California’s air quality regulators will soon consider changing a key climate program that helps companies shift toward cleaner fuels and reduce pollution. Below, an energy researcher argues the proposed changes to the Low Carbon Fuel Standard will burden drivers and subsidize questionable types of fuel. The opposing view: A farm manager says California needs to stay the course and not further regulate dairies.
Guest Commentary written by
Danny Cullenward
Danny Cullenward is a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania and vice chair of California’s cap-and-trade program advisory committee.
The California Air Resources Board is set to renew a relatively obscure climate program called the Low Carbon Fuel Standard that cannot be justified as is.
State policymakers need to understand that the staff proposal will cost California drivers billions of dollars a year, most of which will go to biofuel subsidies that don’t cut emissions as promised. The LCFS program needs a complete overhaul, not a rubber stamp.
A growing number of scientific studies show that the climate benefits of biofuels are often exaggerated and may even be completely nonexistent. That’s a problem, because biofuel producers have earned 80% of the LCFS credits issued since 2013, worth $17.7 billion in today’s dollars.
Just $4.3 billion worth of credits have gone to support electric vehicles — popular technologies that, unlike biofuels, credibly lower emissions.
The latest proposal from CARB staff would continue this approach. While popular climate programs face budget cuts, it seems odd to prioritize biofuel subsidies that don’t have to compete in the budget process and are doled out without legislative oversight. This system favors well-connected industries, fosters a revolving door that employs former government staff, and has allowed the agency to give handouts for over a decade without drawing much attention until recently.
Pork-barrel policies work when the costs are low, but those days are about to end. Last year, the air board’s own cost-benefit analysis found that the proposed rules could raise gasoline prices as much as 50 cents per gallon in the next two years. When people noticed, the regulator delayed its vote on the proposal from March to Nov. 8 — three days after the presidential election, which will dominate headlines no matter who wins.
When asked how much will drivers be asked to pay for the fuel standard program going forward, CARB officials claimed that it’s impossible to say. They insist the program’s relationship to fuel markets is so complicated that no one can really put a price tag on it.
That’s nonsense.
In a recent report published by the Kleinman Center for Energy Policy, I updated the air board’s initial calculations based on the latest proposal. If LCFS credit prices increase only modestly above current levels, the program could have significant gasoline price impacts of 26 cents per gallon in the near term and reach 34 cents a gallon by 2030.
If LCFS credit prices increase to their maximum levels — which has happened in the past, is unlikely in the next few years, but remains plausible in the decade ahead — then the impact could be 85 cents per gallon by 2030.
Some increase in gas prices is inevitable, even as the state acts to contain future price spikes. California’s biggest obstacle to cutting climate pollution is the transportation sector. To make progress, we need bigger investments in electric vehicles and charging infrastructure, buses and bike lanes, and especially more housing near public transit.
Charging polluters for some of those costs is a sensible step. But because polluters pass some of those costs onto consumers, the public has a right to know how much they are paying and what their money is buying.
Legislators should be particularly concerned that CARB staff are being dishonest about LCFS costs. Next year the Legislature is expected to turn its attention to the state’s cap-and-trade program, another landmark climate policy that affects gasoline prices. Reforming the cap-and-trade program is a far bigger priority for California’s climate goals, and unlike the LCFS, it raises revenue to support popular climate investments and utility rebates.
But there won’t be much appetite for either if CARB locks in expensive biofuel subsidies at next week’s vote.
So are biofuel subsidies really a top state priority, and how many billions of dollars should California drivers be asked to pay for them? According to the staff of the Air Resources Board, no one can tell you.