The California Air Resources Board adopted a resolution updating the predictive model for gasoline reformulation. All California refineries making gas sold in the state will have to blend 10 percent ethanol into their gas to meet new fuel standards set by Gov. Arnold Schwarzenegger starting Dec. 31, 2009.
Today's decision by the Air Resources Board is an important step toward diversifying California's fuel supply with alternative and, in this instance, renewable fuels. While many alternative fuels exist in the market, ethanol is one that can be blended into today's gasoline with no change to our current cars. This action allows fuel providers to blend up to 10 percent ethanol into gasoline, while still ensuring we're meeting California's tough air quality standards. - California Governor Arnold SchwarzeneggerIndustry groups said the ruling will almost double demand for the biofuel in California, which last year used about 1 billion gallons (3.8 billion liters) of ethanol, or nearly one-fifth of the total consumed across the United States.
Blending more ethanol into gasoline will improve air quality in California and reduce dependency on foreign oil. The decision blends in with Governor's Schwarzenegger's Low Carbon Fuel Standard (LCFS) executive order. The goal of the LCFS is to ensure that the mix of fuel sold in California market deliver, on average, lower greenhouse gas (GHG) emissions. By 2020, the LCFS is expected to produce at least a 10 percent reduction in the carbon content, replace 20 percent of all on-road fuels with lower carbon alternatives, and more than triple the size of the state's renewable fuels market.
Boost to biofuels market
"Once the market starts to fall in line like this, it shows the demand is there and is growing," said Bruce Scherr, CEO of Informa Economics Inc., a Memphis-based consulting firm specializing in renewable fuels. A handful of other states - including Connecticut, Minnesota and Hawaii - have mandates for the use of 10 percent ethanol, or E-10, according to the Renewable Fuels Association.
A surge in demand will be created as large states like California, Texas and New York roll out legislation forcing gas stations to sell a more environmentally friendly mix, analysts said. That growth is aided by the Energy Policy Act of 2005, which gives small refiners a federal tax credit for using the biofuel:
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"While many alternative fuels exist in the market, ethanol is one that can be blended into today's gasoline with no change to our current cars," Schwarzenegger commented. "It is critical that government continue reducing barriers so that alternative fuels can increasingly penetrate our transportation fuels markets.
If refineries still cannot meet clean air standards with 10 percent ethanol in their fuel mix, they can reduce emissions from other sources by donating money to programs that take polluting vehicles off the road, among other alternatives, said board spokesman Dimitri Stanich.
California's decision may have an impact on global ethanol producers like Brazil and other countries in Latin America, who export to the United States. The biofuels they produce are more efficient and less costly than corn based ethanol, the main biofuel used today in the U.S. In March, the United States and Brazil signed a biofuels cooperation agreement, but President Lula did not succeed in making the US abandon its US$0.54/gallon tariff on imported ethanol (earlier post).
In March, the United States imported 629,000 barrels of ethanol mainly from Latin America (previous post).
California Environmental Protection Agency, Air Resources Board: Groundwork Begun for Greater Use of Ethanol in California's Gasoline - June 15, 2007.
USNewswire: Gov. Schwarzenegger Issues Statement on Air Resources Board's Adoption of Measure in Support of Ethanol, Renewable Transportation Fuel - June 15, 2007.
California Renewable Fuels Partnership.