1. 1 Some Modeling Results for the Low Carbon Fuel Standard International Energy Workshop Venice, June 19, 2009 Carmen Difiglio, Ph.D. Deputy Assistant Secretary for Policy Analysis Office of Policy and International Affairs Thomas Alfstad Brookhaven National Laboratory

2. 2 Credits and Caveats l Staff of the Office of Policy Analysis Contributing to the Project: –Audrey Lee –Peter Whitman l Caveats: –These are preliminary results that represent one modeling scenario. –Different scenarios and further analysis could produce different results. –These preliminary results do not reflect the views of DOE or the Administration regarding the LCFS.

3. 3 California LCFS (Gasoline) YeargCO 2 e/MJ% Reduction 20100.0 201195.610.25 201295.370.5 201394.891.0 201494.411.5 201593.452.5 201692.503.5 201791.065.0 201889.626.8 201988.188.0 202086.2710.5 Baseline Fuel = CA RFG with 10% corn ethanol.

4. 4 Ways LCFS Could Be Met Things to do: l Use biofuels with reduced CO 2 emissions. l Use electric vehicles or plug-in hybrid vehicles. l Increase refinery efficiency. l Use refinery feed stocks that have lower life cycle emissions. Things not to do: l Use more Canadian oil sands refinery feed stocks or heavy crude feed stocks. l Use coal-to-liquid fuels.

5. 5 Well-To-Wheels GHG By Process CA ULSD Source: Detailed California-Modified GREET Pathway for Ultra Low Sulfur Diesel (ULSD) from Average Crude Refined in California, CARB, Feb 28 2009

6. 6 Upstream GHG Emissions By Feedstock Source: “An Evaluation of the Extraction, Transport and Refining of Imported Crude Oils and the Impact on Life Cycle Greenhouse Gas Emissions”, DOE/NETL-2009/1362, March 27, 2009

7. 7 Federal Renewable Fuel Standard

8. 8 Federal Renewable Fuel Standard GHG Requirements l Conventional ethanol (starch) capped at 15B gallons/year: Must have 20% fewer life-cycle GHG emissions than gasoline for new plants. l “Advanced” renewable fuels (includes sugar ethanol): Must have 50% fewer GHG emissions. l Biodiesel: Must have 50% fewer GHG emissions. l Cellulosic biofuels: Must have 60% fewer GHG emissions.

9. 9 Original Waxman-Markey Discussion Draft LCFS (= Federal LCFS) l The average lifecycle emissions of transportation fuels must be 5% lower than the baseline fuel by 2023 and 10% lower by 2030. l From 2014-2022, the average lifecycle emissions of transportation fuels must not exceed those of the baseline fuel not counting the renewable fuels used to meet the Renewable Fuels Standard. l The baseline fuel is defined to be the average fuel sold into U.S. commerce during 2005. l This section was deleted from HR 2454. It was used as a proxy to model a “Federal LCFS.”

10. 10 Models used for this study Global Energy Technology Perspectives (ETP) –15 regions –Developed at IEA with ETSAP –Calibrated to WEO Ten Region U.S. MARKAL Model –Key Regional Differences »Fossil fuel and renewable resource availability »Economic and population growth rates »End-use demand patterns and levels of energy intensity »Energy infrastructure and transportation options and costs »Policies and regulations –Calibrated to AEO

11. 11 MARKAL Model Improvements Implemented for this Study l Introduced framework for tracing carbon intensity of liquid fuels. l Introduced market for tradable LCFS credits. l Introduced State LCFS regulations as outlined by CARB, a Federal LCFS policy as outlined in original Waxman-Markey draft and assumed anti-backsliding regulation.

12. 12 The RFS Already Maximizes U.S. Low-GHG Biofuel Use Through 2025 12 l 2008 DOE study & 2008 EIA AEO indicate that the RFS requires more cellulosic biofuels than what could be available (including imports in DOE Policy Office study). l Since then, the recession has further delayed investment.

13. 13 The RFS leads to increased US demand for low-GHG biofuels in 2030 13 l The LCFS does not lead to increased biofuel production until after 2025, when a substantial increase is required. The majority of the increased supply has to be purchased in international markets, since US supply is already close to the maximum feasible.

14. 14 How the LCFS is Met l Approx. 275 million tonnes of CO2 equivalent credits are required by 2030. 14

15. 15 Impact of LCFS on World and U.S. Biofuels Use l High oil prices and world-wide policy incentives already provide strong incentives for biofuels production. The main impact of the LCFS is to divert biofuels from other markets

16. 16 l The US LCFS limits flow of oil sands to the USA, but only marginally reduces overall oil sands production. 3.4 mbpd 1.2 mbpd 0.6 mbpd 0.7 mbpd 2.0 mbpd Reference case 2025LCFS case 2025 Alberta Oil Sands

17. 17 Impact of U.S. LCFS on CO 2 Emissions l The US LCFS limits leads to significant reductions in US emissions, but this is largely offset by increased emissions in the rest of the world.

18. 18 Preliminary Conclusions Given Current Modeling Assumptions l High oil prices and current world-wide policies already provide strong incentives for alternative fuel production. l A national U.S. LCFS is not estimated to significantly increase world-wide biofuel production until after 2025. l A national U.S. LCFS is not estimated to significantly discourage production of petroleum feed stocks with higher GHG emissions. l A national U.S. LCFS is not estimated to appreciably reduce world-wide carbon emissions. l The relatively low carbon savings comes at the cost of increased U.S. dependence on OPEC imports.

19. 19 However The impacts of a LCFS could be substantially different under different modeling assumptions. For example: 1.The upstream CO 2 emissions of Canadian Oil Sands could be reduced with alternative sources of power and the use of CO 2 capture and storage. These changes might result from Canadian government policies. 2.Other countries might also adopt LCFS policies thus reducing Canada’s ability to market oil sands feedstocks without reducing their lifecycle emissions.