Feature: Ethanol producers say California ‘carbon intensity’ scores still too high

Source: By Josh Pedrick, Platts • Posted: Tuesday, May 17, 2016

Houston (Platts)–13 May 2016 1239 pm EDT/1639 GMT

Most “legacy” ethanol producers who sell their product in California are unhappy with updated “carbon intensity” scores, saying the application process was inconsistent and left scores too high to meet the state’s Low Carbon Fuel Standard.

Legacy applicants are those certified under the California Air Resources Board’s previous carbon emissions model and again under its CA-GREET 2.0 model, adopted in September 2015.

These producers received an average carbon intensity reduction of just over 9 CI, to 61.17 from 70.53, according to California Air Resources Board scores this week.

“The 9 points is greater than expected,” one ethanol marketing source said.

Sources were expecting a reduction of about 5 CI points, they had earlier said. The smallest reduction for a pathway — the combination of feedstock, production process and fuel type — for corn, the overwhelmingly predominant US feedstock, was 4.96 CI and the largest was 12.87 CI. A few non-corn pathway scores actually increased.

Despite the lower scores for corn-based ethanol producers, some raised objections to the process, including that similar plants received different CI adjustments.

“Not everything is apples to apples,” the source said. Two plants might be similar, yet one CI score went down more than the other, he added.

The California Air Resources Board defines CI as “a measure of the [greenhouse gas] emissions associated with the production, distribution, and consumption steps in the ‘life cycle’ of a transportation fuel.”

California’s Low Carbon Fuel Standard assigns pathways with CI scores to individual ethanol production plants that sell ethanol in the state.

The new pathways are effective retroactive to January 1.


Geoff Cooper, senior vice president with the Renewable Fuels Association, the main ethanol trade organization in the US, said some inconsistencies arose from ethanol plants not disclosing certain factors that would have lowered final scores. Cooper cited corn grown in soil treated with lime as an example.

Lime (calcium oxide) can be added to soil to increase its pH. Previous CA-GREET (Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation) models falsely assumed the treatment was common nationwide, while the updated model assumes treatment only every few years, Cooper said.

“A lot of California plants got low CI scores because their corn isn’t treated with lime,” he said. “Most corn isn’t, but other producers didn’t mention that.”

Ethanol producers outside California could have also claimed they don’t add lime to soil and received the same CI reductions — “missed opportunities,” Cooper said. Producers were unsure what factors were being adjusted under the updated model, he added.

This led to ethanol plants using the same techniques, but being scored differently. Corn-based ethanol producers who might want to requalify with new information will have to wait through a long queue of biodiesel, sugarcane-based ethanol and other producers waiting to be certified under the new model.

US corn-based ethanol producers have pushed for the California Air Resources Board to update the CA-GREET model, leading to the current update.

The previous version was released in 2009 and has been in use since. Much of producers’ frustration centered on how indirect land use change, or ILUC, is factored into the final CI score. The ILUC previously caused CI scores to be much higher. But the Air Resources Board, in response to new information, lowered the ILUC by 10.2 points.

While the effect of ILUC went down, those of other factors, such as an ethanol plant’s feedstock or fuel source, increased. Those increases offset the reduction from the ILUC adjustment and some of them were unexpected, leading producers to be unprepared on their applications.


Other than the adjustment to the ILUC, applications focused on how much natural gas or electricity a plant uses to produce ethanol. If using electricity, its source can affect the final CI score. For example, electricity generated from a coal-fired plant would have a higher CI score than wind-generated power.

As producers were focused on those items, small nuances slipped through the cracks and only certain producers captured the benefits.

Another frustration came from “a little lack of transparency,” Cooper said. Producers who included confidential business information on their applications had such information redacted in the CARB’s public release of them. That makes it difficult to see what different producers put on their applications.

The marketing source also said the ethanol price reference in California, currently 90.1 CI, could be lowered in the near future. The price reference is not a requirement of the Low Carbon Fuel Standard, but the California ethanol market uses the CI reference points when trading. If that reference goes down by 10 CI, then plants whose score just fell 8 CI would end up worse off than before the adjustment.

A Houston-based analyst who focuses on biofuels was unconvinced that a change in the reference CI is likely to negatively affect sellers.

“We’re paying for the CI no matter what,” he said.

The California market typically trades as much as 20 cents higher than Argo ethanol, the main US hub for physical trading. The analyst anticipates sellers factoring in the cost of the CI into the selling price when shipping to the California market, regardless of the reference CI.

Though pathways that use corn as their feedstock averaged a 9 CI reduction, sorghum pathways fared much worse, with an average reduction of just over 4 CI.

Some sorghum pathways even increased in CI, from a 3.06 CI increase to an 8.37 CI decrease. The previous average CI for sorghum pathways was 67.7 CI, it’s now 63.33 CI.

“Previously, a lot of plants using [sorghum] had a distinct advantage into California because of their CI,” said a Midwest broker. “It looked like at face value that advantage was diminished with how the new CIs were calculated.”

As part of the update to the CA-GREET model, the CI of direct emissions from sorghum farming were increased. Many of the changes were focused on the nitrogen required for sorghum farming.


Despite ire being focused on the updated score, the motivation for a lower CI comes as ethanol producers seek to meet California’s Low Carbon Fuel Standard.

The LCFS requires a 10% reduction in the CI of gasoline and diesel from 2010 levels by 2020. To achieve this, the Air Resources Board sets a progressively lowering CI standard for fuel each year.

The standard for all gasoline and gasoline related fuels, such as ethanol, in 2016 is a 96.5 CI average.

California is the largest consumer of ethanol in the US, using more than 1.5 billion gallons annually, according to Department of Energy data.

With California such a large demand center, ethanol producers have a vested interest in seeing the state’s Low Carbon Fuel Standard succeed. But there is concern the program’s goals might be too ambitious. Ethanol producers had pushed for lower CI scores in order to meet its requirements.

Producing fuel above the standard generates a carbon deficit and generating fuel under the standard generates carbon credits that can be bought and sold. Ethanol producers therefore have an incentive to produce as low a CI as possible to generate the highest number of credits.

Buyers in California will also pay a premium for ethanol with a lower CI to help them meet the annual CI standard. Parties with a deficit can buy credits to offset the deficit. Each credit represents 1 mt of carbon.

Though California’s final goal for cutting carbon emissions in the state is 10% by 2020, the target for this year is only 2%. That means the next four years require a dramatic deceleration in emissions. This has led many parties to buy carbon credits before they’re needed.

“There’s been a massive amount of credit banking,” said the RFA’s Cooper.

Credits have no expiration date, so companies can hold onto them until they generate a deficit, he explained. “The program would be doomed if credits had a two-year expiration date like RINs,” he said, referring to the Renewable Identification Numbers the federal government uses to track every gallon of biofuel.

Parties are “just hitting the mark this year,” Cooper said. “The market could start to see deficits by next year.”