The transportation sector is second largest source of global warming pollution in the US (contributing about a third of total emissions) and it consumes two-thirds of our daily oil demand. Those two facts make it essential to act now to put transportation on a cleaner road, and that road is outlined in the American Clean Energy and Security Act of 2009 proposed by Congressmen Waxman and Markey last week.
To cut oil consumption and emissions in the transportation sector, we must tackle both supply and demand. The Waxman-Markey draft includes standards to make our cars, trucks, trains and planes cleaner and more efficient. It encourages alternatives to driving, like transit and bikeways, requires the oil industry begin shifting to clean fuels, and directs EPA to set standards for motor vehicles while protecting California's authority to set its own greenhouse gas motor vehicle standards. Critically, in order to ensure this country can meet its global warming pollution reduction targets in the most cost-effective manner possible, the draft also puts transportation fuels under the economy-wide cap.
Let's walk through the transportation-related sections of the draft:
Cap Carbon, Drive Innovation with Performance Standards
An overarching principle of effective carbon legislation is to assign a declining cap to as much of the economy-wide emissions as possible. Therefore, transportation sector emissions must be included. The Waxman-Markey draft uses an approach consistent with recommendations of the United States Climate Action Partnership (USCAP) that requires refiners and importers of transportation fuel (including gasoline, diesel, jet and marine fuel) to hold allowances for the carbon emitted when the fuel is burned in a vehicle or vessel. Fuel refineries, since they are large stationary sources of pollution, must also hold allowances for the global warming emissions released during refining. This means that the cap covers both the upstream emissions associated with fuel production and the downstream emissions from fuel use.
As explained in a previous post, the cap on transportation emissions will ensure that this sector joins the other major polluters in taking responsibility for cutting global warming pollution in compliance with national reductions targets. The price signal at the pump from the cap, however, may not be enough on its own in the early years to spur meaningful change in a sector that has grown accustomed to cheap oil, inefficient vehicles and expansive roads for nearly 100 years. For this reason, the cap must be accompanied by complementary standards and incentives to drive innovation in and deployment of cleaner technologies.
Clean Fuels Standard
As one such policy, Section 121 of the Waxman-Markey draft establishes a Low Carbon Fuel Standard (LCFS) to discourage unsustainable, high-carbon fuels and introduce cleaner ones into the market. The LCFS covers fuels that go into motor vehicles designed for road and nonroad use as well as aircraft. The draft gives EPA discretion to include marine fuels as well. The LCFS requires transportation fuel emissions intensity (e.g. grams of CO2-eq/MBtu) to decline by 5% in 2023 and 10% in 2030.
Before 2023, the standard supplements the existing renewable fuels standard (RFS) by introducing a requirement that prevents increases in the carbon intensity of the non-renewable component of fuels over 2005 baseline levels. This provides a powerful disincentive against investments in dirty fuel supplies such as tar sands, oil shale and coal liquids.
Importantly, the draft also defines what type of biomass will comply under the program to safeguard against the indiscriminate harvesting of forest lands for biofuel production. These safeguards reinforce and extend current safeguards in the existing RFS. The LCFS also extends the requirement of the RFS to include indirect land use considerations in the measurement of a fuel's greenhouse gas intensity.
Clean Vehicle Standards
Passenger Cars: In Section 221, the draft bill directs the President to use existing statutory authority to set vehicle performance standards for light-duty vehicles, to the extent practicable harmonizing fuel economy standards set by NHTSA and greenhouse gas emissions standards set by EPA and California. Standards have to achieve at least as much emissions reductions as would be achieved under a national implementation of California's stringency targets (my colleague Roland Hwang provides an example of how to this can be done). Furthermore, the draft preserves California's authority to continue to set its own emission standards for motor vehicles.
Trucks, Trains, Ships and Planes: Section 221 also requires the EPA to set greenhouse gas standards for new heavy-duty vehicles by the end of 2010, and for new marine vessels, locomotives and aircraft by the end of 2012. Standards for all vehicles "shall achieve the greatest degree of emissions reduction achievable based on the application of technology which the Administrator determines will be available at the time such standards take effect, taking into consideration cost, energy, and safety factors associated with the application of such technology." Also credits can be generated for going beyond standards and those credits can be traded across mobile source categories.
Regional Planning Standards
The Waxman-Markey draft bill adopts a new paradigm for funding regional transportation planning that would boost public transit and other alternatives to driving. Passenger car travel makes up the bulk of transportation emissions and oil use, and curbing vehicle-miles-traveled, or VMT, is crucial to cleaning up the sector. Historically, about 80 percent of transportation funding has gone to road building, which encourages passenger car usage and sprawling development. As NRDC's Deron Lovaas points out, President Obama is focused on making a change and recently commented, "I think right now we don't do a lot of effective planning at the regional level when it comes to transportation. That's hugely inefficient..."
