California’s trucks and buses now use more biomass-based diesel than the traditional petroleum product. An explosion in renewable diesel production from feedstocks like soybeans has put the state on a trajectory to eliminate fossil fuel-based diesel entirely by 2030.
Yet environmental groups are calling for regulators to slow that growth by capping the number of carbon credits for crop-based feedstocks, fearing the alternative fuel source could incentivize deforestation in the Amazon. Farm groups say that would create a chilling effect as the U.S. industry looks to invest billions into ramping up production.
The Air Resources Board (CARB) is examining the issue as it reopens the rulemaking for the Low Carbon Fuel Standard (LCFS) this fall. The air quality agency could approve new guardrails for preventing such environmental degradation in the landmark climate program.
With the dramatic success of LCFS, staff are encouraging board members to go further by setting a new benchmark for 2030. The current goal is to reduce the carbon intensity (CI)—a measure of greenhouse gas impacts—of diesel fuel by 20% of 2010 levels. While petroleum diesel has a CI score of 100, ethanol gasoline stands at 59, biodiesel at 28 and renewable diesel at 37.
The more established biodiesel fuels involve a simpler and cheaper production process compared to the emerging renewable diesel products, but some of that cost differential can be offset by renewable identification numbers and LCFS credits, according to soybean industry sources. And there are other key differences. Biodiesel is blended with petroleum at varying percentages, most commonly B5 and B20. Renewable diesel can be blended, but is generally considered a “drop-in” replacement for petroleum-based diesel, according to FarmDoc Daily.
In the first quarter of 2023, less than half of the diesel used in California came from petroleum, down from 85% just five years ago, according to Aaron Smith, a UC Davis agricultural economics professor. Petroleum generated 532,000 metric tons of deficits, while biomass-based diesel produced about three million metric tons of credits—far offsetting the deficits. California accounts for nearly all the nation’s use of renewable diesel.
The growth in the renewable supply has propelled a flurry of new LCFS credits and pushed the market to perform beyond expectations. LCFS experts are optimistic the state can bump the CI goal to 30%—a scenario that offers a high chance for eliminating the use of petroleum-based diesel by 2030, as Smith and his colleagues project in a new paper.
Currently waste oils like cooking oil, tallow and distiller’s corn oil are the feedstocks of choice for biomass-based diesel production. But the use of crop-based vegetable oil has skyrocketed in recent years and refiners are warning that the supply of used cooking oil is nearly tapped out.
The sudden rise in crop-based feedstocks, however, is making environmental advocates uneasy.
“Virgin oils as a source of biofuels is a real and growing concern,” said Michael Wara, a legal scholar who directs a climate and energy policy program at Stanford University and testified at a recent CARB hearing on the LCFS.
Peter Dahling, NesteCARB’s Environmental Justice Advisory Committee (EJAC) commissioned Wara to model an EJ scenario based on a 40% CI goal. Wara warned the increase in biofuel production to achieve the goal would require an additional 500,000 acres of land, likely from cutting down forests in the Amazon to plant soy, and it would create more air pollution for socially disadvantaged communities near refineries in California. Capping biofuel feedstocks at the current level of usage would avoid such unintended impacts, he claimed.
The elimination of petroleum diesel in the state could lead to other unintended impacts to communities—and many Californians. Without diesel companies buying credits, gasoline suppliers would be on the hook for purchasing expensive LCFS credits to offset the emissions, passing the cost on to consumers. Wara estimated that could bump up the price of gas by as much as 69 cents a gallon, hitting low- and moderate-income Californians hardest.
During an informational hearing last week on potential LCFS changes, Jason John, associate director of Sierra Club California, supported a biofuel cap.
“Failing to do so will continue to over-incentivize this combustion fuel that still results in the emission of carbon, nitrogen oxides and particulate matter and will continue to harm California's communities,” said John, adding that the land use conversion would destroy habitat and carbon stocks. “Regardless of where these crops are planted, this is directly in opposition to California's biodiversity and climate resilience goals.”
