The Limitations of the EPA’s RFS2 program

By Simon Bird, Environmental Accountant at AgRefresh

The US national policy for biofuels has been advancing at a fast and furious pace. Every day new research fights for our attention, heralding technological advances or new impact assessments. A successful national biofuel promotion program would be fluid, allowing for the incorporation of this new research and would promote the development of increasingly sustainable technologies and practices. However, the EPA’s RFS2 program is a static being that will not allow for changes to be incorporated easily, whether great technological leaps or incremental improvement in feedstock production. The program additionally flattens the playing field among the diverse range of fuels, removing any incentive for fuel producers to reduce impacts or move to less environmentally-damaging feedstocks or processes.

This is a result of the EPA’s focus on mandated volumes, and forcing all fuels into one of four set thresholds based on the EPA’s own analysis of national data, instead of the biofuel producers individual processes. If instead the EPA would allow fuel producers to utilize existing LCA software systems, they would be able to conduct full carbon assessments of their fuels, incorporating the entire lifecycle of the product and any indirect effects. The producers’ LCA would then be used to give the fuel a carbon label, which biofuel distributers or users would use to keep under a mandated carbon cap. A system like this would give biofuel producers and feedstock producers a real market-based incentive to improve their processes and reduce the carbon intensities of their biofuels. In this system the “grandfathering” of existing ethanol refineries using coal as a fuel source would no longer be an issue, the marketplace would quickly drive biofuel producers to much less carbon intensive fuel production technologies and fuel sources.

One example of the negative effects of the static nature of this legislation is that Congress mandated that the baseline for GHG emissions reductions be the year 2005. The result is that the GHG emissions of future biofuels are being compared against the historic GHG emissions level of petroleum fuels, a far cry from an “apples to apples” comparison. The mixture of petroleum fuels used in the US is constantly changing, and in future years will become increasingly carbon intensive as oil becomes scarcer and more energy is required for extraction and processing. A low carbon fuel standard using carbon labeling wouldn’t lock the country into using an arbitrary metric such as GHG reductions from petroleum in a historic year, but would compare all individual sources of fuel on an “apples to apples” basis every year.

A well designed low carbon fuel standard using a carbon labeling system would give the program flexibility to adjust to changing research and incentives to reduce the carbon intensity of fuels in comparison to the EPA’s RFS2. This would result in the movement to more sustainable feedstocks, and the incremental improvement in feedstock production methods and biofuel refining technology.

Simon Bird
AgRefresh Environmental Accountant
802.859.0099, ext. 6

Delivering GHG Reductions under Various Climate Policy Options

By Charles Kerchner, Senior Environmental Accountant at AgRefresh

With the economic concerns, health care debate, and climate skepticism delaying any immediate action on climate change policy in Washington, the door has been left open for other climate policy proposals. The question facing farm and forest landowners during this time of uncertainty is: How can the agriculture and forestry sectors deliver GHG reduction benefits under any policy option on the table?

To date, the lion’s share of attention has been given to the cap-and-trade policy (i.e., the Waxman-Markey bill and the Kerry-Boxer bill). Under a cap-and-trade system the agriculture and forestry sectors are expected to be uncapped sectors and are expected to deliver substantial quantities of offsets to capped entities at an early stage in the game.  This could represent a multi-billion dollar a year revenue stream for American foresters and farmers.  However, if a cap-and-trade system is not the chosen policy, there are still opportunities under the other options being considered.

One policy option that has received increasing attention recently is the “cap-and-dividend” plan highlighted by Senators Cantwell and Collins in their CLEAR Act bill.  At the core of CLEAR is an upstream cap on fossil carbon as it enters the economy with a hundred percent auction of permits to energy producers.  75% of the revenue from the auction is returned as a cash refund to every legal citizen. 25% of the revenue is directed to a dedicated trust, the Clean Energy Reinvestment Trust (CERT).   In direct contrast to cap-and-trade legislation, there is no use of domestic or international offsets for meeting compliance obligations. However, the CERT would fund cost-effective reduction/sequestration projects that verifiably reduce, avoid, or sequester GHG emissions.

Another policy option, though not a politically attractive alternative, would be a carbon tax.  This could mirror a similar program as a cap-and-dividend program where additional reductions are financed via tax revenue.

The key to delivering GHG reductions or sequestration outside a cap-and-trade policy is to keep the program as administratively simple and cost-effective as possible.  This can be done.  The advantage of a cap-and-dividend, carbon tax, or hybrid, unlike a cap-and-trade program, is that reductions coming from the agriculture and forestry sectors are not needed for compliance. They will be purely additional reductions beyond the already established cap or tax.  Thus, reductions may not be subject to the same offset rules, (i.e. additional, verifiable, registered, and permanent) as a cap-and-trade system, because they do not sacrifice the integrity of the emission reductions target.

