ADOPT LOW-CARBON FUEL STANDARDS

Low-Carbon Fuel Standards (LCFS) are a way to establish a requirement for a reduction in the carbon intensity of fuels over a given time frame for a given sector of the market. For example, the state could require a 20% carbon reduction in transportation fuels by the year 2030. LCFS can be fuel- and technology-neutral and assess the lifecycle carbon emissions of fuels. In California, technical standards established include calculation of fuel greenhouse gas (GHG) intensity, compliance mechanisms, and a credit trading system. In addition, certain fuels are exempt, but have the option to opt in.

Adopting LCFS is somewhat similar to the renewable energy market in Nevada, where portfolio energy credits (PECs) can be used for compliance with the state’s renewable portfolio standard (NRS 704.7821). The LCFS market could be run via a state agency, like PECs in Nevada, which are run through the Nevada Public Utilities Commission (PUCN), or it could be managed by a third party. Regionally, it would need to be decided if the program was bound only to Nevada or if we would join another state’s program.

The details of a policy—including which fuels and markets are included, calculation of fees or credits, compliance strategy, and implementation strategy—would all need to be developed.

Greenhouse Gas Implications

Shifting to LCFS can reduce emissions, and there are multiple tools available to assess the impact of specific targets. The Oil Production and Greenhouse Gas Emissions Estimator (OPGEE) can calculate annual average carbon intensity (CI) for petroleum-derived transportation fuels. The CI for renewable fuels is calculated through a combination of direct emissions, using the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation model (GREET), and indirect emissions (through land-use change), using the general equilibrium model Global Trade Analysis Project (GTAP).

In the first eight years of its program (2011–2019), California saw a 6% decrease in carbon intensity. Between 2011 and 2015 the LCFS saved 16.8 Mt CO2e, more than double the required standard. If this trend continues, the policy could be considered more successful than anticipated. However, overcompliance in a market system with credits also creates a potential ability for the market to use credits rather than meeting new, tighter CI standards in the future (Energy Systems Catapult, 2018).

The CI reductions of California’s transportation sector have come through increases in alternative fuel use, including biodiesel, renewable diesel, biogas, electricity, and hydrogen. California has a network of charging stations and alternative fueling stations that continues to expand, including a current emphasis on hydrogen. This type of robust network would be necessary to see the increase in alternative fuel use that California has experienced. More planning and analysis are needed to identify the Nevada investment strategy as well as the market for purchase and use of alternative fuel vehicles. However, LCFS has the potential to reduce GHG emissions in Nevada. 

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Climate Justice

This program could increase the prices of gasoline and diesel, creating a potential challenge for low-income communities. Increased diesel prices might also be passed on to consumers depending on how the commercial fleet is affected. However, fuel prices fluctuate due to a number of factors and the actual increase per gallon will likely be less than other market fluctuations, at least in the beginning of a program. However, this cost would gradually increase, enhancing the burden on those most unable to absorb the cost. 

On the other hand, this policy would potentially reduce criteria pollutants in addition to carbon emissions, improving air quality. Depending on how the markets are set up and credits used, incentives could also be created for alternative transportation modes, to provide more access to disadvantaged communities to walking, biking, and transit infrastructure in addition to access to alternative fuel vehicles and fueling/charging infrastructure.

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Integrated Economic Assessment

Implementation costs would vary depending on program setup. The state would require staff dedicated to program oversight, and additional support if the state housed the program. Initial setup would need to include resources to support outside consultants to develop the program, criteria, management, and technical setup for credit calculations and market. If the state chooses to hire a third party to manage the program, then the cost of that contract, plus state staff to administer that contract, would also be needed. If the state administers it in-house, then likely 1–3 staff members would be appropriate.

Costs for the development of LCFS in Oregon may provide guidance of what costs would be in Nevada:

  • 2009 HB 2186: Authorized the state’s Environmental Quality Commission to develop LCFS, among other rules to reduce GHGs.
    • For rule development: 0.5 full-time equivalent (FTE) and $119,318 federal funds in the 2009–2011 biennium
    • For rule implementation: additional 0.5 FTE and $143,182 in the 2011–2013 biennium
  • 2015 SB 324: Authorized Department of Environmental Quality (DEQ) to implement its Clean Fuels Program (CFP) in 2016.
    • Cost: Originally budgeted $778,141 General Funds for 2015–2017, but DEQ concluded it could implement the CFP with existing budget and reclassification of existing staff
  • 2017 HB 2017: Various changes to LCFS and DEQ requirements.
    • For program management: 0.75 FTE and $185,596 General Fund in 2017–2019 and 1.0 FTE and $247,460 General Fund in 2019–2021
      • For associated services and supplies: $51,691 General Fund in 2017–2019 and $68,922 General Fund in 2019–2021
    • For fuel supply forecasting: 0.5 FTE and $178,539 in 2017–2019
      • For associated services and supplies: $80,000
      • For hiring a consultant: $150,000 in 2017–2019

Another consideration of costs is the required investments from providers in the form on fueling and charging infrastructure. The cost/credit structure of the program would need to factor that in to ensure the combination of incentives and disincentives are appropriate to encourage investment in alternative fuels. In addition, this system only works with a strong consumer market for alternative fuel vehicles as well, which leads to other policy discussions regarding incentives for lower-emissions and alternative fuel vehicles. 

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Implementation Feasibility

More analysis is needed, including the identification of the specific elements of LCFS in Nevada. The state may be able to adopt a standard used elsewhere, such as California or Oregon, to minimize the uncertainty. However, laws as well as the fuel delivery in Nevada have significant differences from those states.

Nevada’s rural nature poses additional challenges for providing a robust network of charging and fueling stations. While work on “alternative fuel highways” is already under way and making progress, it is not clear that Nevada has the infrastructure nor the market demand to be successful with a complex system like this. 

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