Author Archives: Larissa Koehler

Science and Economics Agree: The Time is Right for California to Get Serious About Methane Pollution

rp_Larissa-Koehler-200x300.jpgRecent numbers from the Intergovernmental Panel on Climate Change (IPCC) show that methane (CH4) is about 80 times more potent than carbon dioxide (CO2) in contributing to climate change over the first 20 years after it is released. Short-lived climate pollutants, like methane, are a large factor in determining how fast our climate will change over the next few decades.

These figures are particularly relevant in California where natural gas (which is about 99.9% methane) is used throughout the economy. For example, natural gas generates much of the state’s electricity through gas-fired power plants, is extensively used for home heating and cooking, and is increasingly being deployed as an alternative fuel for the state’s cars and trucks.

Yet, while California continues to operate and further build out a natural gas backbone in its energy economy, venting and leakage of uncombusted natural gas from pipes and machines can have an environmental impact. In fact, research shows that keeping methane leakage down to a minimum level is the only way to guarantee that the use of natural gas will provide immediate climate benefits, when switching from petroleum products. Read More »

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Community Fuels: Changing the Face – and Impact – of the Fuel Industry

EDF’s Innovators Series profiles companies and people across California with bold solutions to reduce carbon pollution and help the state meet the goals of AB 32.  Each addition to the series will profile a different solution, focused on the development of new technologies and ideas.

If one were to look around the room at a biodiesel or petroleum industry conference, they would quickly realize that the majority of attendees are male.  This is something that hasn’t escaped the notice of Lisa Mortenson, CEO of Community Fuels, who jokes that her gender makes her stick out at such events. Unique as it is that Community Fuels has a female leader, this is just one way that the company is changing the face of the alternative fuel industry.

Community Fuels is helping to make biodiesel a viable solution in California, by combining exciting research, quality production, and strong business practices. Biodiesel, a renewable alternative to traditional diesel, is made from raw materials (feedstocks) such as vegetable oils and animal fats, rather than fossil fuels. By virtue of its lower emissions profile when compared to standard diesel, biodiesel is helping California achieve its AB 32 and Low Carbon Fuel Standard greenhouse gas emissions reduction goals – and, in turn, the biodiesel industry is benefitting from those policies. “Groundbreaking California policies like AB 32 and the Low Carbon Fuel Standard drive Community Fuels’ growth,” says Mortenson. “Without strong policy support, companies like Community Fuels wouldn’t have the confidence to develop and build new businesses to displace a portion of fossil fuels with clean, renewable fuels like biodiesel.”

Who: Community Fuels, founded in 2005 and in production since 2008, has 25 full-time employees.

What: Community Fuels produces some of the highest quality and innovative biomass-based diesel fuels available. Their plant is operating at 10 million gallons per year of biomass-based diesel fuel with further expansion underway. Fuel is sold in bulk to the petroleum industry for blending with traditional diesel.

Where: Community Fuels operates a bio-refinery, laboratory and clean fuel terminal at the Port of Stockton, California.

Why: Community Fuels is dedicated to producing high-quality biodiesel for blending that lowers harmful GHG emissions, grows the state’s economy, and reduces dependence on foreign oil.

Long before Governor Brown’s plea for Californians to reduce their gasoline consumption, the founders of Community Fuels recognized the damaging pollution caused by traditional fuel and that biodiesel was an efficient alternative fuel that had the potential to scale and greatly reduce harmful emissions. The founders looked not only at California’s strong policies as a reason to open up shop within the State, but also at public sentiment — where they saw growing support of renewable, clean fuel. Mortenson is one of the co-founders and has served as CEO since the company was formed in 2005.

Community Fuels is the first, and currently only, producer in the nation to earn both BQ-9000 producer and laboratory certifications – industry-recognized third party accreditations of quality control procedures for fuel production and analytical laboratory capabilities.  This has contributed to Community Fuels’ reputation for quality and integrity, which has assisted the company in selling the majority of its biodiesel in bulk to petroleum companies and refiners who demand high quality products suitable for commercial-scale distribution and use.

