Energy Conservation
Low Carbon Fuel
Low-Carbon Fuel Standard (LCFS)
How a low-carbon fuel standard impacts the Midwest

As Canada's neighbor, the Midwest has invested heavily in jobs, technology and infrastructure to transport and process Canadian crude oil. The majority of Canada's oil exports to the U.S. go to Midwestern refineries.

The Midwest is also a leader in ethanol production, which helps employ thousands more people. Ethanol is the leading biofuel in the Midwest, and the U.S. produces and consumes more of it than any other country in the world.

But Canadian crude oil and ethanol would no longer be acceptable fuel sources should a state, regional or federal low-carbon fuel standard (LCFS) be implemented. That's because an LCFS promotes transportation fuels with lower carbon content than what Canadian oil sands crude or ethanol contain. An LCFS would therefore discourage the use of fuel sources that the Midwest has come to rely on for a secure, accessible and affordable supply.

Overview
Federal
Midwest states
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A low-carbon fuel standard will uniquely harm the Midwest by:

  • Increasing gas prices
  • Jeopardizing energy security
  • Harming the economy and reducing jobs
  • Increasing global greenhouse gas emissions
  • Increasing our reliance on Middle Eastern oil
Overview
In an attempt to reduce the transportation sector's greenhouse gas emissions, several states and the federal government are considering adopting a low-carbon fuel standard (LCFS). An LCFS seeks to lower CO2 emissions by reducing the carbon content of transportation fuel products.

While LCFS supporters may be well-meaning, an LCFS is an inherently flawed concept that could have very serious unintended consequences. The reduced carbon content required by an LCFS would be lower than what Canadian oil sands crude and ethanol contain. Therefore, an LCFS would discourage the Midwest's use of crude oil from Canada or homegrown ethanol.

But having continued reliable access to nearby crude oil and ethanol is critical to maintaining economic growth, employment, and affordable gas prices in the Midwest and the entire nation. It is also in our best interest to prevent artificial barriers from hindering the responsible development of these resources.

Energy security

Volatile prices for transportation fuels and the reliance on unstable nations for some of our fuel supply have heightened Americans' awareness of energy security. The Midwest generally has a secure supply of crude oil from Canada. But if an LCFS eliminates this source, it will increase our dependence on the oil-rich nations in the Middle East and South America, where instability could jeopardize our steady oil supply and increase fuel prices.
Canadian crude oil
Crude oil will play a critical role worldwide for the foreseeable future. Canada, which is second only to Saudi Arabia in oil reserves, supplies the majority of the oil that is refined into transportation fuels used in the Midwest. Mining crude from the Canadian oil sands generates more greenhouse gas emissions than conventional drilling does. This results in higher life-cycle emissions for fuels made from oil sands crude than light sweet crude - emissions that would be incompatible with an LCFS.

The Midwest's oil transportation system is built to receive nearby Canadian crude. Jobs and consumers in the region depend on it. Changing our system would involve costly new infrastructure to transport crude oil from other foreign nations that are less reliable than Canada.

If the Midwest (or the United States in general) does not purchase Canadian crude oil, other countries will. Developing countries such as China and India, whose environmental standards are lower than ours, will be the likely recipients. This will only relocate global greenhouse gas emissions, not reduce emissions.
Ethanol

Researchers reported in the American Economic Journal: Economic Policy that an LCFS that would only regulate the mix of emissions - rather than the full life-cycle levels of greenhouse gases - would be inefficient. This is a major concern related to corn ethanol, since studies show corn ethanol is more carbon-intensive than gasoline when considering its full life cycle. Life-cycle emissions for corn ethanol are counted from the time a field is cleared for corn production to when ethanol leaves a vehicle's tailpipe.

Like Canadian crude oil, homegrown ethanol is a vital part of the Midwest's transportation fuel supply. More than 100 ethanol plants in the Midwest states of Illinois, Iowa, Michigan, Minnesota, North Dakota, South Dakota, and Wisconsin produce more than 8 billion gallons of ethanol annually. This is approximately two-thirds of the total produced nationwide. The economic impacts of the ethanol industry, ranging from jobs to tax revenues, contribute significantly to the whole region.

