Transportation's Role in Reducing U.S. Greenhouse Gas Emissions ...

Transportation’s Role in Reducing U.S. Greenhouse Gas Emissions: Volume 2
determining the sum of GHG emissions associated with the production, transportation,
and consumption of a fuel. The carbon intensity of all fuels is tracked through a system of
“credits” and “deficits.” Credits are generated from fuels with lower carbon intensity than
the standard. Deficits result from the use of fuels with higher carbon intensity than the
standard. The regulation is performance-based and provides flexibility for fuel providers
to comply with the standard through different approaches:
1. Supply a mix of fuels above and below the standard that, on average, equal the
required carbon intensity;
2. Supply only fuels that have lower carbon intensity than the standard (blend low
carbon ethanol in gasoline, or renewable diesel fuel in diesel fuel);
3. Purchase credits generated by other fuel providers to offset any accumulated deficits
from their own production; or
4. Bank excess credits generated in a previous year and use those credits when needed.
An alternative approach to a carbon fuel standard is provided by EPA’s Renewable Fuel
Standard, which establishes target percentages of certain types of defined renewable fuels,
along with life-cycle GHG reduction criteria for each fuel type. This approach has the
advantage of encouraging the advancement of promising fuel technologies and providing
certainty for fuel producers and vehicle manufacturers regarding a market for particular
fuels.
Tax credits or differential fuel tax rates can be used to encourage consumers to purchase
vehicles that are capable of utilizing low-carbon fuels. Tax credits already are offered for
ethanol to encourage its use, currently at about 47 cents per gallon. A complication for
low-carbon fuel policies is the need to take into account the full fuel-cycle GHG
implications of different fuel strategies. Some strategies are likely to have significantly
better performance from a life-cycle perspective than others, due to the relative energy
intensiveness of different forms of agricultural production or other processes needed in the
fuel production process. Incentives and tax rates based on the life-cycle GHG released from
the fuel provide a level playing field for all fuels and encourage the use of those fuels with
the greatest GHG reductions.
Support also may be needed, whether regulatory or via incentives, to encourage the
development of alternative fuel distribution networks. One strategy is to begin to invest in
such networks in limited geographic areas in order to demonstrate feasibility and consumer
acceptance of the fuel. For example, initiatives have been undertaken in California and in
the Northeast United States to develop a hydrogen refueling infrastructure. Partnerships
with public and private vehicle fleet operators to use vehicles that can make use of these
fuels can help to create initial demand for the fuel and begin to recover investment costs
before there is widespread consumer demand.
For fuels that appear to be at or near viability, requirements or incentives could be placed on
vehicle manufacturers to design vehicles to support the fuel. For example, today’s gasoline
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