Greenhouse Gas Emission Reductions through National Ambient Air Quality Standards: The Role of regional low carbon fuel standards
Jeff Kessler, Graduate Student, Institute of Transportation Studies, University of California Davis, 303.720.6608,
Benjamin VanGessel, Graduate Student, Urban Planning, University of Michigan, 616.430.1447,
Overview
Sections 108 and 109 of the Clean Air Act (CAA) govern the establishment of National Ambient Air Quality Standards (NAAQS) that regulate 6 criteria pollutants considered harmful to public health and the environment. NAAQS are regularly reviewed and revised reflecting improvements in the understanding of risk and exposure to various pollutants. As these standards become increasingly stringent, areas may be designated as “non-attainment” when ambient air monitoring indicates that an air quality standard is not being achieved. States with non-attainment regions are required to compose state implementation plans (SIP) to attain and maintain the NAAQS. SIPs may be far-reaching in scope, and can encompass any number of policy options to facilitate regional compliance. Once the EPA approves a SIP, the EPA and citizens may enforce the SIP rules, requirements, and commitments in Federal court.
There is a body of literature that discusses the addition of greenhouse gas (GHG) emissions to the criteria pollutant list (Burtraw, Fraas, & Richardson, 2011; Raiders, 2011; Richardson, Fraas, & Burtraw, 2010). This addition would effectively create a regional form of cap and trade policy for GHG emissions. While cap and trade serves to reduce GHG emissions at the lowest abatement cost for the economy at large, carbon reductions from the transportation sector are higher on the marginal abatement cost curve than other options in the near-term (Yeh, Farrell, Plevin, Sanstad, & Weyant, 2008). Given that transportation accounts for roughly 30 percent of GHG emissions in the United States, additional consideration is necessary to address GHG emission reductions from the transportation sector. A Low Carbon Fuel Standard (LCFS) is a technology-promoting, market-based mechanism that may be used to facilitate GHG emission reductions in the transportation sector by lowering the average fuel carbon intensity over time (Yeh & Sperling, 2010). LCFS policies have numerous implications, and independent regional implementation of these policies could achieve different outcomes than implementation through harmonized SIPs. In this paper we analyze and characterize differences between regionally independent LCFS policy implementation and harmonized LCFS policy implemented through NAAQ regulation, and discuss economic and policy implications associated with different LCFS implementations.
Methodology
We evaluate the potential effect that independently implemented LCFS policies may have on achieving GHG emission reductions for select regions given the objective of reducing GHG emissions to 80 percent below 1990 levels by 2050. We also evaluate how policy harmonization across regions may impact overall GHG emission reductions and technology investment compared to independently implemented regional policies. Emission reduction appropriation is based on a set of regional carbon emission profiles and data from the EPA Motor Vehicle Emissions Simulator 2010b (MOVES) model. The LCFS fuel carbon intensity reduction schedule was determined by modeling technology diffusion for next-generation ethanol over the 40-year period of analysis (2010 through 2050) starting with sugarcane ethanol carbon intensity values (50 percent reduction from gasoline) in 2010, and moving toward cellulosic ethanol carbon intensity values from farmed trees (2.4 gCO2e/MJ) by 2050 (California Air Resources Board, 2009). The standard National Energy Modeling System (NEMS) diffusion curve was utilized to limit the market penetration of new cellulosic fuels (U.S. Energy Information Administration, 2012). This resulted in a final achievable fuel carbon intensity of 22.37 gCO2e/MJ by 2050. Technology adoption scenarios were determined by minimizing the rate of technology diffusion into the market such that the LCFS average fuel carbon intensity constraint was met with zero carbon deficits by 2050. To limit the scope of this analysis, 4 regions (New York, Oregon, Vermont, and Washington) were selected due to the high contribution of GHG emissions from transportation compared to other emissions in the state. Further analysis was done to aggregate independently implemented regional LCFS policies and constrain biofuel availability to determine the overall effect that these independent regional implementations may have compared to a harmonized national LCFS policy implementation through the NAAQS
As LCFS policy is oriented toward driving technology innovation, we conducted analysis to evaluate individual regional contributions toward technology innovation goals. We utilized the base case experience curve and trajectory for electric vehicle deployment from the Argonne VISION model and evaluate price changes associated with increased technology diffusion driven by LCFS policy implementations. For each region analyzed in this paper, we estimate the cost of compliance and an average price for carbon abatement given the Annual Energy Outlook base case oil price and low oil price scenarios.
