This CI reduction stems from assumed industry-wide adoption of CCS as well as increases in volumes of sugar ethanol in the near future and cellulosic ethanol toward the end of the decade. Therefore, we consider a scenario in which the ICS CI projections are realized. We refer to these set of assumptions as A3 in Table 12. In addition to ethanol, the future path of the CI value for BBD is uncertain, as previously mentioned. We consider a scenario in which the volume-weighted average CI rating of BBD rises from its current level of approximately 32 to 50, a rating more commensurate with soybean oil feed stocks. This represents a future in which soybean oil makes up the majority of the BBD feed stock pool, to provide a bound of uncertainty in this parameter. This is assumption A4 in Table 12. Beyond the four scenarios presented in this paper, we considered adjusting other assumptions in our analysis; none had a qualitatively different impact on the implied BBD blend rate results. For example, a scenario where a cleaner electricity grid is achieved, resulting in a grid-average CI reduction for electricity, as would occur as renewables’ penetration continues, did not substantially impact results. Even with a zero CI rating for electricity over the compliance period had only small impacts on the implied BBD blend rate required for compliance. CI rating improvements for electricity are diluted relative to those for other fuels due to the relative efficiency of electricity, measured by the EER. Similarly, additional penetration of biogas with a substantial negative CI rating due to methane capture, into the natural gas used as a transport fuel did not have a large impact. Other potential scenarios that may be salient to LCFS compliance,greenhouse benches such as expanded use of book-and-claim for low-CI rated electricity and biogas elsewhere in the production process, are left to future research.
Here we present the output from four different compliance scenarios and discuss their differences from the baseline. In each scenario, we calculate the volume of CARB diesel, BBD, and the resulting implied blend rate of BBD in the diesel pool using , , and , respectively. Figure 22 shows the implied blend rate resulting from the baseline scenario and Figure 23 shows the blend rate under the alternative scenarios. For brevity, we present only the implied blend rates here, but the volumes of BBD and CARB diesel resulting from each scenario can be found in the appendix Figure A-6. Because we force annual compliance, the annual quantities of BBD and ULSD, and the implied BBD blend rates, in the figures are conditional on compliance in the previous year. Due to the decreasing CI standards, shown in Table A-6, this characteristic has important implications for interpretation of our results; all else equal, BBD production shifted from one year to the next will earn fewer credits since the CI rating will be closer in magnitude to the standard, and the yet-to-be displaced diesel would earn more deficits as its CI rating falls farther above the standard. Therefore, if the path of any of the blend rates pictured in this section weren’t met in early years, the implied blend rate required for compliance in later years would rise disproportionately more. In that sense, all of our scenarios depict a lower-bound of BBD implied blend rates needed for overall compliance over the eleven-year span. The annual compliance constraint also abstracts away from real-world optimization decisions on credit banking and deficit carryover. We did not model a proposed provision for credit borrowing.Figure 22 shows that, under the baseline scenario, the median outcome calls for an increase in the BBD blend rate from the 2018 level of 17% to 70% in 2030.
In nominal terms, given our demand projections, this outcome implies ramping up BBD consumption in the state to 3.5 billion gallons in 2030, nearly a 300% increase from current levels, and a reduction in CARB diesel consumption to 1.7 billion gallons in 2030, more than a 50% reduction below current levels. Our median baseline scenario results in a BBD blend rate in diesel fuel similar to the high demand/low EV scenario in CARB’s ICS, which is the highest among their four scenarios. Shown by the dashed lines in Figure 22, 90% of the blend rates from our simulations fall between 60 and 80 percent BBD in 2030. Next, we alter our baseline assumptions one by one and observe how the implied blend rate required for annual compliance changes. Figure 23a shows that allowing for the largest number of credits from the other sources in the ICS in each year would result in a blend rate of 50% BBD, rather than 60, for the median draw from the simulations. Thus, the range of possibilities for the other pathways makes only a small difference to the BBD required to meet the standard. Thus, although pathways such as renewable natural gas, off-road electricity, CCS and innovative crude production at refineries, alternative jet fuel, and hydrogen receive significant attention in LCFS policy discussions, their influence on compliance scenarios is relatively minor, as considered in the ARB scoping plan modeling.In contrast, rapid EV growth has the potential to reduce the blend rate below 25% in 2030, as shown in Figure 23b. This is by far the largest reduction from the baseline in any of our scenarios, and it is the only scenario that projects compliance without dramatic changes in the diesel pool. The median required BBD blend in 2030 is approximately 20%, and the 90% confidence interval ranges from 12% to 27%. Scenarios A3 and A4 move the difficulty of compliance in opposite directions. A declining ethanol CI rating, due to CCS and increases in cellulosic and sugar ethanol volumes, would reduce the pressure on BBD production. Figure 23c shows that the median draw would have a BBD blend rate of approximately 45%, compared to 60% in the baseline.
