Gas price hikes for biofuels? Climate policy gets backlash from environmentalists, GOP 

When Mike Scheible launched California’s most important clean transportation program in 2011, electric vehicles were in their infancy. The only EVs available either cost $100,000 or had a battery range of 50 miles.

“It was a different ballgame then,” said Scheible, the former deputy executive officer at the California Air Resources Board who oversaw the creation of the Low Carbon Fuel Standard.

In the last decade, the LCFS went on to make the state’s transportation fuels progressively cleaner and created a multi-billion dollar market for California biofuels, which are made from organic materials like food and animal waste.

But now that electric vehicles are widspread, and given the likelihood that the program will prompt significant gas price increases, Scheible said he would do things differently. He’s now part of a chorus calling on the air board to change course on biofuels.

On Friday, the board will vote on whether to tighten LCFS carbon-reduction rule. Scientists and environmental advocates argue that this decision will likely increase gas prices for millions of drivers to benefit an industry offering minimal environmental benefit.

The debate has prompted a broader conversation about growing costs of California’s ambitious climate agenda imposed on millions of drivers in the state, and about which environmental payoffs justify rising energy prices for consumers.

“The danger is that by making the program so stringent, you’ll force a very high price unnecessarily,” Scheible said. “Why would you want California citizens to pay more than they have to for the same environmental benefit? It hurts consumers, and it’s not good for the state.”

Republican lawmakers are also urging the board to vote no Friday, citing lack of accountability over gas prices. The primary supporters of the policy are biofuel industry groups, the main benefactors of the program’s $2 billion in annual subsidies.

CARB leaders have downplayed gas price concerns and point to the program’s contribution to clean transportation, highlighting support from electric vehicle companies. They say the LCFS has provided $1 billion for EV infrastructure so far and expect that revenue to grow over time.

Gas price hikes for lower carbon

The Low Carbon Fuel Standard is a $2-billion credit trading system that requires fuels sold in California to become progressively cleaner, while giving companies financial incentives to produce less-polluting fuels.

CARB estimates that the program has prevented over 90 million metric tons of carbon emissions since its inception, and frequently highlights that it inspired similar policies in Oregon and Washington.

Currently, the program aims to reduce the overall climate impact of transportation fuels by 20% by 2030.

Friday’s vote would impose tougher limits, raising that reduction to 30%. CARB staff say the proposal could cut 558 million metric tons of carbon emissions by 2046 — equivalent to what 120 million cars emit in a year.

LCFS compliance costs will very likely make their way to the gas pump. Californians pay some of the highest gas prices in the country, and the air board said earlier this month that fuel producers historically passed on 8 to 10 cents per gallon of costs to consumers because of the program.

According to the board’s own projections last year, Friday’s vote could raise gasoline prices by up to 47 cents a gallon in 2025, an average of 65 cents by 2035, and as much as $1.80 a gallon by 2040.

After walking back this estimate, the air board said it’s impossible to estimate how the changes will impact gas prices and has declined to make an updated estimate.

In protest, Republicans in both the state Capitol and the state’s GOP delegation in Washington have called in recent weeks for a delay in Friday’s vote.

Roughly 80% of every cent the LCFS passes onto consumers at the pump in California goes to a booming industry for biofuels, which are derived from plant and animal waste. They have been considered a lower-carbon transition fuel on the path to zero-emission sources.

California’s LCFS drove a tenfold increase in national production of renewable diesel, a soybean-based fuel chemically similar to traditional fossil diesel. National production surged from 295 million gallons in 2013 to 2.88 billion last year — California consumes over 95% of it.

Two in-state refineries, Marathon Martinez and Phillips 66 Rodeo, have switched to renewable diesel. Last year, the fuel source accounted for most of the diesel consumed in the state for the first time.

Yet most of the production comes from out of state, in Texas and Louisiana, or from abroad. In a single month last year, California imported 67 million gallons, mainly from Singapore.

There may be good reasons for raising the costs of fossil fuels, said Severin Borenstein, a leading energy economist at UC Berkeley’s Haas School of Business. After all, prices at the pump have not historically incorporated the costs of climate change and air pollution.

“For all goods, we should be paying a cost that reflects the full costs to produce and use it, including air pollution,” he said. “In California, what we’ve found is that the price of gasoline has been below the full cost of using it.”

Are biofuels really better?

Environmental groups argue that CARB overestimating the benefits of biofuels, and giving the industry billions in subsidies for them overshadows electric alternatives.

Many supported an alternative proposal by CARB’s Environmental Justice Advisory Committee to cap renewable diesel credits and refocus on electric transportation, a measure that agency staff dismissed.

“This program is funneling billions of dollars to polluting biofuels that drive deforestation and food insecurity when those dollars could be spent on accelerating deployment of electric vehicles that will improve our air” said Matt Vespa, an attorney at Earthjustice.

A CARB 2015 analysis warned that biofuel expansion could contribute to food shortages and price increases abroad. Groups such as Earth Justice say increased demand for crop oils could contribute to deforestation in Brazil and Indonesia by encouraging palm oil cultivation.

Another concern is the LCFS’s emphasis on highly lucrative methane-based biofuels, which incentivizes dairy farms to capture cow methane — a potent greenhouse gas. Critics argue it perpetuates harmful waste practices without necessarily reducing emissions.

Biofuels companies say they are producing a rapid and practical solution to reduce emissions and air pollution in the state. In a statement, the California Advanced Biofuels Alliance said its industry reduces emissions by up to 80% compared to conventional gasoline and diesel.

“CABA believes biofuels are an essential tool, offering both immediate and scalable environmental benefits while maintaining affordability for consumers,” said the industry group’s executive director Carlos Gutierrez in a statement.

Critics like Jeremy Martin, a senior researcher with the Union of Concerned Scientists, warned that renewable diesel production may soon generate more greenhouse gasses than the industry displaces.

“California should modernize the LCFS to align with its goal of transitioning to zero emissions,” Martin wrote. A cap on vegetable oil-based fuels will make the program “less expensive and more effective.”

Biofuel companies, which are often interchangeable with traditional oil companies, have become powerful players in California politics.

According to data from the California Secretary of State, ten biofuel-related groups, including the Western States Petroleum Association, have spent $24 million on lobbying and $450,000 on campaign contributions since 2021.

It’s important to note, said Scheible, the original leader of the LCFS, how much biofuel producers stand to gain with a yes vote on Friday. Some groups estimate that the industry could generate $20 billion under CARB’s proposed reforms over the next decade.

“The primary stakeholders pushing CARB are the biofuel and dairy industries,” Scheible said. “And it’s consumers who ultimately bear these costs.”

This story was originally published November 6, 2024 at 2:10 PM.