Policy update

U.S. low-carbon fuel policies

Alternative fuels

There are two major low carbon fuel policies in place in the United States: the US Renewable Fuel Standard (often referred to RFS2) and the California Low Carbon Fuel Standard (known as LCFS). RFS2 regulates renewable fuels (biofuels) in the entire US while LCFS covers both renewable and non-renewable fuels in California. Both RFS2 and LCFS rely on life cycle analysis (LCA) as a tool to regulate fuels, incorporating greenhouse gas (GHG) emissions from indirect land use change (ILUC) in their LCA framework.

The RFS2 is a volumetric standard that will significantly increase biofuel use in the US to 36 billion gallons by 2022. The US EPA estimates that this would result in a reduction of 138 million metric tons (MMT) of GHG in 2022, although uncertainties remain, particularly with regard to ILUC GHG emissions. Approximately 13.5 billion gallons (bgl) of biofuels were produced in the US in 2010, with biodiesel and corn ethanol accounting for 0.3 bgl and 13.2 bgl, respectively. The LCFS is a carbon-intensity-based, fuel neutral standard and aims to reduce GHG emissions from the transportation sector in California by 10%, or approximately 16 MMT per year by 2020. Market-based mechanisms, primarily credit trading and banking, will play a major role in LCFS compliance.

In addition to LCFS and RFS2, efforts are underway to establish regional low carbon fuel standards in Northeast and Mid-Atlantic States, as well as in Midwestern states. 

These regional initiatives are likely to be modeled after the California LCFS. This policy update summarizes recent developments in the implementation phases of RFS2 and LCFS and provides the status of emerging LCF policy initiatives at regional levels.