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Critics question assumptions at core of California’s Low Carbon Fuel Standard

State regulators have entered speculative territory” in forecasting biofuel and EV needs into the 2040s, climate scientists say — and they want to see the data.
By Jeff St. John

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An oil refinery
(Binh Nguyen/Canary Media)

This is Part 2 of a three-part series examining the controversies and conflicts surrounding the future of the California Air Resources Board’s Low Carbon Fuel Standard. Read Part 1 and Part 3.

Michael Wara is worried that a key California climate regulator is about to lock the state into the mistakes of the past. And it’s largely because the agency — the California Air Resources Board — is putting too much faith in its ability to predict the future.

Wara, director of Stanford University’s Climate and Energy Policy Program, led a team of climate scientists that in September presented CARB with a proposal to set its beleaguered Low Carbon Fuel Standard program on the right path for the planet. The proposal, developed on behalf of CARB’s Environmental Justice Advisory Committee, aims to curb what have become lavish subsidies for renewable diesel and dairy biogas, combustion fuels that are not up to the task of cleaning up transportation, the state’s largest source of greenhouse gas emissions.

The agency has issued decisions in recent years that have made California a global leader in electric vehicle adoption. But it has also allowed the Low Carbon Fuel Standard — a marquee program that raises some $4 billion each year to cut carbon emissions from transportation — to rely heavily on crop- and cow-manure-based biofuels that Wara and other climate scientists say are not only an ineffective way to spend the money but also actively harmful for the planet.

Now, as the agency prepares to vote on a plan that rejects the environmental-justice proposal in favor of continuing its support of these biofuels, Wara is concerned that CARB is about to lock in its disastrous policy for another two decades.

Things are changing really fast in the transportation sector, and CARB deserves credit for that,” Wara said, referring to its EV policies. But that rapid pace of change means that the future is highly uncertain in the transportation sector,” he said. The compromises we’re making to get cleaner fuels today may look good today” to CARB analysts, but not look good in 10 years — and I have no idea how they’ll look in 20 years.”

Despite this uncertainty, the staff’s core justification for its preferred biofuel-friendly approach is a model it has created to forecast the optimal pathway for decarbonizing the state’s cars, vans, buses, trucks, trains, planes and even off-road vehicles by 2045. And at the core of that long-range, intricate model is, of course, a set of assumptions. These assumptions are hugely consequential, hotly contested — and shrouded in secrecy.

The agency has entered into very speculative territory” with this model, Wara said, and it may be relying on assumptions that falsely paint electrified transit options as less appealing than biofuels.

Groups including Earthjustice, the Union of Concerned Scientists, Food and Water Watch and Wara’s team have challenged these assumptions, warning that they may not only turn out to be wrong but also create an analytical framework that makes better choices look worse by comparison.

And though they have their suspicions that CARB’s model gets some things wrong given its strong prioritization of biofuels, they can’t even say that for sure. That’s because CARB hasn’t yet let them see and evaluate the inputs to its model.

Wara said he’s reluctant to say that the modeling is good or bad, or that the alternatives have been fairly considered or not.” Until the data is available to test those assertions, I honestly have no idea.”

But as it stands, it’s far from clear that CARB is ready to reform its approach to modeling the impacts of its Low Carbon Fuel Standard policy quickly enough to address the threat that runaway biofuel subsidies pose to transportation-decarbonization goals. That’s why many of CARB’s critics, including Wara and a group of climate scientists, are pushing the CARB board to not only provide transparency into their modeling efforts but also embrace the environmental-justice proposal the staff has spurned — starting with a limit on the amount of crop-derived renewable diesel flooding the program. 

Why CARB’s long-range modeling may be discounting the electric future

Environmental-justice groups have long argued that CARB is giving renewable diesel and methane captured from cow manure more carbon-cutting and air-pollution-reducing credit than the latest science shows they should receive. Opponents of those fuels have accused the agency of bowing to pressure from powerful oil and agricultural industry interests that are profiting from the existing policies.

But one reason CARB puts so much weight on those liquid-fuel-based pathways may be because its analytical and modeling framework simply cannot imagine a low-carbon transportation future without them — at least not with its current assumptions.