Lisa-please work

Lisa Mortenson, CEO of Community Fuels

The petroleum companies typically blend the fuel with petroleum diesel, using 5% or less biodiesel. Mortenson believes that this low-percentage blend is attractive to petroleum companies and consumers because it requires no change to existing infrastructure – the marketability of this end product, according to Mortenson, “results in a large sale volume,  substantial amounts of displaced foreign oil and wide-scale greenhouse gas emissions reductions”.  The combination of these attributes means the biodiesel produced by Community Fuels spurs indirect job growth (by increasing the need for workers across the supply chain), helps to grow California’s economy, and goes a long way towards shaping a cleaner environment.

Community Fuels is constantly researching new feedstocks including unusual materials such as meadow foam seed oil, and has partnered with other companies like Solazyme to process algae oil.  Mortenson reports that every feedstock it uses is carefully vetted to ensure quality, scalability to a wide market, and compliance with a range of regulatory and sustainability standards.  Community Fuels also commits to using feedstocks that are co-products of other industries such as soybeans, canola, animal fats, recycled oils, and the co-products from ethanol plants.

Pano 1It is clear that Community Fuels is dedicated to creating a cleaner environment and a healthier state economy.  A series of grants received from federal and state agencies are both recognition of Community Fuels’ valuable work and a way for the company to continue its contributions to California.  EDF looks forward to seeing Community Fuels further its efforts to expand, innovate, and lead the alternative fuel industry as part of California’s clean energy economy.

 

Please note that EDF has a standing corporate donation policy and we accept no funding from companies or organizations featured in this series.  Furthermore, the EDF California Innovators Series is in no way an official endorsement of the people or organizations featured, or their business models and practices. 

 

Posted in California Innovators Series, Clean Energy, Climate, Global Warming Solutions Act: AB 32, Jobs | Comments closed

Is SONGS haunting energy's past, present, and future?

Larissa KoehlerEarlier this year, Southern California Edison (SCE) permanently retired the San Onofre Nuclear Generating Station (SONGS) after forty years of operation in San Diego County, appearing to put the large-scale power plant firmly in the past. However, much like Ebenezer Scrooge, California is grappling with the specter of SONGS’ past – which may haunt our present and future.

The story of SONGS is not unique to California. As of the end of 2012, 28 nuclear power plants were shut down in the United States – and many more will face the same fate in the near future, as they reach the end of their design life. Thus, a transition to renewables and incentivizing reduced demand – and a refusal to be tied to fossil fuels – is an issue of national importance.

The closure of SONGS has left California at an important crossroads: Continue to lean on fossil fuel energy and build additional combustion power plants – like Marley’s ghost chained to the past – or start shaping the future by using the clean solutions that are available today.

In a brief filed in a California Public Utilities Commission proceeding, EDF explained that California has time to develop environmentally superior resources, which California has dubbed “preferred resources,” and should do so before investing more resources in highly polluting fossil fuels:

  • Demand Response

Demand response (DR) and time-of-use (TOU) rate programs offer incentives to customers who reduce their energy usage when there is a high system-wide demand, which requires the use of more expensive and inefficient peaking power plants.

These programs have a tremendous potential to impact necessary demand: If 50% of SCE’s customers participated, energy demand would be reduced by two-thirds of the capacity SONGS provided.  As a bonus, those customers would also collectively see cost savings of $357 million, a 15% decrease.

Peter Lee /flickr

  • Energy Efficiency

Energy efficiency measures result in huge energy and cost savings.  For example, in 2010 and 2011 CPUC energy efficiency programs saw energy savings that were enough to power more than 600,000 households and offset 1,069 megawatts (MW) of electric capacity – equal to the output of 3 large power plants.

  • Renewables

California currently has 10,700 MW of wind and solar power connected to the CAISO grid, with plans to add 8,000 more MW by 2020. For reference, consider that SONGS had the capacity to produce 2,200 MW of electricity.

  • Storage

The CPUC is already starting to put increased focus on energy storage, to good effect.  Continuing to emphasize the importance of storage could transition California from needing to rely on traditional energy sources at any time of the day.

In a talk on December 2, Commissioner Andrew McAllister of the California Energy Commission stated that the closure of SONGS “is an opportunity to see what’s possible.” We agree: rather than be haunted by the specter of SONGS, California should take this opportunity to innovate and work to fill any gap in production with preferred resources first.

In this way, the state can serve as a template for how other parts of the country could use current, clean resources to create jobs, lower prices for consumers, and improve air quality through reduced emissions. Additional combustion power plants? Bah, humbug!

