On alternative fuels, the House Climate Crisis Action Plan doesn’t think big enough

Last week, the U.S. House Select Committee on the Climate Crisis majority staff released its report, “Solving the Climate Crisis,” an extensive action plan to tackle climate change, promote environmental justice, and spur infrastructure investment. Transportation, the largest source of domestic greenhouse gas (GHG) emissions, is a focal point of the report, which includes policy proposals to drive GHG reductions through efficiency improvements, new infrastructure, and renewable energy deployment. One of the largest sources of emissions reductions in the plan is slated to come from the implementation of a national low-carbon fuels standard (LCFS). Based on state-level programs like California’s, the LCFS would regulate the carbon intensity (CI) of transport sector fuel consumption. While the staff’s action plan for fuel decarbonization is certainly well-intentioned, the proposal fails to incorporate lessons learned from California’s LCFS experience and may instead double down on past mistakes.

Achieving success with an LCFS is not as simple as setting an ambitious GHG reduction target and letting the carbon market sort itself out. The CI of different alternative fuels must first be evaluated through a rigorous life-cycle assessment that includes accounting for indirect land use change (ILUC) emissions. While analysis of biofuels policies over the past decade demonstrates that ILUC impacts are a real problem for some biofuels and may be large enough to undermine the benefits of using those fuels, there is little consensus about which exact ILUC values to use when crafting policy. ILUC cannot be measured directly and is instead estimated through large economic models. While precise ILUC factors are needed for an LCFS, there is a wide range of uncertainty in the estimates due to their extreme sensitivity to modeling assumptions. Political considerations can also push policies towards more optimistic assumptions that predict lower ILUC emissions; EPA’s ILUC estimates for corn ethanol and soy biodiesel dropped by more than 50% between the original RFS proposal and the final regulation after public and interagency comments. Within an LCFS framework, every tonne of carbon abated through food-based biofuels would come with a question mark attached and would crowd out the contributions of other technologies or fuels with greater certainty of emissions reductions.

Food-based biofuels could also receive additional incentives in the Select Committee’s plan through crediting agricultural changes, including “practices that … store soil carbon, and reduce nitrous oxide emissions,” without delivering additional GHG reductions. State LCFSs currently do not credit on-farm GHG emission reductions because of the high risk of shuffling: biofuel companies could simply switch to sourcing from farms that already have efficient practices and healthy soil carbon levels, while letting inefficient farms supply the food and feed market. This could lead to less efficient and more carbon intensive supply chains due to the need to transport products over longer distances and would not necessarily lead to improvements. In addition, soil carbon is notoriously difficult to measure and is already naturally increasing on U.S. farms on average, so crediting these increases, as well as those resulting from measurement error, would result in over-crediting for business-as-usual farms.

Transposing California’s LCFS to the federal level also presents the new challenge of ensuring a sufficient supply of feedstock. Notably, California’s LCFS has struggled to motivate investment in ultralow-carbon, second-generation biofuels made from cellulosic wastes, residues, and energy crops. Instead, to meet their targets, producers import waste fats, oils, and greases from other states and, increasingly, other countries. When processed into drop-in renewable diesel, these feedstocks have grown to be one of the largest credit generators within California’s LCFS because they offer low carbon intensity and have no blending constraints. On a national scale, however, achieving the same level of usage would run into supply bottlenecks immediately; there aren’t sufficient supplies of domestic waste fats, oils, and greases to achieve the same level of deployment (at least, without fraud). In their absence, it is uncertain that a national LCFS would create a sufficient incentive for the production of second-generation biofuels on its own—particularly if food-based biofuels are eligible and can generate the bulk of the credits. Even though sustainable second-generation biofuels should generate more credits per gallon than food-based biofuels, the level of this incentive hasn’t been enough to overcome the high up-front capital costs and perceived investment risk of these technologies in California – and there’s no reason to think it will at a national level.

Congress must ensure that any national LCFS proposal improves upon past policies in order to provide genuine GHG reductions and promote the use of second-generation biofuels. After more than a decade of debate on the benefits of food-based biofuels, their climate benefits are far from certain while their risks have drawn increased scrutiny. We can learn from the European example of the recast Renewable Energy Directive, which caps the contributions of food-based biofuels and introduces sub-targets for second-generation biofuels. In order for a national LCFS to establish a clear incentive for the deployment of advanced biofuels with superior climate performance, we recommend that any future bill emerging from the House caps the contribution of first-generation, food-based biofuels and/or provides a separate target for second-generation biofuels to ensure their potential contributions are not crowded out. Supporting the development of second-generation biofuels over the next decade should be a critical priority under the Climate Crisis Action Plan. Ensuring the long-term commercialization of an ultra low-carbon liquid fuel industry is necessary to supply transportation sectors that will continue to be reliant on liquid fuels beyond 2030.