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Seeing Green: Emission Reducing Fuel Policies Help Lower Gas Prices

September 9, 2013 By Timothy O'Connor

Timothy O'Connor
Californians struggling with high gas prices should feel optimistic about the future.  A new memo [PDF] by economists from EDF and Chuck Mason, a prominent economist at the University of Wyoming, demonstrates that policies established to reduce emissions and help the state reach its climate change goals also help to arm consumers at the pump.

The Low Carbon Fuel Standard, cap and trade, and other complementary policies such as Governor Brown’s Zero Emission Vehicle program and national Renewable Portfolio Standards seek to integrate lower or zero-carbon fuels into the energy market in an effort to reduce greenhouse gas pollution.

As our memo explains, in California these efforts also help to increase the market share for alternative, lower-carbon fuels. Between now and 2020, alternatives may grow to occupy between 15% and 24% of the market, creating new jobs and addressing the large market share that oil companies have in California.

Currently six oil companies control 94% of the fuels market in California. Through a set of mergers and other factors they have developed a strong lock on fuel in the state, and more specifically on consumers’ pocketbooks at the pump.

When alternative fuels enter the market, however, and establish themselves collectively as a “competitive fringe” sector in the market, they could reach almost a quarter of the fuel market for cars and trucks. They have the potential to displace up to 3.7 billion gallons of gasoline a year.

Figure 1. Alternative fuels 2020 projections and market share

Alternative Fuel Type

Year 2020 Projected Volume

Volume of displaced gallons of gasoline in California in 2020 (per year)

% of fuel market share of cars and trucks in CA in 2020 (gasoline and diesel)

Natural Gas-cars

95 MM therms sold

76 million

.5%

Natural Gas-trucks

15-35% new heavy duty trucks

199 million -221 million

1.3-1.5%

Biofuel-ethanol

1.6 billion-2.4 billion gallons

1.6 billion-2.4 billion

10.9-16.4%

Biofuel- biodiesel

5% belend-15% blend into diesel

200 million-600 million

1.3-4%

Electricity and hydrogen passenger vehicles

500,000-1,000,000 vehicles on the road

160.5 million-321 million

1-2%

 

Total displaced gallons of gasoline:

2.3 billion-3.7 billion per year

Market share of alternative fuels:

15-24%

With increased consumer choice from options such as natural gas vehicles, biodiesel and electric cars – overall consumer choice goes up and prices go down.  This healthier market would result in fewer price spikes at the pump, and a more sustainable transportation system.

For the sake of our pocketbooks, we must continue to foster policies that help the environment, create jobs, spur new industries and reduce gas prices. Because in the end we could all use a little more green.

Timothy O’Connor is the Director of Environmental Defense Fund’s California Climate and Energy Initiative in their San Francisco office. This article was republished with permission for the EDF.



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