California's Low-Carbon Fuel Standard Stirs Controversy

In 2006, California created an aggressive climate law calling for a cut in greenhouse gas emissions of 25% by 2020, and a 10% overall reduction in fuel emissions. In order to meet the fuel requirement, the makeup of fuel for cars is going to have to change. That’s where the problems start.

The state’s business associations — and particularly the petroleum interests — do not like this. They say the changes will certainly be accompanied by higher gas prices, and are thus predicting an economic catastrophe brought on by new mixes of gasoline that have never been used before. As evidence, they cite how disruptive high gas prices were last summer, noting that in California even the smallest disruptions in fuel supply can have widespread consequences. Last summer, businesses employed costly fuel surcharges as a result of high gas prices, and tourism took a major hit.

In response, environmental groups say California’s tough rules will help spur innovation in low-carbon fuels, like cellulosic ethanol, or plug-in hybrid technology. They also point out that the new fuel standards will be implemented over the course of 11 years, so they say it’s disingenuous for businesses to complain about the danger of raising prices during an economic downturn. (If we’re in an economic downturn for the next 11 years, we’ll have bigger problems to worry about than high gas prices). The first required changes, however, are slated for 2011.

California’s Air Resource Board has determined that corn-based ethanol has no benefit when it comes to climate change, largely because stripping land to grow corn causes more CO2 to spill into the atmosphere than is saved by not burning petroleum. This obviously has the ethanol lobby infuriated, but it leaves the door open to cellulosic ethanol. Of course, someone will first have to devise a way to manufacture that fuel cheaply.

No one knows if the curve of this law is soft enough to escape true economic pain, or if it will spur the innovation lawmakers are hoping for. Needless to say, there are a lot of people hoping the state’s gamble pays off.

California’s Low-Carbon Fuel Standard Has Oil Companies Anxious (The Sacramento Bee)