Ethanol and Biodiesel Top Contributors to Oregon’s Clean Fuels Program
By S. Patricia Batres-Marquez
Decision Innovation Solutions
About one third of Oregon’s greenhouse gases are generated in the transportation sector (Department of Environmental Quality, DEQ). Oregon’s Clean Fuels Program (Oregon CFP) is an essential component of Oregon’s plan to reduce greenhouse gases in the transportation sector. The program promotes the use of cleaner transportation fuels such as lower carbon ethanol and biodiesel, electricity, natural gas, biogas and propane. Additional benefits from Oregon CFP are decline in other air pollutants, better public health, and more energy security. Oregon’s CFP follows a similar program started earlier in California, the California Low Carbon Fuel Standard. Both programs encourage the use of low-carbon renewable fuels to reduce greenhouse gas (GHG) emissions in their respective states.
Oregon CFP did not begin until 2016, but the process to implement such a program started much earlier. First, in 2009, the Oregon Legislature passed House Bill 2186, which authorized the Oregon Environmental Quality Commission to adopt rules aimed at reducing the average carbon intensity of Oregon’s transportation fuels by 10 percent in a 10-year span. Then, in 2015, through Oregon Legislature Senate Bill 324, DEQ was authorized to fully implement Oregon’s CFP.
According to Oregon DEQ, a clean fuel is a fuel that has a lower carbon intensity than the standard for the fuel it replaces. Most types of ethanol, biodiesel, natural gas, biogas, electricity, propane, and hydrogen are examples of clean fuels. Carbon intensity is the measure of lifecycle greenhouse gas emissions from a transportation fuel. Carbon intensity is expressed in grams of carbon dioxide equivalents per megajoule of energy or gCO2e/MJ. Table 1 shows Oregon CFP lifecycles of petroleum fuels and selected biofuels.
According to the Oregon Department of Environmental Quality, under the Oregon Renewable Fuels Standard, gasoline in the state cannot contain more than 10 percent ethanol. E85 blend used in flex fuel vehicles is allowed in the Oregon market when the dispensing pump clearly identifies that the fuel being sold is E85. While the Oregon Clean Fuels Program does not exceed the blending mandate or enforces new blending mandates, it might favor the type of ethanol with lower carbon intensity.
In the case of biodiesel, by law, diesel in Oregon must contain at least 5 percent biodiesel or renewable diesel. At the request of the user and depending on the type of engine, diesel may contain more biodiesel in the blend. The Oregon Clean Fuels Program does not exceed the minimum blending requirement, but it might select biodiesel with lower carbon intensity to be blended with diesel.
Table 1. Carbon Intensity of Selected Transportation Fuels
Clean Fuel Standards
Oregon CFP uses clean fuel standards as a way for regulated parties to comply with the law. Carbon fuel standards indicate the annual average carbon intensity to which a regulated party must comply. There is a standard for gasoline and its substitutes, and one for diesel and its corresponding substitutes. According to the program’s rules, 2015 is the baseline year and represents 10 percent ethanol blended with gasoline and 5 percent biodiesel blended with diesel. The average carbon intensity in 2025 is required to be 10 percent lower than in 2015. Table 2 shows the annual average clean fuel standards from 2016 to 2025, and the projected reduction in carbon intensity of transportation fuels each year.
Table 2. Oregon Clean Fuel Standards (gco2e/MJ)
Credits within this program are generated when the carbon intensity of a fuel is lower than the year’s standard (clean fuel standards) in a particular year. Deficits, on the other hand, are generated when the carbon intensity of a fuel is greater than the clean fuel standards in a specific year. One credit is equal to one metric ton of carbon dioxide equivalent not emitted as a result of the use of a fuel with a carbon intensity lower than the applicable clean fuel standard for a given year. Total number of credits generated in 2016 was equal to 830,714 metric ton (MT)CO2e. Last year, credits increased 11.3 percent to 924,798 MT CO2e. The most recent data for the first quarter of 2018 indicates credits grew 8.3 percent to 207,984 MT CO2e compared with the same period last year.
Figure 1 shows fuels that generated credits. Most of the credits generated since the program started in 2016 came from ethanol and biodiesel, which were used for blending with gasoline and diesel, correspondingly. In 2016, ethanol and biodiesel contributed with 513,930 and 269,880 credits, respectively. In 2017, credits increased by 5 percent to 540,607 credits from ethanol and 19 percent to 321,368 credits from biodiesel.
From January 2016 to March 2018, 1.963 million credits were generated, with ethanol providing 60 percent of those credits. Data indicates 381.0 million gallons of ethanol were sold in the Oregon market from January 2016 to March 2018. The gallons of ethanol sold in that market during that time generated 1.175 million credits for the program. In addition, during the first nine quarters the Oregon’s CFP has been operating, biodiesel generated 34 percent of total credits corresponding to 665,016 credits and 108.6 million gallons. Renewable diesel started generating credits in the Oregon market in the fourth quarter of 2017. The total number of credits contributed by renewable diesel during the last quarter of 2017 and the first quarter of 2018 was equal to 4,830 MT CO2e equivalent to 593,179 gallons.
