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Low carbon standard could hike gas and diesel prices 80 percent, study shows

WASHINGTON -- The imposition of a nationwide Low-Carbon Fuel Standard (LCFS) would boost average U.S. gasoline and diesel prices by as much as 80 percent within five years of the start of the program and up to 170 percent within 10 years, according to a study issued Thursday by Charles River Associates.

Assuming a nationwide LCFS program is implemented in 2015 with gasoline prices at today’s level, this would result in an average national price for gasoline of nearly $5 per gallon in 2020 and close to $7.50 a gallon by 2025, the study showed.

Specifically for parts of the South and Southwest, the study projects that a nationwide LCFS program starting in 2015 would:

By 2025, result in a net loss of between 640,000 to 1.3 million jobs compared to baseline levels. By 2025, cause a decline in average household purchasing power of between $2,100 and $3,900 a year. Reduce the Gross Regional Product for the region by as much as 7.2 percent by 2025, translating into a $190 billion economic loss. By 2025, result in the loss of $110 billion in regional business investment, a function of a slowing economy made worse under an LCFS.
“It’s always been obvious that policies like LCFS which seek to restrict access to affordable energy would result in higher fuel costs and fewer jobs,” said Michael Whatley, vice president of Consumer Energy Alliance. “But with the release of this study, we now have the ability to quantify those impacts both on a national scale and across several different regions. And among the areas surveyed, no region of the country stands to lose as many jobs under an LCFS as parts of the South and Southwest – a function of the fact that so much of our nation’s energy resources are found, produced and refined in these areas.”

According to the study, a nationwide LCFS could result in the hemorrhaging of as many as 1.3 million jobs in the region (and 4.5 million jobs nationally) by 2025 compared to the baseline.

But the impacts of an LCFS go beyond employment.

According to the research, annual household purchasing power in the region would be cut by $3,900, a function of the fact that more consumers will be forced to spend a larger percentage of their income on energy.

The study examined a region made up of the states of New Mexico, Texas, Arkansas, Louisiana, Mississippi and Alabama.

“Higher energy costs, fewer jobs, less money to spend on your family – that’s what our region of the country should expect to see under a nationwide LCFS,” said J. Kelly Robbins, executive vice president of the Arkansas Independent Producers and Royalty Owners Association. “Unfortunately, what we have here is just the latest example of some regions of the country looking to improve their economic position by lobbying for policies that make other regions less competitive. But in this new study, policymakers now have a new tool to confront the LCFS, and it’s a tool we hope is used frequently as the debate continues.”

The LCFS would prevent certain sources of reliable, affordable petroleum from being converted into fuels such as gasoline, diesel fuel, kerosene and heating oil, according to the study.

The theory justifying the LCFS says that if the supply of these resources is cut, enough lower-carbon alternatives will arrive on the market to replace them – even if sufficient amounts are currently considered decades away from commercial realization, the study said.

In additional to regional impacts, the study also projects that a nationwide LCFS program starting in 2015 would:

By 2025, result in a net loss of between 2.3 million to 4.5 million total U.S. jobs from baseline levels. One-third of job losses, as many as 1.5 million, are U.S. manufacturing jobs. By 2025, lead to the loss of as many as 3.1 million service sector jobs, a direct result of reduced consumer demand under an LCFS, and higher costs for goods and services. By 2025, result in a decline in GDP by approximately 2 to 3 percent, or $410 billion to $750 billion.
Charles River Associates is a global consulting firm that offers economic, financial and business management expertise to major law firms, industries, accounting firms and governments around the world.

Headquartered in Boston, the firm has offices throughout the United States, Canada, Europe, the Middle East, and Hong Kong.

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