SACRAMENTO -- California air regulators approved the world's first plan yesterday for reducing carbon emissions from transportation fuels after making concessions aimed at placating the biofuels industry and expressing concerns about the rule's impact on the state's battered economy.

The Air Resources Board's 9-1 decision is aimed at achieving a 10 percent reduction in motor vehicles' emissions of greenhouse gases by 2020 and spurring commercial development of low-carbon fuels like hydrogen and cellulosic ethanol.

"California's first-in-the-world Low Carbon Fuel Standard will not only reduce global warming pollution – it will reward innovation, expand consumer choice and encourage the private investment we need to transform our energy infrastructure," Gov. Arnold Schwarzenegger (R) said in a statement. "Embraced already by 16 states and with support from President Obama and members of Congress for a national standard, we are on the path toward energy security and a low carbon future."

Schwarzenegger began the move toward low-carbon fuels with an executive order in 2007. The fuel standard is part of California's push to reduce its emissions of greenhouse gases 20 percent below 1990 levels by 2020, as mandated by the state's landmark 2006 climate law, A.B. 32.

Thirteen Northeast states are working toward their own low-carbon fuel standard, with a goal of having their governors sign a memorandum of understanding by the end of the year. In Washington, Congress is debating a sweeping House energy and climate proposal that includes a low-carbon fuel standard.

The California standard is hinged on a scientific analysis of fuels' lifecycle emissions – pollution generated from a fuel's production through its combustion. The rule calls for fuel blenders, refiners and importers to achieve emission reductions of 10 percent for their entire fuel mix by 2020 and allows them to buy credits from producers of low-carbon fuels.

For biofuels, the lifecycle emissions score also includes indirect pollution from the conversion of forests to farms for cultivation of corn and other fuel-feedstock crops. The provision that outlines the calculation of these "indirect land-use changes" has been the bane of ethanol producers, which maintain the law is singling them out.

The final regulation contains several procedural concessions to the biofuels industry. The most significant change moved a review of a measurement of indirect land-use effects up a year, to 2011 from 2012. Other changes from the proposed rule include creating a list of biofuel feedstocks with no or low land-use effects, as well as working with U.S. EPA and the European Commission to synchronize land-use values and modeling.

Before approving the rule, ARB members echoed concerns expressed by industry, environmental and regulatory groups. Faced with the ethanol lobby's fierce opposition to the rule's land-use provision, some board members questioned the proposal's omission of indirect effects of fuels other than biofuels.

"The polarization gives me anxiety," board member Sandra Berg said. And board member Ron Roberts asked why the ARB staff failed to mandate lifecycle scores for petroleum products. Staff members said extraction of petroleum did not significantly contribute to indirect land-use changes.


Ethanol-industry representatives were unhappy with the adjustments. "What they've done is given us a glimmer of hope that there'll be balance by 2011. We do not have balance today," said Brooke Coleman, president of the New Fuels Alliance. His group produced a study this year that found gasoline's lifecycle emissions could be up to a third higher than California estimated, when such indirect effects as road building for oil and gas projects and military activities for protecting oil supplies are considered.

One ethanol group did salute the decision, calling it a "victory," with caveats. The Brazilian Sugarcane Industry Association said ARB failed to account for improved fuel manufacturing and harvesting techniques. "Indirect land use changes must accurately represent the dynamics of Brazilian agriculture today," spokesman Joel Velasco said in a statement. "We are confident that a data driven analysis will conclude that indirect land use change from sugarcane cultivation in Brazil is marginal at best."

Environmental groups were uniform in their praise of ARB's action. "It's the future of fuel regulations in this country," said Roland Hwang of the Natural Resources Defense Council. "The handwriting is on the wall."

Also registering their support were the state's major electric utilities – Pacific Gas & Electric Co., Southern California Edison, San Diego Gas & Electric and several major municipally owned utilities.

Oil companies' reactions were mixed, with Chevron supporting the rule and BP criticizing the land-use calculation. The Western States Petroleum Association, meanwhile, warned that consumers would not tolerate uncertainty in fuel prices or availability.

"It's frankly unclear to us how we will comply with this regulation, given what's here today," said Cathy Reheis-Boyd, the association's vice president. "We are not at all convinced that program will deliver $11 billion in savings, but it doesn't matter what we think, it matters what the consumer thinks. When they want fuel, they want it where they want it and they want it to be affordable."

Naomi Kim of the Environmental Justice Advisory Committee, which the state established to review the effects of climate policies on low-income and minority communities, said the rule would violate A.B. 32 by disproportionately affecting the poor by raising food and fuel prices. To that end, she asked the board to remove all food-based fuels, especially corn, from being considered as low-carbon fuels.

Worries about economic impacts

The board member who voted against the rule, cardiologist John Telles, cited the bad economy. Unemployment rates in the San Joaquin Valley have reached 20 percent in some areas, and hospitals are full of patients who cannot pay for treatment, he said.

"I have a hard time believing this is going to be neutral for California," Telles said. "The price of fuel and food may go up, and have an adverse impact on people and environmental justice communities who can afford it the least. Nowhere in this document does it say what we're going to do if that were to occur."

Telles expressed concern that efforts to put a national or regional fuel standard in place would fail. "What will the impact of this be economically, environmentally, socially, if no one tags on behind us?" he asked.

ARB Chairwoman Mary Nichols conceded that the sour economy might derail the rule. "A year ago ... this would have been a very different discussion, because we could just be unabashedly optimistic about the new businesses coming to California, the incentives we could provide," she said. "We could be comfortable we'd be creating a lot of new businesses and jobs here."

She added, "I think we need to be a bit sober about that, and part of the monitoring I want to see is to make sure we're not ahead of ourselves about what's going to be available in the near term. I don't know if we're going to see the rapid ramp-up of good advanced biofuels that we believe is what should happen as a result of this rule."

But board member Dan Sperling, who heads the Institute of Transportation Studies at the University of California, Davis, defended the rule. "This, in my mind, is an example of government at its best, doing policy that's good and responsive and responsible," he said. "All of the arguments are really the details about how to get those numbers right. If there's problems, there's a mechanism for making adjustments along the way."

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC., 202-628-6500