Lux: California’s Low Carbon Fuel Standard will become a global phenomenon; carbon intensity, not volume
California’s approach to transportation fuel policy—its Low Carbon Fuel Standard (LCFS)—will become a global phenomenon, suggests Lux Research. The LCFS eliminates volume targets and focuses strictly on a fuel’s carbon intensity (CI) measured in gCO2/MJ on a well-to-wheel (WTW) basis—from extraction, conversion, transport, and combustion of the fuel. Lux’s observation comes shortly after the Government of Canada announced it will develop a similar low-carbon clean fuel standard requiring reductions in the carbon footprint of the fuels supplied in Canada, based on lifecycle analysis. (Earlier post.)
Lux sees this approach as a winning one for several reasons:
The feedstock-, technology-, and fuel-agnostic approach opens up opportunities along the entire value chain. Many current policies driving biofuels focuses on what the fuel is made of and what the final product is. This orientation has incentivized specific technologies instead of the best solution.
A full agnostic approach brings to light opportunities along the entire value chain, such as the choice of power, supplemental chemicals, and even forms of transporting the fuel to its final destination, creating opportunities for other types of businesses in a space that has been predominantly geared towards dedicated fuel producers.
Not all countries are positioned to support a biofuels industry as it is designed today. Currently the biofuels industry is driven primarily by the abundant availability of bio-based resources enabling the production of ethanol and biodiesel. For example, the US and Brazil are major corn and sugarcane ethanol producers, respectively, and Malaysia and Indonesia are major palm oil biodiesel producers.
This model does not offer a ubiquitous solution. Instead, with carbon intensity as the lone factor, countries can tap into its domestic resources and expertise to drive low-carbon fuels without the limitations of a biofuels-centric regulatory model. This shift opens the opportunities for further adoption of natural gas vehicles (NGV) and electric vehicles (EV). It will also stimulate conventional fossil fuel innovation as increased efficiencies will also lower a fuel’s CI.
This model will be a bridge to move future regulations and policies past the concept of fuel–based vehicles. Policies today that still focus on volumes will quickly become archaic in an electrified transportation future. With certain cities, such as Paris and London, considering banning the internal combustion engine (ICE), CI-based policies will be the first phase of a paradigm shift that will transition the soon-to-be obsolete biofuels policies of today into a new era of low-carbon transportation policies, Lux says.