Energy & Technology
April 12, 2010
By Eileen Claussen
This article originally appeared in Reuters.
While policymakers in Washington debate the best path forward for dealing with climate change, a growing number of U.S. businesses have discovered a simple technique that can lower costs, increase productivity, and slash greenhouse gas emissions. What’s more, it can work for any business no matter what they make—whether it’s potato chips or computer chips.
It’s called energy efficiency, and a growing number of U.S. businesses are starting to get it.
What does it mean to be efficient? Seven habits of highly efficient companies as identified in the Pew Center’s new report From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency, lists designating full-time staff to be accountable for energy performance, communicating externally the company’s successes in reducing energy costs and emissions and – perhaps most importantly – integrating sustainability as a core part of corporate strategic planning and risk assessment.
The results of this two-year study, featured this week at our Corporate Energy Efficiency Conference in Chicago attended by 260 representatives from 120 companies and universities, speak for themselves.
Dow Chemical, which purchases as much energy in a year as Australia, estimates that its efficiency efforts have saved the company $8.6 billion since 1994 while avoiding about 86 million tons of carbon dioxide emissions. The retailer Best Buy says that in 2008 its sales of certified ENERGY STAR products saved customers over $90 million in electric bills.
Why are they doing it? For starters, higher and more volatile energy prices.
Energy experts at Toyota think of it as a treasure hunt for low-cost efficiency gains that equate to big cost savings. Like other innovative companies, Toyota empowers its employees to uncover and correct inefficient energy practices at their own plants and, in some cases, for their suppliers. These efforts are in line with Toyota’s goal to reduce energy use per vehicle produced by 30 percent in 2011.
But concern about climate change, and growing customer and employee support for action on energy and environmental issues also matter, according to our corporate energy efficiency report. In many cases, CEOs are personally spearheading efficiency efforts at their companies, reflecting the priority now given to energy saving measures.
“The most inexpensive items are generally improvements in energy efficiency, some of which are economic even without a price on carbon,” said Exelon CEO John Rowe at the conference. Exelon, one of the country’s largest electric utilities, cut energy use at its corporate headquarters by 50 percent by retrofitting it to meet LEED Platinum standards.
The most effective companies are also looking outside their own walls to tap into even greater efficiency opportunities. This means working with suppliers to adopt energy efficient practices, and designing products that allow consumers to share in energy savings.
Earlier this year, Wal-Mart announced a goal to reduce carbon emissions from its global supply chain by 20 million tons, which is the equivalent shuttering six average-sized coal plants or taking 3.8 million cars off the road for a year. United Technologies recently announced a goal to improve the energy efficiency of its products by at least 10 percent by 2010.
Energy efficiency also drives broader innovation, and the benefits go beyond dollars saved and emissions reduced. A focus on energy efficiency can lead to reevaluating business practices, often turning up improvements that increase productivity and enhance quality.
Ambitious energy-savings targets forced Frito Lay to reexamine the way it bakes tortilla chips. By installing new draft controls on ovens that reduced heat loss and evened out heat distribution, the quality of the chips improved. At IBM, a focus on efficiency led to equipment upgrades that reduce energy use and improve reliability in semiconductor manufacturing processes.
It is encouraging to see so many leading companies embrace energy efficiency as a win-win solution. But energy efficiency isn’t just for businesses.
We can all cut energy use, lower greenhouse gas emissions, and save money by taking simple steps like turning off the lights when we leave the room, adding insulation in our homes, and taking shorter showers.
But I’ve been around long enough to know that we can’t rely exclusively on voluntary action to achieve our environmental goals.
We need a comprehensive national clean energy policy that puts a price on carbon. Legislation that establishes such a price would unleash hundreds of millions of investment dollars, deliver an adrenaline shot to our nation’s manufacturing sector, and create thousands of well-paying jobs. Energy efficiency sits atop the list of low-carbon choices poised to deliver immediate results in a clean energy economy.
Leading corporations have shown us what is possible. It is time we follow in their footsteps and embrace energy efficiency as something we can do right now to help create a safer, more prosperous future.
Eileen Claussen is President of the Pew Center on Global Climate Change.
Eileen Claussen is President of the Pew Center on Global Climate Change
On Friday, March 12, we held a briefing on jobs and opportunities in clean energy markets.
Today, the President signed an Executive Order creating an Export Promotion Cabinet of top officials and an Export Promotion Council, a private-sector advisory body. This Executive Order serves to highlight once again how important American exports and competitiveness are to economic recovery and continued US economic strength. While much hand-wringing has occurred over the potential for climate and energy policy to hurt the ability of U.S. firms to compete in international markets, the opportunity of such policy to enhance the competitiveness of U.S. businesses has received less notice. The irony is that even as the planet warms, the United States may be left standing out in the cold if it doesn’t choose to lead in the development of next-generation energy technologies.
- The aviation sector accounts for approximately 1.5 percent of global anthropogenic greenhouse gas emissions per year. U.S. aviation activities account for nearly 40 percent of these emissions.
- Gains in aircraft efficiency have been entirely offset by rapidly growing demand for air travel. From 2000 to 2006, global demand for passenger aviation grew at an average rate of 3.8 percent annually.
- A combination of operational practices, lower-carbon fuels, and higher aircraft fuel efficiency could reduce annual greenhouse gas emissions from global aviation by more than 50 percent below “business-as-usual” projections, causing emissions from aviation to only double, as opposed to quadruple by 2050. Aggressive implementation of lower carbon fuels could improve that outlook considerably by replacing a larger share of traditional jet fuel more quickly.
