It was announced recently that the Lujan Grisham administration was planning to place a “Clean Fuel” standard on the call for the 30-day legislative session upcoming in January. Details of the proposed legislation have not yet emerged, but low carbon fuel standards (LCFS) have already been implemented in three states – California, Oregon and Washington, plus the Canadian province of British Columbia. The results in those areas indicate the LCFS has both a very high cost to the consumer and correspondingly very low environmental benefits. Here is the math:
New Mexico’s transportation energy needs result in the emission of approximately 14.8 million metric tons (mT) of CO2 per year. Most LCFS proposals aim at a reduction in these emissions on a percentage basis. All calculations detailed here assume a target of a 10% reduction, but the numbers are scalable to whatever percentage the target might be. Here, a 10% reduction target would be 1.48 million metric tons. This amounts to 0.00004 of annual worldwide emissions, arguably no more than a rounding error.
Because the formulation of gasoline and diesel fuels has been highly optimized over the past 100-plus years, there is little opportunity to improve emissions from these sources. The optimal combustion of a gallon of gasoline will yield 19.6 pounds of CO2. Options to blend in more biofuels are limited by production capacity and cost, and there are no biofuel manufacturing facilities currently in operation in the state. Fuel suppliers will resort to other means to comply with the mandate, likely requiring the purchase of a government-created commodity called a renewable energy credit or REC. These must be purchased and used to offset CO2 emissions created by the petroleum fuels.
RECs are generated byproducts and processes generally thought to have a carbon intensity (CI) lower than the combustion of petroleum fuel baseline. They are created, for example, by electric vehicles and wind/solar generators, and are measured and priced by the mT. REC prices have skyrocketed in recent years and currently run $200.00/mT in the California market. The math is pretty simple – 2204 pounds is a mT. If 19.6 pounds of CO2 are generated burning one gallon of gasoline, then 114 gallons will yield 1 mT of CO2. Dividing 114 gallons into the $200/mT cost of the REC yields an emissions cost of $1.75 per gallon.
The emissions cost gets added to the price of the gallon, so a 10% reduction mandate will cost New Mexico consumers 17.5 cents, a 20% reduction double that, and so on. REC prices invariably start at a low level and increase steadily as the mandate is fully implemented. In BC, the starting price of $20/mT in 2015 now averages close to $400.
These mandates are being justified in the name of climate change. A 0.00004 reduction in annual CO2 emissions will do nothing to alter the course of that change. The atmosphere will not be measurably improved, we will not be measurably healthier. What clean fuel standards will do is raise the cost of motor fuel to New Mexico consumers by somewhere between 15 and 50 cents per gallon. New Mexico is a poor state, ranked 49th or 50th in many quality-of-life yardsticks, and it is exactly these kinds of policies that serve to keep us there.
