Last week Consumer Energy Alliance (CEA) launched a report by Charles River Associates (CRA) which found that the imposition of a nationwide Low-Carbon Fuel Standard (LCFS) would send gasoline and diesel prices skyrocketing and wipe out millions of American Jobs.
CRA found that a nationwide LCFS program, implemented in 2015 with gasoline prices at today’s level, could result in an average national price for gasoline of nearly $5 per gallon in 2020 and close to $7.50 a gallon by 2025. The study also projected that a nationwide LCFS program would cause an estimated net loss of 2.3 million to 4.5 million American jobs by 2025 from baseline levels. As many as 1.5 million of these jobs would be in the manufacturing sector, while as many as 3 million would be in the service sector.
According to a recent article in Diesel Fuel News by Jack Peckham on the LCFS forum, titled “U.S. Low-Carbon Fuel Standard Hikes Fuel Prices 90% to 170%; Shuts 55 Refineries: Study”:
A new study released June 17 by Charles River Associates (CRA) for Washington, D.C.-based energy producer/ consumer group Consumer Energy Alliance finds that a national U.S. nationwide low-carbon fuel standard (LCFS) starting in 2015 could cause diesel and gasoline prices to soar by 90% to 170% by 2025, while drastically reducing U.S. oil refining capacity… “It is highly unlikely that it will be possible to produce sufficient quantities of fuel with sufficiently low emissions to meet the [notional LCFS national] standard without drastically reducing the total amount of fuel consumed,” according to CRA.
An LCFS could also drive down household annual purchasing power by between $1,400 and $2,400 by 2025 and cause the U.S. Gross Domestic Product to decline by approximately 2 to 3 percent, or $410 billion to $750 billion, by 2025.
Given these dramatic study findings, Michael Whatley, vice president of CEA and a leading policy expert on the LCFS, stated the following during a media teleconference last week:
“Any way you slice the data, the future projected by this study is a frightening one – higher fuel prices, fewer jobs, and lower consumer purchasing power. This nightmare scenario is clearly one that policymakers in the United States should avoid at all costs.”
“Intuitively, it’s always made sense that policies such as the Low-Carbon Fuel Standard, which seeks to restrict Americans’ access to secure and affordable sources of energy, would result in higher fuel costs and fewer jobs. But with the release of this study, we can now quantify those impacts under several different scenarios, and understand how they apply to different regions across the United States.”
Reporting on this launch under the headline, “Low carbon fuels will bite deep into economy, says industry study” Tom Fowler in the Houston Chronicle adds:
The LCFS is supposed to hurry up the development of new fuel technologies, according to the study. The LCFS will drive major changes “because the targets are beyond reach with foreseeable fuel technology,” the study says. “None of these changes are likely to involve new technology, because again the time frame is too short to provide new transportation infrastructure or new vehicle technologies on a large scale. Thus the LCFS is turned into a policy that in effect rations gasoline until the required improvement in emissions per gallon is met.”
Colin Sullivan with E&E News writes about the CRA study under the headline “Study claims national low-carbon fuels rule would spike gasoline prices,”:
The firm modeled a 10-percent reduction in carbon intensity over 10 years and found the cost of fuel and goods would experience a price shock because of supply constraints caused by so-called low carbon fuel standards. The study was completed by Charles River for the Consumer Energy Alliance, which represents truckers, shippers and airlines, among other sectors.
Sullivan continues with an excerpt from the press conference to explain an LCFS:
David Montgomery, an analyst at Charles River, compared the low carbon fuel standard (LCFS) concept to diluting coffee with cream. He said the dilution of fuels to trim their greenhouse effect is such that prices would spike as clean fuel supply lags behind the current pace of demand, especially as oil sands and other sources prominent in North America are forced out of the market.
“If enough cream is not on the table to achieve the desired mix, then the only alternative is to reduce the amount of coffee in the cup,” he said. “To reduce transportation fuel consumption sufficiently for the LCFS to be met requires very large increases in fuel prices, so that consumers will limit their driving and demand new vehicles that are much more costly.”
Interestingly, concerns about price impacts on consumers were echoed in both an Albany Times-Union story that highlighted the economic impact of an LCFS on the eastern United States, and an article in The Trucker that reported the devastating impacts that increased gas and diesel prices would have on truckers, titled “Low carbon standard could hike gas and diesel prices 80 percent, study shows.”
While a federal LCFS was added to the Lieberman-Warner climate change bill in 2008 and proposed as part of the Waxman-Markey bill in 2009, the LCFS provision was removed before the bill was passed by the House. Regrettably, supporters of a national LCFS continue to work for its enactment, even as proposed programs are being developed in several states and regions.
As highlighted in the CRA study, the real-life outcome of an LCFS will lead to higher prices at the pump and more economic distress – the last thing America’s struggling economy needs at this time. Instead, we need to ensure that Americans have access to secure and stable fuel supplies as our economy continues to move and grow.