If a federal or Midwest LCFS passes that counts the full life cycle of all fuels, including ethanol, the ethanol industry and entire rural communities will be devastated.
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Midwest states
The Midwestern Governors' Association, a regional climate initiative involving nine states and two Canadian provinces, has recommended adopting a regional LCFS as part of the Midwestern Greenhouse Gas Emissions Reduction Accord. An LCFS would be used to support the participating states' efforts to reach the greenhouse gas emission reduction targets laid out in the accord: 20% below 2005 levels by 2020 and 80% below 2005 levels by 2050.

The Midwestern Governors' Association released the Low Carbon Fuel Policy Advisory Group Recommendations in December 2010. These recommendations provided a regional perspective on any federal LCFS that is proposed and design considerations to aid Midwestern states considering LCFS proposals. In order to implement a regional LCFS law, each participating state would need to adopt the LCFS recommendations as legislation.

Several states have already considered implementing a California-style low-carbon fuel standard. During the 2009 Minnesota legislative session, a proposed LCFS was introduced but did not move out of any committee. This was partly due to strong opposition from business and community leaders who highlighted the negative economic impacts that could accompany an LCFS. The state of Minnesota released a study that examined the impacts of requiring a 20% blend of ethanol in gasoline in 2011.

In December 2009, the Wisconsin Governor's Task Force on Global Warming convened to discuss draft legislation intended to implement 20 of its recommendations. In a letter to members of the Task Force, then-Governor Doyle, and Wisconsin State Legislators, a coalition of Wisconsin businesses argued against the legislation. A public opinion poll showed that 72% of Wisconsinites oppose an LCFS and the higher costs it would result in at the gas pumps.
Minnesotans' opinions on energy and economic issues
More than three-quarters of Minnesotans believe the government's top priority should be to improve the economy, according to a survey of Minnesotans released in March 2009 by the Minnesota Chamber of Commerce.

The survey's most significant findings include:
  • 76% believe that improving the economy should be the government's top priority, in contrast to 18% who think that combating global warming should be the top priority.
  • 51% named jobs and the economy as the most important issues facing the state, followed by health care and taxes - each at 14%.
  • 68% are satisfied with Minnesota's efforts to address energy and environmental challenges.
  • 40% believe that, in general, Minnesota is heading in the right direction, compared to 45% who believe the state is going in the wrong direction.
  • 65% believe that the federal government or an international governing body, such as the United Nations, is most responsible for addressing global warming issues.
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Wisconsinites' opinions on energy and economic issues
More than one-third of Wisconsinites list jobs and the economy as the top issues facing their families, in contrast to 1% who say that global warming is their top concern. This is according to a survey of 500 likely Wisconsin voters released in October 2009 by Wisconsin Manufacturers and Commerce, which represents the business interests of manufacturers, service companies, local chambers of commerce, and specialized trade associations.

Other significant findings of the survey include:
  • 62% say that global warming is a national and global problem to solve (rather than an issue that Wisconsin should legislate).
  • 72% oppose policies such as an LCFS, which would discourage Wisconsins use of Canadian crude oil, which would increase gasoline prices.
  • By a three-to-one margin, Wisconsinites are unwilling to pay as little as $25 a month to contribute to policies aimed at curbing greenhouse gas emissions.
  • 68% oppose increased renewable electricity mandates if the mandates would increase electricity costs.
  • Three-quarters of Wisconsinites oppose paying increased fees on utility bills to pay for energy efficiency programs aimed at benefitting low-income homeowners and businesses.
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Take action
Policymakers are considering adopting a low-carbon fuel standard in an attempt to possibly reduce greenhouse gas emissions. These efforts could greatly affect our energy security, costs, and supplies in our state, region and country. Share your opinions about an LCFS with your elected leaders.

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