While the Puget Sound Clean Air Agency (PSCAA) considers a low carbon fuel standard (LCFS) within four counties, Governor Jay Inslee’s newly released proposed operating budget includes a similar LCFS proposal and $1.5 million in funding to implement the plan. It marks the third time legislators have looked at the idea which is already in effect in the other two West Coast states.
However, opponents may now have reason to be even more confident than in the past, thanks to a new PSCAA analysis that shows the program could raise gas prices in the region by $.57 – and one consulting firm argues even that analysis uses several optimistic assumptions. That same firm warns the program could cost the average household in the Puget Sound region $900 a year.
Testifying at the PSCAA’s Dec. 19 public hearing, Jessica Spiegel with Western States Petroleum Association said “we urge you to reject this proposed regulation – which has been shown to be ineffective and costly, and which PSCAA’s own analysis shows will be harmful to the economy, will add substantial costs to gasoline and diesel fuel and will not achieve its stated goals of significant reductions in greenhouse gas emissions or air quality improvements.”
An LCFS works by setting up a credit program in which participating entities generate either credits or deficits, depending on whether the fuel they provide is below the carbon intensity standard. Entities that generate deficits must then purchase credits from those that provide clean fuel. The fuel standard of allowable carbon gradually becomes stricter.
California’s LCFS program has been cited by detractors as a harbinger of what’s to come in Washington. A 2018 report by the state’s nonpartisan Legislative Analyst’s Office (LAO) noted that not only will the LCFS add up to $.50 per gallon of fuel, but it only reduced emissions by 1.6 percent in 2016. “As a result, the Legislature might want to consider modifying or eliminating some of the more costly programs.”
“Even more than that, from the standpoint of the environment it’s a really bad policy,” Washington Policy Center Environmental Director Todd Myers said. “We’re radically increasing the price of gasoline for tiny environmental benefits. This is the worst policy for climate, it’s the worst policy for clean air and for public health, but it’s done because they want to virtue signal.”
Association of Washington Business President Kris Johnson argued in a letter to PSCAA that its proposal could be even more costly than California’s. He points to the technical analysis conducted by ICF, which estimates a regional LCFS program would require roughly $2 billion worth of infrastructure investments. That, along with the $.57 jump in gas prices, “would increase supply chain costs significantly and lead to higher prices on virtually all goods and services. We can, and we must, find more cost-effective ways to protect our natural environment.”
At the same time, a study by Stillwater Associates of the PSCAA LCFS concluded that while it’s “technically possible” to meet the carbon emission reduction goals set by PSCAA’s LCFS, several factors make it “unlikely.” That includes assumptions in the analysis regarding the sale of fuel cell and electric vehicles that are 2-15 times greater than forecasts made by U.S. Energy Information Administration (EIA).
The study also notes that the EIA anticipates a 20-percent reduction in fuel consumption by 2030 due to increased efficiency. If that were to occur, it estimates the added cost of a regional LCFS could be as high as $1.6 billion annually to both consumers and business –roughly $900 per household.
The same consulting firm found that more than 50,000 truck deliveries per year in the agency’s jurisdiction would have to be reported, “adding to complexity of the operation and to the risks of not doing the reporting and accounting correctly.”
One argument made by proponents is that the LCFS could boost members of the clean energy sector, such as biofuel producers. However, the PSCAA’s analysis found that “agricultural feedstocks… that can be used to produce ethanol are unlikely to be developed as a resource for low carbon transportation fuel production in the region.” It also concluded that the increased use of canola oil is “highly unlikely” under any LCFS because it’s “as competitive as waste-based feedstocks like yellow grease or used cooking oil.”
The public comment period for the PSCAA’s proposal ends Jan. 6.