Posted in Clean Energy, Energy, Energy Efficiency | 2 Responses, comments now closed

New Report Confirms Major Progress in California's Alternative Fuels Market

After months of surveys, analysis and preparation, the California Energy Commission’s draft 2013 Integrated Energy Policy Report (IEPR) is out – and it shows that dramatic progress is underway in the state’s transportation fuels market.  Not only has the state made measured progress towards a more diversified fuel market through targeted investments, the growth of alternative fuels shows that policies like the Low Carbon Fuel Standard (LCFS) are working and compliance is achievable.

Accounting for nearly 40 percent of total energy consumed in the state and 38 percent of the state’s greenhouse gas emissions, the transportation sector is almost universally recognized as an area where significant progress needs to be made.  As shown by the IEPR, California’s powerful response to this realization through policies like the LCFS, AB 118 investment program and AB 1493 Pavley clean vehicle standards, just to name a few, has led to significant strides in greening transportation and reducing fossil fuel use.  Notable milestones to date recognized in the IEPR include:

  • A marked increase in the use of alternative fuel sources.

A rise in the use of natural gas, biofuels, and electricity has enabled lower-carbon energy sources to rise from a barely detectable level a few years ago, to about 7 percent of total transportation fuel use today.  (Page 19)

  • Expanded funding for clean fuels and energy efficient technologies.

The Energy Commission has contributed more than $400 million across 233 projects related to alternative transportation fuels manufacturing, research and development and workforce training.  With matching private and other public sector contributions of nearly $740 million, state-led investments have resulted in a multiplicative effect (about $1.80 from private and additional public sector funding for each $1.00 invested by the Energy Commission) and significant progress towards the state’s energy and climate goals. (Page 176)

  • Substantial progress and growth in the California biodiesel industry.

The biodiesel industry has grown exponentially in the past few years, resulting in significant production of in-state volumes.  In addition, research currently underway could significantly reduce production costs – meaning even greater volumes in the near future. (Page 64) Growth and technological advancement in this sector are particularly important, given the disproportionate amount of greenhouse gas and toxic diesel particulates that come from traditional diesel trucks.

  • Dramatic improvement in vehicle efficiency.

California’s vehicle standards, which have been emulated by the federal government, have resulted in fleet wide improvements in passenger vehicle efficiency.  As a result, California is predicted to experience a 2 billion gallon decline in gasoline consumption from 14.6 billion gallons per year in 2012 to 12.7 billion gallons per year by 2022. At approximately $3 dollars per gallon of gasoline, that’s over $6 billion per year in savings for consumers. (Page 182)

  •  Expected exponential growth in electric vehicles (EV).

Through policies like the $2,500 California Vehicle Rebate Project and the Governor’s 1.5 million EV by 2025 goal, the growth of EV deployment in California is unprecedented.  As a result, the Energy Commission expects exponential growth in the development and use of electric passenger vehicles in the coming years.  (Page 193) Since electric vehicles offer a significant reduction in greenhouse gas emissions compared to gasoline or diesel‐fueled vehicles, particularly if renewables are the electricity source, this will mean substantial carbon savings in the near future.

Notable in this study is that everything points to these trends continuing in the coming years.  As the report states, “existing government incentives and regulations combined with alternative fuel price advantages, expected economy of sale vehicle manufacturing, and technology advances could lead to at least a three-fold increase in alternative fuel growth by 2020.”  (Page 190)

Increasing diversification of the California fuel mix aligns with forecasts conducted by EDF earlier this year.  If these trends continue, the Energy Commission predicts that “California will achieve goals for petroleum displacement, in‐stage biofuel production, and LCFS compliance.”

Achieving full compliance of LCFS and other clean fuels policies is imperative for California to reach greenhouse gas reductions goals.  Though the state has made a tremendous amount of progress to date, it needs to continue to spur advanced technologies and adequately address challenges related to alternative fuel growth. The IEPR shows that California is on track to doing this and continued implementation of existing policies is key to lasting success.

 

Posted in Clean Energy, Energy, Low Carbon Fuel Standard | Comments closed

Fueling the Future: Why Biodiesel is a Clear Choice for California

The transportation sector accounts for 38% of California’s greenhouse gas emissions, the highest from any sector. And, as California’s fuel needs continue to rise, it’s becoming increasingly important that we break our reliance on traditional gasoline and diesel.  California’s low carbon fuel standard is one policy to help us break the cycle by creating more incentive to diversify our fuel mix and produce environmentally friendly and economically viable alternatives. One such alternative, biodiesel, is becoming a clear part of the solution to achieving our clean fuel goals.  