CARB staff’s December report stated that it rejected the environmental-justice proposal, which was backed by modeling done by Wara’s team, because it would lead to higher volumes of fossil diesel being used than any of the other scenarios evaluated” and thus higher carbon emissions and air pollution.

Even with a 2035 phaseout of new light-duty vehicle sales and aggressive deadlines for a heavy-duty [vehicle] phaseout, millions of fossil-fueled vehicles will remain on California’s roads for several decades,” CARB spokesperson Dave Clegern told Canary Media in a March email. They will require cleaner fuels as we move toward 2045 carbon neutrality.”

But that finding relies on assumptions about the amount of liquid fuels that will be needed through 2045, Wara noted. In extremely simplified terms, CARB’s modeling methodology takes as a given how much liquid fuel is required, and then it says, How are we going to get the liquid fuel we need?’”

And if biofuels aren’t available to feed that model, it will presume that fossil fuels are being burned to make up the difference.

On the other side of that coin, CARB’s model also takes as a given the amount of electric transport” that will be available 10 and 20 years from now, he said. But given how quickly electric vehicles and batteries to power them are advancing, it’s far from clear that today’s assumptions on that front will hold true — and if you get that wrong, you get every prediction wrong for the model.”

California has set a goal of ending sales of new gasoline-fueled passenger vehicles by 2035, but how quickly EVs are actually adopted will depend on factors that now remain in flux, ranging from automaker investments and charging availability to consumer sentiment.

There’s even greater uncertainty about how many medium- and heavy-duty vehicles will be able to convert to electric over the next 20 years, as opposed to needing low-carbon liquid fuel alternatives to diesel, Wara said. Previously held beliefs about the cost and range limits of battery-electric heavy-duty trucks are being shattered on an annual basis.

These underlying technological and economic developments are happening so fast that models developed just last summer cannot simulate what’s happening now and next year,” he said.

Why has CARB withheld important data? 

That brings up another problem, Wara said: No one knows exactly what CARB’s modeling inputs are. They only know the outcomes.

The rulemaking is not transparent because CARB has been unwilling to release files that we need to evaluate it,” he said.

For its analysis, Wara’s team used the same optimization modeling platform — the California Transportation Supply, or CATS, model — that CARB developed and uses for its own analysis. But CARB staff has refused to share the underlying data input and output files that informed its latest plan, Wara said.

We need to be able to see those input and output files,” he said. CARB has said they will not release them.”

CARB spokesperson Clegern told Canary Media in a March 7 email that the data being requested by Wara and other stakeholders will be released later,” in accordance with the Administrative Procedure Act, which governs procedures for state administrative agencies to propose and issue regulations.

One of the big questions Wara would like to answer with that data is how heavily CARB’s analysis is weighing near-term versus long-term forecasts to set its immediate Low Carbon Fuel Standard policy goals.

We need to be able to see the yearly data to see how dependent the conclusions are based on what happens in 2040, compared to what happens in 2027,” he said. I believe [their] 2027 [forecasts] far more than I believe 2040 — particularly in the CATS model,” which is structured in a way that may yield unreliable long-term forecasts based on current data.

CARB has made publicly available other aspects of its December analysis, he said. But when it comes to its input and output files for the CATS model, CARB staff has referred Wara’s team and other stakeholders to a previous version of the data made available in August 2023.

And that vintage of data is simply too out of date to be useful, he said — a view that’s been backed up by more recent analysis by another group of experts on the Low Carbon Fuel Standard policy.

How CARB’s analysis is being outpaced by reality

That new evidence came in a February report from the University of California, Davis Policy Institute for Energy, Environment, and the Economy — one of the few academic groups that has been tracking Low Carbon Fuel Standard (LCFS) policy consistently over the program’s history.

That report concludes that CARB needs to cap the amount of renewable diesel that can earn LCFS credits to meet a key goal of its current review of the program — to counteract the crash in LCFS credit prices that has occurred over the past two years as renewable diesel has flooded the state.

Those findings surprised Colin Murphy, deputy director of the institute and lead author of the report. As recently as last year, a similar analysis his team ran indicated that renewable diesel was growing quickly, but not at such a rapid pace as to thoroughly flood the California market, he said.

