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A Bad Rule Is Better Than No Rule?

April 21, 2009
California’s Air Resources Board will vote Thursday on its proposed numbers for the life cycle emissions of various fuels, included under the Low Carbon Fuel Standard.

According to a Greenwire story picked up in the New York Times, advocates of the rule believe that it will stimulate investment in advanced biofuels, since according to the staff analysis those biofuels will be preferred for use in California. But start-up advanced biofuel producers are facing considerable economic challenges in getting the industry off the ground, as described in a BusinessWeek story.

Building a viable biofuel industry requires transformation of the existing petroleum-based economy to a biobased economy. Because oil dominates the market, government intervention is required to carve out a space for alternatives. So, signals from the government will have a large influence on investments.
CARB is required to include measurement of indirect land use change in the calculation of the life cycle emissions for biofuels, even though there is considerable academic disagreement over California’s adopted method for measuring it. CARB chairwoman Mary Nichols said in the Greenwire story, “No one has offered an alternative that they say is better. The people who oppose it say, ‘We just don't know enough and shouldn't do anything,’ and we don't think that's acceptable.”

That’s not an accurate assessment of the academic or the industry point of view. A recent letter from Robert C. Brown, director of the Bioeconomy Institute at Iowa State University, points out that in terms of achieving real reductions in greenhouse gas emissions, California’s proposed law misses the mark:

The inclusion of ILUC in calculating the LCFS will have virtually no influence on the course of land use change in the developing world or the associated GHG emissions. On the other hand, the nascent biofuels industry, if saddled with the GHG emissions generated by other sectors of the world’s economy, will not be able to compete in energy markets.

“Second, a GHG policy that makes exceptions for some sectors of the economy and shifts the associated carbon burdens to other sectors is likely to encourage further growth in GHG emissions. As the Searchinger and Fargione studies revealed, burdening biofuels agriculture while exempting food agriculture could have the effect of encouraging unsustainable land stewardship in the developing world with the perverse outcome of increasing net GHG emissions around the world. All economic activity should be directly responsible for the GHG emissions emanating from them if this situation is to be avoided.”

Brown’s point is that economic impacts are included in California’s calculations for biofuels but not for other fuels or other areas of the economy that are regulated under California’s law. Further, the calculations are based on economic projections that are driven by assumptions.

Michigan State University Professor Bruce Dale recently gave several examples of how indirect effects might perversely apply to other industries or government policies. He summed up his argument by saying, “This is the logic of indirect effects analysis. The polluter does not pay. Those who actually create the additional pollution are not held accountable for their actions.”

Other researchers have proposed methods for directly measuring land use change associated with biofuels, such as Dale and Thomas Darlington of Air Improvement Resource Inc. in “Land Use Effects of U.S. Corn-Based Ethanol.”