What does the low carbon fuel rule now proposed by California and sure to follow in other states mean to retail companies ?

April 28th, 2009

The State of California on April 23rd adopted a first-ever rule to slash carbon emissions in automotive fuels

The State of California on April 23rd adopted a first-ever rule to slash carbon emissions in automotive fuels, and spur the market for cleaner fuel alternatives. This also impacts all types of diesel fuel used to move or global supply chain..

A little education is probably in order as you consider how low carbon diesel may evolve because it is headed at us like a freight train.

The California rule for the nation’s largest market for transportation fuel will require fuel providers to demonstrate reductions in global warming pollution per unit of energy delivered, regardless of fuel source. It is no surprise that transportation-related emissions which are responsible for nearly 40 percent of the United States’ total global warming pollution is driving this initiative in California and similar plans world wide. Simply stated, companies need more efficient transportation choices, fewer transportation miles and lower-carbon fuels. Simply stated, lower carbon fuels generate significantly less heat-trapping gases per unit of energy delivered than today’s petroleum-based gasoline and diesel.

Some promising work is being done on diesel products that will certainly fall within the lifecycle of the California ruling.

A new report from the US Department of Energy (DOE) National Energy Technology Laboratory (NETL) concludes that coupling a Coal to Liquids (CTL) process with carbon capture and sequestration (CCS) yields a fuel with 5-12% less lifecycle greenhouse gas (GHG) emissions compared to the average emissions profile of petroleum-derived diesel, based on the US national average in 2005. These synthetic fuels are economically competitive with petro-diesel when the crude oil price (COP) is at or above $86 per barrel (based on a 20% rate of return, in January 2008 dollars, with a carbon price of zero). I’m sure most of us agree that by the dates suggested in the California legislation and sure to include diesel fuel that oil prices will once again rise to much more than $86 per barrel.

Is is critically important that those responsible for sourcing fuels stay involved and aware of the rapid changes within the petroleum and fuel market places.

We look forward to and appreciate your comments.

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