- The international component of air travel and international treaties affect the policies appropriate for reducing emissions from the aviation sector.
Aviation has reshaped the world we live in—allowing for affordable and rapid travel to almost any point on the globe. In recent years, economic growth and rapid globalization have made air travel affordable to an even larger part of the global population. In this context, demand for aviation, in terms of passenger-miles flown, has grown at a rapid pace. In China, for example, domestic air transport grew at 15.5 percent annually from 2000 to 2006. Globally, the rate of air travel increased at 3.8 percent per year over the same time period. This growing demand for air travel has resulted in increasing levels of greenhouse gas (GHG) emissions from the aviation sector, despite efficiency improvements. Currently, the aviation sector—including both domestic and international travel—accounts for approximately 1.5 percent of global anthropogenic GHG emissions per year. The U.S. accounts for nearly 40 percent of the global GHG emissions from aviation.Barring policy intervention, GHG emissions from aviation are projected to quadruple by 2050.
A number of strategies can mitigate the rising level of GHG emissions from the aviation sector. In the near term, adopting navigation systems and air traffic control techniques that minimize fuel use and idling can reduce emissions by as much as 5 percent. Over the long term, advanced propulsion systems, utilization of lightweight materials, and improved aerodynamics and airframe designs hold the promise of further reducing aviation emissions. The development of cost-effective, lower-carbon alternative fuels could result in even deeper reductions. Strategies also exist to reduce the demand for aviation by switching to other modes of travel – such as high speed rail connections where high speed rail can compete with aviation on time, price, and convenience.
To be effective, policies to reduce GHG emissions from aviation will require a high degree of international coordination. The trans-national nature of airline ownership and travel complicates how responsibility for aviation emissions is assigned to individual countries. The International Civil Aviation Organization has taken some steps toward understanding these complexities, and policies to reduce emissions will need to adequately take account of international sovereignty issues. The industry has proposed a global sectoral approach where GHGs are managed at the sectoral level instead of on a country-by-country basis.
While the discussion herein focuses on CO2 emissions from aviation, there are other emissions and effects of aviation that also contribute to climate change. In addition to CO2 from fuel combustion, airplanes can also emit methane (CH4), nitrous oxide (N2O), hydrocarbons (HC), particulate matter (PM), sulfur oxides (SOx), and nitrogen oxides (NOx). Moreover, certain high-altitude aviation emissions can spur heat-trapping cloud formation. Compared to these non-CO2 emissions and cloud formation, there is more scientific certainty regarding the impacts of CO2 emissions from aviation and greater consensus on the optimal policies for reducing aviation’s CO2 emissions.
Strategies available to mitigate GHG emissions from aviation include the following:
- Operational Efficiency
Optimizing flight paths and reducing airport congestion could immediately reduce the aviation sector’s GHG emissions. Adopting advanced communication, navigation, and surveillance and air traffic management (CNS/ATM) systems can reduce the time aircraft spend idling on runways or circling airports waiting to land, thus reducing fuel use and associated emissions.
- Aircraft EfficiencyAircraft efficiency technologies reduce the amount of fuel aircraft use per unit of distance traveled. Several technological improvements exist to improve aircraft aerodynamics, such as applying laminar flow control to an aircraft to reduce drag and, as a result, fuel consumption. More radical innovations include blended wing body aircraft that not only reduce drag but allow the entire aircraft to generate lift, as opposed to just the wings. More fuel-efficient engines and incorporation of super-lightweight materials, such as fiber-metal laminate, into the airframe offer additional avenues to improving aircraft efficiency.,
- Alternative Fuels
Alternative fuels have lower net GHG emissions than traditional petroleum-based aircraft fuel. Biofuels, Fischer-Tropsch fuels, and liquid hydrogen could all present feasible alternatives in the future. While these fuels do not present an immediate alternative, their adoption presents a long-term path toward lower carbon flight. To be seriously considered as a mitigation strategy, alternative fuels must be both cost-competitive and offer significant reductions in GHG emissions.
- Alternative Modes of Transport
Switching from aviation to less carbon-intensive modes of transport can also help mitigate GHG emissions. High speed rail (HSR) is especially suited to replace short-distance passenger air travel in some circumstances, such as in high density corridors. The energy use per passenger-mile for HSR could be as much as 65 to 80 percent less than air travel, but the overall reduction in GHG emissions would depend on a number of factors, including the design of the system (operating speeds and distances between stops) and passenger load factors (i.e., capacity utilization). The European and Japanese experience has shown high speed rail to generally be competitive with air travel on routes of up to 300-500 miles, where there is existing high demand for intercity travel and where several high-population areas can be connected along a single corridor. The total infrastructure and operations environmental impact should be considered for valid comparison of modes.
It is important to also focus on the timeframe in which these strategies are adopted. The operational lifetime of an aircraft ranges from 20-30 years. As such, it takes a number of years for any new technologies to penetrate through the entire fleet. It also takes many years to implement a new HSR route.
Environmental Benefit / Emission Reduction Potential
Combining all available mitigation strategies could reduce global GHG emissions from aviation by as much as 53 percent below “business-as-usual” (BAU) projections in 2050. As Figure 1 shows, owing to large projected increases in aviation demand, absolute emissions from aviation are projected to increase from current levels by mid-century even in the case of significant policies to limit emissions. However, policy interventions can limit global aviation emissions to about double current levels by 2050, as compared to a nearly four-fold increase under “business as usual” over the same timeframe.
