This report was researched and produced by the Northwest Economic Research Center (NERC) with support from the David and Lucile Packard Foundation.
Fuel switching -- Oregon -- Economic aspects, Motor fuels -- Carbon content, Economic indicators -- Oregon, Spark ignition engines -- Alternative fuels -- Oregon
This report, written by the Northwest Economic Research Center (NERC) of Portland State University with support from the Packard Foundation, is the first in a series designed to assess the economic impact of the Oregon Clean Fuels Program (CFP). Following a discussion of carbon mitigation tools and policies, the body of the report establishes a baseline of infrastructure and regulated parties, followed by presentation and analysis of a set of economic indicator variables expected to influence or be influenced by the CFP. (See p. 5 for a table with all variables and their relevance to the program.)
Low carbon fuel standard (LCFS) programs like the CFP are policies designed to encourage the adoption of low carbon alternative fuels via a market-based regulatory framework, similarly to “cap and trade” policies. In this market, transportation fuel providers offset deficits generated by the production or import of high carbon-intensity fuels by purchasing credits generated by the production of low carbon intensity fuels. The metric used to describe carbon intensity is grams of carbon dioxide equivalent emitted per megajoule of energy produced (gCO2e/MJ).
Over the period that the program has been active, credits have exceed deficits in every quarter except for the most recent one. Banked credits, which accumulate when credits exceed deficits in a given period, rose steadily for the first two years of the program as entities overcomplied with the new regulation, before decelerating in 2017Q4 and starting to fall in the first half of 2018 (due to the excess of deficits over credits). This change in the market may indicate that the regulation is beginning to “bind”—that is, that the expansion of current clean fuels facilities and infrastructure may be necessary to meet the carbon intensity pathway going forwards. In other words, the lowest-cost mitigation measures have at this point been taken, and compliance will entail a higher price going forward. Interestingly, the two other such programs currently in existence—California’s Low Carbon Fuel Standard and British Columbia’s Renewable & Low Carbon Fuel Requirements Regulation—both reached the same turning point within the last year, with deficits exceeding credits for the first time. However, additional data points will be necessary to conclude whether this is indeed a continuing trend or a temporary fluctuation.
As the program is still relatively near its outset, it is difficult to attribute changes in tracked indicator variables to its impact. However, the ongoing collection and presentation of these relevant series of economic outcome indicators will provide insight into changes as they occur. If the aforementioned change in the balance of credits and deficits indicates that the program is in fact beginning to alter the behavior of regulated parties, said impacts will be more apparent in the near future.
© 2019 Northwest Economic Research Center
Liu, Jenny H. & Willingham, Emma. (2019) Oregon Clean Fuels Program Report 2018. Northwest Economic Research Center (NERC) Report. http://www.pdx.edu/nerc/projects/