Resources Board to consider
the impact on food supply of its low-carbon fuel regulations and
to adopt policies that favor fuels with the lowest possible
negative effect on the food supply.
ANALYSIS:
State law assigns the California Air Resource Board (ARB) with
primary responsibility for implementing California's air quality
and greenhouse gas (GHG) emission policies. State law gives ARB
authority to control mobile source air pollution, including the
adoption of rules for the reduction of harmful vehicle emissions
and the specification of vehicular fuel composition.
In 2006, the Legislature passed and the Governor signed AB 32
(Núñez and Pavley), Chapter 488, to establish a statewide GHG
emissions limit such that by 2020 California shall reduce its
GHG emissions to the level they were in 1990. ARB instituted a
low-carbon fuel standard as one element of achieving the AB 32
goal.
This bill :
1.Directs the ARB when promulgating regulations or other
policies on the carbon intensity of fuels to consider:
Food supply sustainability factors including the full
life-cycle carbon emissions from producing the fuel, the
effect a fuel source has on global food supply, and the
direct and indirect land use changes associated with
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producing the fuel.
The state of the fuel market and technologies.
1.Requires ARB by December 2014 to include mechanisms and
policies that favor fuels with the lowest possible effect on
food supply sustainability and give preference to fuels
produced without displacement of food crops.
COMMENTS:
1.Purpose . Executive Order S-01-07 (see comment #3 below)
tasked ARB with looking solely at the carbon intensity of
California's transportation fuels. The author asserts that
this bill directs ARB also to take into consideration the
impacts fuels have on food production, as well as the overall
sustainability of the fuel.
The author notes that ARB is currently updating its indirect
land use change calculation, an algorithm used to estimate the
indirect carbon emissions generated by producing fossil fuels
or alternative fuels. Several articles have challenged ARB to
take into consideration several additional sources of indirect
emissions, including changes in global food shipping caused by
the production of a fuel. This bill requires ARB to include
these additional factors in its update of the indirect land
use change calculation.
Citing the UC Davis Institute of Transportation Studies, the
author notes that the LCFS generated 78% of its credits from
ethanol in 2012. He believes the state should be
incentivizing more sustainable alternative fuels that do not
displace food crops, like waste-based fuels, cellulosic
ethanol, electrification, and efficiency. He introduced this
bill to require ARB to take proactive steps to incentivize
non-food based compliance mechanism and require ARB to give
preference to non-food based fuels.
2.Carbon intensity . Carbon intensity is a measure of the direct
and indirect GHG emissions associated with each of the steps
in the full life-cycle of a transportation fuel (also referred
to as the "well-to-wheels" for fossil fuels, or "seed or
field-to-wheels" for biofuels). The overall GHG contribution
from each particular step in the production and delivery
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process is a function of the energy that step requires. Thus,
if a fuel that requires little energy to produce and that
produces low carbon emissions when consumed has to be trucked
a long way to market, it can still have a high life-cycle
carbon intensity because of the high energy requirements of
getting it to market.
3.Low-carbon fuel standard . In January 2007, Governor
Schwarzenegger issued Executive Order S-01-07 in which he
ordered the establishment of a statewide goal of reducing the
carbon intensity of California's transportation fuels by at
least 10 percent by 2020 and ordered ARB to establish a
low-carbon fuel standard (LCFS) for the state. ARB adopted
the LCFS regulation in April 2009, and it took full effect a
year later. In May 2009, ARB adopted its AB 32 Scoping Plan
to map out how to achieve the reduction in GHG emissions by
2020, as required by AB 32. The scoping plan included the
LCFS as an early action.
ARB staff designed the LCFS to reduce GHG emissions by
reducing the carbon intensity of transportation fuels used in
California by an average of 10 percent by the year 2020. The
LCFS achieves a 10 percent reduction in average carbon
intensity by establishing an initial intensity level for
specified providers of transportation fuels ("regulated
parties") and incrementally lowering the allowable carbon
intensity in each subsequent year. For example, modest
targeted reductions of 0.5 and 1.0 percent are required for
2012 and 2013, respectively. The reductions become more
substantial with each year, such that by 2020, the 10 percent
average reduction is achieved. This reduction makes room for
low-carbon intensity fuels to enter the market.
