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Impact of Intensity Standards on Alternative Fuel Adoption: Renewable Natural Gas and California's Low Carbon Fuel Standard

Abstract:
Natural gas is a rapidly growing transportation fuel. While fossil natural gas is only slightly cleaner than conventional fuels, it provides a vector to introduce renewable natural gas (RNG) which can yield substantial emissions reductions. This paper considers RNG supply estimates from four possible sources: dairy manure, municipal solid waste, wastewater treatment plants, and landfill gas along with other major transportation fuels to evaluate the impact of California's Low Carbon Fuel Standard (LCFS) a first of its kind fuel intensity standard. A static, multi-market, partial equilibrium, numerical model of the California fuel markets assesses the economic surplus and climate impact responses to the LCFS policy and compares the efficiency of the LCFS to a hypothetical carbon tax. Results indicate LCFS policy is sufficient to incentivize substantial quantities of RNG production. The LCFS approaches the efficiency of a carbon tax as the LCFS policy becomes more stringent when combined with a price ceiling.

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Keywords: Renewable Natural Gas, Methane Abatement, Fuel Standards

DOI: 10.5547/01956574.41.2.dsch

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Published in Volume 41, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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