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Climate consequences of low-carbon fuels: The United States Renewable Fuel Standard

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  • Hill, Jason
  • Tajibaeva, Liaila
  • Polasky, Stephen

Abstract

A common strategy for reducing greenhouse gas (GHG) emissions from energy use is to increase the supply of low-carbon alternatives. However, increasing supply tends to lower energy prices, which encourages additional fuel consumption. This “fuel market rebound effect” can undermine climate change mitigation strategies, even to the point where efforts to reduce GHG emissions by increasing the supply of low-carbon fuels may actually result in increased GHG emissions. Here, we explore how policies that encourage the production of low-carbon fuels may result in increased GHG emissions because the resulting increase in energy use overwhelms the benefits of reduced carbon intensity. We describe how climate change mitigation strategies should follow a simple rule: a low-carbon fuel with a carbon intensity of X% that of a fossil fuel must displace at least X% of that fossil fuel to reduce overall GHG emissions. We apply this rule to the United States Renewable Fuel Standard (RFS2). We show that absent consideration of the fuel market rebound effect, RFS2 appears to reduce GHG emissions, but once the fuel market rebound effect is factored in, RFS2 actually increases GHG emissions when all fuel GHG intensity targets are met.

Suggested Citation

  • Hill, Jason & Tajibaeva, Liaila & Polasky, Stephen, 2016. "Climate consequences of low-carbon fuels: The United States Renewable Fuel Standard," Energy Policy, Elsevier, vol. 97(C), pages 351-353.
  • Handle: RePEc:eee:enepol:v:97:y:2016:i:c:p:351-353
    DOI: 10.1016/j.enpol.2016.07.035
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    References listed on IDEAS

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    Cited by:

    1. Abdul-Manan, Amir F.N., 2017. "Lifecycle GHG emissions of palm biodiesel: Unintended market effects negate direct benefits of the Malaysian Economic Transformation Plan (ETP)," Energy Policy, Elsevier, vol. 104(C), pages 56-65.
    2. Gallagher, Paul W. & Sleper, Daniel, 2016. "The market and consumer welfare effects of mid-level ethanol blends in the US fuel market," Energy Policy, Elsevier, vol. 98(C), pages 149-159.

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    Keywords

    Climate change; Fossil fuel; Rebound effect;

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