Hello friends! Here’s my monthly take on the five most interesting developments in future fuels and vehicles trends. Items I selected include:
1. CARB: Proposed Amendments to the LCFS ― As expected, CARB staff have proposed a package of amendments to the LCFS program, the most important of which would extend the program to 2030 with a GHG reduction target of 20% over 2010 levels. The action flows from the state’s Climate Change Scoping Plan, which requires the state to reduce GHGs by 40% below 1990 levels by 2030. CARB “smoothed” the targets over the next few years, adjusting them downward but keeping the overall 2030 target. That caused credit prices to fall.
Among other changes to the regulation, alternative jet fuel (AJF) has been included in the program for the first time and staff have taken great to address the deficiencies in its original environmental impact analysis concerning biodiesel and NOx formation under its Alternative Diesel Fuel (ADF) regulation. The fuels envisioned to help meet the 2030 requirement were estimated based on current technologies and feedstocks. CARB staff envision more volumes of renewable diesel, renewable natural gas (RNG or biomethane) and AJF. It envisions relatively stable and constant volumes of starch ethanol and biodiesel. There is some growth for electricity and a small volume for hydrogen but not as much as might be expected given the state’s commitment to its Zero Emission Vehicle (ZEV) program. Future Fuels Outlook members can read an in-depth critical analysis here.
Meantime, CERES, the Union of Concerned Scientists and NextGen America released an analysis yesterday prepared by Cerulogy showing that it would be possible to meet an even higher target than what CARB has proposed ― up to 26% under the most optimistic assumptions featured in the analysis. Will CARB go there? Doubtful. CARB’s own analysis shows that more progressive targets would cost consumers and the economy too much.
In the analysis a range of scenarios were analyzed from moderate assumptions in a “Steady Progress” scenario to the most optimistic assumptions in the “High Performance” scenario. The report stresses the scenarios are illustrative and not predictive. The High Performance scenario features more aggressive deployment assumptions on cellulosic fuels, passenger ZEVs, heavy duty natural gas vehicles, and on carbon capture at ethanol refineries and green hydrogen use at petroleum refineries. The figure below summarizes the analysis in these two scenarios.
The report suggests that CARB should set a more stringent trajectory in the years 2025-2030:
“In all of the scenarios presented here, compliance against the proposed targets becomes easier (or over-compliance increases) as the program approaches 2030. Without adjustment to the compliance schedule, this would drive significant credit banking; but it may also result in such a reduction of LCFS credit prices that supply would drop off, undermining the very businesses that will have facilitated success in the program. It would therefore be appropriate for the ARB to consider setting a more stringent trajectory in the years from 2025 to 2030, to ensure that the LCFS continues to represent a strong driver for progress in the context of increasing credit supply.”
2. The Wall Street Journal: How China’s Geely Turned a Disassembled Mercedes Into a Global Car Company ― If you want to know what the future of the car market is going to be, look no further than China and watch closely China’s Geely Holding Group Co. Laughed out of the Detroit Auto show in 2006, the Wall Street Journal notes the company in just a little over 10 years has succeeded in making a car that can now compete globally, thanks to its growing international footprint with the acquisition of Volvo, Proton in Malaysia, Lotus and the London EV Co. Last year the company sold 2 million vehicles, far behind Toyota, General Motors and Volkswagen each of which sell about 10 million vehicles a year. Still, the company is catching up and poised to play a significant role in the growing EV market in China (and globally). For an even deeper understanding of Geely and where it’s headed, check out my friend John McHarris’ analysis of the company here.
3. Biofuels Digest: The Digest’s 2018 Multi-Slide Guide to the 2018 Bioeconomy Business Outlook ― I was intrigued by a number of responses to this poll Jim Lane did of advanced biofuels companies and released this month. First, 70% of respondents said were both optimistic for their individual company’s prospects for growth as well as the industry’s prospects for growth than they were a year ago. And that’s amazing considering the general daily turmoil of the Trump Administration, its stated lack of support for climate initiatives and ongoing controversies surrounding the Renewable Fuel Standard and revisions to the Renewable Energy Directive in the EU. What gives?
I asked Jim about it and he indicated a number of factors including companies reaching commercial scale and financing structures being set. Another thought: we have a stable (and about to be extended, see above) California LCFS, a Canadian Clean Fuels Standard that will be finalized this year and the new RenovaBio legislation in Brazil. Second, I was really surprised that 42% of respondents said that there would be 1 billion gallons (3.8 billion liters) of cellulosic ethanol in global production by 2021 (nearly 54% said renewable diesel, which I think is more the slam dunk). We’ll see if it’s 1 billion gallons, but there is much more going on in this space than has been noted outside of industry circles. I will be exploring this in more depth in an upcoming report for Future Fuels Outlook members.
4. Toyota: Toyota Enters the Next Phase of Its European Powertrain Strategy ― Toyota has decided to phase out its diesel passenger car line given strong hybrid sales and plans to introduce three versions of its Auris, one of which will be gasoline direct injection and the other two hybrid electric. Hybrids represented nearly 40% of the company’s sales in 2017, while diesel vehicles represented just 10%. Meantime, Honda plans to introduce a version of its CR-V hybrid in Europe.
Coincidentally, ICCT said in a report this month that the decline in diesel car sales does not put CO2 targets out of reach for the EU. Efficiency improvements in gasoline engines as well as the rollout of hybrid electric power trains, just what Honda and Toyota are doing, offer “more compelling and cost-effective pathways to reducing CO2 emissions from European passenger cars.” Nevertheless, the firm JATO released an analysis also this month showing that average CO2 from cars rose last year. Why? It’s true there was a decrease in demand for diesel cars with sales declining 7.9%, but there was an increase gasoline sales, particularly SUVs, at 10.9%. The increase in SUV sales tracks with trends in the U.S. and China as well and that has implications for the effectiveness of tightening fuel economy standards for all three.
5. IEA: Nordic EV Outlook ― The number of EVs in the Nordic region is projected to reach 4 million cars by 2030, or more than 15 times the number currently in circulation, according to this new IEA analysis. With almost 250,000 electric cars at the end of 2017, the region accounts for roughly 8% of the total number of electric cars around the world. Norway, Iceland and Sweden have the highest ratios of EVs per person, globally. The Nordic countries represent the third-largest electric-car market by sales, after China and the United States. And, Norway leads the way with a 39% market share of electric car sales – the highest globally. One of the key things that underlie the report but is not directly addressed: these countries are rich and can afford incentive schemes to encourage EV purchases and to put into place charging infrastructure, among other measures. I discuss this dynamic further and what it could mean for the future development of the global EV market in my December report to Future Fuel Outlook members.
Honorable Mentions: The EU has proposed to tighten its real-world emissions testing scheme. And, in the U.S., cleaner electricity means cleaner EVs, says the Union of Concerned Scientists. “Based on data on power plant emissions released in February 2018, driving on electricity is cleaner than gasoline for most drivers in the US. Seventy-five percent of people now live in places where driving on electricity is cleaner than a 50 MPG gasoline car. And based on where people have already bought EVs, electric vehicles now have greenhouse gas emissions equal to an 80 MPG car, much lower than any gasoline-only car available.” The dirty power source argument against EV adoption is becoming less and less relevant.
Tammy Klein is a consultant and strategic advisor providing market and policy intelligence and analysis on transportation fuels to the auto and oil industries, governments, and NGOs. She writes and advises on petroleum fuels, biofuels, alternative fuels, automotive fuels, and fuels policy.