The draft bill (section 222) adopts language from Congresswoman Matsui's Smart Planning for Smart Growth Act of 2009 (H.R. 1780), which changes the direction of planning and investment by:
- Requiring that regions set greenhouse gas emission reduction goals;
- Requiring the establishment of standard models and methods for measuring progress;
- Investing in public transportation, technology and other measures to reduce emissions;
- Making regional plans available to the public via the internet; and
- Authorizing a competitive grant program for regions implementing these plans.
Combined, these commonsense requirements make a sound foundation to design a program that reduces greenhouse gas pollution from transportation and land use patterns.
Provide Incentives to Overcome Market Barriers and Stimulate the Economy
Incentives can encourage a more rapid adoption of energy efficient technologies than standards alone, expediting the transformation of our entrenched transportation infrastructure and creating new jobs. Nearly 100 years of driving on cheap oil has created an infrastructure tied to the internal combustion engine. Clean mobility in the future will be across multiple modes and increasingly powered by efficient electric drivetrains. The Waxman-Markey bill establishes programs to start deploying advanced plug-in electric-drive vehicles.
Electric Vehicle Infrastructure
Vehicle electrification holds significant potential to minimize oil consumption and global warming pollution. This fundamentally different transportation system will require equally new ways to refuel our vehicles, regulate fuel supply, and invest in infrastructure. Thus, in Section 122, the draft bill directs electric utilities to begin planning the supporting infrastructure for electric drive vehicles. Utility plans will include ways to support a large fleet of electric vehicles such as charging stations and battery exchanges.
The components of our new electric transportation system must interact seamlessly. Careful planning will ensure compatibility between emerging vehicle and grid technologies. Towards this end, the bill requires utility infrastructure plans to achieve interoperability between new vehicle technologies and new grid technologies to the greatest extent possible. Utilities and regulatory authorities must establish protocols and standards for integrating plug-in vehicles into the electrical distribution system including a smart grid. This will include vehicle identification so that a vehicle owner can purchase electricity for fuel regardless of location. Cost recovery is left to the discretion of state regulatory authorities.
Large-Scale Vehicle Electrification Program
Despite their many benefits, plug-in vehicles are subject to market barriers such as upfront costs. Section 123 addresses this problem by providing regional large scale deployment programs for electric-drive vehicles. The deployment program actually serves several purposes at once. It introduces advanced vehicles into the market but also collects information to control the integration of plug-ins with existing and new infrastructure. For instance, the deployment program will collect and disseminate best practices across different regulatory environments and it will address electrical system performance and demonstrate protocols to facilitate vehicle and grid integration.
State and local governments can apply for deployment funds and may apply jointly with electric utilities, automobile manufacturers, technology providers, car sharing companies, and other entities. Funds may be used to offer plug-in purchase incentives, install electric charging stations for plug-in electric vehicles, establish battery exchanges, or pay for smart grid or infrastructure investments that integrate plug-in vehicles with the grid.
Plug-in Electric Drive Vehicle Manufacturing
Existing fuel economy regulations are essential to keeping vehicle technology aligned with the nation's need to reduce global warming pollution and oil consumption. But they are also interim steps that can be met with conventional technologies. Significant long term emissions reductions will require unconventional technologies that sharply break with today's. Even so, technology deployment is inherently risky. It poses significant upfront costs which some manufacturers are reluctant to incur. In Section 124, the Waxman-Markey bill addresses this by defraying the costs of electric drive vehicle manufacturing investments.
The bill provides incentives for automobile manufactures to retool their facilities so that they can build plug-in electric-drive vehicles that are produced in the United States. The incentive would also help plug-in manufacturers purchase domestically produced vehicle batteries for their final products. The program is needs-based: the applicant must demonstrate that without the incentive, it would be unable to reasonable finance plant retooling or vehicle batteries.
Passenger Transport and Goods Movement
Section 223 of the draft bill authorizes continued operation of the EPA's SmartWay program to promote energy efficient technologies in passenger transport and goods movement. SmartWay provides financing to upgrade existing heavy truck stock with technologies that improve fuel economy, reduce idling fuel consumption and cut criteria and global warming emissions. The program also promotes operational changes that can reduce truck mileage. SmartWay is also expanded to compile a database of the nation's truck fleet characteristics and emissions performance, a task previously managed under the Census that has not been updated since 2002.
The Waxman-Markey draft houses the essential elements of a bill to promote clean transportation (essential elements are also described in NRDC's transportation policy brief here). The draft includes fuels in the cap and establishes performance standards to push innovation. We don't have time to wait when it comes to cutting our oil dependence and solving global warming, so incentives for clean technologies, such as vehicle electrification and the production of sustainable, low carbon liquid fuels, are key for kick-starting the transition. I look forward to hearing your thoughts on the draft bill provisions.