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Uncertainty, Innovation, and Infrastructure Credits: Outlook for the Low Carbon Fuel Standard Through 2030

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  • Bushnell, James PhD
  • Mazzone, Daniel
  • Smith, Aaron
  • Witcover, Julie

Abstract

California’s low carbon fuel standard (LCFS) specifies that the state’s transportation fuel supply achieve a 20% reduction in carbon intensity (CI) below 2011 levels by 2030. Reaching the standard will require substantive changes in the fuel mix, but the specifics and the cost of these changes are uncertain. We assess if and how California is likely to achieve the standard, and the likely impact of infrastructure credits on this compliance outlook. We begin by projecting a distribution of fuel and vehicle miles demand under business-as-usual economic and policy variation and transform those projections into a distribution of LCFS net deficits for the entire period from 2019 through 2030. We then construct a variety of scenarios characterizing LCFS credit supply that consider different assumptions regarding input markets, technological adoption over the compliance period, and the efficacy of complementary policies. In our baseline scenario for credit generation, LCFS compliance would require that between 60% and 80% of the diesel pool be produced from biomass. Our baseline projections have the number of electric vehicles reaching 1.3 million by 2030, but if the number of electric vehicles reaches Governor Jerry Brown’s goal of 5 million by 2030, then LCFS compliance would require substantially less biomass-based diesel. Outside of rapid zero emission vehicle penetration, compliance in 2030 with the $200 credit price may be much more difficult. New mechanisms to allow firms to generate credits by building electric vehicle charging stations or hydrogen fueling stations have minor implications for overall compliance because the total quantity of infrastructure credits is restricted to be relatively small.

Suggested Citation

  • Bushnell, James PhD & Mazzone, Daniel & Smith, Aaron & Witcover, Julie, 2020. "Uncertainty, Innovation, and Infrastructure Credits: Outlook for the Low Carbon Fuel Standard Through 2030," Institute of Transportation Studies, Working Paper Series qt7sk9628s, Institute of Transportation Studies, UC Davis.
  • Handle: RePEc:cdl:itsdav:qt7sk9628s
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    References listed on IDEAS

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    1. Severin Borenstein & James Bushnell & Frank A. Wolak & Matthew Zaragoza-Watkins, 2019. "Expecting the Unexpected: Emissions Uncertainty and Environmental Market Design," American Economic Review, American Economic Association, vol. 109(11), pages 3953-3977, November.
    2. Lucas W. Davis, 2019. "How much are electric vehicles driven?," Applied Economics Letters, Taylor & Francis Journals, vol. 26(18), pages 1497-1502, October.
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    Cited by:

    1. Gabriel E. Lade & C.-Y. Cynthia Lin Lawell, 2021. "The Design of Renewable Fuel Mandates and Cost Containment Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 213-247, June.
    2. Swanson, Andrew C., 2022. "Corn, Carbon, and Competition: The Low Carbon Fuel Standard's Effects on Imperfectly Competitive Corn Markets," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322442, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Engineering; Biomass fuels; hydrogen fuels; energy resources; renewable energy sources; greenhouse gases; carbon taxes; incentives; zero emission vehicles; low carbon fuel standards;
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