Low Carbon Fuel Standards: Implementation Scenarios and Challenges

Abstract

Performance-based low carbon fuel standards (LCFS) of the type implemented in California and being adopted in the European Union, are a promising policy approach for decarbonizing transport fuels and reducing fossil fuel use. This paper examines the efficacy of LCFS policies, along with four major challenges that threaten their effectiveness. These challenges include leakage and shuffling of greenhouse gas (GHG) emissions, impacts on energy security, increased GHG emissions due to global land use conversion (indirect land use changes), and sustainability issues associated with biofuel production. We identify complementary policies that mitigate the severity of these challenges, while noting that some of these challenges are inherent to carbon and alternative fuel policies.

Keywords: Carbon Intensity, Lifecycle GHG Emissions, Biofuels, Alternative Fuels

JEL Classification: N7, Q42, Q48,Q21, Q28, N5, O13