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Designing a low carbon fuel standard to achieve deep GHG reduction targets: Insights from an energy-economy simulation model of British Columbia

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Low carbon fuels are expected to play an important role in achieving long-term regional greenhouse gas (GHG) reduction targets within transport. The Low Carbon Fuel Standard (LCFS) is a policy instrument that has been used in British Columbia, California, Oregon, and Europe to reduce the GHG emissions associated with transportation fuels. I use a dynamic hybrid energy-economy model (CIMS-LCFS) coupled with a linear programming optimization model to explore the potential effectiveness of the LCFS at reducing GHG emissions in British Columbia under a variety of policy scenarios. This study also explores the potential for British Columbia’s transportation sector, including passenger vehicles and freight vehicles, to achieve the province’s mandated target of reducing GHG emissions by 80% below 2007 levels by 2050. CIMS-LCFS is a technologically-explicit, behaviorally-realistic energy-economy model that simulates the effects of climate policies on technology adoption and GHG emissions. The LP optimization model represents fuel supplier decisions to supply fuel to the market at the lowest possible cost subject to 50 unique constraints encompassing limited fuel availability, policy, and technical constraints. Results demonstrate that British Columbia’s present suite of transportation policies are not strong enough to induce the emission reductions required to achieve the province’s 2050 GHG target. These targets are only achievable for the entire transportation sector when the most stringent climate policies are combined, including a LCFS, a zero emission vehicle (ZEV) mandate, fuel efficiency standards and carbon pricing. My results indicate that the LCFS may have a particularly strong effect in decarbonizing the freight sector. In contrast, the LCFS may be less important for the passenger vehicle sector in the presence of other stringent transport policy (e.g. a ZEV mandate). Overall, I find that with careful policy design, the LCFS can be complementary to other stringent policies, and could play an important role in achieving 2050 GHG reduction targets in the transportation sector.
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