What does this mean? In straight speak, it means that these reductions may be cheaper to deliver than under a cap-and-trade program.   Because they might not have to prove “additionality” and incur the many monitoring and verification costs as a cap-and-trade offset, they could be rolled into programs that already exist, such as the USDA’s Conservation Reserve Program or Conservation Security Program or newly established programs like Senator Shaheen’s bill that calls for USDA to administer a forest carbon incentive program.

There are many questions facing the farm and forestry sectors: How does the quantity of reductions compare among the policy options? How do the costs of reductions compare?  In sum, how does the net revenue for agriculture and forestry sectors compare among policy options? Because many of the details needed to answer these questions have yet to be determined, it is difficult to say. However, the next step will be to quantify the reductions that can be delivered under the different policies, examine the costs of the policies, and compare the potential revenue streams to the agriculture and forestry sectors.

Charles Kerchner

AgRefresh Senior Environmental Accountant
802.859.0099 ext.5

Models versus Common Sense

By Jeffrey Frost, Executive Director of AgRefresh

When the models we use generate answers which violate common sense, it is time to check the prevailing assumptions within. The Manomet study for Massachusetts, “Biomass Sustainability and Carbon Policy Study”, essentially concludes that global warming will be exacerbated by substituting forest biomass energy for fossil fuels for the production of electricity. I do not have to think very hard or long to conclude that digging up ancient carbon from coal, oil, and natural gas is unlikely to reduce greenhouse gas emissions as compared to growing renewable biomass in our forests and harvesting it for energy use. Yet, this is exactly what the Manomet study tells us, wrapped in massive amounts of very sophisticated analysis.

I have no wish to invalidate the strong work product produced by a stellar team regarding an analysis of prime importance: Will renewable forest biomass or fossil fuels best serve our needs for a low-carbon energy future (1)? I do suggest a need to examine the logic behind some of the prevailing assumptions – explicit and inherent – in this extensive analysis. Here then are questions which need to be answered:

  1. How do you choose the point in the growth and harvest cycle for forest biomass at which to begin the analysis? Manomet chose to begin the life cycle analysis with the day of harvest. If they had taken the other extreme and started the analysis the day after harvest (the first day of sequestration), the results would have flipped entirely and showed the huge benefits of biomass over fossil fuels instead of the reverse finding. Intuitively, the biomass must be grown and the carbon sequestered before it can be combusted anyway. The most defensible answer is probably to begin the analysis midway between harvests which will improve the relative status of biomass substantially.
  2. How does Manomet justify basing this study on the assumption that whole forest harvests will be used for biomass energy? The expert groups I have worked with refused to consider this extreme case because they considered it outside the bounds of reasonable likelihood. These other experts describe actual practices where forest thinnings and forest residuals and harvested biomass byproducts – along with agro forestry, and other purpose-grown biomass – are the current and expected future sources of bioenergy feedstocks.
  3. When the analysis assumes the use of biomass energy sources, how does Manomet justify excluding the avoided emissions benefits from not mining fossil fuels? The analysis does not assess the avoided greenhouse gas emissions – not to mention the huge other environmental, social, and economic consequences – from reductions in mountain-top coal mining, Gulf of Mexico deep water drilling, and natural gas hydrofracking. Similarly, the greenhouse gas emissions associated with the entire infrastructure of activities supporting our fossil fuel economy need to be considered. For example, we would be less likely to have the Middle East wars and the U.S. military effort to protect shipping lanes if we grew our own fuel supplies instead of importing oil?
  4. Which form of life cycle analysis is appropriate for this type of policy-informing analysis, attributional or consequential? Manomet does not specify which form of life cycle analysis they have used or the reasons they choose one over the other. Yet the differences in outcomes for this type of analysis can be material. It appears that consequential is the appropriate analysis framework for this study and that instead, attributional, the less appropriate form was implicitly chosen.
  5. Does the Manomet study give proper acknowledgement to the manner in which harvesting energy biomass and generating carbon credits produces supplemental income streams which will keep land in forests which may have otherwise been converted to urban development? Manomet anecdotally dismisses this issue by noting that current green biomass payments to forest owners are minimal. Yet this study, which is intended to inform policy development for coming decades, should consider the more robust biomass pricing which will emerge under future national renewable energy standards and cellulosic biofuel production. Similarly, the inevitable price of carbon from future policy will enhance carbon credits as a source of income. Avoided loss of forestland is an issue which needs a robust treatment beyond that received here.

This note is authored by a reader who confesses to having found time for only a brief scan of the Executive Summary and Chapters 5 and 6, the chapters most relevant to the carbon accounting issues. In the event the above five questions were answered in a satisfactory manner elsewhere in the study, apologies to the authors.

Jeffrey Frost
AgRefresh Executive Director

1 Manomet and the author of this note would both assume that energy efficiency and other forms of renewable energy or low-carbon energy are important too. The purpose of Manomet analysis was keyed to a comparison between forest biomass and fossil fuels for electricity and thermal generation in Massachusetts.