Why California's Low Carbon Fuel Standard Matters To You

Transcription

1 Why California's Low Carbon Fuel Standard Matters To You OPIS National Supply Summit October 24, 2012 Las Vegas David Hackett 1

2 Agenda Ø What is the California LCFS? Ø What is the impact of the LCFS? Ø What are the other LCFS programs? Ø What happens from here? 2

3 The California LCFS is part of the Global Warming Solutions Act AB 32 3

4 AB32 also includes: Ø Cap & Trade to limit GHG from stationary sources Ø High Carbon Intensity Crude Oil Ø Clean Fuels Outlets 4

5 The LCFS is designed to reduce the Carbon Intensity of transportation fuels 1. A 10% reduction of greenhouse gases per unit of transportation energy is required by 2020 by the LCFS. 2. Applies to Gasoline and Diesel fueled vehicles and their substitutes including natural gas, electricity and hydrogen. 3. Describes credit and debits, CI s, pathways, defines terms. 4. Program began in 2011 with 2011 and 2012 as reporting only years. However, LCFS credits could be accrued during those years for future years begins the compliance period. 5

6 What does it apply to? Ø The LCFS shall apply to all transportation fuels providers, a category which is defined as all refiners, blenders, producers, or importers. Regulations apply, either on a compulsory or opt-in basis, to the following fuel types: California reformulated gasoline ( gasoline or CaRFG ) California diesel fuel ( diesel fuel or ULSD ) Fossil compressed natural gas ( Fossil CNG ) or fossil liquefied natural gas ( Fossil LNG ) Biogas CNG or biogas LNG Electricity Compressed or liquefied hydrogen ( hydrogen ) Fuel blends containing hydrogen, E10+, biomass-based diesel, denatured fuel ethanol ( E100 ), neat biomass-based diesel ( B100 ) and any other liquid or non-liquid fuel. 6

7 What was the reasoning? Ø Cap on state GHG emissions at 1990 levels for 2020 Ø Goals: diversify fuel sources decrease oil use transition from oil dependency encourage innovation in the transportation industry set an example for other regulating entities to follow Reduce California s impact on the environment and reduce contributions to climate change Ø Alternatives RFS: admirable but clumsy Dr. Dan Sperling Carbon tax is not viable because would cause little change A tax as high as $50/ton CO2 would only raise prices by 45 cpg at the pump Re cap & trade, can t make a cap stringent enough to be effective 7

8 How is Carbon Intensity calculated? Source: Life Cycle Associates 8

9 Carbon Intensity Look Up Table Source: CARB 9

10 Carbon Intensity Look Up Table Source: CARB 10

11 Carbon intensity of ethanol needed to meet LCFS Midwest Corn Ethanol CI Range Sorghum/Wheat/Corn Ethanol CI Range California Ethanol CI Range Brazil Sugar Cane Ethanol CI Range Carbon Intensity (gco2e/mj) Sources: WSPA, CARB Tool for Calculation for Required Ethanol CI to Comply with Gasoline Standard, May 2011; Method 2A/2B Applications and Internal Priority Pathways (as of June 24, 2011); May 25, 2011Clean Final Regulation Order Part 1 and 2 Combined; Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Farmed Trees by Fermentation, February 27,

12 Agenda Ø What is the California LCFS? Ø What is the impact of the LCFS? Ø What are the other LCFS programs? Ø What happens from here? 12

13 Carbon intensity has to go down CI Range of Available Ethanol Carbon Intensity (gco2e/mj) * Assumes no change to current 10% ethanol blend wall and no wide scale use of E85 Cellulosic Ethanol from Trees CI 20.4 (not commercially available) Sources: WSPA, CARB Tool for Calculation for Required Ethanol CI to Comply with Gasoline Standard, May 2011; Method 2A/2B Applications and Internal Priority Pathways (as of June 24, 2011); May 25, 2011;Clean Final Regulation Order Part 1 and 2 Combined; Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Farmed Trees by Fermentation, February 27,

14 Brazilian Biofuels Shuffle Brazilian sugar cane ethanol shipped to California to comply with LCFS U.S. corn ethanol shipped to Brazil for domestic consumption Source: Boston Consulting Group, Understanding the Impacts of AB 32, June 19,

15 There is no way the system can transition to Brazilian ethanol E85 by 2015 LCFS targets will require high levels of E85 adoption Only sugar cane ethanol has enough Carbon Intensity reduction to meet the goals Retailers need to change their pumps, lines and tanks to be E85 capable 2015 ethanol volumes are a significant fraction of the total Brazilian production Source: Boston Consulting Group, Understanding the Impacts of AB 32, June 19,

16 LCFS, AB 32 Policies Impact on Trade Flows Motor Gasoline Diesel Jet Fuel Source: Boston Consulting Group, Understanding the Impacts of AB 32, June 19,

17 LCFS costs are significant Source: Review of CARB Staff Analysis of Illustrative Low Carbon Fuel Standard (LCFS) Compliance Scenarios, Sierra Research Inc., February 20,

18 LCFS and Fuel Costs Refiners in will have to recover 33 cents to $1.06 per gallon to cover higher costs associated with LCFS Compliance costs could be much higher if the cost of carbon rises and becomes volatile up to $2.70 per gallon Massive shift in fuel trade flows Loss of up to 50% of the state s refining capacity Source: Boston Consulting Group, Understanding the Impacts of AB 32, June 19,

