Lower emis­sions can cut gas prices, study finds

A green­house gas credit sys­tem could spur in­vest­ing in al­ter­na­tive fu­els, the UC re­port says.

Los Angeles Times - - California -

BERKE­LEY — Gov. Arnold Sch­warzeneg­ger on Fri­day re­leased a Univer­sity of Cal­i­for­nia study show­ing that the state can cut gaso­line prices and stim­u­late the econ­omy by re­duc­ing green­house gas emis­sions in the pro­duc­tion of trans­porta­tion fu­els.

In Jan­uary, he signed an ex­ec­u­tive or­der man­dat­ing that Cal­i­for­nia re­finer­ies re­duce the car­bon con­tent of pas­sen­ger ve­hi­cle fu­els 10% by 2020. The ef­fort is crit­i­cal for Cal­i­for­nia to reach its tar­get of cut­ting all green­house gas emis­sions over the same time by about 25%.

For the state to be­gin work­ing on a plan to do so, how­ever, it first needs a for­mula to cal­cu­late pol­lu­tion from re­finer­ies and com­pa­nies that blend gaso­line and a way to mea­sure the progress.

The UC study at­tempted to solve the prob­lem. It cre­ated a com­plex way to mea­sure to­tal green­house gas emis­sions cre­ated dur­ing fuel pro­duc­tion in the state.

The study also con­cluded that an emis­sions credit sys­tem — in which over­achiev­ing re­finer­ies can sell cred­its to those fail­ing to meet the stan­dard — could stim­u­late enough com­pe­ti­tion and in­vest­ment in al­ter­na­tive fu­els that Cal­i­for­nia could sur­pass its 10% re­duc­tion goal.

“Our low-car­bon stan­dard is a so­lu­tion, a pol­icy to rec­og­nize that we can’t trans­form our multi­bil­lion-dol­lar fu­els mar­ket un­less the private sec­tor sees a rea­son to in­vest and cus­tomers see a rea­son to buy,” Sch­warzeneg­ger said.

In cus­tom­ary style, he cast the state’s chal­lenge to re­duce green­house gas emis­sions in out­sized terms.

“This is our race to the moon,” the gov­er­nor said. “And like that race, this, too, would be ‘one gi­ant leap for mankind.’ ”

Re­finer­ies, gaso­line com­pa­nies and auto pro­duc­ers took pains Fri­day to stress that they sup­port the gov­er­nor’s ef­forts. But they also raised con­cerns about how the state would im­ple­ment the study, which will be re­leased in its en­tirety May 31.

“With all the un­cer­tainty and unan­swered ques­tions, how do you come to the con­clu­sion that ... it’s re­ally fea­si­ble?” asked Catherine H. Re­heis-Boyd, chief op­er­at­ing of­fi­cer for the West­ern States Pe­tro­leum Assn., which rep­re­sents re­finer­ies that pro­duce about 90% of all gaso­line in Cal­i­for­nia.

She said the in­dus­try must ask tough ques­tions be­fore the reg­u­la­tion is made fi­nal. For ex­am­ple, she said Cal­i­for­nia must con­sider the green­house gases pro­duced in grow­ing and pro­cess­ing corn for ethanol to de­velop a fair for­mula.

“We don’t want un­in­tended con­se­quences,” she said.

Sci­en­tists of­fered only a peek at the for­mula Fri­day, ac­knowl­edg­ing that many de­tails must still be worked out. The Cal­i­for­nia Air Re­sources Board is ex­pected to vote on it next month.

If ap­proved, it would launch an 18-month rule-mak­ing process that would start the clock tick­ing to­ward a 2010 dead­line to im­ple­ment the so-called low-car­bon fuel stan­dard, said Daniel Sper­ling, a co-au­thor of the re- port.

He said one ad­van­tage of the credit-trad­ing pro­gram is that it would not push re­finer­ies and fuel pro­duc­ers to­ward one tech­nol­ogy or an­other.

“The gov­ern­ment is not pick­ing win­ners and losers,” said Sper­ling, di­rec­tor of the In­sti­tute of Trans­porta­tion Stud­ies at UC Davis. “We’re cre­at­ing a frame­work, a process to guide in­vest­ment and in­tro­duce clean fu­els.”

If re­finer­ies have trou­ble meet­ing the stan­dard, he said, they might be able to buy cred­its by in­vest­ing in elec­tric­ity for elec­tric cars.

Sper­ling and other ad­vo­cates also said they be­lieve the low­car­bon fuel stan­dard could help sta­bi­lize, if not re­duce, gas prices by in­tro­duc­ing com­pe­ti­tion to tra­di­tional gaso­line im­ports and pro­duc­tion.

“In the near-term it’s hard to say, but in the long-term it should lower gas prices,” he said. “This is not an Exxon or Chevron is­sue, this is a global oil is­sue. Oil costs about $25 to $30 a bar­rel to [pro­duce]. There’s no mar­ket rea­son it should cost $60 a bar­rel.”

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