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Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard

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  • Scheitrum, Daniel

Abstract

Natural gas is a growing portion of transportation fuel consumed in California. While natural gas has a slight environmental benefit relative to the use of conventional liquid fuels, such as gasoline and diesel, the environmental performance of natural gas can be greatly improved by procurement from renewable sources. Yet renewable natural gas (RNG) production is too expensive to compete with fossil natural gas in the absence of policy intervention. I consider the impacts of the LCFS policy on four pathways of RNG production: (1) dairy manure, (2) municipal solid waste, (3) wastewater treatment plants, and (4) landfill gas. Using a novel dataset of California RNG supply estimates, I construct a static, multi-market, partial equilibrium model of the California fuels markets to evaluate the supply response of RNG to existing California fuel policy, the Low Carbon Fuel Standard (LCFS). I also evaluate policy response of natural gas from fossil sources, gasoline, ethanol, diesel, and biodiesel fuels. Additionally, I apply a method of modeling consumer fuel switching to accurately reflect the extent to which fuel substitution is possible in the short term. I assess the economic surplus, climate, and RNG response to the LCFS policy and compare the policy efficiency of the LCFS to a hypothetical carbon tax. My findings indicate that the LCFS policy is sufficient to incentivize substantial quantities of RNG production; enough to supply the entire market for vehicular natural gas. Further, the LCFS is less efficient than a carbon tax, but when combined with a price ceiling, the policy approaches the efficiency of a carbon tax as the LCFS policy become more stringent.

Suggested Citation

  • Scheitrum, Daniel, 2017. "Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard," MPRA Paper 77193, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:77193
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    References listed on IDEAS

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    1. Scheitrum, Daniel & Myers Jaffe, Amy & Dominguez-Faus, Rosa & Parker, Nathan, 2017. "California low carbon fuel policies and natural gas fueling infrastructure: Synergies and challenges to expanding the use of RNG in transportation," Energy Policy, Elsevier, vol. 110(C), pages 355-364.

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    More about this item

    Keywords

    renewable natural gas; methane abatement; fuel standards; multi-market partial equilibrium;
    All these keywords.

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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