The California Air Resources Board acted decisively Friday to improve the economics of a decision to drive on electricity. The Board unanimously adopted amendments to the Low Carbon Fuel Standard (“LCFS”), one of the state’s most important measures to reduce oil dependence, combat air pollution, and spur investment in clean fuel technology. The LCFS doesn’t mandate the use of any particular fuels, but allows regulated parties to determine which technologies are needed to lower the carbon intensity of California’s transportation fuels ten percent by 2020. To meet this target, oil companies can make their own investments in cleaner technology or can buy credits from others providing low-carbon transportation fuels, including natural gas, biofuels, and electricity. One of the amendments the Board adopted requires electricity providers to return all proceeds from the sale of these credits to electric vehicle customers. This means electric vehicle drivers could see cash rebates or rate reductions potentially worth hundreds of dollars a year, at no cost to the state treasury. This would significantly improve the economics of a decision to drive on electricity.
Of course, oil companies don’t have to buy credits from electric utilities or vehicle charging service providers, they can make their own investments in clean fuels. Part of the goal of the LCFS is to spur such investments, because oil companies have spent more time talking about clean fuels than they have actually producing them, choosing instead to invest in sources that are even dirtier than conventional crude oil. As shown in this figure, the oil industry spends fifty times more on a single dirty fuel source, tar sands, than it does on renewable resources.
Note the subsidies oil companies receive for producing oil are even bigger, and dwarf their investments in clean fuels.
Thankfully, other industries are investing heavily in clean transportation fuels, including electricity. Driving an electric vehicle on the national electricity mix emits half as much carbon pollution as the average car. In states with cleaner electrical grids, such as California, driving an electric vehicle emits only a quarter as much as the average car. As the electrical grid becomes cleaner, the emissions benefits improve. When driven on renewable resources, electric vehicle emissions approach zero. Furthermore, driving on electricity can be as cheap as driving on a dollar-a-gallon gasoline. The actions of the California Air Resources Board could make driving on electricity even cheaper, improving the economics of a decision to buy an electric vehicle, and moving California one step closer towards a cleaner, more sustainable, healthier economy.