NEWPORT BEACH, Calif. – Diverse viewpoints and ideas on how to satisfy both environmental protection and consumer interests in the transportation market took center stage on Monday at the first ever Fuels Institute Annual Meeting and Fuels Summit.
Daniel Sperling, professor and founding director of the UC Davis Institute of Transportation Studies, is a leading expert on the effect of environmental policies on the market and one of the principal architects of the California Low Carbon Fuel Standard program. As the Summit’s keynote speaker, he shared with retail attendees his provocative views about climate policy, as well as insights on how the market is adjusting to the push for environmental sustainability.
He noted that there is tremendous change in both energy and transportation, outlining three “revolutions” that are underway:
- Fossil energy revolution: Shale, oil sands, etc., in the United States. The upstream oil industry has become excellent at finding, extracting and processing these sources. However, the perception is that the shale revolution is probably not going to move beyond the United States.
- Motorization (car) boom: There is a real boom in car ownership and sales in countries such as China, India and Brazil. However, there has been very little increase in vehicle ownership per capita in the United States since 2005.
- Automotive energy efficiency revolution: A tremendous amount of technology is emerging, and will continue to emerge, to make vehicles more efficient.
Following Sperling’s presentation, panelists from environmental, petroleum marketing and auto manufacturing groups discussed the effects of environmental policy and objectives on market development, specifically focusing on the bellwether state of California.
In the session, “Effect of Environmental Policies on Market Development,” Simon Mui of the Natural Resources Defense Council commented that California has experienced stronger clean air regulations because of innovation and performance-based standards, which include the Low Carbon Fuel Standard (LCFS), advanced clean car standards and the zero emission vehicle (ZEV) program. Although the state has made real reductions in pollution, new challenges — such as climate change — have emerged. And although significant gains have been achieved in technology, population growth and more miles driven have created a “take back” effect.
The LCFS is working, according to Mui, but ongoing litigation has resulted in a start-stop dynamic. He added that advanced clean car standards are good for the environment and consumers by bringing more fuel-efficient vehicles to market.
Panelist Jay McKeeman of the California Independent Oil Marketers Association dubbed his state a “living experiment” that began when the California Global Warming Solutions Act of 2006 (AB 32) was enacted and subsequently left up to interpretation by several state agencies, including the California Air Resource Board (CARB). The law requires California to reduce its greenhouse gas emissions to 1990 levels by 2020 — a reduction of approximately 15% below emissions expected under a “business as usual” scenario.
McKeeman said that overarching concern with new regulations created by the law will bring additive costs to consumers, such as higher gas prices. The CARB has not addressed this issue, he believes, and has not adequately taken a look at small business impacts of carbon-offset programs such as “Fuels Under the Cap,” which takes effect on January 1, 2015. Furthermore, the program will likely hit low-income residents the most — a regressive tax. McKeeman noted that these policies could add significantly to the retail price of fuel.
Robert Bienenfeld of American Honda Motor Co. Inc. commented that current environmental policies boil down to one: GHG emissions, suggesting that while federal EPA targets can be met with gas-powered vehicles and eventually ZEVs, automakers need to start now to be ready by 2050. Developing ZEVs so early is necessary because a laundry list of factors must be looked at, such as codes, standards, technology, supply chain and market knowledge. Bienenfeld noted that none of these advancements is free and that consumers will ultimately and always pay for the costs.
The Fuels Institute Annual Meeting and Fuels Summit is taking place this week in Newport Beach, California. For more information about the event and the Fuels Institute, visit fuelsinstitute.org.