Large oil companies like to tell the public "We Agree" when it comes to clean energy.
But in Sacramento and Washington, their motto seems to be "It Can't Be Done."
A Jan. 31 article in the San Jose Mercury News, "Chevron and its allies take aim at California's low carbon fuel standard," demonstrates how the oil industry has once again banded together to oppose groundbreaking environmental initiatives.
Passed by Gov. Arnold Schwarzenegger in 2007, the LCFS seeks to lower the carbon intensity of transportation fuels like diesel and gasoline by at least 10 percent by 2020. The program encourages innovation while penalizing poor excuses for "renewable fuel" such as corn ethanol, which have been supported by politically driven subsidies, are unsustainable and have little environmental benefit. The size of California's market ensures that this gradual transition will have little short-term economic impact, while kick-starting clean alternatives.
Oil companies would have you believe that the goals of the fuel standard are either impossible or obscenely expensive. Since the LCFS was first passed in 2008, the oil industry has spent millions of dollars trying to convince legislators and the public that low-carbon alternatives don't exist or that they can't be produced in large enough volumes to meaningfully reduce demand for traditional fuels or that corn ethanol is the only biofuel technology around. This is one of the biggest myths perpetrated by oil companies.
Economically viable and far superior alternatives do exist. For example, KiOR, one of the companies in the Khosla Ventures portfolio, will produce a drop-in replacement for gasoline from wood chips or nonfood crops like switchgrass that grow on marginal land. KiOR's technology at scale competes with conventional gasoline while reducing "well-to-wheel" greenhouse gas emissions by 63 percent to 80 percent. KiOR, ironically, could help the oil companies substantially reduce the financial and environmental risks they face.
The old stalwarts are trying to extract oil from underneath polar ice caps or extract it from tar sands, and they use obstructionist initiatives to scare away third-party capital from burgeoning newer and cleaner technologies.
KiOR's first two refinery sites are located near shuttered paper mills.
Think of the positive impact of replacing more of the hundreds of shutdown paper mills in this country with refineries producing clean fuels, creating jobs and restoring devastated communities. Regardless of these advantages, which KiOR and other renewable fuel companies have already demonstrated, the oil companies and their allies continue to spend tens of billions of dollars on much riskier, longer-term and dirtier bets, developing new oil fields while spending next to nothing on scaling lower-risk, low-carbon intensity fuels.
The lack of support for clean renewable biofuels in the financial markets is exacerbated by doubt injected by the oil industry's efforts to cancel or dramatically roll back clean air standards, scaring off investment in commercializing these production-ready technologies. In the end, scaling any new technology takes capital, and securing capital requires some industry support.
This lack of leadership and outright obstruction discourages the rest of the investor community from taking necessary risk, a risk that's much lower than offshore oil exploration where the failure rate can be 75 percent or more, since the industry's determined opposition adds uncertainty to the commercial success of renewables in spite of their readiness to scale.
California has an opportunity to show the rest of the nation and the world why it is known as the leader in environmental standards and why we should embrace instead of fight the LCFS. If the major oil companies and investors invested 2 percent of the $140 billion they spend on exploration and production in North America on alternatives, such as KiOR, they would meet the 2022 targets for low carbon fuel while achieving very attractive investment returns.
Yet few in the oil industry have bothered to visit the first refinery built in the United States in 35-plus years, creating hundreds of jobs and producing 100 percent renewable oil with up to an 80 percent carbon reduction gasoline and diesel. This is a fuel with such a low carbon footprint that it would result in lower life cycle carbon emissions when consumed in today's vehicles than electric cars would in most of the country.
Meanwhile, the oil companies continue to complain eloquently about the red herring of corn ethanol. They engage in scaremongering about food vs. fuel when the same hydrocarbon fuel can be produced at a fraction of the cost of today's corn ethanol using sustainable nonfood-based biomass, reducing the need for corn ethanol production and producing a superior-quality low-carbon intensity fuel.
Advanced biofuels technologies are ready to meet the demand as soon as the capital is available.
Vinod Khosla heads Khosla Ventures, a venture capital firm in the Silicon Valley.