With most attention focused outside Olympia in the run-up to the Nov. 4 election, a potentially key piece of Gov. Jay Inslee’s push for carbon emissions reductions statewide is expected to be released this week – a draft version of a study on the feasibility of a low-carbon fuels standard, which is predicted to raise the cost of gasoline.
Inslee has made decreasing Washington’s carbon emissions – intended to help combat global climate change – a centerpiece of his first-term agenda on environmental issues, and environmentalists view a low-carbon fuels standards as a means of achieving significant reductions on that front.
But pushback from business interests and Republican lawmakers figures to be stiff if Inslee pursues a fuel standard in the 2015 legislative session, especially if Republicans gain true control of the state Senate on Nov. 5.
A petroleum-industry-backed study has estimated the costs of a similar program in California could result in raising the price of a gallon of gasoline from 33 cents to about $1. Environmental groups dispute those projections and argue they rely on worst-case scenarios, but any looming fight over fuels would be among several in an upcoming session that could be fraught with conflict.
In Washington, a portion of a draft study on fuels standards was released late last month, and it charts several possible courses for implementing the program. But it’s missing a crucial analysis on the economic feasibility of the program, which is scheduled to be out by the end of this week, according to Jim Cahill, a staffer with the Office of Financial Management, which commissioned the report for Inslee.
A low-carbon fuels standard mandates that refiners mix gasoline products with cleaner, advanced kinds of ethanol that generate less carbon when burned, or purchase credits from renewable energy producers.
INSLEE DEVELOPING PACKAGE OF EMISSIONS PROPOSALS
Inslee has touted the potential of new jobs via investment in clean and renewable energy production, and a low-carbon fuels standard is promoted as a way of kick-starting the market needed for more producers to locate in Washington.
An executive order he issued this spring says the state must ultimately cap the level of carbon emissions generated within its borders, but Inslee hasn’t tipped his hand on which of the market-driven programs such as a cap-and-trade, carbon tax or low-carbon fuels standard he may ultimately pursue to accomplish that.
Sen. Doug Ericksen, R-Ferndale and chair of the Energy Committee in the Senate, said he’s prepared to fight any proposal for a low-carbon fuels standard, arguing that technology necessary to implement the standard in Washington isn’t ready to mass produce the lower-carbon-intensity fuels needed.
“We’re going to be using gasoline to power our economy for a long time,” said Ericksen, whose 42nd District in Whatcom County is home to two of the state’s five oil refineries. “There’s no viable mass-scale options.”
But Sen. Kevin Ranker, D-Orcas Island and a proponent of low-carbon fuels standards, said Washington can’t wait to adopt the standard while risking greater economic costs associated with climate change, such as longer and more intense wildfire seasons.
“I think we have to move forward,” Ranker said. “There is a real economic cost. The idea of non-action or the status quo is unacceptable.”
Washington has explored a low-carbon fuels standard over the past several years, and speculation that this would be Inslee’s preferred option in addressing emissions ramped up last fall, when he signed an accord with the governors of California and Oregon, and the premier of British Columbia, to adopt the standard.
The accord Inslee signed, however, is not legally binding, and the Legislature took no action to adopt the standard during the 2014 session, while it also debated raising the state’s gasoline tax to pay for transportation projects. Republicans argued that the standard would torpedo any gas tax package in the eyes of the state’s voters, while also questioning if Inslee would circumvent the legislative process and pursue implementing the standard by executive order.
Fuels for transportation account for about half of the state’s emissions totals, making them Washington’s largest single source and an inviting target in a broader emissions reductions plan. Inslee is considering a wide range of programs intended to cut emissions, and a task force he appointed is due to release preliminary recommendations Oct. 28.
KEY BIOFUEL STRUGGLES TO GET FROM LABS TO HIGHWAYS
Following Congressional action in 2007, much of the U.S. biofuels market has been dominated by corn-based ethanol products produced in the Midwest, but the goal was to transition to a non-food-based ethanol product called cellulosic biofuel, produced from parts of trees or grasses, after several years.