A regulated party needs to meet each year's specified target,
taking into account all of its transportation fuels. If the
reduction in intensity exceeds the target, the provider earns
a credit, which can be sold or carried forward. The LCFS
allows fuels like electricity, hydrogen, and natural gas -
which already meet the carbon intensity standards through 2020
- to generate LCFS credits that may be sold. Regulated fuel
providers, therefore, can meet their annual CI levels through
several compliance strategies:
Making low-GHG fuels, such as biofuels made from waste
products;
Carrying forward credits from previous years from their
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own production process;
Buying credits from other fuel producers; or
Reducing the amount of fuel they sell.
A fuel provider meets the requirements of the LCFS if the
amount of credits at the end of the year is equal to, or
greater than, the deficits. A provider determines its credits
and deficits based on the amount of fuel sold, the carbon
intensity of the fuel, and the efficiency by which a vehicle
converts the fuel into useable energy. Under the LCFS, a
regulated party's compliance with the annual carbon intensity
requirements is based on end-of-year credit/deficit balancing.
1.Update to LCFS underway . ARB staff is currently hosting a
series of workshops to discern what matters should be included
in an update to the regulation that staff plans to present to
the board in the fall with approval before end of the year.
The workshops are covering issues related to the structure and
organization of the program, the carbon intensity of crude
oil-based fuels, and the carbon intensity of crop-based bio
fuels, including revisions to indirect land use change values.
The matters that this bill raises appear to be part of those
workshops and could therefore be included in what staff
presents to the ARB in November. In any case, it is unclear
that this bill changes the work ARB has previously done and
continues to do on the LCFS or its other fuels regulations.
Part of this lack of clarity stems from the language of the
bill which requires, for example, that ARB "consider the state
of the fuels market and technologies" when promulgating
regulations on carbon intensity of fuels. It is unclear what
"technologies" means or how ARB could promulgate such a
regulation without considering the state of the fuels market.
2.Oppose unless amended . The American Lung Association and the
Natural Resources Defense Council are concerned that the bill
calls for analyses that are already underway at ARB, does not
reflect the benefits of the LCFS and the need for California
to move strongly in the direction of reducing carbon content
of fuels, and focuses on the issue of "food supply
sustainability" rather than sustainability more generally.
Both of these organizations note the importance and benefit of
the LCFS as a key tool to fight both air pollution and climate
change problems, expressing concern that the bill may weaken
the LCFS, which they believe is already structured to favor
fuels that do not compete with food production. The Lung
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Association and Natural Resources Defense Council instead are
seeking amendments to the bill that would clarify the benefits
and importance of the LCFS, support continued ARB review of
direct and indirect land use issues (including food supply),
and direct ARB to incorporate policies in the LCFS that favor
the least carbon-intensive and most sustainable fuels.
3.LCFS never codified . Twice in the past this committee passed
legislation to codify the LCFS that Governor Schwarzenegger
established via executive order in January 2007. The first
time was through SB 210 (Kehoe) of 2007, which Governor
Schwarzenegger vetoed, and the second was through SB 1240
(Kehoe) of 2008, which the author amended to address another
subject while it was pending on the Assembly floor.
4.Gut and amend . When heard in the Assembly, this bill required
ARB, when updating the LCFS to consider land use effects, to
identify the environmental laws of the jurisdiction from which
a fuel originates, and to consider evidence of the LCFS's
impact on food supply and job loss. On June 17th, the author
deleted that language from this bill and replaced it with the
language analyzed here and focused primarily on impacts of
ARB's fuel's regulations on food supply. It is unclear,
therefore, whether the Assembly votes shown below are relevant
or not.
5.Double-referral . The Rules Committee has referred this bill
to both this committee and the Environmental Quality
Committee. Therefore, if this bill passes this committee, it
will be referred to the Committee on Environmental Quality.
Assembly Votes
Floor: 77-0
Appr: 17-0
Nat Res: 9-0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 19,
2013.)
SUPPORT: Milk Producers Council
OPPOSED: Advanced Ethanol Council
American Lung Association
Natural Resources Defense Council
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