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Mandate for low-carbon fuel would hurt economy

Governors of Northeastern states in 2009 set in motion an “environmental protection strategy” that could have disastrous economic consequences but no discernible environmental improvement if implemented. New governors in several of these states, including Pennsylvania’s Tom Corbett, have the opportunity to abandon this flawed plan.

The purpose was to reduce greenhouse gas emissions into the atmosphere from fuels burned to power vehicles. The standards would apply a life-cycle analysis to the carbon released in the production and consumption of all fuels and institute carbon reduction mandates. Supporters of the standards argue their plan is “market-based and fuel neutral” allowing those regulated to make decisions and providing a marketplace for new fuels and new technologies.

Here we go again: Government trying to manipulate and create markets. It never works as planned.

The low-carbon fuel standard seeks to avoid environmental embarrassments such as the ethanol craze of the last decade. Ethanol was another idea to switch from oil to a “renewable resource” that would be good for the environment. However, we learned:

  • That a life-cycle analysis of ethanol production shows it to be worse for the environment than petroleum production.
  • Ethanol contains fewer BTUs of energy, so it takes more of it to power a vehicle.
  • Ethanol production diverted corn from livestock feed and other food production, driving up food prices.
  • Prolonged ethanol use wears out engines faster, meaning more energy is diverted
  • to making replacement engines at a faster rate.

This is an example of the law of unintended consequences that always follows government intervention in the marketplace.

We were told we simply used the wrong crop to make ethanol — we should have used switchgrass. We don’t grow much switchgrass commercially in the U.S., but heck, we could create a market. …

When will they learn?

Enter the low-carbon fuel standard. No fuel specified. Just a mandate to reduce carbon through swaps to lower-carbon fuels and the use of carbon credits.

And those lower-carbon fuels would be … what?

The first thing that would happen is a switch from heavy crude oil to lighter crude oil to manufacture gasoline and diesel fuel. Heavier crudes have more carbon content released when burned. The oil we drill in the Americas — the U.S., but also Venezuela, Mexico and Canada — is heavy crude. The lighter crudes with lower carbon content come from — you guessed it — the Middle East.

So the standard would increase dependence on Middle Eastern oil. There’s good thinking.

With a mandated demand for low-carbon fuels in the northeastern U.S, lighter crude destined for states without the standard would be diverted to our region while the heavier crude-based fuel here would be sent to states that do not follow the standard. Net improvement to the environment: zero.

Funny thing about atmospheric gas: it doesn’t abide by state boundaries.

Yes, there could be some switch to fuels like compressed natural gas. But we don’t have the vehicles or fueling stations to make that practical, and there is still a significant carbon content to natural gas. And, while burning natural gas produces 30 percent less carbon dioxide (the primary greenhouse gas) than oil, CNG vehicles would not be immune to the low-carbon fuel standard mandates and impact.

Can electric vehicles meet the standard? Well, as long as the electricity was generated from low-carbon fuels they would be an option. But currently, we can power a small, very light car for 100 miles between charges. We cannot get an 18-wheeler with 20 tons of goods to the market on electrical power.

The price of transportation fuel in the Northeast would skyrocket from implementation of the low-carbon fuel standard. Pennsylvania is called the “Keystone State” for a reason. We are the transportation and logistics hub to reach one-third of the nation’s population and half of Canada’s population. The standard would decimate Pennsylvania’s logistics businesses.

The governors agreed to study extension of the low-carbon fuel standard to heating fuels. Anybody remember how cold it was last winter? Imagine the impact on heating bills if we begin to increase fuel costs. I, for one, would be delighted to be the first in my neighborhood to have a home nuclear plant, but I’m guessing it would take a while to get it installed.

Presumably that standard would include heating fuel for schools, colleges, hospitals, government offices, factories and all public buildings. The high-priced fuel would be purchased with scarce tax dollars.

And would the heating fuel standard apply to the operation of boilers in our manufacturing plants that power systems and melt raw materials? Would the energy for melting steel be required to be sourced from low carbon fuel? What about the natural gas used as feedstock for plastics and fertilizers?

The unilateral agreement of Northeast governors to implement a low-carbon fuel standard is badly flawed public policy. Gov. Corbett, you have to rescind Gov. Ed Rendell’s agreement to the protocol.

David W. Patti is the president and chief executive officer of the Pennsylvania Business Council in Harrisburg. Email him at [email protected].

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