While more easily implemented, adoption of a broad array of more efficient operational practices—from improved landing techniques to reduced taxiing times—would only produce emissions savings of 5 percent below the BAU projection in 2050.
Technological advances offer the potential for more significant reductions. Current trends in aviation efficiency improvements are expected to continue; the efficiency of the U.S. and global aircraft fleets will continue to improve as older, less efficient aircraft are retired and then replaced with new, more efficient aircraft. Under “business as usual,” a projected 30 percent decrease in aviation energy intensity will be achieved by utilizing currently known technologies: more efficient propulsion systems (engines), advanced lightweight materials, and improved aerodynamics (e.g., winglets, increased wingspans). Added support through government sponsored research and development (R&D) and other policy interventions could yield an additional 35 percent reduction below BAU emissions in 2050. Much of this 35 percent would come from application of the more ambitious and therefore riskier technological alternatives. Blended wing body or other innovative airframes, for example, could reduce fuel consumption by as much as 32 percent when compared to an Airbus A380 (a currently operating state-of-the-art aircraft model). Advanced laminar coatings that reduce drag could increase fuel efficiency by a further 16.5 percent.
The emission reduction potential from alternative fuels is slightly less certain. While a number of technologies exist to produce alternative fuels, it is unclear at this time which technologies will prove viable in the long term. Conservatively, these alternative fuels could provide an additional 24 percent emission reduction against a BAU scenario.
The potential emissions reduction from shifting to alternative modes of transport is more difficult to quantify and likely the option with the smallest emission reduction potential.
Table 1. Global GHG Emissions Abatement for Aviation Sector
Reductions from “Business as Usual” in 2050 (%)
Advanced CNS/ATM systems (e.g., NextGen, SESAR)
Aircraft Design and Propulsion
Unducted fan (open rotor) engines where feasible, greater application of advanced lightweight materials, improved aerodynamics (e.g., laminar flow control), new airframe designs (e.g., blended wing body)
Medium term: Biofuels;
Long term: Biofuels, hydrogen
Total Reduction from BAU Emissions in 2050
Figure 1: Global GHG Mitigation Potential from the Aviation Sector
Source: McCollum, David, Gregory Gould, and David Greene, Greenhouse Gas Emissions from Aviation and Marine Transportation: Mitigation Potential and Policies, 2009. http://www.c2es.org/technology/report/aviation-and-marine
The cost of mitigating emissions from aviation depends on the strategy adopted. Not only do cost estimates vary among studies, but some costs are inherently uncertain, given the experimental nature of many of the technologies analyzed. A study that focused on European aviation fleets estimated that GHG abatement costs for the aviation sector range widely, depending on abatement option, spanning -$222 to $308 per metric ton of CO2, with most of the abatement options at costs below $110 per ton.
At the lower end of the cost spectrum, operational innovations, such as CNS/ATM technologies, hold the potential to yield cost savings via reduced expenditures on fuel. More advanced technologies, such as laminar coating, come with higher costs, including significant R&D costs. It is especially difficult to estimate the costs of these longer-term solutions, as the estimated capital costs for development and implementation are often highly speculative.
Similar uncertainty surrounds the costs of alternative fuels for the aviation sector. Existing biofuels cannot currently compete against jet fuel and are not expected to achieve significant penetration in the aviation sector through 2050 under “business-as-usual” conditions. Even in the event of significant improvements in biofuel technology, a number of cost barriers would remain. New fuel types might require re-engineering airplane propulsion systems, increasing the costs of fuel switching.
Building new HSR infrastructure for shifting transportation from air to rail is very capital-intensive. For example, constructing a proposed HSR line between Los Angeles and San Francisco has an estimated cost of $45 billion. Reliable estimates of the dollars-per-ton cost of CO2 emissions reductions from transportation mode shifting are lacking, and some estimates of the marginal cost of emission reductions from HSR are very high.
Current Status of Aviation Emissions Mitigation Efforts
Efforts are already underway to mitigate GHG emissions in the sector. For example, airlines regularly retire older aircraft and make adjustments to airframe design through the addition or repositioning of winglets. Future state-of-the-art aircraft, like the Boeing 787 and Airbus A350 (first deliveries of the former are expected in 2010 with the Airbus A350 about three years later), will combine a number of technologies—from lightweight materials to advanced propulsion systems—to achieve even greater fuel efficiency. Nonetheless, in terms of absolute emissions, these gains in efficiency are entirely offset by burgeoning demand.
Efforts to improve operational efficiency include the U.S. NextGen initiative, which uses satellites to track aircraft routes and uses the satellite data to shorten travel distances and reduce congestion. A similar initiative known as the Single European Sky ATM Research (SESAR) project is underway in Europe.
Some airlines are also testing the possibility of blending jet fuel with alternative fuels. A number of commercial airlines, such as Continental Airlines, have conducted or plan to conduct test flights that make use of biofuels. The International Air Transport Association (IATA) has set a goal for its member airlines to use 10 percent “alternative” fuels by 2017. Initial formal technical approval of these new low carbon biofuels is expected in 2010.