I recently took a trip to Iowa sponsored by the National Biodiesel Foundation, that centered around biofuel production in that state. One big takeaway for me was that alternative fuels are being embraced by a wide variety of economic sectors.  Additionally, there is a firm commitment by producers to ensure that biofuels are being produced from sustainable feedstock and production is conducted in a way that minimizes environmental harm and maximizes energy efficiency.

A biofuel that is seeing a surge in popularity in California is biodiesel – and for good reason. Like other biofuels, biodiesel greatly reduces harmful emissions into the air, but because it uses a variety of feedstocks, many of which are byproducts (think recycled cooking oil or left over soybean oil from another process) of other industries, the energy used to produce it is much lower.  In fact, the ratio of energy output to input for biodiesel is the highest of any transportation fuel. Finally, biodiesel can be used in any vehicle that runs on diesel, without modifications.

Leading the charge in California are six companies profiled in an EDF case study released today.  Biodico, North Star Biofuels, Yokayo Biofuels, Crimson Renewable Energy, Imperial Western Products, and Propel Fuels are all shining examples of businesses that have used the demand for alternative fuels created by California’s low carbon fuel standard to produce sustainable biodiesel.  Not only are these companies making biodiesel more readily accessible, they are supporting job growth as they expand production, enabling necessary reductions of harmful pollutants, and reducing our dependence on foreign oil. The founder of one California biodiesel company I visited said, “Biodiesel is creating real energy and real jobs for an economy that really needs it.”

In short, a stable and thriving biodiesel industry not only provides ample environmental advantages to merit further investment, but with its contribution of nearly $5 billion to the U.S. GDP, it’s also proving it can help build a stronger economy, making biodiesel a win-win solution for California. And most importantly, its success helps create pathways for other alternative fuels to follow, leading to the diverse mix of fuels that California needs to meet our clean fuel goals.

Posted in Clean Energy, Energy, Jobs, Low Carbon Fuel Standard | Comments closed

Five in Five: How to Achieve AB 32’s Goals and Build a Healthier, More Prosperous California

The 5-year update to the 2008 AB 32 Scoping Plan is being met with great anticipation, since it will continue California's trajectory down a path toward a healthier environment and economy.

The Scoping Plan update from the California Air Resources Board (CARB) will certainly lay out a vision for the years ahead, with its north star being a goal of reaching 1990 greenhouse gas emission levels by 2020.

The emission reduction opportunities in the Scoping Plan update are a blueprint and encompass improvements and coordinated efforts across all sectors of the California economy.

To maximize reductions, here are five concrete areas to consider, from the nine topics in which EDF submitted recommendations.

Ultimately, the Scoping Plan update should:

  • Make it clear that the low carbon fuel standard (LCFS) and cap and trade will extend beyond 2020.  Consumers need some certainty regarding California’s policy future upon which to base investment decisions. Clear incentives and a long-term regulatory structure will enable CARB to achieve the reductions it needs to meet 2020 and 2050 goals.  It is imperative that CARB create an expectation that both the LCFS and cap and trade will remain in effect post-2020 in order to implement long-term change.  This will mean that consumers are more likely to make choices with long-term impacts, like buying a more fuel efficient car or even an electric car.
  • Establish a plan for meeting the state-wide goal of a 75% recycling rate. Recycling 75% of the state’s waste will help to generate valuable greenhouse gas emissions and go a long way towards meeting the state’s goals.   Further composting can be encouraged by finding valuable uses for compost and creating markets that allow composters to sell their products. For example, EDF has conducted research on the benefits of applying compost to rangelands which can facilitate further GHG reductions. Other areas to consider include developing offsets for compostable materials and streamlining the permitting process for new composting and anaerobic facilities.
  • Implement a comprehensive strategy to reduce emissions from freight transportation.  As the demand for goods and services increases, emissions are expected to rise in freight transportation by 74 percent.  Measures such as investing in lower carbon modes of transportation are critical but there are also innovative approaches that might not be as obvious.  For example, by working together, companies like Hershey's and Ferrero have saved impressive amounts of GHGs and money by combining shipments so that they maximize cargo capacity for every trip.  EDF has profiled companies that are already seeing the benefit of these  and other similarly innovative approaches and believes that California can see large-scale change if they’re implemented state-wide.
  • Use On-Bill Repayment (OBR) to lower financing and transactional cost of clean energy projects.  OBR solves the problem many consumers have of the high up-front cost of clean energy projects.  It allows participants to borrow from private investors and pay the loan back directly through their utility bill, often lowering the overall amount of the bill despite the loan because of decreased energy demand. OBR accelerates clean energy investments and emission reductions without direct costs to taxpayers or ratepayers.  EDF estimates that OBR will avoid 200 million metric tons of CO2e over ten years (which translates to taking approximately 50,000 cars off the road), and OBR has the potential to create many jobs in the state as it spurs demand for clean energy projects.
  • Develop a comprehensive methane reduction plan.  As a short-term pollutant that has a high global warming potential, even small amounts of methane can have a tremendous negative impact.  This source of emissions is often overlooked because methane emissions can often occur indirectly as methane leaks from wells, pipelines, storage areas, or natural gas vehicles.  CARB can take charge of this challenge by creating an inventory of methane emissions that provides a comprehensive understanding of the scope and location of methane emissions sources, by implementing measures to reduce methane leakage, and by requiring energy efficient solutions to reduce the amount of natural gas used.

