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Low Carbon Fuel Standards: Is there a better way?

On April 23, 2009, the California Air Resources Board adopted a low carbon fuel standard (LCFS) for transportation fuels. The LCFS takes effect on Jan. 1, 2010 and is aimed at reducing the greenhouse gas lifecycle intensity of fuels sold in California by 10 percent by 2020. The regulation means that obligated parties (refiners and fuel sellers) must track the greenhouse gas lifecycle intensity of all the fuels they sell to ensure that the average intensity is in compliance for each year.

“Using lifecycle assessment (LCA) as a tool to improve sustainability thinking is not new” says Suncor's Brent Stuart, director, government relations, pointing out that Suncor utilizes just such a tool in many of its design decisions. “However, applying LCA in the form of a legal regulation has raised some complicated issues for policy makers and affected parties”. Some of those issues include: how the LCA for all fuels will be calculated, which fuels will qualify as being less intense and how the LCFS interacts with other regulations affecting the transportation sector (i.e. renewable fuel standards).

“The LCFS begins to underscore the challenges of tackling reductions in greenhouse gas emissions in the transportation sector,” says Stuart. For petroleum-sourced transportation fuel, approximately 75-80% of the lifecycle emissions occur when the fuel is combusted and therefore these emissions are highly dependent on engine fuel efficiency and total kilometers driven — aspects that a fuel provider has no control over. California policy makers originally envisioned that fuel substitution would take place - for example, increased use of ethanol blended into the fuel pool. But much controversy has arisen recently over the calculated lifecycle intensity reduction benefits of ethanol, casting some uncertainty on how obligated parties will be able to comply with the LCFS in the near term. In the longer term, policy makers hope that advanced biofuels, which are expected to exhibit lower lifecycle intensities, will reach commercial scale production levels in time to help satisfy the LCFS.

In the meantime, the LCFS and its associated measurement tool, LCA has caused people to try to assess what the true lifecycle intensity of existing fuels are, including fuels produced from oil sands. Earlier studies tended to indicate that oil sands sourced transportation fuels had a higher lifecycle intensity than fuels produced from so called conventional crude oil. However, recent reviews of those past studies coupled with new research underway is revealing a different picture: oil sands sourced fuels appear to be only marginally more intense (5-15%) compared to conventional crude sourced fuels. “Preliminary results from research undertaken by the Alberta Energy Research Institute shows oil sands sourced fuels are actually less intensive than fuels produced from California heavy crude oil," says Stuart referring to work that Suncor and others have been participating in over the past year. Further, when things such as cogeneration electrical exports from our operations and the unique refining aspects of oil sands synthetic crude oil are taken into account, the lifecycle intensity of oil sands sourced fuels could be lower still. Results from this new research is expected later on in 2009.

Where does this leave governments considering adoption of an LCFS? “In California's case, one of their stated objectives is to see their policy adopted by other jurisdictions, perhaps even at the US federal level one day” says Stuart. The province of Ontario has indicated its intent to develop an LCFS modeled after California but to date no regulations have been developed while policy makers are tackling similar issues described above; how the LCA is conducted, which fuels qualify and how does this interact with renewable fuel standards.

One of the other objectives of LCFS is to spur the development of advanced fuels, be they advanced biofuels, greater use of electricity or even hydrogen fuel. Whether the LCFS is the best policy lever to incent that development is unknown at this time.

As of May 2009, the US Environmental Protection Agency, along with the State of California and auto makers agreed to adopt more stringent corporate average fuel efficiency (CAFE) standards at a national level and on a faster implementation timeline than previously mandated. In addition, a committee of the US House of Representatives decided to eliminate an LCFS in their current draft of a Clean Energy and Security Act, citing an overlap with renewable fuel standards.

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