The European Union is on track to integrate the aviation sector into its GHG cap-and-trade system beginning in 2012. The EU regulations cover GHG emissions from all flights either landing at or departing from airports within the European Union.
Obstacles to Further Development or Deployment of Aviation Emissions Mitigation Strategies
- International Jurisdiction
The international dimension of aviation emissions complicates their mitigation. In fact, no paradigm exists for assigning transnational GHG emissions to individual countries. While the International Civil Aviation Organization is analyzing options for curtailing global aviation emissions, little agreement exists on specific policy actions.
- Lack of a Price on Carbon
With the exception of future flights to and from the European Union (see above), businesses and consumers do not face a financial cost associated with GHG emissions from aviation. This means firms and consumers do not fully take into account the social cost of GHG emissions when considering investments in new technology or travel decisions.
- High Level of Risk in Research and Development
The most advanced mitigation technologies come with high capital costs and considerable investment risks. Many firms are reluctant to invest in developing advanced technology such as blended wing body or laminar coating, as the effectiveness and payoff of these technologies are unknown.
- Government Regulations
Many operational strategies are beyond the control of airlines and strongly dependent on government regulation and support.
Policy Options to Help Promote Aviation Emissions Mitigation Strategies
- Carbon Price
Government policies that put a price on carbon, such as a GHG cap-and-trade program, would guide firms and consumers in making cost-effective decisions regarding limiting emissions from aviation—ranging from blending lower-carbon fuels to choosing alternative transport modes or reducing consumption of aviation services—all relative to the cost of comparable avoided emissions from other sectors of the economy.
- Aviation Emission Standards
Governments could mandate fuel efficiency standards for new aircraft or implement standards to limit the carbon intensity of the fuels used.
- Regulatory Changes
Policies that facilitate the transition to more advanced air traffic management systems would improve operational efficiency in the aviation sector. The revamping of government-mandated operational protocols could reduce congestion, thus saving fuel by reducing idling time and taxiing distance.
- Government Sponsored R&D
Government-sponsored R&D can be an effective driver of innovation, especially when it is targeted at basic research that is beneficial to many industries (e.g., low-carbon fuels and advanced lightweight materials) or is focused on risky projects (e.g., radical changes to airframe designs) that individual companies may not be willing to fund. Public R&D has been a particularly important driver of aviation innovation in the past, and an increase in government R&D funding could accelerate the rate of innovation and development of new technologies.
- Supportive Agricultural Policy
While the technical barriers to low carbon biofuel for aviation are rapidly being retired, the availability of feedstocks is a barrier to fuel capacity building. Policy that would reduce the risk of investing in new crops aimed at aviation biofuel could accelerate capacity and lessen reliance on fossil fuels.
- Department of Defense Leadership
As the single largest user of aviation fuels, the Department of Defense could help build capacity and mitigate risk of initial capital investment by implementing a program to “lead the fleet” in sourcing low carbon fuels. The assurance of market demand would help green entrepreneurs with initial start-up challenges.
- Increased Government Spending on Infrastructure
Strategic government spending could enhance efficiency within the aviation sector, such as funding airport expansion projects or improving air traffic control to reduce congestion. Governments could also invest in alternatives to air travel, such as high speed rail. The American Recovery and Reinvestment Act of 2009 (i.e., the economic stimulus package) includes more than $8 billion to help finance high speed rail corridors throughout the United States.
Related Business Environmental Leadership Council (BELC) Company Activities
Related C2ES Resources
Climate TechBook Biofuels Overview
McCollum, David, Gregory Gould, and David Greene, Greenhouse Gas Emissions from Aviation and Marine Transportation: Mitigation Potential and Policies, 2009.
Further Reading / Additional Resources
Congressional Research Service (CRS) – Aviation and Climate Change, 2010
International Civil Aviation Organization (ICAO) - Aircraft Engine Emissions
National Aeronautics and Space Administration (NASA), Environmentally Responsible Aviation (ERA) Project
Partnership for AiR Transportation Noise and Emissions Reduction (PARTNER)
Transportation Research Board (TRB) of the National Academies - Aviation
Boeing, Current Market Outlook 2008-2027.
Karagozian, A., W. Dahm, et al., Technology Options for Improved Air Vehicle Fuel Efficiency: Executive Summary and Annotated Brief, United States Air Force Scientific Advisory Board, 2006.
Greener by Design, Mitigating the Environmental Impact of Aviation: Opportunities and Priorities. Report of the Greener by Design Science and Technology Sub-Group, 2005.
McCollum, David, Gregory Gould, and David Greene, Greenhouse Gas Emissions from Aviation and Marine Transportation: Mitigation Potential and Policies, 2009. Unless otherwise noted, all facts and figures in this document are drawn from this report.
McCollum et al. 2009.
For more detail on this topic, see the box on p.11-12 of McCollum et al. 2009.
CNS/ATM refers to technologies that enhance the ability of air traffic control to monitor and direct multiple aircraft within an airspace. For example, satellites can more accurately pinpoint an aircraft’s location, allowing more planes to safely operate within close proximity. This allows for more fuel efficient routing and landing procedures, thus reducing GHG emissions.
Laminar flow control (LFC) refers to technologies that modify the aircraft’s boundary layer (the layer of air that clings to the surface of the airframe). LFC increases fuel efficiency by reducing turbulence in this layer. There are two types of LFC technology: passive and hybrid. Passive LFC reduces aerodynamic drag by modifying the air-wing interaction through the shape of the front of the wing. Hybrid LFC removes a portion of the boundary layer (e.g. through slotted or porous wing designs) to reduce drag.
