Oregon’s low carbon fuel standard returns

Associated Oregon Industries
Oregon’s largest business advocate

by John Ledger

Higher costs for your business, higher prices for your customers

The Low Carbon Fuel Standard (LCFS) is a proposed state mandate promoted as a way to reduce greenhouse gas emissions. It would require fuel providers (gasoline and diesel) to reduce the fuel’s carbon content by 10% over 10 years.

The program has several phases, moving through the increased use of Midwest corn ethanol, imported ethanol, ethanol made form cellulosic materials, and finally a Cap & Trade-like system utilizing the purchase of offsets – all built into the price of the fuel.

The implementation of the program hinges on the passage of legislation (technically the removal of a sunset provision) in 2015, and the approval of draft rules by the Environmental Quality Commission (EQC) this fall.

The proposed LCFS could mean higher fuel and transportation costs for business, big and small, and potentially higher prices for consumers – yet have no measurable impact on global warming.

Oregon has already made significant contributions to the reduction of greenhouse gas emissions through energy efficiency programs, wise choices in vehicles and adoption of alternative transport modes and technologies. We have a relatively small carbon footprint. Still, proponents are pushing the program even though few states are pursuing the policy and a challenge to the constitutionality of a similar California law.

The program is replete with problems. Some of them are just a matter of practicality. For example, one of the ways fuel providers can comply with the law is to use cellulosic-derived biofuels in huge volumes. Unfortunately, such biofuels won’t exist in commercial quantities for many years. For this reason a similar California law is viewed as simply non-achievable according to the Boston Consulting Group (BCG).

In any case, the use of biofuels, at a much more feasible level, is already underway. Because of U.S. EPA’s Federal and Oregon’s state Renewable Fuel Standards (RFS), Oregon is already one of the lowest per capita CO2 emitters in the nation. According to a recent study by Charles River Associates, Oregon is blending 170 million gallons of ethanol and 60 million gallons of biodiesel per year thanks our state Renewable Fuel Standard. Under the Federal RFS, the EPA has proposed requiring 15.2 billion gallons of biofuels to be blended in 2014, increasing to 36 billion gallons by 2022.

Adoption of the LCFS could affect just about everyone. It could increase fuel costs by an estimated dollar or more per gallon forcing many small businesses to cut costs, defer hiring, or increase their prices and become less competitive. An economic impact study by Charles Rivers Associates shows it could result in the loss of as many as 29,000 jobs in Oregon. The same study suggests the law could cost the average family up to $1,280 per year. Although legislation requires an “off ramp” nixing the program if costs are driven too high, the procedures to do so are lengthy, complex, and would be contested.

Associated Oregon Industries has opposed the program and is working closely with Oregonians for Sound Fuel Policy, a broad coalition of labor, businesses, contractors, transportation, farmers and ranchers. Business owners, especially those of small businesses, form the backbone of Oregon’s economy and have an important story to tell about the jobs they provide and the economic activity they generate. You can help: