Using Fuel Standards and Carbon Credits to Accelerate Transportation Electrification

Introduction to Transportation Fuel Standards

To reduce transportation sector greenhouse gas (GHG) emissions, the United States and other countries are implementing a wide range of regulatory and incentive programs. Transportation fuel standards use various mechanisms to accelerate the deployment of less GHG-intensive transportation fuels and support electrification of transportation. Two of the most prominent types of transportation fuel standards are alternative fuel standards and low-carbon fuel standards.

  • Alternative fuel standards (AFS): Alternative fuel standards require specified percentages of fuel volume to be from renewable sources. At the United States federal level, the Renewable Fuel Standard (RFS) is aimed at refiners and importers of gasoline or diesel fuel, and requires annually increasing volumes of renewable fuel to replace or reduce the quantity of petroleum-based transportation fuel, heating oil, or jet fuel. The federal RFS allows program participants to buy and sell credits toward meeting the annual volume requirements. This credit trading creates a revenue-generating opportunity for fuel suppliers that are able to exceed their current requirements for volumes of applicable fuels. Various states have also developed their own alternative fuel standards, and this trend may continue.

  • Low-carbon fuel standards (LCFS), in contrast to fuel volume-based standards, are based on GHG emissions. LCFS require the reduction of transportation fuel carbon intensity (CI). CI accounts for the GHG emissions resulting from all stages of a fuel’s lifecycle, from production through combustion. While AFS only apply to fuel suppliers, LCFS offer revenue-generating opportunities to fleet owners; those that own electric vehicle (EV) charging equipment can voluntarily participate and generate credits to sell to other LCFS program participants.

This paper focuses on low-carbon fuel standards because they provide revenue-generating opportunities to owners of electric vehicle charging equipment.

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