California Gov. Establishes Low Carbon Standard for Transportation Fuels

Continuing his effort to reduce greenhouse gas emissions and lower California's reliance on foreign oil, Governor Schwarzenegger signed an Executive Order establishing a groundbreaking Low Carbon Fuel Standard (LCFS) for transportation fuels sold in California. By 2020 the standard will reduce the carbon intensity of California's passenger vehicle fuels by at least 10 percent. This first-of-its kind standard will support AB 32 emissions targets as part of California's overall strategy to fight global warming.

"Like the rest of the nation, California relies excessively on oil to meet its transportation needs. In fact, 96 percent of our transportation fuel is oil. And that means our transportation fuels are responsible for more than 40 percent of California's greenhouse gas emissions," said Governor Schwarzenegger. "Being dependent on one source of fuel leaves our economy and our national security vulnerable to price shocks and global events beyond our control. Reducing the carbon content of transportation fuels sold in California by just 10 percent means we will replace 20 percent of our gasoline consumption with lower-carbon fuels, more than triple the size of the state's renewable fuels market, and add 7 million alternative fuel vehicles to our roads.

"Right now, entrepreneurs from around the world are investing billions of dollars in clean technologies and alternative fuels. With this initiative, we are saying invest in California.

"We continue to set the example for the nation and the world on how to ensure a clean, healthy and secure future for our children and grandchildren."

The LCFS requires fuel providers to ensure that the mix of fuel they sell into the California market meets, on average, a declining standard for GHG emissions measured in CO2-equivalent gram per unit of fuel energy sold. By 2020, the LCFS will produce a 10 percent reduction in the carbon content of all passenger vehicle fuels sold in California. This is expected to replace 20 percent of our on-road gasoline consumption with lower-carbon fuels, more than triple the size of the state's renewable fuels market, and place more than 7 million alternative fuel or hybrid vehicles on California's roads (20 times more than on our roads today).

The LCFS will use market-based mechanisms that allow providers to choose how they reduce emissions while responding to consumer demand. For example, providers may purchase and blend more low-carbon ethanol into gasoline products, purchase credits from electric utilities supplying low carbon electrons to electric passenger vehicles, diversify into low carbon hydrogen as a product and more, including new strategies yet to be developed.

The University of California estimates that the Governor's greenhouse gas (GHG) emissions goals can increase Gross State Product by about $60 billion and create over 20,000 new jobs. As a result of AB 32 and other initiatives, including the Million Solar Roofs and Hydrogen Highway projects, the Bioenergy Action Plan and the Strategic Innovation and Research Initiative, California drives clean technology research, investment and development nationally. California leads the nation in clean tech investment, attracting $484 million in venture capital to California in 2005 alone-40 percent to startups in energy generation and efficiency sectors. The Low Carbon Fuel Standard further expands the state's clean tech market by creating more sustainable demand for cleaner fuels.

The Governor's Executive Order directs the Secretary for Environmental Protection to coordinate the actions of the California Energy Commission (CEC), the University of California and other agencies to develop a draft compliance schedule to meet the 2020 goals for carbon intensity reductions in transportation fuels. This analysis will become part of the State Implementation Plan for alternative fuels as required by AB 1007 (Pavley, Chapter 371, 2005) and will be submitted to the California Air Resources Board for consideration as an "early action" item under AB 32. The ARB will complete its review of the LCFS protocols for adoption as an early action no later than June, 2007. The ARB will also begin a regulatory process in the summer of 2007 to implement the Low Carbon Fuel Standard. It is expected that the regulatory process at ARB to implement the new standard will be completed no later than December, 2008.

In 2005, there were more than 24 million vehicles registered in California which is more than one per licensed driver. Statewide gasoline consumption was almost 16 billion gallons in 2005 which is second only to the entire United States and slightly more than that of Japan (a country with four times the population). Currently, there are only 80,000 hybrids and 240,000 flex-fuel vehicles on our roads today, together composing only 1.3% of all cars in California.

Last September, Gov. Schwarzenegger signed AB 32 by Assembly Speaker Fabian Nunez (D-Los Angeles), California's landmark bill that established a first-in-the-world comprehensive program of regulatory and market mechanisms to achieve real, quantifiable, cost-effective reductions of greenhouse gases.

This article originally appeared in the 01/01/2007 issue of Environmental Protection.

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