Excessive Economic and National Security Costs to Result From Low Carbon Fuel Standards

New Studies Highlight Consequences of Proposed Federal and State Actions

The George C. Marshall Institute has released two studies documenting the adverse economic, environmental and national security implications of proposed low carbon fuel standards (LCFS). Low carbon fuel standards have been proposed at both the federal and state level, and serve as an element of the Obama Administration’s broad energy and environmental agenda. The studies, issued in early April, come on the heels of climate and energy legislation introduced in the U.S. House of Representative’s Energy & Commerce Committee, which includes a LCFS similar to one under consideration by several states, notably California.

A low carbon fuel standard sets limits on the greenhouse gas (GHG) emissions allowed from the production and consumption of a transportation fuel and then reduces those limits over time.

“The low carbon fuel standard is another in a long line of examples of government legislating by whim instead of facts and reality,” Marshall Institute CEO William O’Keefe said. “The low carbon fuel standard is expensive, environmentally ineffective given available technologies, and may undermine U.S. energy security. It is just another government boondoggle.”

The economic analysis shows that LCFS will be “prohibitively costly” before cheap low carbon fuel alternatives are developed. Few alternatives, other than corn-based ethanol, will be available for commercial consumption in the near-term. The assessment of a hypothetical LCFS requiring a 10% reduction in GHG emissions via use of ethanol effective in 2020 found costs of $65.5 billion annually – equivalent to $570 per household per year.

Without rapid advances in alternative fuels, LCFS are a costly strategy for lowering GHG emissions and have limited effectiveness. The estimated net savings in emissions is 142 million metric tons per year – equal to 7% of transportation emissions and 2.2% of total projected U.S. emissions in 2015 with a per ton cost of $457, which is significantly larger than the costs of other possible reductions.

U.S. adoption of an LCFS will do little to curtail the worldwide growth in transportation-related GHG emissions. World demand for oil for transportation is paced by China, India and the developing world. Decreasing U.S. demand will reduce the price of conventional gasoline and petroleum, resulting in increased demand elsewhere in the world. The resulting consumption will offset reductions in GHG emissions expected from a U.S. LCFS.

The national security analysis finds that an LCFS undermines U.S. energy security by erecting barriers to the use and exploitation of North American fuel sources. Canadian oil sands and U.S. oil shale reserves would no longer be viable options for the U.S. transportation fuels market due to their relatively high carbon content. In the case of Canada, Canadian companies will sell petroleum derived from the oil sands on the world market, leaving no environmental benefit to the LCFS, and removing a trusted and reliable supplier of energy for the U.S. U.S. oil shale reserves are enormous, with estimates suggesting they could supply U.S. import needs for decades.

These studies can be found by following the links below.

Economic, Environmental, and Energy Security Consequences of a National Low Carbon Fuel Standard – a summary of both studies.

Economics of a National Low Carbon Fuel Standard by Michael Canes and Edward Murphy

National Security, Energy Security, and a Low Carbon Fuel Standard by Jeff Kueter, President George C. Marshall Institute

 

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