Essay On How Alternative Fuels Impact The Transportation Industry

Implications of Alternative Fuels on Transportation

Paul Argyropoulos, EPA1

Introduction

There are obvious links between the U.S. Department of Transportation and the U.S. Environmental Protection Agency just as there are linkages between fuel and the movement of people and goods. Without the highways, vehicles cannot travel with ease and, without the fuels, the vehicles cannot travel at all. While DOT's focus is on the transportation system, EPA's focus is on the environment, though again these two worlds come together in the form of the need for fuels and the vehicle emissions that result from the use of those fuels.

This paper is based on EPA's Office of Transportation and Air Quality's (OTAQ's) perspective. OTAQ's mission is to provide guidance and regulation on emissions from anything that uses fuel to move and some things that don't move including emissions from vehicles both heavy- and light-duty, on-road and non-road, and anything from hand-held equipment to power generation equipment, etc. As part of this mission, OTAQ regulates fuels and requires registration of fuels for compliance purposes. OTAQ requires information about the composition, toxicity, and emissions effects of fuels, and how this use would equate to meeting current emission standards.

The strategy that EPA began to develop and deploy back in the late 80s and early 90s was a systems approach. This approach recognizes that regulations may affect a range of stakeholders, all of whom are sensitive to the possible effects of EPA regulations on the cost structure of their industry. Stakeholders are naturally reluctant to incur new costs that would result in additional costs to consumers. EPA realized that stakeholders need to work together and develop a systems approach so that new regulations are based on common sense and also provide greatest amount of flexibility to the stakeholders with the least amount of impact, while still realizing that not every stakeholder will be happy with the final result. However, EPA believes that this approach yields a larger segment of satisfied stakeholders than would result from unilateral decisions and associated regulations. In keeping with this philosophy, EPA has designed programs to transition the industry into new regulations and provide flexibility, training, and banking programs with development of more stringent programs so that fuels are helping new technologies to be deployed. It makes the technologies easier to meet the emission standards and ultimately saves costs. Another dimension to EPA's systems approach is to consider, to the extent possible, not only the direct effects of regulations, but the indirect effects as well. In the case of fuels, this means that EPA may consider not only the emissions resulting from the use of the fuel, but also the emissions resulting from the production of the fuel.

Turning to alternative fuels, any discussion must start by defining what this term really means and how it is defined. For example, is this a fuel that is different than what we have now, a non-petroleum based fuel, a bio fuel, or a gaseous fuel? From EPA's perspective, “alternative fuels” are any fuels that are used in motor vehicles that differ from the existing fuels, which may include conventional petroleum fuels that have been modified by a change in formulation or it may be a completely different fuel type.

A New Renewable Fuels Standard

One of the major recent government actions was the passage of the Energy Independence and Security Act of 20072, which has the goals of reducing the U.S. dependency on foreign imports of oil and reducing the environmental footprint and greenhouse gas (GHG) emissions though utilization of new fuels and fuel blends. The Policy Act of 2005 had set forth national standards of renewable fuels of 7.5 billion gallons by 2012. The new Energy Independence and Security Act (EISA) changed this goal by significantly increasing this target to 36 billion gallons of renewable fuel by 2022. Currently, EPA is engaged in developing all of the new requirements that will be needed to meet all of the objectives of EISA. In particular, there are new categories for replacement of gasoline that have been expended beyond the on-road sector to the off-road sector to permit credit generation into some other pools as well. However, to be in compliance, there are a number of critical provisions that need to be met.

For a fuel to be used as a renewable product, it has to have been made from an approved renewable biomass and has to come from lands that have been previously cultivated. This criteria has far reaching implications for biofuels, including the need to conduct a life-cycle assessment to follow the distribution and refinement of feed stocks into renewable fuel including tracking where the feed stock originated, what land was it grown on, etc. Each fuel category has an associated standard that must be met with the exception that corn ethanol has been “grandfathered.” Generally speaking, if it is a new fuel from a new facility, it has to meet a 20% GHG reduction over the fuel it is replacing, which was established in the Act as the 2005 petroleum-based fuel. Congress included provisions in the Act to provide for the situation where the new technology does not work or come on line as quickly as projected and the standards cannot be reached. In this case, EPA was granted the authority to issue waivers to the standards.

The proposed rulemaking for the second Renewable Fuels Standard (RFS 2)3 requires that some renewable fuels must achieve GHG emissions reductions compared with the gasoline and diesel fuels they displace. To receive credit toward meeting the new standards, refiners must meet these requirements. For each fuel pathway, the proposed rulemaking takes into account GHG emissions produced over the full life cycle of the fuel. This includes production and transport of the feedstock, land-use change, production, distribution, blending of the renewable fuel, and use. The resulting life-cycle GHG emission level is then compared with the life-cycle GHG emissions of 2005 petroleum baseline fuels that are displaced by the renewable fuel. For renewable fuels to quality for RFS 2, they must meet or exceed the minimum GHG reduction thresholds. The thresholds for the four categories of renewable fuels are as follows:

  • 20 percent less GHG emissions for renewable fuels produced from new facilities;
  • 50 percent less for biomass-based diesel;
  • 50 percent less for advanced biofuels; and
  • 60 percent less for cellulosic biofuels.

Ultimately, the implication of this Act is that there will be a shift in the distribution of fuels with renewable fuels obtaining a much higher volume than ever before. Under EPA's original Renewable Fuels Standard (RFS 1)4, alternative fuels were only anticipated to displace 1%-1.5% of conventional fuels in the U.S. by 2012. However, under ESIA the expected change is much more dramatic with an anticipated 16% replacement by 2022. Further, within the transportation sector, petroleum-based liquid consumption is expected to be flat, replaced in part by bio-fuels.

