Thursday, June 25, 2009

Conversation with NRDC's Nathanael Greene

The New Fuels Alliance and the NRDC do not agree on how indirect carbon effects should be applied in carbon regulations. The latest dialogue occurs on Nathanael Greene's blog; the thread is available here.

Nathanael asked NFA to "put up or shut up" with regard to the indirect effects of petroleum fuels. Our response is pasted below for your convenience.


Thank you for the response. As an advocate, I think I should probably put up rather than shut up, or find another job! A good debate is always worth having.

It is one thing to say NRDC is for accurate accounting for all fuels. We are as well. It is another to specifically say that if indirect effects are included for biofuels they should be included for petroleum to maintain parity in the comparative analysis (i.e. apples to apples). NRDC has not done the latter. NRDC arduously

defended the selective enforcement of indirect effects under the CA LCFS and criticized other groups that asked for parity. You want all fuels to pay for attributional carbon (or direct effects) and biofuels to pay for consequential (indirect) effects as well. Your rationale is that other fuels do not have significant consequential (or indirect effects). But there is no data to support that position, and the limited data available suggests otherwise.

Again, my point is that if you think indirect effects should be included for biofuels – i.e. the LCA boundary should be expanded for biofuels to economically-derived effects – I would think that NRDC would push for them to be included for petroleum (or explain why you have concluded that they are zero). NRDC has not done that (substantively), to my knowledge. So what are these effects? We put up (commissioned) a preliminary analysis of petroleum, one of the few analyses of petroleum out there. It showed that even before getting into economic modeling - which is what produces indirect land use change for biofuels - there are significant effects. It finds that petroleum coke, for example, is a potential significant factor. For every 1000 barrels of crude refined, 90 barrels of extremely dirty coke goes to market as a by-product of refining. Much of this ends up outside of the refinery and the transportation sector. Petroleum coke combustion is the equivalent to 5% of all vehicle GHGs per year in the United States. You might call this an indirect effect of petroleum, or the avoidance of this effect (avoided coke combustion) an indirect benefit of biofuels. Either way, this is just one market impact worth looking at. Another is military. Two years ago I would have laughed at military inclusion. But indirect land use change completely changed the carbon assessment boundaries, putting military well within play. A recent published study (Liska et al.) concluded that military carbon emissions - assuming 26% of military activities in the Persian Gulf are for protecting oil resources - doubled the carbon score of Persian Gulf fuel. Perhaps the study has flaws, just like Searchinger’s first study of iLUC did, but that's a pretty big number. If you cut it in half it's a huge number. Either way, our petroleum study came to this basic conclusion: "Broader economic or price-induced petroleum effects are difficult to systematically assign a boundary given the prevalence of oil-induced economic drivers in the world economy. However, to the extent that economic effects are considered a part of the life cycle analysis of alternative fuels, as is the case with iLUC for biofuels, their effect vis-à-vis petroleum is also of interest." So let's get the economic modeling done so we can compare indirect effects to indirect effects, instead of isolating one indirect effect and adding it to the carbon score of one fuel, and offering without analysis that it is the only indirect carbon effect out there.

You say I am wrong about the expansion effect of electricity. I don't think so. Capping electricity emissions in California will not prevent an indirect (price induced) carbon effect occurring outside of the borders of California any more than capping agricultural land expansion in California would prevent theoretical land conversion overseas from increased demand for agricultural products for biofuels. Most of California's power comes from natural gas. Up to 30% of all electricity comes from outside state borders. If California or the country needs more natural gas to produce electricity because electricity is going into cars, or because NG is going into cars directly, the price of natural gas is going to go up. Power producers looking to produce the marginal electron (the electron now needed in the system to meet new demand) may be priced out of natural gas and choose coal. You say they cant because electricity is capped in CA. But the effect might occur in Nevada, or Pennsylvania, or Canada, or Mexico. It's all about asking what happens on the margins. That's the approach taken for indirect land use change, and it should be the approach taken for other fuels if parity was enforced and LCA boundaries were consistent. But the LCA boundaries have been allowed to be inconsistent, and the result is unneeded controversy and division.

You invited me to “put up or shut up” on petroleum. As discussed, we have commissioned a study that only scratches the surface for petroleum but nonetheless shows some significant effects. Others have bigger numbers for petroleum. But we cannot fund all the work that needs to be done, as much as we would like to, and even while we explore further research as we speak. Much of the heavy lifting on iLUC was underwritten by oil companies, so we may have to find a big donor to do in-depth work on petroleum indirect effects (assuming oil isn’t interested). But in the spirit of “put up or shut up”, let’s be honest about what an indirect effect is. An indirect effect is someone else’s direct effect, by definition. In other words, indirect land use change is the land converted to produce another product (e.g. food) somewhere else (ascribing causation to biofuels for theoretically pushing them there). Ok, let’s assume that this causal chain is reasonable; 2 truths emerge: (1) there is really only direct land use change on this planet (i.e. if a tree falls to produce food, you can blame biofuels but it still fell to produce food); and, (2) ascribing an indirect effect penalty to any product is a way to shift the direct carbon effect of Product A to Product B. How does that work in cap and trade? And is that good public policy?

This was just an illustrative example. The question is: should a Prius be debited for likely increasing the driving of the populace? Imagine how 50% penetration of all electric vehicles could make gas prices plummet and bring back the gas guzzling SUV. I do not know if the effect is large or small. Given the history of economic modeling, I bet one researcher could make the effect large, and another quite small. You seem to think it is our responsibility to present all the data -- we would if we could -- but who is making the policy and don't they have a legal obligation to be balanced? Either way, the point is this: an indirect effect is a questionable metric to judge a product by. It makes sense to assess it on the context of a specific policy (like the RFS) - but part of the biofuel carbon score? To do that, you have to hold the rest of agricultural production static and harmless for cumulative agricultural expansion. Talk about willful ignorance.

I guess one person’s precaution is another’s willful ignorance. Holding off on enforcing a single indirect effect until a better understanding of indirect effects across all fuel pathways (or at least oil and biofuels) can be achieved is not willful ignorance, it's being careful. The parity assessment does not have to be perpetual, but it has to happen. Even the modelers admit these models are in their infancy. We need not ask for certainty before we act, but blatant asymmetry is not the solution. Selective enforcement of indirect effects could produce unintended consequences, such as more marginal (carbon intensive) petroleum consumption in the near term.

I am sure the environmental community will blame "agriculture" for yesterday’s concessions on biofuels. But isn't selling economic modeling as precise enough to put people out of business and supporting selective LCA boundary expansion part of the reason for the backlash? I think so. To be clear, indirect effects should be part of any policy consideration (with emphasis on “policy”) but I also believe that the controversy today stems in part from a reasonable concern being misapplied.

Thanks for the response and I appreciate the invitation to reply.

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