Energy Exchange

You can’t turn on a TV or radio in California these days without hearing the oil companies and their industry associations complaining that the state can’t afford to move to cleaner fuels and predicting that cutting pollution from the transportation sector will drive up gasoline prices.

What the oil industry’s $56 million political campaign, and even wider reaching ad campaign, doesn’t say is that if gas prices do go up this year, it is likely to be the oil industry—not clean energy—that’s to blame.

Since 2005, the price of gas in California has fluctuated by an average of $1.16 per gallon, while diesel has fluctuated by $1.01. Year after year, prices at the pump shoot up – yielding significant additional profits for fuel suppliers – then casually drift down back to a point higher than where they started. The phenomenon is so well known, industry insiders call it rockets and feathers.

The oil companies say they don’t cause these fluctuations, but the problem is so severe that Governor Jerry Brown and the state legislature just gave the California Energy Commission $342,000 to investigate and prevent gas price fixing and market manipulation by the industry.

Market domination can lead to price manipulation

Transportation fuel is a concentrated market where a handful of suppliers control a product everyone has to have. Small and large businesses, commuters, soccer moms, motorcycle clubs—pretty much everyone needs the gas and diesel supplied in California by just 22 companies, six of which (Chevron, Tesoro, BP, Phillips 66, Valero and Shell) control 90 percent of the total supply. Read More »

Yesterday, the Environmental Defense Fund, the Natural Resources Defense Council, the Sierra Club and the Conservation Law Foundation filed a brief in opposition to March 2014 petitions for Supreme Court review in American Fuel & Petrochemical Manufacturers Association v. Corey and Rocky Mountain Farmers Union v. Corey, cases in which oil and ethanol companies attack the constitutionality of California’s Low Carbon Fuel Standard (LCFS).

The LCFS, adopted under California’s trail blazing Global Warming Solutions Act, is a central contributor in the effort to move the transportation system away from the current paradigm of unsustainable global warming pollution, foreign energy dependence, and community-choking air pollution. The LCFS works by putting market incentives in place that encourage the production and use of low carbon fuels that were not prevalent when the program went into effect. It is projected to reduce greenhouse gas emissions from California’s use of transportation fuels by 16 million metric tons per year by 2020.

As we have explained in prior posts here and here about this important case, the challengers in the litigation have argued that the LCFS discriminates against ethanol and oil coming from outside of California and that it attempts to regulate actions occurring outside the state in violation of the U.S. Constitution’s Dormant Commerce Clause. A panel of the United States Court of Appeals for the Ninth Circuit rejected these arguments in September 2013. In their March 2014 petitions, the industry challengers seek Supreme Court review of the appeals court’s decision. The Supreme Court’s decision on whether to take the case could come as early as late June. Read More »

California drivers don’t have much choice when it comes to what fuel they fill their cars with, or how dirty it is. As recently as five years ago, nearly 97 percent of the energy used for transportation in the Golden State came from gas and diesel – over half of which was made from imported oil.

This basic lack of consumer choice means that California drivers like myself are stuck with a high-priced product that is made from dirty crude and controlled by a few major multinational oil companies.

What’s more, our transportation system has a direct effect on our health – in addition to contributing to climate change and energy insecurity.

And it’s not a pretty picture.

A study just out from the Environmental Defense Fund and the American Lung Association, with modeling by Tetra Tech, finds that the negative impacts of California’s transportation system cost us a staggering $25 billion per year. It also shows that the benefits of policies aimed at supporting the use of cleaner fuels can significantly reduce such costs.

25 million drivers, worst air pollution in the U.S.

I’m probably similar to many other drivers around here. Last year I drove some 15,000 miles, paying about $2,400 for gas – a sizeable portion of my disposable income. This gas is always more expensive in the summer than in winter, and it won’t matter if I fill up my car at the Shell station on the corner or from Chevron at the freeway on-ramp.

My 15,000 miles of driving last year released about 5 tons of greenhouse gas pollution and other air contaminants. When combined with the pollution released from California’s other 25 million drivers, I have, unfortunately, helped give California the nation’s worst air pollution.

Not only is our state home to the top five most polluted cities in the United States, but countless Californians suffer from lung and heart problems, and even risk early death, from pollution-related health impacts cause by transportation. Read More »

By Tim O’Connor and Chloe Looker

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

Modern society makes a lot of garbage. The decomposition of organic material from garbage in landfills releases methane gas, a potent global warming pollutant.

At the same time, the modern transportation system is powered mostly by fossil fuels and also releases global warming and toxic air pollution. Today, two companies are turning rotting lemons (garbage) into lemonade (low carbon fuels for cars and trucks), and are showing that AB 32 creates a powerful incentive for new ideas and innovations.

Although the ultimate solution to the problem of waste generation and pollution from landfills must include reduction of waste going into the landfills, the fact of the matter is landfills aren’t going anywhere any time soon. Read More »

EDF’s Innovator 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.

Time and again, the people of California have affirmed that pursuing policies to cut climate pollution is critically important for the health of current and future generations. At the same time, history has shown it to be much harder to implement environmental policies if there is a perception that economic health will suffer. The ultimate goal is well-designed public policy that delivers environmental, health and economic benefits together.

