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Unintended Consequences of California's LCFS

April 16, 2009
The LA Times today published an insightful opinion article written by Gal Luft, executive director of the Institute for the Analysis of Global Security and co-founder of the Set America Free Coalition titled "Greenhouse gas rules could fuel oil dependence",0,2388173.story. One of the reasons many experts and stakeholders are following the California Air Resources Board’s (CARB) low carbon fuel standard (LCFS) process so closely is that in all likelihood other states and ultimately the federal government and Congress will use the CARB process as a blueprint for other regulations involving fuels and carbon mitigation, particularly their findings on indirect land use change (ILUC) values.

Embracing inclusion of immature ILUC values for the CARB greenhouse gas regulations in California would mean two things that will be particularly worrisome if applied at a national level.

One, ILUC penalties have implications not just for biofuels, but for all agricultural activity and, justly so, for all land use decisions. For example, residential buildings, wind farm projects, commercial real estate projects, public and community buildings are just examples of other businesses that inflict land use change from natural habitat in this country.

Two, for the land displaced in the aforementioned projects, American (California in this case) businesses will essentially be held responsible for land use decisions, and the resulting carbon emissions, of individuals and nations around the world over which they have no control. This creates a structure where the United States is positioned to shoulder the burden of, and potentially even encourage, poor land use choices in other nations by assessing their carbon emissions due to land use change to American businesses instead of encouraging sound land use practices on a local level. I would assume the greenhouse gas emissions would not be counted twice so even if other countries instituted their own carbon emission reduction policy, those land use changes, having already been allocated to businesses in the US, would not be allocated again on the local level.

Due to the likely direct affects on American businesses of all kinds, this policy formulation, which will in all probability be used as a blueprint for regulatory decisions in other states and on the federal level, deserves serious consideration and discussion to minimize economic harm and other unintended consequences. The Board’s credibility as well as the credibility of the analysis itself is at stake.

In order to ensure a sound scientific foundation for these policies and to avoid the pitfalls and unintended consequences Ms. Luft outlines in her piece, greater consensus is needed on assumptions being made in California particularly concerning indirect land use change. Legitimate fundamental disagreements over data, modeling, and other assumptions call for a period of further analysis, and a transitional policy that drives investment in land efficiency and production best practices.