The “low-carbon fuel standard” (LCFS) is a policy innovation emerging from the energy and policy minds of the University of California and the regulators of the California Air Resources Board.

It has been adopted by British Columbia (BC) policymakers and adapted to the unique contexts of the province. At first glance, the targets and timelines for compliance with the LCFS appear modest. Using 2010 as a baseline, industry is required to reduce the carbon intensity of fuels sold by 10 per cent by 2020. However, the LCFS is anything but a modest proposal.

The LCFS is intended to bring about a transformation of the energy system that powers transportation services, from one that is currently served by fuels derived from oil—a fossil fuel, to a system that is powered by a diverse range of alternatives, such advanced biofuels, methane and electricity—preferably derived from renewable energy sources that contribute few greenhouse gas (GHG) emissions to the atmosphere, according to the net emissions accounting of life-cycle analyses.

To complement the diversified range of fuel options useable under the LCFS, a corresponding transformation of vehicle technology and energy infrastructure is required. For electricity to supplant gasoline as the dominant vehicle “fuel”, electric motors, advanced batteries and electric vehicle charging infrastructure will need to displace internal combustion engines, petroleum product distribution systems and retail pumping stations. Thus, the implications of LCFS are far-reaching, requiring a much more ambitious scale of transformation than, say, standardizing fuel composition or requiring the blending of ethanol in gasoline, or such other past regulations.

As an advocate for practical environmental policy, the question that I struggle with is whether the transformation of the transportation energy supply system envisioned under the LCFS can be carried by regulation alone, as the sole instrument of government policy. To be blunt, I believe not. And here’s why.

Regulation is used to normalize the practice of individuals, processes or organizations, such that minimum acceptable levels of performance are guaranteed. The performance that is being regulated may relate to the energy efficiency of an air conditioner, or the GHG emissions from a car, or the contaminants in a fuel, or the dimensional tolerances of a widget or the safety of an entire system. When applied to industry, regulations usually align to a standard that is technically feasible and economically practicable. In other words, the standard of performance is already being achieved by some, or could be by most. Failing to comply with a regulated standard puts others at risk, be they suppliers or consumers, or at unfair advantage, such as competitors in the market, and thus it is often punishable by fine or legal consequence. Because of this, regulations must conform to a measurement or test procedure that is documented, reproducible and internationally recognized by any obligated party.

To be sure, regulation can thus be a limitation to transformative change. Prescriptive standards can impede innovation by removing the opportunity and incentive for change. But even if the standards are performance-based and facilitating of change to products or processes, the objectives are never to eliminate a product or process, but to make it better.

By contrast, the LCFS sets an objective that cannot be met within the current product or process. Of the total GHG emissions produced over the life-cycle of a petroleum fuel, less than one-third originate “upstream” of the vehicle—the rest are generated “downstream”, in the combustion of the fuel in vehicle engines. Therefore, to comply with the 10 per cent reduction target on life-cycle emissions intensity, the petroleum companies are faced with achieving a one-third reduction in the GHG emissions associated with the production and shipping of their product to market. Process efficiencies can usually be improved, marginally, but no one is quite sure where to find an additional energy savings of 30 per cent in the refinery business.

So, regardless of how efficiently the extraction of oil and its refining into gasoline or diesel is conducted, the regulated targets for carbon intensity are not achievable unless fuel suppliers displace these conventional fuels with less carbon-intense alternatives. The regulation, therefore, requires petroleum companies to become something other than producers of petroleum products.

Of course, there are many examples of companies and even entire markets that have undergone successful transformations. IBM was once a builder of machines; it is now a designer of information management systems. Gasoline was once the most common fuel for freight transport; now diesel dominates. Yet such transformations are driven by the pursuit of a more attractive value proposition to the end-user. Regulation can certainly assist the process of transformation to a state that is more productive or more valued by the market, but history has few examples of successful regulation that forces transformation in the opposing direction.

In the context of transportation fuels, the assumed advantage of low-carbon alternatives to gasoline and diesel is lower emissions of GHGs that contribute to climate change. But how is the carbon intensity of fuels measured? Well, it isn’t. Instead, the LCFS relies on life-cycle models to estimate the relative carbon intensity of different fuel options. In BC, GHGenius is the model used; in California, GREET is used. These models produce similar (though different) outputs, since they incorporate different input values and boundary conditions, reflective of different assumptions and regional differences in source data, for example. These models are powerful tools for understanding the “climate impact” of different types of fuels, which is crucial for informing policy options. However, they do not constitute a standardized testing protocol for measuring the carbon intensity of any given fuel.

Therefore, I believe that the LCFS transcends regulation as an instrument of policy. Quite different from a standard, it seems to me that the LCFS represents the intended outcome of a strategic framework, populated with many policies, voluntary initiatives and private sector investments. It is also complementary to carbon pricing, which BC has already implemented, and GHG emissions standards, which the federal government is regulating for vehicles and for industrial sectors. In other words, a low-carbon fuel system is what you get when the proper measures are implemented at the proper time. You don’t regulate the outcome—you regulate what you can measure and manage.

Far from implying that the LCFS is dead, what I recommend is that the LCFS evolve into a multifaceted, multi-stakeholder initiative, in which government plays a coordinating and enabling role. For example, biofuel blending mandates help to establish a market for the product, and thus drive important biotech research and development. Investment in liquefied natural gas-powered vehicle technology is transforming the business of trucking (and of gas utilities). Thoughtful and progressive deployment of electric vehicle (EV) charging infrastructure can provide critical support to the early adopters of EVs. These are examples of actions already underway in BC, in which government, industry and utilities have each contributed, and from which successes have emerged. So why not go with what works?

The LCFS aspires to instigate an ambitious transformation; regulation is an insufficient means to get there.

– By Bob Oliver

Bob Oliver is the Chief Executive Officer at Pollution Probe, one of Canada’s oldest and most respected environmental organizations. He has more than fifteen years experience managing industrial projects and developing strategies for energy efficiency and greenhouse gas emissions reductions.

Mr. Oliver is a member of many expert advisory panels and steering committees, including the National Advisory Committee on Energy Efficiency, the Steering Committee for Canada’s Electric Vehicle Technology Roadmap, the Advisory Group to the Commission for Environmental Cooperation Secretariat’s Independent Study on Sustainable Freight Transportation in North America, the Green Mining Initiative Advisory Committee and the Great Lakes Canadian Stakeholder Advisory Panel.

Prior to becoming CEO, Mr. Oliver established the Transportation Program at Pollution Probe, initiating effective campaigns to reduce greenhouse gas emissions from transportation activity in Canada. Before joining Pollution Probe, Bob worked at Marbek Resource Consultants, Cintas Corporation and has additional experience in intelligent transportation systems design and hazardous-source radiation detection systems in the heavy transport industry.

He holds a Bachelor of Mechanical Engineering from Carleton University and has researched and authored several major Pollution Probe reports on transportation technology and policy, including Greenhouse Gas and Vehicle Fuel Efficiency Standards for Canada and has been a contributing author on other important publications, including Sustainable Development Technology Canada’s Sustainable Development Business Case on Industrial Freight Transportation.