Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard

Daniel Scheitrum

MPRA Paper from University Library of Munich, Germany

Abstract: Natural gas is a growing portion of transportation fuel consumed in California. While natural gas has a slight environmental benefit relative to the use of conventional liquid fuels, such as gasoline and diesel, the environmental performance of natural gas can be greatly improved by procurement from renewable sources. Yet renewable natural gas (RNG) production is too expensive to compete with fossil natural gas in the absence of policy intervention. I consider the impacts of the LCFS policy on four pathways of RNG production: (1) dairy manure, (2) municipal solid waste, (3) wastewater treatment plants, and (4) landfill gas. Using a novel dataset of California RNG supply estimates, I construct a static, multi-market, partial equilibrium model of the California fuels markets to evaluate the supply response of RNG to existing California fuel policy, the Low Carbon Fuel Standard (LCFS). I also evaluate policy response of natural gas from fossil sources, gasoline, ethanol, diesel, and biodiesel fuels. Additionally, I apply a method of modeling consumer fuel switching to accurately reflect the extent to which fuel substitution is possible in the short term. I assess the economic surplus, climate, and RNG response to the LCFS policy and compare the policy efficiency of the LCFS to a hypothetical carbon tax. My findings indicate that the LCFS policy is sufficient to incentivize substantial quantities of RNG production; enough to supply the entire market for vehicular natural gas. Further, the LCFS is less efficient than a carbon tax, but when combined with a price ceiling, the policy approaches the efficiency of a carbon tax as the LCFS policy become more stringent.

Keywords: renewable natural gas; methane abatement; fuel standards; multi-market partial equilibrium (search for similar items in EconPapers)
JEL-codes: Q18 Q4 Q42 Q5 (search for similar items in EconPapers)
Date: 2017-02-28
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/77193/1/MPRA_paper_77193.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:77193

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().