Liebeck, R. H., “Design of the Blended Wing Body Subsonic Transport,” Journal of Aircraft 41(1):10-25, 2004.
Karagozian, A., W. Dahm, et al., , Technology Options for Improved Air Vehicle Fuel Efficiency: Executive
Summary and Annotated Brief, United States Air Force Scientific Advisory Board, 2006.
Greener by Design, Mitigating the Environmental Impact of Aviation: Opportunities and Priorities, Report of the Greener by Design Science and Technology Sub-Group, 2005.
While the direct GHG emissions from combustion of biofuels or Fischer-Tropsch fuels will be similar to or the same as the direct GHG emissions from combustion of traditional petroleum-based aviation fuel, such alternative fuels can have significantly lower net lifecycle GHG emissions since they can be manufactured from biomass feedstocks so that, in effect, combustion of such alternative fuels emits CO2 that was earlier absorbed from the atmosphere by the biomass feedstocks. For more information on biofuels, see C2ES’s Climate TechBook “Biofuels Overview.”
Fischer-Tropsch synthesis of transportation fuels involves gasification of a carbon-containing feedstock (e.g., biomass, coal) and production of a synthetic crude oil, which can then be processed into refined liquid fuel products.
Winglets are vertical extensions of wingtips that reduce drag and increase fuel efficiency.
Greener by Design, The Technology Challenge. Report of the Technology Sub-Group, 2001.
Morris, J., A. Rowbotham, et al., A Framework for Estimating the Marginal Costs of Environmental
Abatement for the Aviation Sector, Omega and Cranfield University, 2009.
Greener by Design, Annual Report 2007-2008.
Government Accountability Office (GAO), High Speed Passenger Rail: Future Development Will Depend on Addressing Financial and Other Challenges and Establishing a Clear Federal Role, 2009.
See, for example, Morris, Eric, “High-Speed Rail and CO2,” blog post, New York Times, 24 July 2009.
GAO, Aviation and the Environment: NextGen and Research and Development Are Keys to Reducing
Emissions and Their Impact on Health and Climate, Statement of Gerald L. Dillingham, 2008.
International Air Transport Association (IATA), “Fact Sheet: Alternative Fuels,” 2009.
For more details, see C2ES’s brief, Climate Change Mitigation Measures in the European Union, 2009.
P.L.-111-5, American Recovery and Reinvestment Act of 2009 (H.R.1), 111th Congress.
- The renewable fuel standard (RFS) is a requirement that a certain percentage of petroleum transportation fuels be displaced by renewable fuels. RFS1 started with the Energy Policy Act of 2005. Congress updated the standard in the Energy Security and Independency Act of 2007 (EISA). This new renewable fuel standard is known as RFS2.
- RFS2 is a renewable fuel standard for biofuels only that requires obligated parties to sell a certain amount of biofuels per year through 2022.
- RFS2 contains a four-part mandate for lifecycle greenhouse gas emissions levels relative to a 2005 baseline of petroleum: for renewable fuel, advanced biofuel, biomass-based diesel, and cellulosic biofuel.
- The EPA published the final rule for RFS2 on March 26, 2010.
The Energy Policy Act of 2005 created a Renewable Fuel Standard (RFS1) in the U.S. that required 2.78 percent of gasoline consumed in the U.S. in 2006 to be renewable fuel. The EPA finalized this requirement for RFS1 in April of 2007.
Congress expanded U.S. renewable fuel usage with the Energy Independence and Security Act (EISA) of 2007. The Act included a provision for a new Renewable Fuel Standard (RFS2), which increased the required volumes of renewable fuel to 36 billion gallons by 2022 or about 7 percent of expected annual gasoline and diesel consumption above a business-as-usual scenario. The Act gave the EPA the authority to revise and implement regulations related to RFS2.
Figure 1: Renewable Fuel Standard requirements through 2022
The EPA issued a notice of the proposed rulemaking for RFS2 in May of 2009 and the final rule in March of 2010. Table 1defines the four categories of renewable fuel according to the EPA. In order to be classified under one of these categories, a fuel must meet the percentage reduction in life-cycle greenhouse gas emissions shown in the table. The EPA’s rule defined the renewable fuel volume requirements from 2008 through 2022. From Figure 1, one can see the RFS2 slowly ramps up advanced biofuels (cellulosic, biomass-based diesel, and non-cellulosic advanced) until they overtake conventional biofuels in consumption levels by 2022.
Table 1: Renewable fuel types in RFS2
from displaced gasoline/diesel
Fuel produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel present in a transportation fuel.**
Renewable fuel other than ethanol derived from corn starch.
Includes both biodiesel (mono-alkyl esters) and non-ester renewable diesel (including cellulosic diesel). It includes any diesel fuel made from biomass feedstocks. However, EISA included three restrictions. EISA requires that such fuel be made from renewable biomass. The statutory definition of “biomass-based diesel” excludes renewable fuel derived from co-processing biomass with a petroleum feedstock.
Renewable fuel derived from any cellulose, hemicelluloses, or lignin each of which must originate from renewable biomass.