Yet CARB staff pointed out that the agency has been factoring land use change into the LCFS calculations for more than a decade. The global economic analysis is challenging to quantify, due to complex interactions between supply and demand for crops, trade dynamics, population changes, the availability and competition for agricultural land, and regional renewable mandates, explained Dillon Miner, an air pollution specialist at CARB.
In a new report examining potential LCFS changes, staff found that scaling down the use of biomass-based diesel would result in greater fossil fuel consumption to meet the demand of the remaining combustion vehicles—despite a rapid shift to zero-emission trucks under CARB mandates.
They pointed out that no high-risk feedstocks that could contribute to deforestation have entered the LCFS program and no data have validated the environmental concerns.
Biofuel industry representatives seized on those findings.
“California must double down on these fuels in heavy-duty sectors, while aggressively pursuing electrification where it can—not arbitrarily taking valuable decarbonization options off the table,” said Floyd Vergara, director of state governmental affairs at Clean Fuels Alliance America.
Vergara argued that a science-based guardrail is already hardwired into the LCFS and no evidence suggests that biofuels are causing a problem. The alliance supports a 30% CI target, while Neste is urging the board to push it even further to 35%. The company is a leading producer of renewable diesel and sustainable aviation fuel.
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“Stronger action in the LCFS rulemaking will speed up the phaseout of fossil fuels and result in billions of dollars in health benefits to Californians,” said Peter Dahling, senior public affairs manager at Neste.
He called it impressive that consumers have seen a drop in diesel prices despite the rise in renewable fuel consumption.
Tanya DeRivi, Western States Petroleum AssociationThe Western States Petroleum Association (WSPA), which has been in Gov. Gavin Newsom’s political crosshairs over spikes in gas prices, claimed a cap on alternative fuels would complicate his efforts to ensure that transportation fuels are adequate, affordable, equitable and reliable. That was one of the goals behind a bill he fast tracked through the Legislature in March, though the focus of the legislation was to enable the state to investigate oil industry profits. Last year Newsom also directed CARB to accelerate the production of cleaner fuels at refineries while considering a more stringent LCFS standard.
Tanya DeRivi, a policy director at WSPA, stressed that crop-based feedstocks create a significant bridge between petroleum diesel and ZEV technologies, which face challenges with permitting, scalability and infrastructure.
Like DeRivi and WSPA, the American Soybean Association warned of reversing investment signals for the industry. Soybean oil represents about half of the feedstock used to produce biomass-based diesel, though it accounts for just 4% of the total U.S. soybean production, according to the association. The industry is set to expand its crushing capacity 25% by 2026 to meet the rising demand.
“Changing [feedstock eligibility] now would result in large losses to both the industry that is investing billions of dollars in new processing capacity and our future ability to decrease greenhouse gases through biofuels,” the association claims in a letter to CARB. “If CARB wishes to spur advancements in reducing emissions from the fuel supply, then it must provide dependable policy.”
More than 800 active fuels have CI approval, leading to logistical complications for staff in untangling the many complexities for food and cropping systems. Amanda Parsons DeRosier, a vice president at Global Clean Energy Holdings, for example, worried about the unintended impacts of a cap on farmers who plant camelina as a cover crop and as feedstock for biofuels.
Despite the pleas and dearth of data, CARB officials pledged to investigate the land use issue further and propose temporary guardrails to prevent any potential impacts like deforestation.
“We can all agree that biofuel production must not come at the expense of forest land or food production,” said CARB’s Dillon Miner.
He detailed the guardrails that other governments have incorporated into carbon markets, which CARB could consider. The agency could ban certain high-risk feedstocks or locations the fuel comes from, for example. It could establish sustainability criteria or set limits on credits or volume.
“I do really want to hear more about potential guardrails, what our potential options are,” responded CARB Chair Liane Randolph. “It's not a today problem, but it could potentially be a significant problem.”
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