Increasing Market Competition to Reduce the Level and Variability of Transportation Fuel Prices: A Case Study on California’s Low Carbon Fuel Standard

California’s groundbreaking Low Carbon Fuel Standard (LCFS) is reducing carbon pollution while saving $837 million per year from increased diversification and competition of fuel suppliers, according to a study by economists Jasmin Ansar and Roger Sparks. The study, commissioned by NRDC, finds that the LCFS - a major component of California’s clean energy and climate law AB32 - will result in more suppliers of alternative fuels entering the market, increased competition, and reduced market power in the oil-dominated fuels market. By 2020, the authors find these spillover benefits from the LCFS translate to downward pressure on fuel prices of about 4 cents per gallon and reduced price variability from $0.70 to $0.58 per gallon. These benefits are in addition to other benefits of the LCFS and AB32 including reduced damages from greenhouse gas emissions, petroleum dependency, and smog and soot-forming pollutants that harm public health.