CARB Responds to Industry Urging, Will Cut LCFS Penalty for Ethanol in Half

November 19, 2010

CARB Responds to Industry Urging, Will Cut LCFS Penalty for Ethanol in Half

(November 19, 2010)  Washington - The California Air Resources Board (CARB) on Thursday adopted a resolution that will integrate the latest research on indirect land use change (ILUC) into the Low Carbon Fuels Standard (LCFS) regulation, meaning the current ILUC penalty for corn ethanol likely will be cut by at least half by the spring of 2011. The Renewable Fuels Association (RFA) said the resolution is good news for the ethanol industry, but expressed frustration that the changes aren't going to be effective sooner. Waiting until next Spring to make the ILUC changes will unnecessarily confuse the marketplace and complicate compliance with the LCFS in 2011, RFA said.

"We're encouraged that CARB is moving in the right direction and is finally living up to its commitment to use the best available science for the LCFS," Dinneen said. "However, we're concerned that the changes to ILUC won't be effective until midway through 2011, by which time the LCFS will have been up and running for several months. Why would CARB begin a program on Jan. 1 that is based on ILUC numbers that they now freely admit are wrong and inflated? They have better science and they should use it now—before the 2011 compliance year beings. Regulated parties will begin the 2011 compliance year with one set of numbers and likely finish with another, which will confuse and disrupt the market. It's unfortunate CARB didn't take action sooner to provide more certainty and clarity to the marketplace in 2011--and there's no reason they couldn't or shouldn't have."

The resolution passed Thursday stems from recommendations made by the CARB staff, the LCFS Expert Workgroup, RFA, and other stakeholders to adopt the latest ILUC modeling results from Purdue University in lieu of CARB’s current ILUC values. The results from the most inclusive Purdue modeling runs (called “Group 2” and “Group 3”) generally ranged from 14 to 18 grams of CO2e/mega joule (g/MJ), compared to CARB's current penalty of 30 g/MJ.

RFA first made CARB aware of the new Purdue University ILUC results in a letter to Board Chair Mary Nichols in May, shortly after the Purdue research was released. RFA's letter in May, along with subsequent letters and several conversations with CARB members and staff, strongly encouraged CARB to adopt the Purdue results in lieu of the current ILUC analysis. Additionally, using the same model employed by CARB and Purdue, RFA conducted analysis throughout the LCFS rulemaking process that showed CARB’s values were inflated.

According to the Board resolution, CARB will “…update the land use change and other indirect effects values in the Spring of 2011 or as expeditiously as practical afterward and that…the update will consider modifications that reflect the Group 2 land use modeling conducted by Purdue University.” In his presentation to the Board, Wes Ingram of CARB’s stationary source division, stated, “Staff is recommending that we use what is referred to as the ‘Group 2’ simulation model. Application of this new model reduces land use change for corn ethanol by about one half over the current LCFS value.”

Other modifications recommended by CARB staff at Thursday’s meeting likely will reduce the ILUC value by even more than half. For example, CARB staff is recommending revisions to the emissions factors it used for the original LCFS analysis. RFA research using the same model employed by CARB shows revising the emissions factors results in ILUC for corn ethanol being less than 12 g/MJ.

Dinneen said he expects further reductions to the ILUC values in the future, as researchers continue to refine the methodologies used to estimate ILUC and better data become available. "While we're cautiously optimistic about yesterday's resolution, the fact remains that ILUC is still an immature science. We fully expect that the penalty for ILUC will continue to drop as more and better data become available," said Dinneen. "Last month's release of information from the Department of Energy showing 'minimal to zero' ILUC for corn ethanol is a perfect example that the science continues to evolve. We encourage CARB to continue to make adjustments to the LCFS as the understanding and science of ILUC continue to progress."