While other lower-carbon-intense forms have emerged such as food oil or Brazilian sugar cane ethanol, the key break through for widespread, multistate success and compliance with low-carbon fuels standards has been the mass-scale development of cellulosic biofuel, according to a July 2014 study from researchers at the University of California, Davis.
That hasn’t happened. Despite an average of $1.9 billion in investment from a cadre of public, private and corporate sources, producers have not been able to make cellulosic biofuels in the quantities needed for low-carbon fuels standards to achieve the long-range reduction targets, according to the UC Davis study.
Last year, U.S. biofuels manufacturers produced more than 14 billion gallons of corn- and oil-based ethanols, while only generating less than 1 million gallons of cellulosic biofuels – well short of the 1 billion gallon target Congress set.
The technology remains tantalizing for start-up biofuels manufacturers, as the UC Davis researchers reported that 50 firms were attempting to develop commercial-scale cellulosic plants. Only six, however, were partially or fully completed and their production has been well below their capacity, according to the study.
The investments in these firms carries a great deal of risk – 22 firms have gone belly up financially over the last decade seeking to profit from cellulosic biofuel development, while dozens more abandoned the endeavor, according to the study.
The federal government chipped in $3.3 billion in research grants or loans from 2009 to 2012, while venture capitalists provided another $368 million and oil companies such as British Petroleum gave more than $1 billion to research and development, according to the study.
AWAITING A BREAKTHROUGH
Under the scenarios laid out in the recent OFM draft study, produced by Life Cycle Associates, Washington would have to rely on the development of cellulosic biofuels to some extent, but the extent of that reliance would vary.
Cellulosic biofuels wouldn’t be needed in mass quantities for another eight years based on how the carbon-intensity reductions are backloaded to the years 2022 to 2026. Still, the study called for three plants devoted specifically to producing cellulosic biofuels to be built in the next eight to 10 years at a cost of $500 million to $900 million. Any additional cellulosic biofuels would be imported from out of state.
The state has two biomass sources that could work for cellulosic biofuel production, poplar tree plantations and wheat fields. The University of Washington and Washington State University have been awarded $80 million in U.S. Department of Agriculture grants and are currently researching that.
Nathan Parker, a UC Davis researcher who helped produce the study, said no biofuels manufacturer in the U.S. is currently using Washington’s two sources in cellulosic biofuels production. In eight years, Parker said the state could be looking at “a different world” when it comes to biofuels manufacturing. He said a low-carbon fuels standard is needed to generate market demand for such a product.
“Without those confident market signals in place, you can’t invest in those two or three plants,” Parker said.
Ranker also urged moving forward with implementing the standard, which would give an incentive for biofuels manufacturers to look to Washington.
“There’s some interesting opportunities for biofuels,” Ranker said. “They create jobs in Washington state. Should we be moving in this direction? Absolutely. We have to get serious about climate.”
Frank Holmes of the Western State Petroleum Association countered by saying Washington shouldn’t rush forward with a requirement that he views as technologically impossible to comply with presently, and would add to the price of gasoline consumers pay at the pump.
“There’s been a lot of investment done and a lot of research that’s been done,” Holmes said. “It just can’t make the commercial step very well. It’s a hurdle that has to be achieved down the line, but probably not in the time frame of a low-carbon fuels standard.”
Sen. Doug Ericksen agreed, saying the state shouldn’t be mandating technological breakthroughs at the expense of consumers.
“I don’t think that’s in the best interest of carbon emissions reductions,” Ericksen said. “I cannot mandate a technological breakthrough. Billions and billions of dollars have been spent on cellulosic fuels with no breakthrough.”
DAY TWO: What would an LCFS program in Washington look like, and could it avoid California’s struggles?
10/13/14 – This post has been updated to correct information about the predicted effect on the price of fuel from a low-carbon fuels standard.
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