Readoption of the California Low Carbon Fuel Standard

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S. Patricia Batres-Marquez
Decision Innovation Solutions
3315 109th Street, Suite B
Urbandale, IA 50322
http://www.decision-innovation.com/

Concerns over climate change have encouraged policies that intend to reduce greenhouse gas (GHG) emissions. An example of such a policy is the California Low Carbon Fuel Standard (LCFS), which was approved in 2009 and is administered by the California Air Resources Board (CARB). LCFS requires ongoing reductions in carbon intensities (CI) for transportation fuels sold in California. The policy aims at a 10% decline in CI by 2020 (from petroleum refiners and other fuel providers). A regulated party must meet the average CI requirements as specified in Table 1 and Table 2 for its transportation gasoline and diesel fuel, correspondingly, in each year.

LCFS uses a market-based approach to reduce GHG emissions from petroleum-based transportation fuels like reformulated gasoline and diesel. Companies can earn LFCS credits using several approaches, including improving their processes or incorporating renewable feedstocks and inputs. To be deemed a suitable alternative, the relative CI of alternative fuels have to be considered, as not all alternative fuels are estimated to have the same level of CI.

Table 1. LFCS Compliance Schedule for 2011 to 2020 for Gasoline and Fuels Used as a Substitute for Gasoline

LFCS Compliance Schedule for 2011 to 2020 for Gasolien and fuels used as a substitute for gasoline

Table 2. LCFS Compliance Schedule for 2011 to 2020 for Diesel and Fuels Used as a Substitute for Diesel Fuel.

LCFS compliance schedule for 2011 to 2020 for diesel and fuels used

According to CARB, under the LCFS, CI are calculated on a full life cycle basis, meaning that the CI value indicates the GHG emissions related to the fuel’s production, transport, storage, and use (CARB, 2015a).These fuel emissions are considered direct effects in the life cycle analysis of transportation fuels. As indicated by CARB, because of intermediate market mechanisms, CI for fuels produced from crops have an additional indirect GHG effect, which is called indirect land use change (ILUC). According to CARB, land use change happens when demand for a crop-based biofuel brings non-agricultural lands into production, releasing the carbon sequestered in soils and vegetation. ILUC is meant to measure these resulting carbon emissions. CI are measured in terms of grams of carbon dioxide (CO2) equivalent per megajoule of energy (gCO2e per MJ).

When CARB approved the original LCFS regulation in 2009, the California-Modified Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation model version 1.8b (CA-GREET 1.8B) was designated as the model to be used for estimating life cycle emissions (CARB, 2015b). ILUC was estimated using the current information at that time, but ILUC was (and still is) a controversial topic of discussion and research. For example, using empirical data, Babcock and Iqbal (2014) concluded that the main driver for land use change response by the world’s farmers from 2004 to 2012 was to use available land resources more efficiently instead of expanding the amount of land brought into production. As indicated by the authors, this finding was not new yet was not acknowledged by regulators (such as CARB and EPA) who calculate indirect land use in their CI models.

In September 2015, CARB approved the readoption of the LCFS. At that time, a new version of the GREET model (CA-GREET 2.0) was approved. The new model is a two-tiered system for fuel pathway applications. Tier 1 is for common, conventionally produced, first-generation fuels (starch- and sugar-based ethanol, biodiesel, renewable diesel, compressed natural gas, and liquefied natural gas). Tier 2 is for next-generation fuels (cellulosic alcohols, hydrogen, and drop-in fuels) or first-generation fuels produced through innovative production processes.

In general, the differences using the two models show the developments in the quality of life cycle inventory data, emission factors, and process efficiency data since the program started.

Carbon Intensity of Ethanol

Figure 1 through Figure 3 compare fuel CI for some of the existing fuel pathways that were certified using CA-GREET 1.8b during the 2010-2015 period, with CI for the same fuel groups estimated using CA-GREET 2.0 during the 2016-2020 period. As indicated by CARB (CARB, 2015c), these calculations show the expected CI changes that would happen as a result of the adoption of CA-GREET 2.0 and do not illustrate CI differences driven by CA-GREET for the same production facilities at the same point in time.

The total CI for corn ethanol (ETHC004=Midwest; Dry Mill; Dry DGS, NG) is now 80.09 gCO2e per MJ, declining by 9.62 gCO2e per MJ from the previous estimate (89.71 gCO2e per MJ) (see Figure 1). The main driver of change for corn ethanol using the new CA-GREET 2.0 model was a lower ILUC value. In addition, lower farming energy (-1.2g) contributed to the reduction in the total CI of corn ethanol. The new ILUC value for corn ethanol is 19.8 gCO2e per MJ compared with 30 gCO2e per MJ, the ILUC value estimated under the previous model. Overall, ILUC was reduced for all ethanol-producing crops (i.e., corn ethanol, sorghum ethanol, and sugarcane ethanol), with Brazilian sugarcane ethanol ILUC declining the most.

The new direct CI estimate for corn ethanol also changed, increasing from 59.7 gCO2e per MJ to 60.3 gCO2e per MJ. This change was based on higher ethanol production CI (1g), and higher denaturant (0.9g).

The direct CI estimate for sugarcane ethanol using GREET 2.0 increased by 14.03 gCO2e per MJ for sugarcane-base case to 41.43 gCO2e per MJ and by 18.69 gCO2e per MJ for sugarcane mechanized harvest and power export to 31.09 gCO2e per MJ. These increases were due to higher cane farming energy, higher fertilizer application, higher straw burning, higher denaturant use, and higher ethanol transport. However, the resulting total CI scores for these two types of sugarcane ethanol (53.23 gCO2e per MJ and 42.89 gCO2e per MJ) remain below that of corn ethanol CI (see Figure 1).  

