No Bull | Goin' Green - Part One
This week it’s all about the green… green diesel that is.
I am spreading this update out over two Thursdays because there is far too much material to get through in one evening.
Where it all began, in sunny California
California is big.
Not only is it the most populous state in the nation but its $3.4 trillion economy would rank as the fifth-largest in the world if it were a standalone country.
In fact, California’s economy is poised to overtake Germany for the #4 spot soon as the margin between Germany’s $4.2 trillion economy and that of California dwindled to its smallest on record in 2022.
For this reason, California’s regulatory decisions often result in sweeping changes across the rest of the United States.
Low Carbon Fuel Standard 101
In 2007, California Governor Arnold Schwarzenegger (a Republican, interestingly enough) issued an executive order directing the California Environmental Protection Agency to establish the first low-carbon fuel standard mandate in the world.
Governor Schwarzenegger set out to terminate greenhouse gases by requiring refineries and distributors to ensure gasoline and diesel sold in California meet a declining emissions standard.
The currents LCFS aims to achieve a 20% reduction in the carbon intensity of California’s transportation fuel by 2030.
Carbon intensity (CI) is defined as the lifecycle greenhouse gas emissions for a fuel per unit of transportation energy delivered.
It isn’t just about what exits the tailpipe, but the emissions resulting from the ‘pathway’ that covers the fuel’s full lifecycle from production to the pump.
Renewable fuels are compared with a carbon intensity benchmark for petroleum gasoline and diesel. This year, diesel’s benchmark CI score is 89.15 gCO2e/MJ and gasoline is 88.25.
Fuels used in California that have a lower carbon intensity than the targets established by the California Air Resourced Board generate LCFS credits and fuels with carbon intensity scores higher than the target generate deficits.
Therefore, fuel producers with deficits must have enough credits through generation and/or acquisition to be in (annual) compliance with the standard.
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