Will low carbon fuel standard move forward?

Will low carbon fuel standard move forward?
ESSHB 1110 would create a low carbon fuel standard in Washington state, but fears of increased fuel prices could cause friction amongst legislators in the Senate. Photo: freepik.com

Now that a state House bill creating a low carbon fuel standard (LCFS) has cleared that chamber, it remains to be seen whether its supporters will achieve similar success in the Senate. Testimony and comments on ESSHB 1110 during a Mar. 19 public hearing of the Senate Environment, Energy & Technology Committee underscored an ongoing debate over an LCFS’s impact on fuel and consumer prices and the implications that might have for other proposed legislation affecting gas costs.

At the Mar. 19 public hearing, Transportation Chair Steve Hobbs (D-44) told colleagues he is keeping an “open mind” about the proposal, “but this kind of scares me.” Hobbs has sponsored 10-year transportation funding package that would include a carbon fee and a $.06 gas tax increase to help pay for a new Interstate 5 bridge and repair hundreds of fish culverts being required as part of a court injunction.

However, increased gas prices could make it difficult for lawmakers to approve a gas tax increase to fund education. Hobbs cited a recent report by California’s nonpartisan Legislative Analyst’s Office, which concluded that the state’s partially-implemented LCFS has so far directly contributed to a $.16-cent increase to the price of gasoline per gallon, with an estimated $.46-cent increase to every gallon of fuel by 2030.

During testimony, Association of Washington Business Government Affairs Director Mike Ennis told the committee that “we can expect the same results in Washington.”

A similar argument was made by Carolyn Logue with the Washington Food industry Association, who said low profit margins for those businesses means consumer prices will go up if transportation costs increase. Ben Buchholz with Food Northwest said the program “represents a significant fiscal impact to the ag (agricultural) community.”

However, Committee Vice Chair Guy Palumbo (D-1) argued that market fluctuations cause a much greater impact on gas prices. According to the U.S. Energy Information Administration, California’s average regular gas prices between 2013-2019 have ranged from as high as $3.93 (2013) to as low as $2.72 (2016).

“How can you claim it’s (LCFS) going to hurt business?” Palumbo said.

Under ESSHB 1110 as currently written, the state Department of Ecology would create a clean fuel program with the goal of reducing the carbon intensity in fuels to 10 percent below 2017 levels by 2028 and 20 percent below 2017 levels by 2035. Entities participating in the program either voluntarily or required to do so would generate credits if they provide fuel below the standard. If they produce fuel above the standard, they must purchase credits from entities that generate a surplus. All participating entities would have to pay Ecology a fee to cover the program’s costs.

The bill also includes certain reporting requirements. The state Department of Commerce would have to publish periodic fuel supply forecasts estimating the availability of fuels and credits. The Joint Legislative Audit & Review Committee would have to submit an analysis on the first five years of the program by 2027.

Sponsor Rep. Joe Fitzgibbon (D-34) touted the program at the Mar. 19 public hearing as “a technology neutral standard” that unlike other similar policies allows entities to “find the most effective pathway toward reducing the greenhouse gas intensity of these fuels,” rather than require a certain mixture of clean fuels. He attributed improved air quality as one potential indirect benefit of reducing carbon intensity. According to Ecology’s Air Quality program, Washington state complies with all air pollution standards, but “there are several areas of concern that are being watched closely” for particle pollution.

In addition to California, Oregon adopted an LCFS in 2015. While California’s program has generated credit deficits since 2017, the Oregon Department of Environmental Quality’s latest report shows its program is narrowly generating credits. The latest fuel forecast for Oregon shows a low estimate with only 70 percent of needed credits generated, with a high estimate of 144 percent (page 7). Unlike California, the latest data shows Oregon’s program has not led to a significant increase in gas prices, though the program also only requires 1.5 percent reduction in carbon intensity.

Jessica Spiegel with Western States Petroleum Associations told committee members the LCFS proposal wouldn’t work due to “technical barriers. Advanced biofuels are needed, and they are not ready.”

Aside from whether an LCFS is practical, some lawmakers also emphasized transparency regarding the cost to consumers. Sen. Tim Sheldon (D-35) argued that people should be kept informed about how the program affects gas prices at the pump in a similar manner to the gas tax.

When asked by Sen. Phil Fortunato (R-31) about the estimated fuel increase by the program, Fitzgibbon replied that “unfortunately there’s not a satisfying answer to this question, because it’s a technology neutral standard. What we’re saying is find the cheapest and cleanest pathway toward these (fuel) productions.”

The bill is scheduled for executive action on Mar. 21.

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