Despite these low CI scores that give competitive advantage to sugarcane ethanol from Brazil over U.S. corn ethanol, the chances that California’s refiners will increase ethanol imported from Brazil to meet some of the LFCS carbon reduction requirements this year are quite slim. The latest Energy Information Administration (EIA) data indicates that no U.S. ethanol imports from Brazil were registered in January 2016 (EIA, 2016a). Since last year (March 2015), Brazil’s government approved a 2% increase in ethanol blending for gasoline, from 25% to 27%, discouraging exports and increasing Brazil’s domestic ethanol demand to fulfill their own requirements.

Carbon intensity of gasoline and ethanol products

Figure 1. Carbon Intensity of Gasoline and Ethanol Products (gCO2e/MJ)

On January 29, 2016, CARB certified the corn stover pathway for cellulosic ethanol produced by POET-DSM at the Project Liberty Cellulosic Ethanol Plant in Emmetsburg, Iowa (CARB, 2015c). The Project Liberty plant is expected to produce more than 13 million gallons per year. By using crop residue (corn stover) as a feedstock for ethanol production, the total CI of cellulosic ethanol produced by this plant does not include an ILUC estimate. The total CI value for cellulosic ethanol produced at this plant was certified by CARB at 21.58 gCO2e per MJ, which is substantially below both corn ethanol and sugarcane ethanol. In addition to producing cellulosic ethanol, the plant produces two important co-products: surplus steam from the solid fuels boiler (SFB) and biogas from the wastewater treatment process. These two co-products, which are exported to the nearby corn-starch plant in Emmetsburg, accrued a substantial credit to the Liberty corn stover pathway (CARB, 2015d).

Carbon Intensity of Biodiesel and Renewable Diesel

Both biodiesel (BD) and renewable diesel (RD) qualify for the LCFS. As Figure 2 shows, the total CI estimates for soybean BD (BIOD001= Midwest soybeans to biodiesel, fatty acid methyl esters [FAME]) using the new CA-GREET model (version 2.0) declined from 83.25 gCO2e per MJ to 51.83 gCO2e per MJ. Similar to corn ethanol, the main driver of change in the total CI of soybean BD using GREET 2.0 was the large reduction in ILUC scores, from 62 gCO2e per MJ to 29.1 gCO2e per MJ. Despite this reduction, soybean biodiesel’s total CI is the highest among all other biodiesel products, mainly because of the ILUC CI component. Figure 3 shows the CI for different RD products. CI for RD are comparable to those for BD. Among the three new fuel pathways that were estimated using CA-GREET 2.0 (i.e., used cooking oil [UCO] RD, canola RD, and corn oil RD), UCO RD had the lowest CI estimated at 18.21 gCO2e/MJ.

Overall, all biodiesel and renewable diesel products shown in Figure 2 and Figure 3 have substantially lower total CI scores using the GREET 2.0 than do the ethanol products shown in Figure 1. These biomass-based diesel fuels, particularly those with lower CI, have an advantage over other renewable fuels to qualify for higher credit values in the LCFS program.

As reported by CARB (2016a), so far fuel blenders are overcomplying with the regulation. From the first quarter of 2011 to the last quarter of 2015, there has been a total of about 16.55 million metric tons (MMT) in credits and 9.14 MMT in deficits (i.e., a surplus of 7.41 MMT in credits). But as the CI target is reduced each year, compliance with the regulation will become more challenging.

Carbon Intensity of diesel and biodiesel products

Figure 2. Carbon Intensity of Diesel and Biodiesel Products (gCO2e/MJ)

Carbon intensity of diesel and renewable diesel products

Figure 3. Carbon Intensity of Diesel and Renewable Diesel Products (gCO2e/MJ)

Future of Midwest-Based Biofuels in the California Market

Diesel substitutes and lower carbon-intensity (CI) ethanol have the most potential for meeting the 10% target for CI reduction by 2020 specified in the LCFS regulation, as these fuels have lower-carbon feedstocks, including recycled fats and oils and agricultural residues.  

Despite reductions in the estimated ILUC of Midwest corn ethanol and Midwest soybean biofuels (i.e., biodiesel and renewable diesel) using the new CA-GREET 2.0 model, these fuels remain the least competitive in the California market in terms of credit generation to meet the LCFS requirements. Much larger declines in CI are required to increase the value of these products in the California market. We will discuss the LCFS credit market in future issues.

As always, we look forward to your helpful comments and suggestions. Send your comments patricia@decision-innovation.com.

Sources

Babcock, B.A., and Z. Iqbal, 2014. “Using Recent Land Use Changes to Validate Land Use Change Models.” Staff Report 14-SR 109, Center for Agricultural and Rural Development, Iowa State University.

California Air Resources Board (CARB), 2015a. Staff Report, “Calculating Carbon Intensity Values from Indirect Land Use Change of Crop-Based Biofuels.

2015b. CA-GREET 2.0 Model.

2015c.CA-GREET 1.8b versus 2.0 CI Comparison Table Approach and Limitations.

2015d. Final Staff Summary Method 2B LCFS Application for the Production of Cellulosic Ethanol from Corn Stover Residue Feedstock at POET-DSM Project Liberty, Emmetsburg, IA (ARB Code: ETHB004).

2016a. Low Carbon Fuel Standard Reporting Tool Quarterly Summaries.

California Energy Commission. Low Carbon Fuel Standard. (Accessed April 22, 2014).

U.S. Energy Information Administration (EIA) 2016. U.S. Fuel Ethanol (Renewable) Imports (U.S. Imports by Country of Origin). April 4.

 

The views expressed in this publication do not necessarily reflect the views of Iowa State University or Decision Innovation Solutions.