Local Meets Global: The Low Carbon Fuel Standard and the WTO

Abstract

Unexpected side effects sometimes sabotage our efforts to design solutions to the problem of climate change. So it is with the Low Carbon Fuel Standard (LCFS) that has been adopted in California and elsewhere, which has the initial goal of reducing the carbon intensity of California's transportation fuels by at least ten percent by 2020. To succeed, the LCFS anticipates widespread substitution of gasoline with biofuels. However, there is evidence that increased demand for biofuels leads to destruction of forests and wetlands, themselves important carbon sinks. California's regulatory response, intended to avoid this type of indirect land use change, may be limited by international trade rules. California's LCFS illustrates how regulators may be confounded by the web of policy considerations and interwoven legal regimes that link the World Trade Organization (WTO), farmers and cattle barons in Brazil, the European Commission in Brussels and orangutans in Borneo to transportation fuel in California.

Keywords: trade, energy