How will state-level resistance to a low carbon fuel standard affect efforts to implement a national program? During today's OnPoint, Daniel Sperling, director of the Institute of Transportation Studies at the University of California, Davis, discusses new research, released by the National LCFS Project, on the economic and environmental impacts of an LCFS. Sperling explains why he believes the LCFS framework allows for market flexibility and consumer choice.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Dr. Daniel Sperling, director of the Institute for Transportation Studies at the University of California Davis. Dan, thanks for coming on the show.
Daniel Sperling: It's my pleasure.
Monica Trauzzi: Dan, you're one of the researchers involved in a new series of studies just released on the impacts of a national low-carbon fuel standard and the research sheds positive light on what a national LCFS could look like. We've seen hurdles though and even some outright rejection on the state level of LCFSs. So, why do you believe a national program would yield different results than what we've seen on the state level?
Daniel Sperling: Well, I think there is, what we are doing as a research team is saying, OK, what's a template, what would a low-carbon fuel standard look like? What would good low-carbon fuel policy look like? And creating the scientific foundation and the knowledge for moving forward, doing the analysis. So, then you get into the politics and, of course, what we're trying to do is just make sure that when the public discussion starts, it's based upon science and knowledge and not just purely political. Now, once it gets out of our hands, when it gets to the states and the federal level, there are a lot of interest groups at stake. But I think the sands are shifting. I think that we're seeing more of an interest in actually taking some initiative. There's concerns about energy security and there is growing concern about what do we do about climate? And we have, the reason why it's really getting attention right now is there is this renewable fuel standard. This is basically a biofuels mandate that has led to a lot of the corn ethanol. And there's a lot of criticism of it and so the question is how do we move forward? And what we're saying is this is a policy that can take us to the next level and we think that there'll be potentially a lot of political groups, interest groups will coalesce around.
Monica Trauzzi: So, you think the LCFS is a better option than the RFS?
Daniel Sperling: I think the RFS has done a good job to get us where we are. It's induced a lot of investment. It's gotten companies and people used to alternative fuels. And now we need to go to the next level. You know, now, so what the low-carbon fuels banner does is it provides choice. It's not just biofuels. It includes electricity, natural gas, hydrogen. It doesn't pick winners. It leaves it to industry and consumers to pick the winners, as opposed to government or policy. And it harnesses market forces. It stimulates innovation. Because in the end, the only way we're going to change, we're going to get a low-carbon future, is with better technology. And that's what this policy does.
Monica Trauzzi: So, economics are a big part of the discussion here and there are concerns across the board that an LCFS could have negative impacts on pricing coming out of the oil and gas industry. So what did you find in your research in terms of the costs and benefits of an LCFS?
Daniel Sperling: Well, what we found, and this was surprising to me, not being an economist, but our economist colleagues did the analysis, found that it's likely that consumers will save money with a low-carbon fuel standard. And the reason for that is because what you're doing is reducing the consumption and the demand for oil and, therefore, the price of oil goes down a little bit. And offsetting it is a higher price for biofuels. And the question is, how does that higher cost here and lower cost there fit together? And they say there's a good chance it'll end up being savings for the consumer. But in any case, it does suggest that it's not going to be these really huge prices that we hear about. And even if there were this possibility of a price spike, there are ways of dealing with it to make sure that, you know, these scare scenarios or these worst-case scenarios don't happen.
Monica Trauzzi: So, in order for the economic impacts to be as you're suggesting, does it really need to be on a national level? Because it's sort of this patchwork that we have, you know, in the various states that are participating, not allowing the technology to catch up in a way that the economics make sense.
Daniel Sperling: Well, it doesn't have to be national. It's better if it's national, but California has already put in place a low-carbon fuel standard. So partly what we're doing is learning from California's experience. So California is already doing it. The European Union is already doing it. British Columbia is already doing it. And there are a number of states that are looking at it very seriously. And so, you know, this is not a brand-new idea and we've got a lot of experience to learn from and, you know, clearly it's better to make it national instead of a patchwork approach and that's what we're here in Washington to do.
Monica Trauzzi: Right, I know you said you want to separate sort of the politics and the scientific evidence. But speaking of California, they've had some pretty major hurdles. The LCFS is now awaiting a decision by the appeals court because it was ruled unconstitutional. So, that's sort of the flagship model that the U.S. has. So what do you think of what's happening there and how that could impact the future of a national LCFS?
Daniel Sperling: Well, legally, you know, I'm not a lawyer, but talking to the lawyers, what they say is first of all, there was a second court that said California could go ahead and implement and enforce it. And so California is proceeding with it in moving forward. And my understanding with the lawyers is that it's unlikely to be, you know, to be shut down, that the legal case, in their mind, doesn't seem to be very strong in the end. And there are minor changes, even if those hold, there are minor changes that can be made to respond to that. But, you know, we already do have the experience around the world and so that's, you know, whenever you do something new, there's going to be challenges to it. But in the end, with a low-carbon fuel standard, you know, if you look at it in a political sense, you've got the auto industry supporting it. You've got the electric utility industry supporting it. You've got the advanced biofuels supporting it or likely to support it. In many cases they haven't really thought it through yet, because it's a relatively new idea. But you've got three major industries whose interests align well with it. And even some of the big oil companies, you know, Shell Oil for instance has indicated that they think it's basically the right construct for moving forward. So, you know, we're going to have to have a lot of discussion. You know, there are some companies and some industries that don't agree with it yet, but I think that when you sit down and you say, OK, if you don't like this, what's a better idea? And none of them, none of them, you know, I've been spending years talking to different companies, none of them are able to come up, you know, with a better idea. The best I've heard is, well, what I suggest is we step back a few feet from the shoreline and let the sea rise happen. You know, it's that kind of, we'll just adapt to it. But other than that, there just isn't, you know, we haven't been able to come up with a better policy framework for moving forward.
Monica Trauzzi: So, how significant could the emissions reductions be from a national LCFS?
Daniel Sperling: So, the kind of numbers we're looking at is we're suggesting a target that seems to make sense is a 10 percent to 15 percent reduction in the carbon intensity of the fuel by 2030. That means that there will be 10 to 15 percent less carbon and what that translates to is about a 30 percent use of alternative fuels. And that's biofuels, that's electricity for electric vehicles, that's natural gas vehicles, hydrogen, a mix of all of those.
Monica Trauzzi: All right, we're going to end it right there. Thank you for coming on the show. Nice to see you.
Daniel Sperling: Thank you, very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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