On December 17, Washington Governor Jay Inslee (D) unveiled the Carbon Pollution Accountability Act for Washington State, which includes a carbon cap, a low-carbon fuel standard, and incentives for renewable energy sources. Faced with a growing deficit, as well as a 2008 state mandate to lower state agencies’ greenhouse gas emissions, Gov. Inslee’s proposal is expected to generate $1 billion in the first year alone. While Inslee recognizes that consumers may see an increase in costs initially, the program’s overall goal is to shift the state to a low-carbon economy, which would eventually save them money “It's impossible for [companies] to pass along the cost of carbon when consumers aren't using any,” he noted.
It’s thought Washington’s proposed Low Carbon Fuel Standard would most likely be modelled on California’s somewhat controversial standard. Many U.S. ethanol producers claim the California Low-Carbon Fuel Standard unfairly penalizes them through a hefty indirect-land use (ILUC) penalty, which tends to favor more expensive imports, such as Brazilian sugarcane ethanol. In California, each fuel type is assigned a carbon intensity (CI) score that is measured in grams of carbon dioxide (CO2) equivalent per megajoule (g/mj), and California Air Resources Board measures CI based on both direct and indirect emissions. According to CARB, the CI of corn ethanol is approximately 60 to 70 g/mj and the CI of gasoline is 99.2 g/mj. After the ILUC penalty is applied, corn ethanol’s CI is only marginally better, and in some cases worse, than gasoline. This ruling has essentially locked Midwest corn ethanol producers out of the California fuel blending market for the last five years.
In November, the Center for Agriculture and Rural Development at Iowa State University published a study by Dr. Bruce Babcock, an Iowa State professor and a former California Air Resources Board consultant. The study examines real-world data on land-use change and concludes “the primary land use change response of the world's farmers from 2004 to 2012 has been to use available land resources more efficiently rather than to expand the amount of land brought into production. This finding is not necessarily new and it is consistent with the literature that shows the value of waiting before investing in land conversion projects; however, this finding has not been recognized by regulators who calculate indirect land use.”
California has been re-examining its ILUC calculation, and a final decision on the new calculation is expected shortly. Since the final ILUC numbers have not been released, it is unclear what effect this will have on U.S. corn and cellulosic ethanol producers. Inslee has been openly supportive of cellulosic ethanol, recently calling on the Obama administration to maintain a strong mandate for the advanced and cellulosic fuel categories in the Renewable Fuel Standard. Inslee has tasked the Washington Department of Ecology to prepare a draft rule for a clean fuel standard. The proposal for the Carbon Pollution Accountability Act will go to the Washington legislature next month, and is expected to meet significant opposition from the state Senate.
For more information see:
Washington Governor Proposes Carbon Market, Fuel Standard, Business Week
Indirect land use change: ARB needs evidence, not theory, Captiol Weekly
Using Recent Land Use Changes to Validate Land Use Change Models, Center for Agricultural and Rural Development Iowa State University