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California Needs the LCFS for Cleaner Air and Continued Economic Growth

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August 1, 2016

A significant shift to clean fuels is happening across California, thanks to the state’s landmark climate change programs. In just five years, the Low Carbon Fuel Standard program has helped prevent 16.6 million tons of carbon pollution, reduce petroleum use by 6.6 billion gallons, and save $1.6 million in health costs.

But that’s not enough.

Transportation is the largest single source of greenhouse gas emissions in the state, accounting for 37 percent of the annual total. Any successful plan to meet the state’s air quality goals beyond 2020 must directly address transportation-based pollution. That’s why the Legislature and Gov. Jerry Brown must stand firm in support of the LCFS, even in the face of unrelenting pressure from the oil industry.

LCFS is already working

The LCFS, which requires a 10 percent reduction in the carbon intensity of the state’s transportation fuels by 2020 and allows low-carbon fuel producers to sell credits, is helping truck fleets and public transit agencies in particular reduce their greenhouse gas emissions. That success explains why nearly 60 producers and providers of cleaner fuels have signed a joint letter urging state policymakers to retain the LCFS.

The use of cleaner fuels has increased 36 percent. Companies with large fleets that log many miles up and down the state’s freight corridors—where residents suffer some of the worst air quality in our state—have been switching to cleaner fuels because LCFS credits have made them price-competitive with petroleum fuels. For example, last year Clean Energy sold over 50 million gasoline gallon equivalents of its Redeem biomethane fuel (also known as renewable natural gas) in California. The fuel, made from renewable organic waste streams, is 80 to 90 percent cleaner than petroleum fuels. Redeem users now include UPS, Ryder, Santa Monica Big Blue Bus, and the University of San Diego. That success would not have been possible without the LCFS program, attests Harrison Clay, president of Clean Energy Renewable Fuels.

Similarly, carbon credits generated by using alternative fuels to power transit buses have helped agencies offset the cost of low-emission and zero-emission buses. As a result, more than 100 zero-emission buses are operating in the state, most of them in disadvantaged communities, which are hit hardest by air pollution.

The Orange County Transportation Agency has generated more than 10,500 LCFS credits since March 2014, in part by running about 500 natural gas buses. The agency estimates that between the LCFS program and the federal Renewable Fuel Standard program, it will gain $10.2 million over the next three years.

At the same time, the LCFS is driving economic growth in California, hastening the development of the alternative fuels market even faster than expected. More than $650 million so far has been invested in producing and distributing clean fuels, and California companies filed 193 new biofuel patents in 2015. Local businesses have accrued $300 million in LCFS credit value. The California Electric Transportation Coalition estimates that the LCFS could result in more than 9,000 new jobs by 2020 as additional new clean fuel producers open for business; more than 20 in-state facilities now generate low-carbon fuels.

Sorting fact from fiction

Despite the good that the LCFS is doing for California, it is under attack. The oil industry reportedly has spent a record $25 million during this legislative session, using much of it to fight against the LCFS and other climate change programs. Big oil has claimed that the LCFS would instigate fuel shortages, skyrocketing consumer costs, and job losses across California.

None of these doomsday predictions have come true.

Market data shows that the petroleum refineries’ costs to comply with the LCFS have been only about 6 to 19 cents per gallon—about 80 times lower than the Western States Petroleum Association’s predictions. According to a recent study for Consumers Union, even when factoring in compliance costs, each household in California stands to save $1,210 to $1,530 annually in fuel costs by 2030 due to California’s full suite of low-carbon transportation policies.

Improving Californians’ lives

The LCFS is improving the lives of Californians by making them healthier and saving them money. The program, combined with cap-and-trade regulations, will save a cumulative $8.3 billion in health costs by 2025, according to a report by the American Lung Association and the Environmental Defense Fund.

Some studies have shown, too, that the LCFS will result in a diversified fuels market with lower fuel prices. These lower prices will save consumers $837 million by 2020, according to the National Resources Defense Council. In fact, the NRDC predicts that Californians will pay 20 percent less for fuels by 2020 under the state’s low-carbon fuel regulations, saving nearly $800 a year.

The LCFS is working as planned. It is reducing greenhouse gas emissions in the transportation sector. It is encouraging the production of low-carbon fuels in California, creating new jobs, and reducing the state’s dependence on petroleum. And it has helped make California a worldwide leader in the fight against global warming.

To sustain this momentum, the Legislature must continue to support the LCFS. Lawmakers should not sacrifice the LCFS in the fight to extend AB 32—mollifying the oil industry’s fear of lost revenue is not worth the cost. A stable LCFS provides the certainty investors need to stay the course with technological advances in clean fuels. The LCFS is a necessary policy for meeting California’s climate change and clean air goals by 2020—and beyond.

Show your support for the LCFS

The Coalition is asking all members to send letters to the Assembly and Senate leadership supporting the LCFS. Several members have already written letters; see examples from Clean Energy, Agility Fuel Systems, and Applied LNG.

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