California plans major carbon cut in its gasoline

Now that California is on record as mandating a 25 percent cut in the state's greenhouse-gas emissions by 2020 – a move that made headlines worldwide four months ago – leaders here are starting to lay out how they intend to hit that ambitious mark. First up: requiring transportation fuels sold in California to contain less carbon, a major greenhouse gas.

Gov. Arnold Schwarzenegger (R) announced Tuesday that he will issue, within weeks, an executive order that sets a new "low carbon fuel standard" in the state. Aimed at petroleum refiners and filling stations, the new standard will give them 13 years, until 2020, to cut the carbon content of the fuels they sell for passenger vehicles by 10 percent.

The intent is twofold: to stimulate investment in alternative low-carbon fuels, and to curtail actual carbon emissions from tailpipes, which the governor said account for about 40 percent of the state's total.

"This is going to stir billions in investment – inviting technology companies of all kinds to come up with innovative ideas to reduce carbon emissions," says Eric Heitz, president of the Energy Foundation, a partnership of seven foundations dedicated to advancing energy efficiency and renewable energy. "It puts market forces to work to find the lowest costs and the best methods with a clear environmental goal.... It [also] eases US vulnerability to volatile price fluctuations driven by foreign political events." The entire world community, he predicts, will be watching California's efforts to curb greenhouse-gas emissions, which many scientists say are responsible for global warming.

California is the world's ninth largest emitter of the greenhouse gases that trap heat in the atmosphere. In unveiling the new standard for fuel content, Governor Schwarzenegger said a year-in-the-making white paper showed the importance of addressing the transportation sector.

"Transportation accounts for 40 percent of California's annual greenhouse-gas emissions, and we rely on petroleum-based fuels for 96 percent of our transportation needs," he said. "This dependency contributes to climate change and leaves workers, businesses, and consumers vulnerable to price shocks from an unstable global energy market."

Higher prices for consumers?

As California moves to implement the new standard, its effect on consumers and the state economy will be closely watched. Several Republican lawmakers and business leaders have expressed early concern that the state crackdown on emissions will encourage businesses to locate outside California, or will increase their overall costs. Consumers worry that new fuels or fuel additives will raise prices at the corner gas station.

Advocates of the move, though, say California businesses and consumers stand to reap the windfall of technological investment. They say the new standard is expected to replace 20 percent of the state's on-road gasoline consumption with lower-carbon fuels, lead to a tripling of the size of the in-state renewable fuels market, and place more than 7 million alternative-fuel or hybrid vehicles on California roads – a 20-fold increase.

"The impact of this policy on consumers and the economy will likely be positive," says James Winebrake, chairman of the Public Policy Program at the Rochester Institute of Technology (RIT) in New York. "Although these low-carbon fuels may cost a bit more than conventional fuels, they may have a greater domestic content.... Therefore, money spent on low-carbon fuels is less likely to end up overseas and more likely to generate greater economic activity locally. This could have significant benefits to state and regional economies."

Schwarzenegger's announcement included appearances by environmental leaders, scholars, and energy and transportation consultants – all generally supportive of his plan.

Industry's view

Conspicuously absent were representatives of oil producers and carmakers. Conoco Phillips, in a written statement, said it "is supportive of and invests in technology development to produce and enable the use of low-carbon fuels and recognizes this [plan] is one component in a suite of actions necessary to reduce CO2 in the atmosphere."

BMW spokesman Andreas Klugesheid, reached at the auto show in Detroit, says his company is pushing a hydrogen car "whose emission pipe will eventually emit nothing but water vapor.

"We understand the limitation of fossil fuels is basically something that, in the long run, endangers our business.... We share the governor's approach to reduce CO2."

Some observers say oil and car companies will eventually warm to the idea of alternative fuels.

"Oil and car companies generally don't like to be told what to do, so their knee-jerk reaction is not to like it," says Dan Sperling of the Institute for Transportation at the University of California at Davis. "Once they look at this, they will think it is palatable because it gives them a lot of flexibility and comes with a market-based approach. No one of them will be at a disadvantage."

Others, such as RIT's Mr. Winebrake, say the question remains whether the action is "too little, too late."

And environmentalists worry that the state's rule on fuel content may not prevent ways of creating alternative fuels that are themselves polluting. Some ethanol plants in Texas, for instance, burn coal – a big carbon source – in the distilling process, says Sara Hessenflow Harper of the Natural Resources Defense Council (NRDC). Some methods of growing and harvesting corn for ethanol can be far more polluting than others, environmentalists note.

Supporters and detractors of the new standards agree that the rulemaking and implementation phases are complex – and fraught with political and economic pitfalls.

"In general, we are very excited about the prospect of simultaneously transforming the whole energy economy, lessening dependence on foreign oil, and reducing global warming all at once," says NRDC's Jennifer Witherspoon. "We just hope they don't inadvertently overlook any of the great solutions that are out there."

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