California’s Revised LCFS Challenged

Source: By Todd Neeley, DTN  • Posted: Thursday, February 19, 2015

Biofuel Industry Questions Standard’s Lack of Real-World Data

OMAHA (DTN) — Though real-world data suggest biofuel production has not led to so-called indirect land-use change, the California Air Resources Board, or CARB, continues to see ILUC as a vital part of its low-carbon fuel standard.

The state’s standard largely shuns Midwest-produced corn ethanol as a carbon-friendly fuel and has led to several unsuccessful legal challenges to the law. The board recently released an initial statement of reasons for the re-adoption of an updated standard, making what the industry believes were only minor adjustments to the ILUC portion.

In comments offered to the board this week, the Renewable Fuels Association asked the state to incorporate new data that suggests there is little or no ILUC connected to corn-ethanol production. A November 2014 study by the Center for Agricultural Rural Development at Iowa State University found that farmers around the world responded to higher crop prices in part as a result of biofuels production by mainly using existing land more efficiently and not by converting forest and grassland to cropland.

California’s low-carbon fuel standard continues to penalize Midwest ethanol producers with higher carbon penalties, based on the theory of ILUC.

“While the proposal for re-adoption marks a slight improvement over the current regulation, we remain deeply concerned by several aspects of the proposal and believe it threatens the long-term durability of the LCFS program,” the RFA said in a 62-page comment letter sent to the board Monday.

The ethanol interest group makes the case that grain-based ethanol has made a “substantial contribution” to LCFS compliance during the first four years of the program.

“Indeed, ethanol has accounted for 59% of total credits generated from 2011 Q1 through 2014 Q3, and 95% of the ethanol used for compliance has been grain-based ethanol, according to CARB reporting data,” said RFA Senior Vice President Geoff Cooper in the letter. “If not for the LCFS credits generated by grain-based ethanol, deficit generation would have certainly outpaced credits by now, and compliance with the program would be extremely difficult, if not impossible.

“Thus, it is not an exaggeration to state that the LCFS has endured so far only because of the contributions of grain ethanol.”

In the new proposed LCFS, however, the California board continues to assess carbon-intensity penalties on corn-based ethanol for indirect land-use change emissions. If the state moves forward with the penalty, Cooper said the use of most grain ethanol would be “infeasible” as soon as 2016.

The RFA forwarded the ISU study to the California board back in December. The study is believed to be the first to quantify land-use changes from biofuels. The board’s recently released initial statement of reasons for the new LCFS makes no mention of the ISU study, which takes aim at how the model to calculate land-use change is used.

More specifically, the ISU study found “the pattern of recent land-use changes suggests that existing estimates of greenhouse gas emissions caused by land conversions due to biofuel production are too high because they are based on models that do not allow for increases in non-yield intensification of land use.”


Cooper said in the letter, “For the first time, we have real-world data that provides important insight into actual market responses to increased biofuels demand and higher crop prices. As described in the attached comments, we believe CARB must take into account the new CARD/ISU research and use it to immediately re-calibrate the GTAP model.”

Cooper said the California board is using a “fundamentally flawed” approach to predicting indirect land-use change, that doesn’t include “real-world” observations.

“Nearly six years have passed since CARB originally adopted the LCFS, which included carbon intensity penalties for certain biofuels for predicted ILUC,” the letter said. “In the intervening years since the program was adopted, the scientific understanding of land-use change has significantly progressed. Retrospective analyses of global agricultural land use have been conducted, actual market responses to increased demand and higher commodity prices have been observed and characterized, the reliability of predictive economic models has been improved, and new data has emerged to better guide certain modeling assumptions.

“Yet, in spite of these advances in the science, CARB continues to rely on the narrow — and completely unsubstantiated — view that a ‘sufficiently large increase in biofuel demand in the U.S. would cause non-agricultural land to be converted to cropland both in the U.S. and in countries with agricultural trade relations with the U.S.'”

The state’s approach to indirect land-use change, Cooper said in the letter, is based on the notion that “farmers are limited to only two responses to increased demand for crops. While CARB recognizes four potential market responses to heightened demand for crops, its predictive modeling framework essentially allows only two of these responses to play out.”

In its proposal, CARB lists four potential market responses to increased demand for their crops. Those include growing more biofuel feedstock crops on existing crop land by reducing or eliminating crop rotations, fallow periods, and other practices that improve soil conditions; converting existing agricultural lands from food-to-fuel crop production; converting lands in non-agricultural uses to fuel-crop production; or taking steps to increase yields beyond what would otherwise occur.

“CARB has produced no evidence whatsoever that such land conversions have actually occurred on a meaningful scale in response to the LCFS or growth in U.S. biofuels demand,” Cooper said in the letter.