In January 2010, two WRI-recommended features were incorporated into the U.S. Environmental Protection Agency’s (USEPA) regulations for implementing the new Renewable Fuel Standard (RFS). These regulatory features will help minimize the negative impacts of biofuels by ensuring comprehensive accounting of their lifecycle greenhouse gas (GHG) emissions.
The 2007 expansion of the RFS program required the EPA to set lifecycle GHG threshold standards to ensure that biofuels being used to meet the RFS emit fewer greenhouse gases than the petroleum fuel they replace. The framework the EPA would develop to calculate the GHG emissions factors of biofuels was critical. A framework that was less than comprehensive could end up creating incentives for U.S. biofuels that would actually lead to more GHG emissions than the traditional fossil-based fuels they replace. Two accounting factors were particularly important: How to account for carbon dioxide emissions that occur in the future. WRI recommended applying a zero discount rate over a shorter time horizon, rather than the more popular proposal of a two percent discount rate over a 100 year time horizon. Our recommendation was more consistent with prior research and would minimize the risk of artificially inflating the emissions reductions benefits of bio-fuels.
Whether or not to include the emissions associated with indirect land-use changes. For example, a shift from soybean to corn farming in Iowa to make ethanol can result in a ripple effect that drives land conversion for soya in the Brazilian Cerrado. This land conversion may result in significant emissions of carbon dioxide. The uncertainty of indirect land use impacts does not render them insignificant. WRI recommended that emissions associated with global indirect land-use changes be included in the framework, along with approaches for refining the estimates as the science improves.
EPA adopted both our recommendations. In particular, the adoption of an accounting methodology that accounts for the emissions associated with global indirect land use impacts of domestic policy sets a precedent that has significant implications well beyond the biofuels sector.
WRI was the pioneering voice on the zero discount rate. WRI’s Biofuels and the Time Value of Carbon was the first and, to the best of our knowledge, only publication to address the issue of how to choose a discount rate for physical carbon in the context of biofuels accounting. WRI’s Liz Marshall was selected as one of five professional peer reviewers for the time parameters portion of the RFS rule. WRI’s perspective on indirects, set forth in Biofuels, Carbon, and Land-use Change and Rules for Fuels, also provided the analytical foundation for advocacy NGOs during the course of this debate.