Results
This study provides important analysis on the costs and viability of addressing GHG emission reductions from the transportation sector through LCFS policy implemented through the NAAQS compared to independent regional implementation of LCFS policy. Our results indicate that harmonized policies are likely to provide lower costs for carbon abatement than disconnected regional policies.
Table 1. Carbon Abatement Costs
Low Oil Price ($/tonne-CO2e) / AEO Baseline ($/tonne-CO2e)New Jersey / $95 / $(10)
Oregon / $111 / $(13)
Vermont / $122 / $(10)
Washington / $96 / $(42)
Harmonized / $84 / $(29)
Limit to Biofuel / $67 / $(172)
Biofuel availability for the constrained biofuel case was constrained using supply curves from Parker (2012). Total biofuel allotment was limited by aggregating each state’s GHG emissions from transportation and assigning a volume of total U.S. biofuel production potential proportional to the region’s contribution to GHG emissions from transportation (roughly 7 percent of all U.S. transportation emissions). As electric vehicle penetration increases, the cost of abatement is initially higher than in business as usual case but becomes lower during later years of deployment where the aggregate benefits from electric vehicles provide substantial savings over the all-petroleum case. Scenarios that increase electric vehicle adoption have overall lower costs of abatement than those with limited electric vehicle adoption.
Conclusions
Independently introduced low-carbon fuel policies will likely have higher abatement costs than harmonized, regional policies as could be implemented through the NAAQS. Initial deployment of electric vehicles may be expensive, but as the cost of electric vehicles comes down, and market penetration increases, an electric vehicle fleet will be far cheaper to operate than the traditional fossil fuel fleet. To reduce GHG emissions from transportation by 50 percent relative to 1990 levels, gasoline and diesel fuel will have to make up less than 5 percent of the market in the limited biofuel case by 2050, and be completely phased out of the market by 2040 if biofuel supply is substantially expanded and electric vehicle adoption does not happen at the rate given in the limited biofuel scenario.
References
Burtraw, D., Fraas, A., & Richardson, N. (2011). Policy Monitor--Greenhouse Gas Regulation under the Clean Air Act: A Guide for Economists. Review of Environmental Economics and Policy, 5(2), 293-313. doi: 10.1093/reep/rer009
California Air Resources Board. (2009). Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Farmed Trees by Fermentation
Parker, N. (2012). Spatially Explicit Projection of Biofuel Supply for Meeting Renewable Fuel Standard. Transportation Research Record: Journal of the Transportation Research Board, 2287(1), 72-79.
Raiders, R. (2011). How EPA Could Implement a Greenhouse Gas NAAQS. Fordham Environmental Law Review, 22(2), 233-310.
Richardson, N. D., Fraas, A. G., & Burtraw, D. (2010). Greenhouse Gas Regulation Under the Clean Air Act: Structure, Effects, and Implications of a Knowable Pathway. SSRN Electronic Journal. doi: 10.2139/ssrn.1589545
U.S. Energy Information Administration. (2012). NEMS Model Documentation 2012: Transportation Sector Module (pp. Maximum light-duty vehicle market penetration parameters (percent)).
Yeh, S., Farrell, A., Plevin, R., Sanstad, A., & Weyant, J. (2008). Optimizing U.S. Mitigation Strategies for the Light-Duty Transportation Sector: What We Learn from a Bottom-Up Model. Environmental Science & Technology, 42(22), 8202-8210. doi: 10.1021/es8005805