Integrating these five opportunities into the Scoping Plan update can, and will, go a long way towards mitigating the effects of climate change and creating a healthier environment and thriving economy for Californians that is built to last.

 

Posted in Cap and trade, Global Warming Solutions Act: AB 32, Jobs, Low Carbon Fuel Standard | Comments closed

Major California Refineries Logging Big Pollution Reductions Under AB 32

By Larissa Koehler and Tim O’Connor

 

It is well-documented that petroleum refineries release large amount of pollutants that are harmful to the environment and make people sick.  In California, these refineries are among the largest sources of carbon dioxide, accounting for 7 of the top 10 sources for climate pollution. According to data from the U.S. Environmental Protection Agency, refineries can also emit large amount of toxic compounds, including carcinogens and respiratory irritants.

California’s landmark global warming law (AB 32) offers a solution, placing nearly all refineries in the state within a cap-and-trade program that started January 1st of this year. One of the most innovative features of cap and trade was putting a price on carbon, forcing refinery business models to take a long look at the long term financial costs of releasing greenhouse gases.

As a result of the program, evidence shows that petroleum refineries in California are starting to change their ways.  Recently, the California Air Resources Board (CARB) released 2011 emissions data showing that 11 of the state’s refineries logged significant reductions in their greenhouse gas (GHG) pollution, as compared to 2010. This represents over half of the refineries reporting emissions to the agency.

In addition to cutting climate pollution, many of California’s biggest and dirtiest refineries are also documenting major cuts in other pollutants.  As reported to the US EPA’s Toxics Release Inventory (TRI) database, 2011 was a banner year for reductions of many compounds that are known to be harmful to human health, with many at record low levels – clear evidence that AB 32-inspired reductions can improve public health and help mitigate the effects of climate change.

Refinery – City Reduction of GHGs in 2011 compared to 2010 Toxic Pollutants Reported in Record Low Amounts (5 or 10 year low) in 2011
Paramount – Paramount 22% (74,146 MT) Ammonia, Benzene, Toluene
Ultramar – Wilmington 4% (75,621 MT) Hydrochloric Acid
BP – Carson 1% (76,070 MT) Diethanolamine, Ethylene, Tetrachloroethylene
Valero – Benicia 2%  (95,225 MT) 1, 3 Butadiene, Ammonia, Benzene, Mercury Compounds, Methanol, Molybdenum Trioxide, Naphthalene, Propylene, Sulfuric Acid
ConocoPhillips– Rodeo 4% (137,212 MT) Ammonia, Ethylene, Lead Compounds, Polycyclic Aromatic Compounds
Chevron – Richmond 2% (167,468 MT) 1,3 Butadiene, Ammonia, Benzene
Shell Oil – Martinez 2% (185,313 MT) Cumene, Ethylbenzene, Methanol, Nickel Compounds, Sulfuric Acid
Chevron – El Segundo 7% (422,994 MT) Benzo (G,H,I) Perylene, Chromium Compounds, Ethylbenzene, Lead Compounds, Mercury Compounds, Xylene
Pollutant Commonly Referred to Health Effect from Chronic Exposure
1,3 Butadiene Cardiovascular effects, leukemia, cancer
Ammonia Skin irritant
Benzene Blood disorders, neurological disorders, cancer
Chromium Compounds Respiratory irritant
Ethylbenzene Eye, skin, and throat irritant
Ethylene Cancer, reproductive damage
Hydrochloric Acid Skin, eye, respiratory irritant
Lead Compounds Reproductive damage, neurological damage
Mercury Compounds Dizziness, nausea, and vomiting
Methanol Upper respiratory irritant, abdominal pain
Nickel Compounds Asthma
Polycyclic Aromatic Compounds Cancer
Sulfuric Acid Respiratory irritant
Toluene Respiratory irritant

