New Plug-In Hybrid Market Trading System Floated

By Published On: August 10, 2007

California should establish a credit trading system that includes plug-in hybrid cars as it forges a standard to reduce greenhouse gas emissions from transportation fuels, a team of University of California researchers advised state agencies late last week. This all-star academic/state study maintains utilities should be eligible for carbon emissions reduction credits based on power sold to charge plug-in hybrid cars. However, to the extent that power is not directly metered, utilities can expect to get fewer emissions reductions credits than they could be entitled to, the researchers concluded–thus underscoring a new policy potential for plug-in vehicle meters. The University of California team outlined its recommendations in the second volume of a report that is expected to weigh heavily as the agencies develop the specifics of a state low-carbon fuel standard under a gubernatorial order. The first volume issued earlier this year examined the technical feasibility of meeting the governor’s order for a 10 percent reduction in the carbon content of transportation fuel by 2020 (Circuit, May 11, 2007) “This new policy is hugely important and has never been done before,” said Daniel Sperling, California Air Resources Board member and University of California at Davis Institute of Transportation director. “It will likely transform the energy industries.” Under the plan outlined in the report, low carbon fuel providers–such as biofuel manufacturers or electric utilities providing electricity to charge plug-in hybrid vehicles–would accrue credits for carbon reductions. Major marketers of transportation fuels, namely oil companies, then would be held responsible for gradually reducing the carbon content of the fuel they sell each year until they achieve a 10 percent reduction in 2010. They could meet their carbon reduction targets either by cleaning up their fuels or by purchasing credits to cover excess carbon content. Low carbon fuel providers could subsequently use the money to recoup their investments in alternative fuels infrastructure. Likewise, to the extent they could not sell credits immediately, they could bank them for later sale as the pressure to reduce carbon emissions under the standard mounted. “The study reinforces our view that a low carbon fuel standard will play a major role in reducing California’s greenhouse gas emissions 25 percent by 2020,” said Mary Nichols, California Air Resources Board chair. The Air Board has pledged to adopt a low carbon fuel standard as an early action measure under the state’s climate protection law, AB 32 (Circuit, June 25, 2007). The report recommends that the state standard take into account the life cycle greenhouse gas emissions of various fuels, from production to consumption. However, it notes that to do so the state agencies charged with enforcing the standard will need more staff and resources. “One of the key roles for the state agencies will be ensuring that the competition among the different fuels results in real carbon emission reductions, more consumer choice, and minimal costs,” said Alex Farrell, University of California at Berkeley Transportation Sustainability Research Center director. In discussing electricity as a low carbon fuel for both battery electric vehicles and plug-in hybrid vehicles, the report laid out three options for how credits could be granted. Under the first, credits would be awarded based on dedicated meters connected directly to vehicle charging stations. However, because not all charging stations have the meters and plug-in hybrids may be charged with 120 volt lines plugged directly into conventional wall sockets utility credits likely would not fully reflect actual carbon emissions reductions. Under the second approach, the report said, meters would be placed on all cars charged with electricity. This would be the most accurate way of measuring emissions reductions and granting credits, it said. However, neither the state’s power companies nor big automakers favor this approach due to the expense and possible difficulty of reading the meters. The third way, the document outlined, would be to estimate the amount of electricity used to power vehicles. Miles traveled by the cars would have to be recorded by the Department of Motor Vehicles, for instance, which is not done now, or estimated based on surveys. The researchers said this “is not the most reliable approach, nor is it acceptable for measuring and assigning large amounts of credits.” Utilities favor plug-in hybrids because they can reduce greenhouse gases from transportation while making better use of the power grid. However, some worry that the vehicles will be charged up with nuclear and coal power. Natural gas will be similar, the researchers concluded. Special meters on gas dispensers will be required to accurately determine the amount of credits the state should issue for using compressed natural gas and liquefied natural gas in vehicles. — Editors’ note: For a more detailed version of the Los Angeles ethanol story, please see our new sister publication: E=MC2 – Energy Meets Climate Challenge. You can find it at

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