In 2006, the state legislature took the environmental and economic paradigm to heart when it passed California’s global warming law, AB 32, creating a fundamental promise that cutting pollution and growing the Golden State’s prosperity will go hand in hand. Today, California business and community leaders are proving that promise to be a reality – and new stories are regularly emerging to show it. Our new AB 32 Innovator Series will work to capture these stories, bringing the companies – and people behind them – into light.

One of the reasons AB 32 has succeeded has been its ability to use market-based programs to cut pollution, allowing for both environmental and economic progress. Economic, government and academic experts have long suggested that well-designed market-based programs are the best tools for achieving pollution reductions because they inspire businesses to identify and apply new and innovative solutions. These solutions are often cheaper and faster at cutting pollution than prior methods, resulting in reduced compliance costs and rapid pollution declines.

For example, in a 2012 paper published in the Proceedings of the National Academy of Science, it said this about a market mechanism used in AB 32 (cap and trade):

“Facilitating innovation in “clean” technologies may be the key to achieving climate change stabilization without dampening economic productivity…CTPs [cap and trade programs] have several attributes that support clean technology innovation.”

For a concrete example of the possibility that innovation provides, think back to the acid rain problem of the 1990’s. Sulfur pollution was spewing from major coal-fired power plants across the U.S., degrading forests, lakes and architectural landmarks at a threatening rate.

When the U.S. Environmental Protection Agency (EPA) adopted a cap-and-trade regulation to help solve the problem, most experts thought installing expensive scrubbers and equipment upgrades across the U.S. was the solution. As a result, power companies across the U.S. predicted runaway costs and facility closures. However, when faced with the opportunity of a market-based solution and its inherent signal to innovate, a simple low-cost solution was developed by these same companies: find lower-sulfur coal and bring it to the power plants by train, rather than using high-sulfur coal located closer by.

Through this simple innovation, compliance costs were 80–90% cheaper than initially estimated.

Unfortunately, most economic models and regulatory implementation scenarios are ill-equipped at predicting innovation because it tends to happen in ways people don’t expect. If it was easy to predict how and when ground-breaking ideas occur, they would have already been applied. As the acid rain example shows, innovation can, and does, take many forms. Accordingly, by documenting the development and implementation of innovative solutions as they emerge, the true potential of policies like AB 32 can be realized. This is the essence of our new California Innovators Series.

In California, AB 32 is helping to develop groundbreaking solutions, proving that the state’s climate policy mission of protecting the economy and the planet can be realized. EDF’s Innovator Series will recognize several of these bold solutions throughout the year in an effort to distinguish the companies positively impacting California’s landscape and inspiring future innovators to come.

Please note, 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.

While several stories have been written on this week’s historic climate pact signed by California, Oregon, Washington and British Columbia, little has been mentioned about the path its created for low carbon fuels in Western North America. Such a clear statement on the direction for West Coast low carbon fuels development has never been made, so it certainly deserves a deeper dive.

In Part II of the pact: “Transition the West Coast to clean modes of transportation and reduce the large share of greenhouse gas emissions from this sector” the leaders agreed to “Adopt and maintain low-carbon fuel standards in each jurisdiction. Oregon and Washington will adopt low-carbon fuels standards, and California and British Columbia will maintain their existing standards.”

The relevance of this statement cannot be understated.

According to the US Energy Information Agency, the 3 western states burn a combined 23.7 billion gallons of gas and diesel every year, emitting just over 200 million metric tons of carbon dioxide. British Columbia, for its part, releases about 15.5 million tons from burning gas and diesel in cars and trucks every year.

Furthermore, based on recent projections of alternative fuel industry growth from the California energy commission, the US Energy Information Agency, and consulting firms like Navigant, stringent Low Carbon Fuel Standards (LCFS) are achievable.

For example, according to recent cutting-edge research on electric vehicle (EV) sales, California and Washington will likely lead the nation in EV sales by the year 2022 with about 813,000 and 105,000 EV’s sold respectively. Additionally, the state of Oregon is expected to account for over 5% of all EV sales in 2022. With policies like the LCFS, these vehicles can capitalize on the huge amount of zero carbon power (hydroelectric, wind, etc.) produced throughout the pacific northwest on a yearly basis – yielding even greater economic investments while also significantly reducing pollution that causes climate change and public health impacts.

In addition to the EV example, a set of LCFS standards across the western region can build upon the large amount of low carbon biofuels that are being produced. By way of example, according to the US EIA, at least 14 different biodiesel production facilities with a production capacity of 183 million gallons of fuel are already located in California, Oregon and Washington, with more to come. Furthermore, as documented by the California Energy Commissions, at least a 3-fold increase in alternative fuels production is expected by 2020, enabling the achievement of goals for “petroleum displacement, in‐stage biofuel production, and LCFS compliance.”

These alternative fuel facilities and companies mean local jobs, economic growth and reduced imports – a much different picture than the current trend of buying massive amounts of foreign crude oil and sending billions of dollars abroad.

For years, members of the oil and traditional ethanol industries have fought to undermine the LCFS in the media, the courts and at the ballot box. These groups have spared no expense to build implementation road blocks and cast doubt over the standard, hiring consulting firms that deliver highly criticized sky-is-falling cost estimates, sponsoring industry groups aimed at casting doubt over implementation readiness, and suing California in state and federal court. With this most recent announcement, those efforts were again proven futile.

Though time will tell how Oregon and Washington will implement the LCFS portion of the recent climate pact, for now, a green light means it’s go time for low carbon fuels across the region.