The lower bound of the 90% confidence interval is 37%, which is double the current BBD blend rate. On the other hand, if the CI rating for BBD were to increase due to insufficient availability of low-CI feed stocks such as used cooking oil and a corresponding shift towards soybean oil, then the median BBD blend rate would need to rise to 90 percent in 2030 to achieve compliance, as shown in Figure 23d. The upper bound of the 90% confidence interval exceeds one, which means that compliance would not be achieved even if every on-road diesel gallon was 100% BBD. We have no reason to believe that one of A3 and A4 is more likely than the other. These two scenarios can be viewed as a widening of the baseline confidence interval to include possibilities that are both more optimistic and more pessimistic for compliance.The California LCFS sets out to achieve a 20% reduction in carbon intensity in the state’s transportation sector below 2011 levels by 2030. Reaching the standard will require dramatic changes in the fuel mix in California, but the relative push needed from individual fuel sources is uncertain and will depend upon both demand and supply factors over the next decade. One of the most critical aspects of understanding compliance is future demand for fuel; the demand for LCFS credits will be explicitly tied to consumption of gasoline and diesel fuel in the state. Therefore, we estimate a distribution of fuel demand under business-as-usual uncertainty, i.e. the continuation of historic trends, in order to estimate a distribution of demand for LCFS credits over the 2019-2030 compliance period. We estimate that gasoline and diesel will generate between 320 and 410 million metric tons of deficits in the LCFS program over the eleven-year period. In 2018, a total of 11.2 MMT credits were generated. For context, if the lower-bound of the distribution of credit demand were realized,growers equipment the market would need to supply 29 MMT credits per year on average, nearly a 170% increase from 2018 levels. State policies such as those targeting VMT and efficiency standards, represent a separate source of demand uncertainty, although the BAU uncertainty embraces a wide range of potential trajectories for each measure. On the credit supply side, uncertainty surrounding compliance stems from the unknown future market penetration of alternatives to the internal combustion engine, such as electric vehicles, as well as uncertainty around adoption of technologies such as carbon capture and sequestration . We assume the marginal compliance fuel in the LCFS is biomass-based diesel and we show that BBD’s role in compliance could vary widely depending on, in addition to BAU demand conditions, the pace of EV adoption in the state.
The adoption of CCS and other CIreducing technologies and the market for feed stocks used to produce BBD also could have significant effects. In our baseline scenario for credit generation, LCFS compliance would require that between 60% and 80% of the diesel pool be produced from biomass. Our baseline projections have the number of electric vehicles reaching 1.3 million by 2030, however if the number of electric vehicles increases more rapidly than what is captured under BAU conditions and reaches Jerry Brown’s goal of 5 million vehicles by 2030, then LCFS compliance would require substantially less biomass-based diesel. Under this scenario, annual compliance could be achieved with between 10% and 25% biomass-based diesel in the diesel pool, which is commensurate with recent levels and could be achievable with an indexed $200 credit price through 2030. Outside of rapid ZEV penetration, hitting 2030 targets with the $200 credit price may be much more difficult. For instance, a scenario in which CCS is widely adopted in ethanol plants would bring the median BBD blend rate down to approximately 45% BBD in 2030, rather than 60%. However, a 45% blend rate in 2030 under this scenario still results in nearly a 125% increase from current levels. Additionally, if increasing BBD production calls for an increasing level of higher-CI feed stocks, the implied blend rate required for compliance could increase above the baseline. If the volume-weighted average CI rating of BBD were to increase only to 50, the median draw requires nearly 100% of diesel to be biomass-based. Since 2016, ARB has expanded credit generation opportunities in the program, and some opportunities are relatively new. This study provides a range of the magnitude of credit generation, under uncertainty, that such expanded opportunities would need to provide to appreciably change the compliance outlook from one more to one less reliant on cost containment mechanisms. New mechanisms to allow firms to generate credits by building electric vehicle charging stations or hydrogen fueling stations have minor implications for overall compliance. This mechanism represents a major departure from the original design of the LCFS as it does not directly subsidize the consumption of a low carbon fuel. Rather, the credits subsidize a fixed cost of providing network infrastructure that may encourage adoption of EVs, the technology which may in turn use a low carbon fuel. In the same way, however, the infrastructure credits can reduce the very effect that LCFS critics have focused on as the central flaw in the regulations design: the encouragement of low, but still non-zero carbon fuel. Nonetheless, because the total quantity of infrastructure credits is restricted to be relatively small, their effect on potential compliance scenarios is small.As laws legalizing the recreational use of cannabis diffuse around the globe, governments face the need to coordinate cannabis control policies with existing regulations on alcohol. Policy coordination is important because the availability of cannabis can influence the consumption of alcohol as a substitute or complement . Cannabis is frequently co-used with alcohol , and when people co-use, it doubles the odds of im-paired driving, social consequences , and harms to self compared to alcohol use alone . Canada, Uruguay, and Portugal have recognized a need to coordinate recreational cannabis legalization policies with those regulating alcohol and tobacco . Similarly, the US has entertained a federal initiative called the “Regulate Marijuana Like Alcohol Act” . Although cannabis use remains illegal at the federal level, a growing number of US states have legalized recreational cannabis and now permit large commercial markets selling diverse types of cannabis products to anyone aged 21 years or older. Some US state governments have passed identical policies on alcohol and cannabis, for example those addressing minimum ages of legal access and advertising restrictions .