For the past four consecutive legislative sessions, lawmakers have introduced proposals to impose a low carbon fuel standard (LCFS) in Washington state. This session, HB 1091 sponsored by Rep. Joe Fitzgibbon (D-34) at the request of Governor Jay Inslee calls for limiting greenhouse gas emissions (GHG) in fuel energy by 10 percent below 2017 levels by 2028 and 20 percent below 2017 levels by 2035. Its companion bill is SB 5231, sponsored by Sen. Derek Stanford (D-1).
Much of the discussion during a Jan. 14 public hearing on the bill in the House Committee on Environment & Energy rehashed arguments made in years past by both proponents and critics.
For supporters like Fitzgibbon, who chairs the Environment & Energy Committee, an LCFS would reduce carbon emissions within the transportation sector, which makes up roughly half of the GHG emitted in Washington state.
However, a December 2020 policy brief from the Governor’s Office estimates that an LCFS would reduce GHG emissions by 2.7 percent by 2030, and a 2014 study for the Washington Office of Financial Management estimated such a proposal would decrease GHG by 1.3 percent annually under the most robust scenario. And an analysis for the Puget Sound Clean Air Agency (PSCAA) examining the impact of such a proposal on reducing particulate matter (PM2.5) found that even without an LCFS, PM2.5 levels are expected to decrease by 68 percent by 2030 “mainly as a result of federal vehicle standards reducing PM2.5 emissions,” while the potential impacts of an LCFS “are small in comparison.”
Supporters also argue an LCFS would promote the growth of the biofuel industry in the state, which currently sends its product to California and Oregon where LCFS programs have already been set up. LCFS programs operate by having fuel providers generate credits when they sell fuel below the standard, to be sold to fuel providers who do not meet the standard.
Yet BP America Communications Director Tom Wolf told the committee that while the company produces biofuel in Washington, “there’s no incentive to sell that fuel in Washington state. I can’t guarantee we’re going to produce more. We will respond to the market, and I’m sure other companies will as well.”
American Biogas Council Executive Director Patrick Serfass told the committee that expanding the biofuel market can provide farmers and other industry members with a side income supply stream. “It does create a kind of resilience because you’re able to add in those new revenue streams. This isn’t just about transportation fuel. We’d like to make these economics a lot more local. It’s growing but not nearly as fast as it could be.”
However, a study for the PSCAA found that the “potential for new facilities is limited given the upfront costs for fuel production and competition from existing producers.” A PSCAA analysis also noted that while canola oil and landfill gas are the only feedstocks produced in enough quantities to generate alternative fuel, an LCFS is “highly unlikely” to spur more use of canola oil as a biodiesel.
Further, critics point to a 2020 study by Stillwater Associates which concluded that more than 70 percent of the financial value from compliance credits would be purchased from out-of-state producers.
Other supporters point to what they characterize as public support for an LCFS. According to a recent Crosscut poll, 63 percent of those surveyed were in favor of “requiring makers of gasoline and other fuels to reduce carbon emissions.”
Disputes among stakeholders include how cost effective an LCFS is in reducing carbon emissions and the impacts on fuel prices. Advocates note that fuel prices in Oregon and California have fluctuated in recent years, yet detractors point to a 2018 report by California’s nonpartisan Legislative Analyst’s Office (LAO), which concluded: “most or all of the costs of purchasing credits and allowances are likely passed on to fuel consumers in the form of higher retail prices.”
At the time, the report estimated the program had added $.13 per gallon, with the potential for a total increase of $.46 by 2030. Oregon’s LCFS program, created in 2009, is only 15 percent implemented.
While stakeholders dispute the impacts in other states, a recent conducted by the PSCAA when it was considering its own regional program may offer the most accurate picture of what Washington could expect financially. That analysis concluded that an LCFS could raise regional gas prices by $.57 per gallon by 2030, while another follow-up Stillwater Associates study concluded it would cost households in that region $900 annually.
Paul Graves with Oak Harbor Freight Lines told the committee that because of California’s LCFS program, “the cost of everything that touches the truck is higher in California than it is in the rest of the country.”
Billy Wallace is the political and legislative director for the Washington-North Idaho District Council of Laborers. He told the committee an LCFS would represent “another regressive tax” placed on his members. “As much as we try to emulate and want to be like California, this is one time that we should learn from their mistakes.”
Jessica Spiegel with Western States Petroleum Association told lawmakers at the Jan. 14 public hearing that an LCFS is a “costly and ineffective mandate.” Instead, she said her association has proposed the idea of a carbon pricing system tied to transportation fuel prices, adding that “we recommend the legislature manage the money that’s generated by a program like this.”
Others reiterated prior observations that the 2015 Connecting Washington transportation package included a de facto prohibition on an LCFS prior to 2023 by redirecting some of the revenue; like other past proposals, HB 1091 would eliminate that provision.
Washington Policy Center Environmental Director Todd Myers told the committee an LCFS is an incredibly expensive way to reduce carbon, highlighting GHG reduction programs pursued by entities such as Seattle City Light.
“For just $25 million, we could get the same C02 reductions in 2021 that an LCFS would produce in the year 2030,” Myers said.
The public hearing on HB 1091 will continue Jan. 15.