* EPA could have exercised the 10 percent adjustment allowance provided for in EISA for the advanced biofuels threshold to as low as 40% but did not do so. ** Transportation fuel includes gasoline, diesel, heating fuel, and jet fuel. It can also include electricity, natural gas, and propane if it can be determined that the source of the fuel is renewable and the fuel is used for transportation. Source: Federal Register. (2010, March 26). Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program: Final Rule. 74(99). Washington: National Archives and Records Administration.
- On petroleum consumption, energy security, and fuel costs:
- RFS2 will displace about 13.6 billion gallons of petroleum-based gasoline and diesel fuel in 2022; this represents about 7 percent of expected annual gasoline and diesel consumption in 2022.
- RFS2 will decrease oil imports by $41.5 billion, and will result in additional energy security benefits of $2.6 billion by 2022.
- By 2022, gasoline costs should decrease by 2.4 cents per gallon and diesel costs should decrease by 12.1 cents per gallon because of the increased use of renewable fuels.
- RFS2 will reduce greenhouse gas emissions by 138 million metric tons in 2022; this is equivalent to taking about 27 million vehicles off the road.
- Agriculture sector and related impacts:
- RFS2 will increase net farm income by $13 billion dollars (or 36 percent) in 2022.
- RFS2 will decrease corn exports by 8 percent and soybean exports by 14 percent in 2022.
- RFS2 will increase the cost of food $10 per person in 2022.
Changes from RFS1
- RFS2 peaks at 36 billion gallons of renewable fuel by 2022 instead of 7.5 billion gallons by 2012
- RFS2 set volume requirements for newly defined renewable fuel types; see Figure 1.
- RFS2 goes beyond gasoline replacement by also including biodiesel.
- Added greenhouse gas reduction thresholds for different fuel types (see Table 1) and takes into account indirect land use change. From C2ES’s report, Reducing Greenhouse Gas Emissions from U.S. Transportation, “[i]f land is converted to another agricultural use to produce biofuel, this will tend to raise the price of the agricultural commodity displaced. The higher price will encourage land somewhere in the world to be converted to agricultural use. If the land is cleared, carbon sequestered in the biomass and in the soil will be released to the atmosphere. The release of sequestered carbon will offset some of the potential GHG benefit of biofuel use.”
- RFS2 limits fuel from corn starch to 15 billion gallons by 2022; there are no limits from corn stover (waste).
Final EPA Analysis
- Released in February, 2010.
- Indirect land use change assumptions defined such that almost all corn ethanol qualifies for program as a conventional biofuel feedstock (see Figure 2).
- Under the final rule, EPA must reduce the cellulosic biofuel requirements if there is insufficient supply. EPA did so for 2013 for the fourth year in a row (see Table 2).
- Grandfather Clause: According to the final rule, renewable fuel from existing facilities, which commenced construction on or before December 19, 2007, is exempt from the percent reduction from displaced gasoline/diesel for “renewable fuel” defined in Table 1. Ethanol plants that use natural gas or biodiesel for process heat, which commenced construction on or before December 31, 2009 are also exempt.
Figure 2: Fuel Pathways from EPA in 2022
Source: Federal Register. (2010, March 26). Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program: Final Rule. 74(99). Washington: National Archives and Records Administration.
Final EPA Requirements
Table 2: RFS Ethanol-Equivalent Volume Requirements, 2011 – 2013 (billion gallons unless noted)
Total Renewable fuel (Including Ethanol)
Note: Volumes are ethanol-equivalent, except for biodiesel, which is actual volume, Source: EPA, Renewable Fuel: Standards and Regulations, http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm
Refiners that produce gasoline or diesel as well as importers of gasoline or diesel in the lower 48 states and Hawaii are the obligated parties for RFS2. Parties that add renewable fuel to gasoline or diesel (blenders), the state of Alaska (which can opt in), small refiners (whose exemption could expire on December 31, 2010), and gasoline exporters are exempt from RFS2.
Renewable Fuel Requirements and Penalties
Each year, the EPA must determine how much renewable fuel an obligated party must sell in order to meet RFS2. The EPA does this by determining the percentage of each of the four types of renewable fuel (see Table 1) that must be in the entire market in order to achieve the volume required by the standard for that year. It then requires each obligated party to own RINs (see box below) representing the same percentage of each of the four types of renewable fuel (known as renewable volume obligations or RVOs). See Appendix A for a description of the formulas the EPA uses to calculate obligation requirements. A provider may acquire these RINs either through producing the biofuel or through purchasing RINs on the open market. Most obligated parties are not biofuel producers so they would be expected to meet their obligation through the purchase of RINs. Thus, RFS2 establishes a credit trading system to attain the lowest possible cost of compliance.
|In order to track renewable fuel sold into the market, the EPA requires renewable fuel producers and importers to assign unique Renewable Identification Numbers (RINs) for each batch of renewable fuel sold where a batch is any amount less than 100 million gallons per month, unless the producer or importer processes less than 10,000 gallons per year.|
If an obligated party is out of compliance, the EPA may impose fines up to $32,500 as specified under sections 205 and 211(d) of the Clean Air Act for every day the entity is in violation and the amount of economic benefit or savings resulting from each violation.
EPA. 2010. EPA Finalizes 2011 Renewable Fuel Standards. November. Accessed December 6, 2010. http://www.epa.gov/otaq/fuels/renewablefuels/420f10056.htm.
Federal Register. 2010. "Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program: Final Rule." Vol. 74. no. 99. Washington: National Archives and Records Administration, March 26.