But when his team began an update of that model in January, we said, Wait a second — our projections massively undershot what actually happened.’” In fact, the new data indicated the growth in renewable diesel production could allow California to displace its entire demand for fossil diesel within a few years. U.S. production capacity of the fuel grew from 1.75 billion gallons per year in early 2022 to 3.9 billion gallons per year at the end of 2023, with the vast majority flowing to California.

That’s a problem because that would undermine the LCFS program’s goal of financing emerging clean-transportation technologies, Murphy said. LCFS works by requiring refiners and sellers of fossil fuels in the state to counteract the carbon emissions of those fuels by buying credits generated by emissions-reducing technologies, including EVs and EV charging.

But with current renewable-diesel trends, those fossil fuel companies don’t have to pay a higher credit price to get newer or riskier things,” such as credits tied to building thousands of electric truck chargers needed to meet CARB’s Advanced Clean Fleets mandate. Instead, they can just buy more and more renewable diesel for the next five or six years,” he said, because the fuel has become so abundant and cheap.

Bio-based diesel fuels have already passed the halfway mark for all diesel consumed in the state as of last year. But CARB hasn’t yet modeled the impact of the latest data on the even faster growth of renewable diesel that is now underway, Murphy said.

To date, renewable diesel has been a success story at the LCFS. It’s come on more quickly and more cheaply than we thought,” he said. It’s tough to do this U-turn and say, It’s good — but not too much.’ And the industry could just say, It’s been good so far — so let’s do more.’”

Where critics say CARB’s methods miss the mark 

To know whether more renewable diesel is a net benefit or detriment to the climate, CARB would need to reassess its approach to modeling indirect emissions caused by fuels like renewable diesel, Murphy said.

These analyses, known as long-term indirect land-use change (ILUC) methodologies, attempt to determine the environmental and climate relationships between demand for biofuels and the changes that demand causes for farms, forests, watersheds and the atmosphere. In the case of California, that would mean determining how its growing appetite for renewable diesel, which is already outstripping available supplies of waste oils, may be driving producers to source crops — primarily soybeans — as feedstocks. That can lead to increased deforestation in countries growing soybeans and palm oil to fill the gap.

Multiple groups noted in comments that CARB’s December analysis uses an ILUC methodology first developed in 2015, when demand for biofuels was much lower than it is today. Recent surveys of more up-to-date ILUC methods conducted by the U.S. Environmental Protection Agency indicate that CARB’s ILUC estimates are too low — and perhaps significantly too low,” Wara’s team wrote in its comments.

Whether California’s future demand for renewable diesel will tip the balance from the fuel being a net positive for climate and environment to a net negative is very hard to answer definitively, however, Murphy said.

If it grows too much, we lose confidence that it’s in fact better than petroleum,” he said. But we don’t have a very clear scientific basis to say this much vegetable oil can go to renewable diesel and no more.”

That’s not a universally held view. Environmental groups cite studies indicating California’s demand for renewable diesel is already causing these harms and overwhelming whatever benefits it may bring to the state. Other studies, some funded by biofuel and oil and gas industry groups, have found that the tipping point is still far from being reached.

But at this point in CARB’s Low Carbon Fuel Standard review process, it may be too late to adjust its ILUC methodology to deal with the near-term threat of renewable diesel glutting the market, Murphy said.

The problem is that it requires a lot more research,” he said. If we started on that two or three years ago, we probably would have been able to have an answer.” 

But with the flood of renewable diesel presenting a more immediate challenge, a cap on the fuel is likely CARB’s best option moving forward, he said.

Such a cap is exactly what the environmental-justice proposal Wara and team put together intends to institute. Doing so would put the program on track to do what it’s meant to do, Wara said: slash planet-warming emissions from transportation by funding the carbon-free technologies California — and the world — truly need.

My perspective is that the LCFS has to be the program we use to create financeability for high-risk, high-reward technologies,” he said. And if it’s not doing that, it’s not being used appropriately.”

Jeff St. John is director of news and special projects at Canary Media. He covers innovative grid technologies, rooftop solar and batteries, clean hydrogen, EV charging and more.