What is the likely reason for the reduced GHGs at California Oil Refineries?

Evidence shows that reductions of GHGs and toxic pollutants are not a mere result of facilities suspending or cutting production through voluntary or involuntary action. Instead, evidence points to AB 32’s cap-and-trade program inspiring facilities to reduce emissions by investing in and upgrading equipment.  A prime example is Valero’s refinery in Benicia, CA, which decreased covered GHG emissions by over 95,000 metric tons while also cutting ammonia emissions by 98%, sulfuric acid by 84%, and benzene by 49%.

As reported in the Benicia Herald, this decrease was the direct result of a new flue gas scrubber put into use at the refinery in 2011.

According to Sue Fisher Jones, public affairs manager for the Benicia refinery, the Valero installation.

“…will let the refinery retire existing furnaces, allowing new, energy-efficient furnaces to operate and reduce the refinery’s greenhouse gas footprint.”

Valero demonstrates that putting a dollar figure on emissions leads industries to change, yielding pollution reductions while saving energy and fuel use.  Not only will the environment benefit from fewer emissions, human health will improve as well.

California should be proud of the progress it has achieved thus far with AB 32’s cap-and-trade program, but we shouldn’t rest on this success  Environmental integrity and human health depend on a continuing decline in emissions.  Thankfully, CARB has created a program, outlining strategies that monitor changes in pollution and adopts necessary measures to mitigate pollution if needed.

AB 32 policies that encourage petroleum refineries to cut pollution are a tremendous start to mitigating climate change.  However, in order to meet the goals of AB 32, more refineries need to incorporate energy efficient solutions.  Such steps will not only strengthen California’s economy, but will go a long way towards ensuring clean air and better health for present and future generations.

Posted in Climate, General, Global Warming Solutions Act: AB 32 | 1 Response, comments now closed

The Nuts and Bolts of California’s First Greenhouse Gas Auction

By: Jonathan Camuzeaux, EDF Research Analyst

Following today’s California Air Resources Board’s (CARB) board meeting, the next major milestone in California’s efforts to reduce greenhouse gas (GHG) emissions is on November 14th, when California will hold the first auction of carbon allowances for the Global Warming Solutions Act (AB 32) cap-and-trade program. EDF has closely followed the steps CARB has taken to prepare, including participating in their successful “practice auction” this past August.  In order to shed some light on the nuts and bolts of how these auctions will work and the process going forward, we’ve put together an Auction FAQ factsheet to help answer some basic questions.

Why is CARB Auctioning CO2 Allowances?

In terms of allowance distribution, the AB32 program includes a combination of free allocation and auctioned allowances.  While it is the cap that ensures that the targeted quantity of emission reductions are achieved – regardless of the choice of type of allowance distribution – there are important differences between auctioning and free allocation relating to issues such as transaction costs, market power, price certainty, and distribution of allowance value.

Perhaps most importantly, auctioning allowances creates proceeds that can be invested in a variety of ways to further the goals of AB32 – for example, financing emission reduction projects in either capped or uncapped sectors, keeping energy prices down, or preparing for the impacts of global warming.  In addition, twenty-five percent of proceeds are actually required to be used in ways that benefit disadvantaged communities.

Another advantage of auctioning CO2 allowances is that it guarantees that all regulated entities have access to allowances on an equal footing. By holding an auction, California ensures that both large and small companies have access to allowances under the same terms, thus reducing the risk that the market becomes dominated by a few big players.