The average price per credit was $48.09 in 2017. This value was estimated using 8 data points of information. The most recent data indicates the average price per credit during the first 8 months of 2018 was equal to $63.34.
Figure 1. Oregon’s Clean Fuels Program: Credit Generation by Type of Fuel (Metric Tons CO2e in Green House Reduction)
Because of the higher carbon intensity of ethanol used in 2017 compared with the carbon intensity of biodiesel used during the same year, it took more gallons of ethanol to generate one metric ton CO2e reduction compared with biodiesel. In 2017, the average carbon intensity of ethanol was equal to 62.64 gCO2e/MJ compared with 47.03 gCO2e/MJ, the carbon intensity of biodiesel. As Figure 2 shows, 166.079 million gallons of ethanol were used to generate 540,607 credits (307.2 gallons/credit, on average). In contrast, 50.969 million gallons of biodiesel generated 321,368 credits (158.6 gallons/credit, on average). The amount of renewable diesel sold in 2017 (333,496 gallons) is relatively small compared with ethanol and biodiesel; nonetheless, renewable diesel contributed to a reduction of 2,863 MT in CO2e contamination in Oregon. In 2017 the carbon intensity of renewable diesel used in Oregon was equal to 33.64 gCO2e/MJ and it took 117.9 gallons of renewable diesel to generate one credit.
Figure 2. Oregon’s Clean Fuels Program: Credits Generated by Ethanol and Biodiesel and Number of Gallons Sold in 2017
Since the beginning of the Oregon Clean Fuels Program, the number of credits generated have outpaced the number of deficits. As Figure 3 indicates, the credit bank has continually increased, from 45,636 in 2016 (quarter 1) to 433,738 in 2018 (quarter 1).
Figure 3. Oregon’s Clean Fuels Program: Cumulative Credit Bank (MT CO2e)
Ethanol and Biodiesel Consumption Projections
Oregon Department of Environmental Quality publishes an annual supply forecast. The most likely substitutes and alternatives for gasoline are ethanol and electricity. The 2018 forecast indicates 165 million gallons of ethanol are going to be consumed in the Oregon market in 2018. The most likely facilities to deliver ethanol to Oregon are shown in Table 3. Those facilities already have Oregon-approved carbon intensity values. Ethanol carbon intensities approved by Oregon for these facilities ranges from 53.81 gCO2e/MJ for Pacific Ethanol Columbia in Boardman, Oregon, to 62.42 gCO2e/MJ for Guardian Energy Janesville located in Janesville, Minnesota. Based on data available at the time of the projection (November 2017), the average ethanol carbon intensity was 63.17 gCO2e/MJ. Projections assumed the same ethanol carbon intensity average in 2018. DEQ projects ethanol would generate between 463,500 to 588,500 credits in 2018. There is not enough current data to corroborate which facilities are actually delivering ethanol to the Oregon market this year.
As of now, the program is focusing on supplying corn ethanol to the market, but sugarcane ethanol from Brazil remains a viable option in the future.
Table 3. Clean Fuels Program: Facilities that Might Deliver Ethanol to the Oregon Market in 2018
The 2018 biodiesel demand projection ranges from 32 to 73 million gallons with blends varying from 5 to 10 percent. Facilities that most likely would deliver biodiesel to Oregon in 2018 are shown in Table 4. These facilities already have Oregon-approved carbon intensity values. Data available at the time of the projection (November 2017) indicated the average biodiesel carbon intensity was 50.34 gCO2e/MJ. This value is expected to continue in 2018, resulting in a projected number of credits generated by biodiesel ranging between 221,200 and 592,400 credits during 2018. There is not current data to verify which facilities are actually delivering biofuel to the Oregon market this year.
Table 4. Clean Fuels Program: Facilities that Might Deliver Biodiesel to the Oregon Market in 2018
Following the success of California’s LCFS program, Oregon started the Oregon Clean Fuels Program at the beginning of 2016. Lower carbon intensity ethanol, biodiesel, and renewable diesel are important to the Oregon market as more pollution reduction is achieved per gallon of lower carbon intensity fuel consumed. In over two years of operation, Oregon Clean Fuels Program reports a reduction of 1.9 million MT in carbon dioxide contamination in the state of Oregon. Sixty percent of that reduction is attributed to the consumption of low carbon intensity ethanol and 34 percent is attributed to the consumption of biodiesel in that market. Meanwhile, the state of Washington is working through its legislature to implement its own program similar to the California LCFS and Oregon CFP programs.
Increasing the 10 percent ethanol blending mandate to 15 percent would increase the demand for ethanol, and contribute to a higher generation of credits in the Oregon market.
Batres-Marquez, S. Patricia. 2018. “Ethanol and Biodiesel Top Contributors to Oregon’s Clean Fuels Program." Renewable Energy Report, Agricultural Marketing Resource Center, Iowa State University. September 2018.