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REGULATIONS: Study claims national low-carbon fuels rule would spike gasoline prices A national policy aimed at cutting the carbon intensity of fuels would lead to as much as an 80 percent increase in the cost of diesel and gasoline, according to a study from the political consulting firm Charles River Associates. The firm modeled a 10-percent reduction in carbon intensity over 10 years and found the cost of fuel and goods would experience a price shock because of supply constraints caused by so-called low carbon fuel standards. The study was completed by Charles River for the Consumer Energy Alliance, which represents truckers, shippers and airlines, among other sectors. David Montgomery, an analyst at Charles River, compared the low carbon fuel standard (LCFS) concept to diluting coffee with cream. He said the dilution of fuels to trim their greenhouse effect is such that prices would spike as clean fuel supply lags behind the current pace of demand, especially as oil sands and other sources prominent in North America are forced out of the market. "If enough cream is not on the table to achieve the desired mix, then the only alternative is to reduce the amount of coffee in the cup," he said. "To reduce transportation fuel consumption sufficiently for the LCFS to be met requires very large increases in fuel prices, so that consumers will limit their driving and demand new vehicles that are much more costly." The increase would be 30 to 80 percent within five years of the LCFS implementation, Montgomery claimed. This is especially relevant in states like California, Oregon and Washington, where rules similar to the 10-year, 10-percent horizon have moved forward. In a press conference yesterday, Montgomery went on to question the wisdom of California in pursuing a fuels policy alongside an economywide cap-and-trade system for greenhouse gas reductions under its climate law, A.B. 32. He argued it would be a cheaper adjustment for transportation and the industries that rely on fuels -- including shipping, trucking and airlines -- to fall under the cap-and-trade market and not an LCFS. "There's a fairly long-term drag on economic growth" under an LCFS, Montgomery said. "The LCFS is forcing much larger cuts in emissions from transportation fuels than you would have gotten with an economywide cap-and-trade system." CARB refutes study Taking up the coffee-cream metaphor, ARB spokesman Stanley Young said Charles River has adopted the assumption that an inadequate supply of biofuels would follow enactment of a national LCFS. Young cited the California program as a direct contradiction to that premise. "If the national rule follows the California model, companies that do not have access to low-carbon fuels can compete by investing in next generation fuels that the next generation of vehicles and drivers want," Young said. The regulations, then, would spur use of cars powered by electricity, natural gas and hydrogen, all of which emit less emissions and, in the long run, could be just as inexpensive or even cheaper than fossil fuels, Young argued. "We think the cream will come from different sources," Young said. "There will be ample cream, and it will come from different sources." Young added that the California LCFS has already helped encourage $1 billion invested into algal research in Southern California, to cite one alternative biofuel. He said "forward-looking companies" -- including Exxon Mobil Corp. -- are investing now, "knowing in five years new products will be available." "The fact that the Nissan Leaf sold out of its proposed models in a week or two is an indication that consumers in this country are moving toward these kinds of alternative fuels," he said. "We just don't believe that the scenario that [Charles River] assumed will in fact be realized." Source: ClimateWire |
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