BILL ANALYSIS Ó
AB 278
Page 1
( Without Reference to File )
CONCURRENCE IN SENATE AMENDMENTS
AB 278 (Gatto)
As Amended August 5, 2014
Majority vote
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|ASSEMBLY: |77-0 |(May 28, 2013) |SENATE: | | |
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(vote not available)
Original Committee Reference: NAT. RES.
SUMMARY : Requires the Air Resources Board (ARB) to consider
specified sustainability factors when promulgating regulations
or other policies on the carbon intensity (CI) of fuels, such as
the Low Carbon Fuel Standard (LCFS) regulation.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Add findings regarding the California Global Warming Solutions
Act (AB 32 (Núñez), Chapter 488, Statutes of 2006) and the
LCFS regulation.
2)Provide that the bill's provisions apply to all regulations or
other policies on the CI of fuels, rather than only the LCFS
regulation.
3)Require ARB to consider the following sustainability factors:
a) The full life-cycle carbon emissions from the
production of a fuel.
b) The positive or negative effect of a fuel source on
the global food supply.
c) The direct and indirect land use changes resulting
from fuel production.
4)Require ARB to consider the state of the fuel market and
technologies.
5)Require ARB, no later than December 2015, to include
mechanisms and policies that favor low-carbon fuels with the
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highest possible sustainability based on the sustainability
factors and provide incentives for sustainable fuels produced
without food stock or the displacement of food crops.
AS PASSED BY THE ASSEMBLY , this bill required ARB to:
1)Consider greenhouse gas (GHG) emissions associated with land
use or other significant indirect effects in determining the
CI of fuels for purposes of the LCFS.
2)Identify, to the extent feasible, the environmental laws and
practices of the jurisdiction from which the fuel originates
that may affect GHG emissions from production and
transportation of fuel.
3)Solicit comments and consider and respond the evidence
regarding:
a) Significant effects upon food supply, food costs, and
food shipping caused by the LCFS.
b) Significant effects upon the local economy, including
job loss or worker displacement caused by the LCFS.
EXISTING LAW :
1)Pursuant to AB 32, requires ARB to adopt a statewide GHG
emissions limit equivalent to 1990 levels by 2020 and to adopt
rules and regulations to achieve maximum technologically
feasible and cost-effective GHG emission reductions.
2)Pursuant to Executive Order S-01-07, sets a statewide goal to
reduce the CI of California's transportation fuels by at least
10% by 2020. The order required ARB to consider adopting a
LCFS to implement this goal. In 2009, ARB adopted the LCFS as
a regulation. The LCFS attributes CI values to a variety of
fuels based on direct and indirect GHG emissions, including
land use changes caused by production of biofuels.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Ongoing costs of $1.6 million from the Cost of Implementation
Account within the Air Pollution Control Fund (special) for
nine positions starting in fiscal year (FY) 2013-14.
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2)Initial costs of at least $400,000 for outside contracts for
FY 2013-14 and FY 2014-15 and ongoing annual costs of up to
$135,000 beginning FY 2015-16 from the Cost of Implementation
Account to assist ARB with modeling a global food supply
analysis.
COMMENTS : In 2007, Governor Schwarzenegger issued Executive
Order S-1-07, calling for a reduction of at least 10% in the CI
of California's transportation fuels by 2020. In response, ARB
adopted the LCFS regulation in 2009, to be implemented beginning
in 2010. 2010 was a reporting year and the first CI reduction
requirement of 0.25 percent began in 2011. The target increased
to 0.5% in 2012 and 1% in 2013. To date, fuel suppliers have
over-complied, predominantly by blending ethanol with gasoline,
which is preferred in the near term because ethanol blending is
required by the federal Renewable Fuel Standard and does not
require significant changes in fueling and vehicle
infrastructure. However, natural gas, biodiesel and electricity
have also been used in significant amounts to comply with the
LCFS.
For the LCFS, ARB staff has identified one indirect effect that
generates significant quantities of GHG emissions: land use
change effects. A land use change effect is initially triggered
by a significant increase in the demand for a crop-based
biofuel. When farmland devoted to food and feed production is
diverted to the production of that biofuel crop, supplies of the
displaced food and feed crops are reduced. Supply reductions
cause prices to rise, which, in turn, stimulates increased
production. If that production takes place on land formerly in
non-agricultural uses, a land use change effect results. The
specific effect consists of the carbon released to the
atmosphere from the lost cover vegetation and disturbed soils in
the periods following the land use conversion.
ARB estimates the land use change effects of biofuel crop
production using the Global Trade Analysis Project (GTAP), which
is a computer model developed and supported by researchers at
Purdue University. Within the GTAP's scope are 111 world
regions, some of which consist of single countries, others of
which are comprised of multiple neighboring countries. Each
region contains data tables that describe every national economy
in that region, as well as all significant intra- and
inter-regional trade relationships. The data for this model is
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contributed and maintained by more than 6,000 local experts.
ARB's efforts to examine the full lifecycle GHG emissions of
fuels have provoked claims that the LCFS impermissibly regulates
interstate commerce. The regulation assigns a significant
penalty to ethanol produced from corn and an even higher penalty
for ethanol produced from sugar cane in Brazil. In fact, the
majority (60% to 80% depending on the source) of the CI value
attributed to Brazilian ethanol is due to indirect effects.
These penalties are directly attributable to land conversion,
including deforestation, associated with the feedstock crops.
LCFS analysis accounts for lifecycle CI impacts related to
potential or actual deforestation. When a lifecycle pathway is
developed for a crop-based biofuel, an indirect land use change
(iLUC) value is developed using the GTAP model for land that
will be converted to agricultural production as a result of
increased demand for that crop. The approach accounts for land
conversions in all regions of the world based on available land
and likelihood of land to be converted as demand for land goes
up. The methodology attributes new land to come from forests in
addition to pastureland and cropland pasture. A fuel that is
more likely to displace forests will have a higher CI, making it
less attractive for use in complying with the LCFS.
Waste-derived biofuels do not require land (no attendant
deforestation) and are assigned "zero" iLUC values. The LCFS
seeks to incentivize the production and use of waste-derived
biofuels, limiting any potential for deforestation.
The LCFS currently incents the production and use of
next-generation biofuels, preferably derived from waste
feedstocks that have no impacts on food shipping, food prices,
or food availability. Nevertheless, ARB is working with
stakeholders to further refine the methodology to account for
potential impacts of price effects and related reductions in
food consumption from the diversion of food crops to produce
biofuels. The inclusion of an additional CI to a crop-derived
biofuel further reduces its GHG savings under the LCFS. This
would send a signal that biofuels produced from food crops would
generate lower LCFS credits and discourage the use of such
fuels.
It appears the LCFS already considers and accounts for many of
the sustainability factors this bill requires ARB to consider.
Further, CI scores based on iLUC values create an incentive for
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fuels produced without food stock or the displacement of food
crops.
Analysis Prepared by : Lawrence Lingbloom / NAT. RES. / (916)
319-2092
FN: 0005598