Greene, David, and Steven Plotkin. 2011. Reducing Greenhouse Gas Emissions from U.S. Transportation. Arlington, Virginia: Pew Center on Global Climate Change.
February 17, 2010
Contact: Tom Steinfeldt, (703) 516-4146
MARKET-BASED SOLUTIONS CAN GROW U.S. CLEAN ENERGY ECONOMY
Pew Center Briefs Point to Clean Energy Jobs, Detail Carbon Market Oversight
WASHINGTON, D.C. – The Pew Center on Global Climate Change has released two timely publications that make the case for market-based clean energy and climate solutions.
Clean Energy Markets: Jobs and Opportunities, a new brief, explains how investment in clean energy technologies will generate economic growth and create new jobs in the United States and around the world. Comprehensive, market-based national policy that attracts investment in clean energy markets can help create these economic benefits.
A second brief, Carbon Market Design & Oversight, assesses the opportunity now before Congress to create the optimal design and oversight mechanisms to ensure a viable, transparent, and robust carbon market.
“It’s in our economic self-interest to ramp up development and deployment of U.S. clean energy technologies so that we can compete in the rapidly growing global clean energy markets,” said Eileen Claussen, President of the Pew Center on Global Climate Change. “It’s not too late for the U.S. to position itself as a global clean energy leader, but we must act now. Passing comprehensive climate and energy legislation that prices carbon will give businesses the certainty needed to unleash millions of dollars in clean energy investments that will create U.S. jobs and expand economic opportunities.”
Worldwide, clean energy markets are already substantial in scope and growing fast, explains the Clean Energy Markets brief. Historically, regions where an industry gains an initial foothold are more likely to become a major center of growth for the industry. In the United States, comprehensive climate and energy policy can give nascent clean energy industries this initial start by attracting investment in clean energy markets and helping to create homegrown jobs.
In crafting sensible, market-based climate and energy policy, lawmakers should build on best practices and lessons from a number of existing markets to create the optimal carbon market design and oversight mechanisms. The Carbon Market brief provides policymakers a thorough yet concise assessment of the key considerations involved in establishing a sound, transparent U.S. carbon market. These include:
- Roles and rationales of exchange-based and over-the-counter markets;
- Options for improving oversight of these markets;
- Assessments of potential regulatory agencies for a U.S. carbon market; and
- Comparisons of carbon market oversight provisions in legislative proposals.
“Effective carbon market oversight will be critical, but it is fundamental and achievable,” said Claussen.
For more information about global climate change and the activities of the Pew Center, visit www.c2es.org.
The Pew Center was established in May 1998 as a non-profit, non-partisan, and independent organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
ANCHORAGE - Alaska is a big state, with big mountains, big wildlife, and big development projects. It’s also a place of big changes: the state has warmed more than 4 degrees, creating tremendous pressures on the natural environment and society. But in a place where the people are always looking for the next big economic driver, like a $40 billion Alaska natural gas pipeline, uncertainty about carbon regulation is an Alaska-sized problem.
First among the big news items related to nuclear power is the official naming by the Obama Administration of a much-anticipated Blue Ribbon Commission on America’s Nuclear Future to recommend a safe, long-term solution for used nuclear fuel and nuclear waste. The commission, announced on January 29, will issue its final report within 24 months. Energy Secretary Chu noted that the commission is not tasked with recommending a site for a long-term waste repository.
In tackling climate change, a diverse transportation sector can contribute greatly to reducing greenhouse gas (GHG) emissions. In 2008, the transportation sector accounted for 28% of U.S. GHG emissions, according to the EIA. In achieving the goal of reducing emissions, transportation policy must reduce GHG emissions from travel without compromising the mobility of Americans. To that end, electric vehicles provide a much-needed alternative to gasoline and diesel powered cars.
Carmakers are responding to this challenge by designing plug-in electric vehicles (PHEVs) and all electric vehicles (EVs). Nissan’s Leaf, a new electric vehicle, is slated to hit showrooms throughout the U.S in late 2010. One of two Leafs seen in public was on display last week at the Washington Auto Show where the Green Car Journal named the Leaf its 2010 Green Car Vision Award winner.
At first, Nissan will likely place prospective buyers on a waiting list, but it anticipates ramping up Leaf production at a factory it is retooling in Smyrna, Tennessee. The company secured a $1.4 billion loan from the U.S. Department of Energy (DOE) last week to prepare the plant to manufacture the vehicles and the advanced batteries that will power them. DOE points out that the facility will “create up to 1,300 American jobs and conserve up to 65.4 million gallons of gasoline per year.” The 150,000 vehicle-per-year factory positions the U.S. as a leader in the next generation of low-emissions vehicle manufacturing.
At the DC auto show, the Nissan representative shared details about the vehicle along with the company’s program to distribute it worldwide. Nissan is partnering with Better Place, an innovative electric vehicle services provider, to sell the Leaf in Denmark and Israel in 2011. The company intends to make modifications to the Leaf’s chassis to support Better Place’s battery switch stations. The Leaf will also meet SAE’s J1772 standard for electric vehicle charging. Lastly, by laminating the lithium-ion battery packs in order to make them self-cooling, Nissan solved a complex technical problem without using a computer control system. More information about the Leaf is available on Nissan’s website.
The L.A. Time reports Nissan hints at a sticker price of less than $30,000, before accounting for the $7,500 federal tax credit for plug-in hybrid vehicles and electric vehicles provided in the Recovery Act. No pricing information was available at the auto show.
