WASHINGTON — A study released today by Consumer Energy Alliance (CEA) reconfirms the damaging impacts a national low carbon fuel standard (LCFS) would have on the American consumer and our economy.  With economic analysis conducted by National Economic Research Associates, Inc (NERA), today’s report “Critique of the UC Davis National Low Carbon Fuel Standard Study” outlines the false assumptions, selective analysis, and unsupported conclusions used by UC Davis to determine a national LCFS would benefit consumers.

Upon the release of the report, CEA’s Michael Whatley made the following statement:

“NERA’s economic analysis of UC Davis’ LCFS study underscores the catastrophic economic impact a low carbon fuel standard would have on consumers.  The UC Davis report is riddled in with dubious assumptions not facts. As NERA’s analysis highlights, the reality of a LCFS is troubling for American drivers, consumers, and homeowners who are already struggling to make ends meet.

“Given our nation’s record high prices and listless economic growth, a national low carbon fuel standard is the wrong choice for consumers.  The central conclusion that gasoline prices will fall due to the LCFS demonstrates a fundamental lack of understanding of the economics of fuel supply and demand.  A LCFS is more likely to increase gas prices, cost jobs, threaten reliable fuel supplies-shuffling resources, increasing transportation distances and augmenting total greenhouse gas emissions-and cost taxpayers millions than it is to provide any tangible economic or environmental benefits.”

As the NERA report analyzes, UC Davis made countless assumptions throughout its report to support the implementation of a LCFS. A few of the highlights from the report include:

  • UC Davis study assumption: A LCFS will automatically lead innovators to develop greater quantities of low carbon fuels and any infrastructure needs for their deployment will materialize – ignoring many of the critical obstacles to adoption of lower carbon fuels.
  • Reality: The federal renewable fuel standard (RFS) has failed to stimulate the development of advanced biofuels. Congress established the RFS seven years ago yet only a few thousand barrels of cellulosic ethanol have been produced commercially, despite the program’s initial mandate that hundreds of millions of gallons be produced by this year. There’s no evidence a LCFS will better stimulate development of advanced biofuels than the RFS.  Technological or commercial breakthroughs cannot be mandated by the government.
  • UC Davis study assumption: The whole world will develop complementary policies to overcome the standard’s shortcomings including its call for large quantities of limited ethanol supplies and its impact on fuel prices.
  • Reality: This assumption ignores history and current global politics. A LCFS has never been on the global agenda.  Furthermore, other countries will likely increase deforestation and crop production  to account for greater quantities of food that will be diverted as fuel, increasing global GHG emissions.
  • UC Davis study assumption: Lower gasoline imports will lead to lower gasoline costs for consumers.
  • Reality: The study misconstrues the true drivers of fuel costs and therefore incorrectly assumes a LCFS will put downward pressure on global oil prices. UC Davis’ exaggerated view on how U.S. gasoline imports affect domestic prices erroneously predicts that gasoline prices will decrease.

Read the complete NERA report here and CEA’s one page summary of the report here. For more information on the costly impact of a LCFS visit the Secure Our Fuels website or visit one of these reports:

  •  A copy of a June 2010 Charles River Associates study that delineates the economic effects of a national LCFS can be found here.
  • A recent study conducted by the Boston Consulting Group on the California LCFS can be found here.
  • A copy of IHS-CERA’s critique of NESCAUM’s economic analysis of a LCFS on the Northeast region can be found here.
  • A copy of CEA’s study on the negative economic impacts of a LCFS in the Northeast region, with modeling conducted by SAIC, can be found here.