Examining the projected distribution of biomass liquids in 2022, it is still expected that a large component of alternative fuel will be based on corn ethanol, bio diesel, bio-butanol, or a renewable fuel feed stock. There is a tremendous amount of technology that is currently in existence that has the potential to turn feedstock into a product that is very similar to conventional gasoline and diesel. It is clear that transportation will still be utilizing a type of liquid transportation fuel well into the future. However, how quickly technology develops, market penetration, and shifts in purchasing are still somewhat unknown. The recent drop in cost of crude oil has affected the price of gasoline and diesel. However, despite this reduction in price there continues to be a shift in the type of vehicles that the public is purchasing, with movement toward smaller, more fuel efficient vehicles. With changes in technology and shifts in the vehicle fleet, will come changes in GHG emissions.

The reduction of GHG emissions appears to be a priority for the new administration, although many have been working on this issue for a long time. The reality is we are going to see a shift in the change in the mix of types of energy sources – more in broad sector perspective rather than transportation sector. For example, we are still going to see a lot of the transportation sector GHG emissions associated with the shift into electricity, because the energy source for production of electricity is unknown. Quantifying this shift will be big factor in the evaluations of the impacts of GHG emission from the transportation sector. Again, if demand shifts, there could be a shift in types of vehicles utilized by the public and a resulting change in the mix of energy sources used for transportation. So, projections of reduced GHG emissions result partly from reduced travel demand, partly from increased vehicle efficiency, and partly from a shift from petroleum to other alternative fuels, such as renewable fuels, which may have lower associated carbon dioxide emissions.

Research Needs

There are a number of different areas where further research is needed, some of which are included below. One key area of future research will be to conduct a closer examination of the projected changes in fuel use as a result of EISA. Historical trends can provide some insight into whether these projections are reasonable, but there have been many changes in recent months that may impact these projections. New research is needed to incorporate these changes and assess the impact of these changes on the EISA projections.

Additional research is needed on several other topics, including continuing discussions on the costs and benefits of energy security and independence, the importance of maintaining gains in public protection regarding emission controls, and others. One emerging question on sustainability that warrants research is to quantify the trade-off between the use of crop-based feedstocks for transportation fuel versus for food production. For example, ethanol requires a large quantity of corn for production, which necessarily competes against the use of the same corn for livestock and poultry feed.

The area of public policy and market drivers is another area for additional research. Public policy is the center of everything, but there are so many things now are affecting these policies. Climate change is a significant policy issue, but there are so many other factors, including the economy, that ultimately are going to factor into whether a consistent and balanced public policy can be developed that simultaneously meets the needs of a variety of stakeholders and of potentially conflicting viewpoints. Finally, research is needed to understand the infrastructure needs for alternative fuels. There are infrastructure issues associated with alternative fuels that need to be studied, including the need to haul biomass to a refinery, and the associated infrastructure requirements for this activity. This research needs to address questions such as pipelines, highways, etc. that will be needed.

Workshop Presentation


1 Extracted from Oral Presentation by Battelle Staff.

2http://www.govtrack.us/congress/bill.xpd?bill=h110-6

3http://www.epa.gov/otaq/renewablefuels/

4http://epa.gov/otaq/renewablefuels/index.htm

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The second step in prioritisation is the need for alternative fuels. The main reasons for customers to consider alternative fuels are rising fuel costs and pressure to reduce the environmental impacts of non-renewable fuel combustion.

Sectors with high relative intensity of energy expenditure are likely to be more motivated to reduce fuel consumption or switch to alternative fuels (Figure 11). These sectors include aviation, road transport, rail, marine and mining.

Source: ABS; ABARES; Defence Material Organisation; L.E.K. analysis

Figure 11: Relative energy expenditure intensity by sector, excluding electricity (FY2009)

Sectors with high greenhouse gas (GHG) emissions are under greater pressure to reduce their environmental impact. For sectors where fuel is a major source of these emissions, deploying lower impact fuel alternatives has become a priority.

The sectors that generate the greatest direct GHG emissions are agriculture1, mining, manufacturing, private transport and road transport (mainly freight road transport) (Figure 12). Mining and road transport all have combustion of liquid fuels as the major source of their emissions.

Note:Direct emissions exclude emissions from consumed grid-based electricity
Source:Australian National Greenhouse Accounts National Inventory by Economic Sector 2009; L.E.K. analysis

Figure 12: Direct greenhouse gas emissions by sector (FY2009)

External pressure to reduce GHG emissions can also be influenced by public perception. Certain sectors such as mining, aviation, and private vehicles are more visible in the public domain and as a result face increased pressure to demonstrate tangible efforts to reduce their impact on the environment.

Strategies to reduce fuel consumption and GHG emissions can include:

  • improving fuel efficiency through better engine technology;
  • reducing weight through use of lighter materials;
  • changing operating practices (e.g. flight paths, operating procedures); and
  • switching to alternative fuels.

While all of these can make a contribution, consideration of fuel alternatives is important (if not key) for many of these sectors.

Four sectors therefore demonstrate a tangible need to consider fuel alternatives due to concerns over high fuel costs and GHG emissions:

  • aviation (aviation fuel);
  • mining (diesel, natural gas);
  • freight road transport (diesel); and
  • private transport (gasoline).

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