A Better Biofuel Law

The U.S. District Court ruled yesterday that California’s low carbon fuel rules must be halted due to violation of the commerce clause in the U.S. Constitution.   I agree the low carbon fuel rules should end, but with the rationale that they are a bad policy choice for carbon emission reduction.

The California Air Resources Board (CARB), which was given authority to regulate greenhouse gas emissions in California under AB 32, designed the Low Carbon Fuel Standard.  The standard is “fuel neutral” meaning that it includes in its ratings gasoline, natural gas, hydrogen, and biofuels such as ethanol and biodiesel.

CARB intended to rate fuels based on a carbon intensity score, which includes both carbon content of the fuel itself and also the emissions generated in the transportation of the fuel to California on a lifecycle basis.  These ratings would then be used to support low carbon fuels, with the current commercially viable option being biofuels.  The CARB lifecycle score would penalize biofuels from other states, such as in the Midwest, interested in exporting their biofuels for sale in California.  While a carbon intensity metric may make sense in the context of carbon emissions, the courts ruled that California is infringing on the federal government’s rights to regulate interstate commerce.

This debate is politically salient for California and Midwestern biofuel producers, but it overshadows the more important debate of whether we should be supporting biofuels at all.  The appeal of biofuels as a climate solution is that they could theoretically be carbon neutral – plants absorb carbon dioxide and use it to grow and then release that same carbon when burned.  However, commercial biofuels production in the United States includes additional carbon emissions from fertilizer, harvesting, and transportation.  In addition, biofuel carbon savings are uncertain due to indirect land-use changes.  Indirect land-use change refers to the unintended impact on carbon emissions of growing more crops for biofuels.

Biofuel policy can unintentionally encourage deforestation

As an example, consider the California low carbon fuel law.  When Californians increase demand for biofuels, the price of ethanol in the US increases.  Ethanol demand increases the global price of corn.  A higher corn price then induces a farmer in rural India to hire workers to clear more land and cultivate more corn this year.  In this example, the low carbon fuel laws stimulate economic development but lead to additional land clearing which causes further carbon emissions.  The carbon emissions from land use changes negate some of the savings from Californians who switch from gasoline to ethanol.

The interconnected global agriculture markets are complex, and it is not immediately obvious whether the simple scenario I described is significant from a carbon emissions standpoint.  Do land use changes negate 1% of the savings or all of them?  The topic requires academic research, such as that by UC Berkeley professor, Dr. Richard J. Plevin.  Dr. Plevin is an expert in land-use change modeling, and joined academia after working for 20 years as a software engineer.  According to his research, lifecycle modeling with indirect land-use changes involves such uncertainty that we cannot determine whether switching to biofuels from gasoline saves any carbon emissions at all.

Dr. Plevin is not an environmental extremist; along with the late Dr. Alex Farrell, he supported the original California Low Carbon Fuel Standard in 2007.  Since 2007, he has spent his time researching the most detailed information available on indirect land-use changes from biofuels.  He views his conclusion as an unfortunate result.  Disappointing though it may be, the research result is significant and should put immediate brakes on the Low Carbon Fuel Standard in California, as well as other biofuel legislation nationwide.

Indirect land-use changes are not a factor when considering non-agricultural biofuels, such as the algal fuels grown in tanks.  I have yet to see any evidence that algal fuels can be produced commercially, but from a carbon policy perspective they make more sense to support than biofuels from products requiring agricultural land use.  California should therefore create a law that distinguishes not on distance traveled, but on method of production, requiring that all low carbon fuels come from non-agricultural feedstock.  Such a law would pass the tests of both the commerce clause and sensible carbon policy.

Biofuels grown in tanks are not currently economical but represent better biofuel policy

Introduction

Green Jouleus is a blog about businesses in the energy and environment sector.  My interest in the energy field stems primarily from concerns of climate change.  Throughout the blog, I will assume that greenhouse gas emissions by people are causing climate change, as determined by the IPCC.

All climate modeling projections involve uncertainty, and I think of investment in climate change mitigation as insurance against uncertain outcomes.  Coral reef bleaching and ocean acidification are catastrophic risks that could disrupt ocean ecosystems and the human food chain.  These risks merit insurance investments on the part of people and governments worldwide.  The threat of climate change will therefore induce long-term business investment in the energy and environment sector.

Any business that works to reduce greenhouse gas emissions is fair game for discussion here, although Green Jouleus will focus on low carbon electricity generation, as my experience is in the North American electricity sector.

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