Low-carbon fuel standard—Status and analytic issues

In the United States, the federal government and several state governments are formulating or implementing policies aimed at reducing greenhouse gases emissions. In April 2009, the State of California adopted the Low-Carbon Fuel Standard (LCFS), a groundbreaking policy for reducing greenhouse gas emissions in the transportation sector. This paper reviews the major elements of a LCFS, focusing on Californiaʹs implementation, and discusses the key open issues of a LCFS. This paper also summarizes the major elements of the cap-and-trade and carbon tax concepts, the two principal alternative approaches to regulating greenhouse gases emissions. Analytical issues associated with the LCFS are highlighted, including land-use change effects associated with certain biofuels. If electricity becomes a significant transportation fuel, a number of regulatory issues will need to be addressed. Beyond California, the LCFS approach appears to be favored by several other US states and the European Union. A Hydrogen-Success scenario example illustrates the key features of a national LCFS following Californiaʹs model.