The three most important issues to Americans today are the economy, jobs, and terrorism according to the Pew Research Center for the People & the Press. If one makes the logical connection between protecting against terrorism and promoting energy security, Nissan is timely in releasing the Leaf in 2010. With the Leaf, the company will create American jobs to manufacture an affordable vehicle that lowers U.S. dependence on foreign oil.
Nick Nigro is a Solutions Fellow
In a letter to Secretaries Clinton, Geithner, and Locke, Attorney General Holder, and US Trade Representative Kirk, 19 business groups, including the National Association of Manufacturers, argue that new “indigenous innovation” programs are designed by the Chinese government to find “national champions” of industry that can be advantaged in a variety of sectors, including green technology, and create "barriers to competition." The Hillicon Valley technology blog over at The Hill notes that this concern comes in the context of rising trade conflicts between the United States and China.
This attention comes on the heels of increasing concern over China’s leadership in clean energy technology. As noted in this weekend’s New York Times piece on the subject, the country has become the world’s largest manufacturer of wind and solar generation equipment. Through industrial policy, China is trying to take advantage of the growing export market for power sector equipment of all types, especially clean energy.
We should have expected that China would be a strong competitor in the clean energy sector. Regardless of the outcome of continuing international climate negotiations, countries from Europe to most U.S. states to China itself have already made unilateral policy choices to increase the use of clean energy technology in the coming decades for a multitude of reasons. The demand will be tremendous for the manufacture of clean energy technologies, and there is potential for fortunes to be made in their export.
What should the appropriate policy response be? As the authors of the letter suggest, the US should promote fair access for American goods and services in foreign markets. Protectionist responses and trade wars have never helped any country grow its economy and create jobs.
But reducing protectionism is not enough to regain the American lead in the clean energy sector. The US needs to have a policy of its own that encourages innovation and gives the right incentives for US companies to compete globally. America is a land of innovation, and we should be the ones taking advantage of these new and growing markets, not ceding them to competitors. Part of the answer is for the US to put a price on carbon. Doing so would encourage innovation in the private sector and provide regulatory certainty for companies to make investments here in clean energy technologies. American ingenuity is second to none, and Congress needs to work on a climate and energy bill that provides the right framework for our businesses to flourish.
Michael Tubman is a Congressional Affairs Fellow
We just added a brief on natural gas to its Climate TechBook that helps to explain why natural gas is unique among fossil fuels. Natural gas is both a contributor to climate change (natural gas combustion accounts for about 16 percent of total U.S. greenhouse gas emissions) and an option for reducing emissions since natural gas is less carbon-intensive than coal and petroleum. The United States could actually reduce total greenhouse gas emissions by burning more natural gas if it’s displacing other fossil fuel use (this is particularly the case for fuel switching from coal to gas in power generation).
Like coal, but unlike petroleum, natural gas is primarily a domestic energy resource, with net imports of natural gas constituting only about 13 percent of U.S. consumption and about 90 percent of imports coming from North America. Unlike coal (93 percent consumed for electricity generation) and petroleum (more than two thirds used for transportation), natural gas consumption is more evenly split across the electric power, industrial, residential, and commercial sectors.
The past few years have seen a “revolution” in the outlook for natural gas supply. Until recently, experts thought that the United States would become increasingly dependent on expensive imports of liquefied natural gas (LNG) from overseas, but the recent boom in domestic “unconventional” gas production (driven by shale gas) and the dramatically increased estimate of U.S. gas reserves have led to projections of increasing domestic natural gas production and declining imports.
Natural gas is receiving a lot of attention in the discussion about U.S. climate and energy policy. The gas industry is pressing for favorable treatment in possible climate and energy legislation, with a specific set of policy priorities recently put forth by a major industry lobby group.
While some tout natural gas as a “bridge fuel” to a low-carbon future others fear that a “dash for gas” (i.e., fuel switching by electric power generators) could increase demand for and the price of natural gas, thus negatively impacting manufacturers that rely on natural gas for energy and as a feedstock.
Recent analysis by the U.S. Energy Information Administration (EIA) of the climate and energy bill passed by the House in June 2009, illustrates how the projected role of natural gas in reducing U.S. greenhouse gas emissions depends in large part on the use of offsets under cap and trade and the relative cost and commercial availability of low-carbon technologies (e.g., wind, solar, carbon capture and storage, and nuclear power). When low-carbon technology deployment and offsets are constrained, EIA finds a much heavier reliance on natural gas for electricity generation under cap and trade, but the new outlook on U.S. natural gas supply means that even this pessimistic scenario does not lead to major increases in projected natural gas prices.
A new modeling analysis from Resources for the Future (RFF) sought to quantify the implications of the dramatically expanded U.S. natural gas supply. RFF researchers found that without new energy and climate policy, more abundant and less expensive natural gas could actually mean slightly higher U.S. greenhouse gas emissions in 2030 than would otherwise be the case (as cheaper natural gas competes with non-emitting energy sources and increases total energy consumption).
This last point brings us back to the overarching importance of implementing a policy that puts a price on carbon, as a greenhouse gas cap-and-trade program would do. Putting a price on carbon would harness market forces to drive the deployment of a portfolio of low- and lower-carbon technologies and fuels, including increased natural gas use to the extent it can cost-effectively reduce emissions.
Steve Caldwell is a Technology and Policy Fellow