How the Auction Works

The California auction will be using a single-round, sealed-bid, uniform-price format. Under this format, companies submit confidential bids for a specific amount of allowances at specific prices (also called a bid schedule). The highest bidder is allocated their requested quantity of allowances first, then the second highest bidder, etc., until there are no more allowances.  Winning bidders receive the quantity of allowances they bid for at the uniform settlement price, which is determined as the value of the lowest winning bid – or more simply, the price at which the market clears. Regardless of their original bids, all winning bidders pay the same price. This auction format creates a clear market price, which is crucial for investors.

Using Auction Revenue to Further Emissions Reductions

There are abundant opportunities to invest the auction proceeds into sectors that deliver greenhouse gas reductions in California – from clean energy to clean transportation, energy storage and clean tech finance and investment. Not only do these investments further California’s greenhouse gas reduction goals, they can also provide considerable economic benefits, as well as substantial health co-benefits, while helping set California’s path towards sustainable economic growth. To learn more about investing AB32 auction proceeds to grow California’s clean economy, read the EDF Invest to Grow report.

Auctions will play an important role in California’s cap-and-trade program; they encourage a more stable market and create proceeds that can be used to make California’s efforts to cut climate change pollution even more effective. For more details about how the auctions are designed, how the bidding process works and what to expect on November 14th, see EDF’s Auction FAQ factsheet and the California Air Resources Board’s website (here).

Jonathan Camuzeaux is a Research Analyst in the Office of Economic Policy and Analysis at EDF. He provides economic analysis to support the development of market-based solutions to environmental issues with a focus on climate and energy economics.

 

 

Posted in Cap and trade, Clean Energy, Climate, Global Warming Solutions Act: AB 32 | Comments closed

California’s record gas prices shows AB 32 will help both your wallet and your health

Fuel prices in California hit historic highs this week, an unexpected price spike that has put the state’s dependence on oil and natural gas into sharp focus.  Like many of the state’s former fuel price shocks caused by demonstrable events (i.e. foreign and domestic supply disruptions), oil companies are once again saying that refinery problems and pipeline issues were the root cause.  However, most reports on the current price swing aren’t pinpointing the true reason – drivers en masse are too reliant on the current mix of gas and diesel, an energy source that pollutes our environment every time it is used.

The true cause of California’s fuel price spikes must be seen for what it is –an unhealthy dependence on fossil fuel (primarily imported), and lack of diversity in our transportation system.  Furthermore, since over 50 percent of the oil used in the state is obtained from foreign sources, California consumers aren’t exactly benefitting the state’s economy as we send billions of dollars out-of-state but release combustion byproducts here – polluting our air and water.  Over time, the impact of buying and burning all of that gas is going to get even worse: an increasing population and declining in-state oil production means we are going to import, and burn, more.

Growing fuel use and declining in-state production puts California on a path to spend between $112 and $182 billion per year by 2020 on imported energy, which translates to roughly $8,000 to $13,000 per household.   Even worse, the American Lung Association, using EPA data, has included 9 cities and 16 counties in California on their list of most polluted areas in the country; more fuel burning will only exacerbate these problems, worsening air pollution and sickening people – leading to poorer public health, higher healthcare costs, and more missed work and school days.

California’s fuel and energy policies , if implemented as planned, have the ability to protect the economy and help lessen air pollution and human health impacts.  By setting a cap on emissions and requiring a diversification of energy sources away from an over-reliance on fossil fuels, AB 32 will result in decreased dependence on foreign imports and will make California consumers less vulnerable to price shocks.  Low carbon solutions such as advanced biofuels, ultra-efficient vehicles, and improved community planning are all part of the AB 32 solutions package, and all are aimed at breaking the grip that traditional fossil fuel companies have on our economy. Add to that the obvious environmental and health benefits from reducing fossil fuel use, and it is clear that the California Air Resources Board’s vision for AB 32 policies is the right choice for California.

For more information on how AB 32 saves California’s money during fuel price swings, see two articles co-authored by EDF economist Jamie Fine — Shockproofing Society: How California’s Global Warming Solutions Act (AB 32) Reduces the Economic Pain of Energy Price Shocks and The Upside Hedge Value of California’s Global Warming Policy Given Uncertain Future Oil Prices.

Posted in Clean Energy, Climate, Global Warming Solutions Act: AB 32, Politics, Transportation | Comments closed