iven the results of the recent election, the conclusion of this series on “Envisioning a West Coast LCFS” seems to have taken a decidedly different direction than anticipated by much of the country and the world. The apparent west coast alliance of emerging carbon economies, while very strong, is about to be challenged in ways we could not have anticipated a few short days ago. How will this new world we find ourselves in impact biodiesel markets, biofuels markets, feedstock markets and carbon markets?
Perhaps one of the most significant outcomes of last week’s American election will be the effect on climate policies across the US, North America and the entire world. There is a lot of political dust that needs to settle before the hard work of governing can begin, but one area that we may see early coordination on will be bi-partisan support for biofuels. After all, president-elect Trump was the only supporter of the RFS in the republican primary race – enthusiastically so. But he has not been supportive of carbon policies nor does he even acknowledge the existence of climate change. Early signs from his transition team indicate that this will become the policy of the land – but not without fierce resistance.
The silver lining for biofuels in general, and biodiesel in particular, is that a Trump administration with energy security and protectionist tendencies may potentially decide to cut support for RFS pathways for foreign producers in order to eliminate exporting US tax dollars while American domestic producers languish. They might also support a domestic producers’ credit rather than a blenders’ credit for the same reasons. Those with assets invested to work with a blenders credit, and some in the fuels sector, may muddy the waters on this, but it is clear that either or both of these changes would send strong signals simultaneously to Trump’s rural agriculture constituency and to foreign producers, that he is making sure tax dollars are put to work in America first while creating jobs for American workers. This would be an early statement reinforcing some of his campaign promises.
The good news is that it could provide the added benefit of reducing carbon. A pivot to more domestic production might have the side benefit of addressing concerns about high-carbon imported biofuels that are currently, and unintentionally, supported by current regulation structures. More low carbon North American feedstocks would reduce GHG emissions – another win for biofuels.
And where does that leave carbon policies such as the Low Carbon Fuel Standard (LCFS) and similar programs developing on the west coast and in Canada?
Trying to summarize this series on the potential for an expansion of an LCFS policy in the western US and Canada also got much more difficult since the election. It seems abundantly clear that California, Oregon, Washington and British Columbia (BC) are aligned at the macro-level in their legislative efforts to limit carbon emissions. Whether these policies focus on greenhouse gas (GHG) emissions in general or the more specific GHG emissions from the transportation sector, which comprises anywhere from 25 – 50% of overall GHGs, there is no turning away from the very strong policy directives.
Since the election of Mr. Trump, however, it would seem that the expansion of carbon policies in general are far less likely, at least for the next 2-4 years. Beyond these four state and provincial policies we know that much of Canada is looking at similar reduction goals. There is also broad support in the US, but the leadership that had helped lead to the Paris Climate Accord after some 20 years of negotiation is no longer in place.
Possible actions of a more protectionist Congress may also run into the complexities associated with north-south feedstock and biofuel flows, and energy flows generally. Canada is a net importer of US biofuels, yet its producers do benefit from US policies, albeit on a relatively minor level. The possible shift to a biodiesel producers credit may bring some instability to the free flow of product in both directions, and with policies under development in Canada that could expand the demand for more feedstocks and fuels, both countries may see an incentive to adopt a more continental approach.
We know that California’s LCFS has demonstrated that the overwhelming majority of GHG reductions have come from the biofuels sector (greater than 90% since the program’s inception). We also know that well over half of those biofuels have come from out of state and overseas. All of this has happened while state regulators seem to have taken a more ideological path in support of zero-emission vehicle (ZEV) technologies including electrification and hydrogen fuel cells.
Meanwhile, much of the biofuels have come from the US heartland, even while California in-state production has gradually increased. Some might argue that there is generally more support for biofuels outside of California, even as demand for biofuels in the Golden State has increased dramatically due to the LCFS program. This may seem paradoxical to California regulators who had been hoping to influence national and even global policy. But after the outcome of this national election, we would guess that compromise might be in store as we move forward.
On a regional level, the ballot failure of the WA carbon pricing initiative, I-732, could set the stage in the next election cycle for a revisit of some of the low carbon fuel policies that would have been a bigger lift had a carbon price been in place. We do know that a carbon tax and an LCFS can co-exist as they do in BC, but the political will needs to be big enough to carry both.
We know that biofuels work to lower carbon, and we know that the best near-term biofuel solution appears to be biodiesel. There are 1.3 billion gallons of unutilized biodiesel production capacity across the US waiting for some pragmatic leadership to take hold. Many had thought that leadership would come from President Hillary Clinton, but the biggest surprise may be that it comes from President Donald Trump. The question is whether we now have the political will to reach across the aisle and make it happen.