Low-Carbon Fuel Standards:
Driving in the Wrong Direction
INDEPENDENTREASONEDRELEVANTMay 26, 2009
Many Canadian provinces are considering a low-carbon fuel standard (LCFS).
An LCFS would require transportation fuel providers to distribute a mix of fuel
that, on average, emitted a declining amount of greenhouse gas emissions per
unit of energy produced, measured on a lifecycle basis.
An LCFS has numerous problems: administrative complexity, scientific
uncertainty – owing to the difficulty of measuring all emissions from fuel
consumption and production, and the possibility that there will be little net
reduction in total emissions.
An economy-wide cap-and-trade system would be more economically efficient
and more certain to reduce greenhouse gas emissions.
The author would like to thank Frank Wolak of Stanford University for his considerable contribution to the original draft
and for comments received throughout the drafting of this paper, and to Colin Busby and Finn Poschmann for their helpful
suggestions. The author assumes sole responsibility for the paper.
1 Transportation’s contribution ranges from a high of 41 percent in Quebec to a low of 15 percent in Alberta (Canada 2008).
In 2007, gasoline and diesel powered 87.3 percent and 12.3 percent, respectively, of kilometres travelled by fuelled vehicles
(Cansim Table 405-0066).
In British Columbia, such a plan is referred to as a low-carbon fuel regulation.
Transportation is a major contributor to Canada’s greenhouse gas (GHG) emissions, accounting for 26
percent of the total.1 A number of technologically feasible low-carbon fuels exist that could reduce these
emissions. The leading candidates are electricity, hydrogen, and biofuels, although there is uncertainty about
the future market shares of these fuels and about what other technologies will emerge.
One policy tool that has been suggested for increasing the market share of low-carbon fuels, without
regulating what specific types of fuels should meet reduction targets,