The report also finds that biofuel production—for example, harvesting biofuel feedstocks from renewable sources such as corn, sugarcane and food waste—could provide jobs and create revenue in economically challenged parts of the state.

California’s environmental laws and policies have created an effective framework for cutting down our use of petroleum fuels. These high-carbon emitting fuels power our cars, trucks and airplanes, but pollute the air, pose widespread health risks and threaten the stability of the earth’s climate. We have the potential in California to produce a significant amount of low-carbon fuel to meet our transportation needs over the coming decades, but the state has not yet taken full advantage of its own agricultural opportunities to increase biofuel production.

—Ethan Elkind, a co-author of the report

Elkind is associate director of the climate change initiative at UCLA School of Law’s Emmett Institute on Climate Change and the Environment and UC Berkeley Law’s Center for Law, Energy and the Environment.

California’s transportation sector represents the largest single source of greenhouse gas emissions in the state at 37.3% vs. 33% nationwide—just for tailpipe emissions. Lifecycle fuel costs, including oil and gas extraction and refinery processing from the industrial sector, add more than 10 additional percentage points, making the transportation sector responsible for almost half of all greenhouse gas emissions in the state on a full lifecycle basis.

Although zero emission vehicles are projected to make up a significant percentage of the California vehicle fleet by 2030, improvements in vehicle fuel economy due to new federal corporate average fuel economy (CAFE) standards will constitute some of the reductions. In addition, the Air Resources Board projects flattened or decreasing vehicle miles traveled due to more compact development patterns and growing demand for non-automobile dependent communities. Nevertheless, biofuels are still likely to constitute up to half of the long-term petroleum reductions.

California will need more federal and state action to achieve the greater economic and environmental payoff that can come from in-state biofuel production, according to the report.

California to date has a small but growing amount of biofuel consumption. Out of 14.5 billion gallons of finished gasoline burned in the state each year, Californians consume approximately 10 percent (1.5 billion gallons) as ethanol fuel (most of which is blended with gasoline). Meanwhile, out of approximately 3 billion gallons of diesel fuel consumed annually, about 2.3 percent (70 million gallons) consists of biodiesel.

But California has not yet taken full advantage of the diverse opportunities for biofuel production from in-state biomass. While current policies have put the state on a leadership path with biofuel uses, more federal and state action could ensure that California maximizes both the environmental and economic potential of in-state production.

—“Planting Fuels”

According to the paper, the top four barriers to increasing in-state biofuel production are:

1. Policy uncertainty at multiple levels of government, primarily related to incentive programs, that hinders private investment in biofuels;
2. Restricted market access to existing fuel infrastructure and gas stations due to incumbent industry resistance from automakers, gas stations, and petroleum fuel refiners;
3. Policy misalignment among various levels of government that may inadvertently limit biofuels deployment; and
4. Lack of feedstock access to some of the most promising in-state resources that could result in significant environmental and economic co-benefits.

Among the possible solutions are financial incentives for automakers and gas stations that would allow them to sell greater amounts of low-carbon biofuels and higher blend rates, and a state-launched process to study the optimal reduction of nitrogen oxides, greenhouse gases, and petroleum fuels.

In addition to making several recommendations for policymakers at the national level, the paper makes numerous recommendation for California state officials, including:

• Clarify the status of the low carbon fuel standard (LCFS) for the years following 2020, either under existing AB 32 limits or based on new legislation for 2030 and 2050.

• Consider strengthening the current low carbon fuel standard to require petroleum fuel providers to blend more low-carbon biofuels into their products as a means to counter petroleum fuel providers’ economic disincentive to blend more biofuel.

• Develop contingency backup plans in case of federal retrenchment of the renewable fuel standard, including a statement of steps to compensate for the potential loss of federal support for biofuels, such as a blenders’ tax incentive or subsidies for low carbon fuel standard compliance.

• Create a “carbon intensity group” at the California Air Resources Board to speed determinations of carbon emissions calculations for biofuels and thus more quickly identify the co-benefits from various biofuel deployment scenarios, particularly for in-state providers, such as through better staffing for the life-cycle assessment process.

• Develop a funding program for California that enables temporary purchasing of biofuels as a market backstop to reduce uncertainty in the wholesale oil and biofuels feedstock markets, with built-in protections for taxpayers.

• Ensure biofuel regulations such as the LCFS have compliance periods that discourage last-minute compliance due to incumbent industries fighting regulations, such as by requiring a more gradual and consistent phase-in of compliance obligations.

• Include an in-state biofuel production incentive or capital expense support for greenhouse gas reduction funds from the cap-and-trade auction proceeds from transportation fuels, with distinct targets for each biofuel type that match their unique development potential.

• Consider stronger incentives for gas stations to provide 85 percent biofuel blends (E85), such as through state grants or tax credits to offset the costs of installing new infrastructure for the biofuels.

• Consider approving the sale of higher low-carbon ethanol blends in vehicles, based on calculations for higher-level blends up to E30 in California’s regulatory “predictive model,” in order to encourage greater use of lower-carbon ethanol above the current ten percent blends.

• Establish biofuel goals that better balance the three requirements of nitrogen oxide, greenhouse gas, and petroleum fuel reductions, by working with federal officials who review state Clean Air Act plans to develop a methodology to determine the optimal amount of each goal, while also incorporating economic and job benefits where feasible.

• Ensure that both biofuel providers and petroleum refiners are held to the same high standard on underground fuel storage standards, water disposal, and water recycling, specifically with underground leak detection systems that may disproportionately benefit petroleum-based oil refining from weaker oversight.

• Develop uniform statewide standards and programmatic environmental review documents for permitting biofuel production facilities, while still preserving local context-specific review, including compliance checklists and processes for local governments to adopt.

• Ensure that the low carbon fuel standard more explicitly includes a role for biofuels in addition to zero-emissions vehicles, in order to avoid over-reliance on a single transport fuel to meet state petroleum reduction goals.

• Explore loosening restrictions on the use of technologies that can harvest and convert local feedstocks to biofuels in an environmentally and economically beneficial manner, via a multi-stakeholder study group that addresses local pollution and economic development concerns.

• Identify optimal locations for wood residue as a feedstock and then coordinate with the federal government to improve access to these sites by launching a multi-stakeholder group to achieve agreement on how forests should best be managed.

• Explore ways to make the transport of feedstock residues from around the state more financially viable, either by decreasing the time and uncertainty related to regulatory compliance or by providing financial support.

• Investigate options to encourage the reuse of rice straw as a biofuel feedstock, such as by basing capital support and carbon credits on a calculation of the benefits of reduced methane emissions from not returning it to the ground versus potential increased costs.

• Study and explore opportunities to encourage purpose-grown crop production for biofuel feedstocks that result in overall greenhouse gas benefits, as well as rural economic benefits.