19 HCICO Table Carbon Intensity (gco2e/mj) Brazil Marlim 6.75 Saudi Arabia Arab Light 6.75 Canada Federated 7.77 Colombia Oriente 9.34 Iraq Basra Light Russia ESPO Oman Oman Venezuela Boscan United States Alaska North Slope California Average Production Nigeria Bonny Light Canada Cold Lake Canada Syncrude Sweet Premium Venezuela Petrozuata Canada Suncor Synthetic A Baseline Crude Average*

20 Crude Oil Shuffle California crude oil shipped to Far East for refining and consumption Foreign, Middle East oil shipped to California for refining and consumption Source: Boston Consulting Group, Understanding the Impacts of AB 32, June 19,

21 Clean Fuels Outlet is unfair, costly for CA refiners New regulations require oil companies to build, maintain and supply hydrogen fueling stations at service stations they do not own or operate Initial cost for refiners: $1.25 billion (does not include costs of supplying, maintaining and operating facilities) Source: California Air Resources Board, Clean Fuels Outlet regulation; Clean Fuels Outlet Workshop III, July 13,

22 Cumulative Impacts - $0.49 to $1.83 per gallon Impacts Could Reach $2.70 per Gallon Cap & Trade (Fuels) $0.14 to $0.69 per gallon Cap and Trade (Stationary Sources) $0.02 to $0.08 per gallon Fuel Low Carbon Fuel Standard $0.33 to $1.06 per gallon Source: Boston Consulting Group, Understanding the impact of AB 32, June 19,

23 Agenda Ø What is the California LCFS? Ø What is the impact of the LCFS? Ø What are the other LCFS programs? Ø What happens from here? 23

24 Low Carbon Fuel Standards Outside of California Source: Center for Climate and Energy Solutions 24

25 National Low Carbon Fuel Standard Project Ø The NLCFS Project Team is lead by Dr. Daniel Sperling of UC Davis and includes academics from Carnegie Mellon, University of Illinois, Oak Ridge National Laboratory, International Food Policy Research Institute and the University of Maine. Dr. Sperling helped to develop the California Low Carbon Fuel Standard. Ø Presented findings from a series of studies on a National LCFS to a bi-partisan briefing on Capitol Hill on July 19, 2012 Ø According to the findings published by the NLCFS Project, fuels of the future will be cleaner, cheaper, and more made in America if the United States adopts a national Low Carbon Fuel Standard, say scientists from six of the nation's leading research institutions. Ø Versions of a national LCFS made their way through congress in 2007 and 2009 but failed. There is no current bill calling for a National LCFS. 25

26 Low Carbon Fuel Standards Outside of California Ø Oregon is the only other state that has adopted a Low Carbon Fuel Standard. The OR LCFS will require fuel suppliers to gradually lower greenhouse gas emissions of transportation fuels 10 percent over a 10 year period. Fuel suppliers can choose the types of fuels they provide such as gasoline, diesel fuel, ethanol, biodiesel, natural gas, electricity, propane, hydrogen or any other new fuel to meet the program requirements. Oregon DEQ is in the process of drafting rules for the standard. The Oregon LCFS is scheduled to take effect in

27 Other states considering LCFS Ø Washington In 2009, Governor Christine Gregoire issued an executive order directing the state Department of Ecology to assess whether the California LCFS or a modified version would best meet Washington s greenhouse gas emissions reduction targets. The final report was issued in 2011 Currently no LCFS policy has been implemented, and the state has not yet decided how to proceed 27

28 Other states considering LCFS Ø Northeast and Mid-Atlantic States In 2009, Governors from 11 states (Delaware, Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont) signed a memorandum of understanding committed to examining the issues surrounding a regional Low Carbon Fuel Standard. The Northeast and Mid-Atlantic LCFS is currently in the draft planning stages, but aims for a 5 15 percent reduction over a period of years. 28

29 Agenda Ø What is the California LCFS? Ø What is the impact of the LCFS? Ø What are the other LCFS programs? Ø What happens from here? 29

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31 Practical Limit of Mid Continent Crude Distribution Crude Prices Relative to WTI on October 22, 2012 ($/bbl) WCS ($20) Bakken ($22) ANS +$18 Brent +$21 SJVH +$10 WTI $89 Maya +$6 LLS +$20 Source: CAPP with Stillwater annotation All rights reserved.

32 Los Angeles Spot & Retail Gasoline Prices $4.90 $4.80 $4.70 $4.60 $4.50 $4.40 $4.30 $4.20 $4.10 $4.00 $3.90 $3.80 $3.70 Torrance Power Outage $3.60 $3.50 $3.40 $3.30 $3.20 $3.10 $3.00 $2.90 $2.80 $2.70 9/1/2012 9/6/2012 9/11/2012 9/16/2012 9/21/2012 9/26/2012 Average Retail Price 10/1/ /6/ /11/ /16/ /21/2012 Spot Price Source: OPIS

33 Ø experience runs deep Ø Presenter: Ø David J. Hackett Ø Ø Ø

34 Sources Ø Ø Ø Ø Ø Ø Ø Ø Ø Ø 34