sub-group 6: indirect effects of other fuels

Sub-group 6:Indirect Effects of Other Fuels

Presented to the LCFS Expert WorkgroupJune 17, 2010

Sacramento, CA

Subgroup 6 Membership

• John Courtis, ARB Staff• Manisha Singh, ARB Staff• Blake Simmons, Sandia (Subgroup Chair)• Bob Larson, EPA (Subgroup Co-chair)• Seth Meyer, University of Missouri• Wally Tyner, Purdue University• Phil Heirigs, Chevron Global Downstream LLC• Jesper Kløverpris, Novozymes A/S• Paul Wuebben, South Coast Air Quality

Management District

Presentation Outline• Review of workplan and status update• Focus on indirect effects of oil and gas• Presentation by Bjorn from ERA on their approach• Subgroup presentation– Focus on indirect effects of oil and gas– Conversion technology effects– Supply change effects– Displacement effects

• Discussion of table of indirect effects• Next Steps/Conclusion• Q&A

Review of Work Plan and Approach

Task 1: Establish Criteria for Defining “Indirect Effects of Other Fuels”

Effects influencing GHG emissions and the carbon intensity (CI) of fuels:

1. Direct effects: All significant effects within the primary production chain or life cycle (cradle to grave)

2. Co-product effects: Significant effects caused by co-products from the production chain (handled by the system expansion – or displacement – methodology)

3. Other market-mediated effects: Significant effects caused by changes in economic markets, e.g. ILUC or changes affecting marginal electricity or fossil fuel supply. This also includes ‘carbon leakage’ as a function of increased production/consumption.

It is recommended to define indirect effects as ‘market-mediated effects other than co-product effects’ (3)

It is also recommended to consider carefully if direct and co-product effects (2 and 3) have been overlooked for some fuels

Battery Materials Vehicle Materials

Upstream Energy Production

Downstream Energy Production

Vehicle EnergyUse+ +

Oil Spills

Deforestation

Co-products

Water Use

Invasive Species

Net C Time Lag

Reservoir Depletion

Albedo Effects

Black Carbon etc.

Is Everything Outside the Red Line an Indirect Effects under the LCFS?

Task 2: Develop a List of Indirect Effects to be Assessed

• We have developed an initial list of potential indirect effects as a function of fuel type

• Excel spreadsheet – working draft for comment

• Need to further refine for division between direct and indirect effects

• Need input from ARB on scope for the sub-group on the list

• Petition input from the EWG on input thus far as well

• Examples:– Gasoline/diesel– Coal– BEVs + Hybrids– Natural gas– Electricity– Hydrogen

Task 3: Indentify Significant Gaps in Current Indirect Effect Analyses

• Biofuels – recommended to use update from Prof. Tyner on corn ethanol production scenarios into the LCFS

• There is still a lack of robust data sets for almost all elements of monitoring and determining indirect effects

• The modeling tools employed to date, for the most part, have not been validated

• We are working our way through each fuel conversion technology and developing a prioritized list of indirect effects for consideration under the LCFS

• Gaps will not be hard to define – finding solutions will be

Subgroup 6 Milestones: Update

Goal Deadline

Task 1 Establish Criteria for Defining Indirect Effects of Other Fuels May 2010 ✔

Task 2 Develop a List of Indirect Effects to be Assessed June 2010 ✔

Task 3 Identify Significant Gaps in Current Indirect Effect Analyses July 2010

Task 4 Identify Available Data Sets and Models for Indirect Effects as a Function of Fuel Type

September 2010

Task 5 Develop a Long-Term Work Plan for the ARB and LCFS October 2010

Presentation by Björn PieprzykEnergy Research Architecture

Direct and indirect effects of fossil fuels

Era Energy Research Architecture

Björn Pieprzyk

www.energy-research-architecture.com

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A. Basis for the analysis of direct and indirect effects of fossil fuels

• ERA – study: The impact of fossil fuels (November 2009)

Analysis of conventional and unconventional fuels:– Greenhouse gas emissions– Environmental consequences– Socio-economic effectsRecommended actions: Alternatives to conventional and unconventional

oil have to be created: biofuels and efficiency measures

• Current research - short study: Substitution of biofuels for fossil fuels

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B. Definition of system boundaries of direct and indirect effects of fossil fuels

Resource extraction

AgricultureRaw material production

Transport

Processing

Utilisation

Fossil fuels Biofuels

Direct effects

Indirects effects

Life Cycle AnalysisLower OPEC production ?

Lower deep water oil production ?

Lower tar sand production?

Lower future CTL production?

Lower future GTL production?

Lower EOR-production ?

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Increase of biofuel produktion

Decrease in oil import

Decrease in fossil fuel production in the refineries

Decrease in global oil demand - due to low price elasticity of oil demand

Decrease in OPEC production

Decrease of global oil price

Scenario 1: Lower production of tar sands, extra heavy oil, CTL, oil shale

Strong importance of OPEC for global supply decisions in the short term

direct effects

indirect effects

Increase in OPEC production

National interests of OPEC members

Lower IOC investements in very expensive oil technologies

Decrease in oil demand prevents investments

Lower NOC investments in very expensive oil technologies

Decrease in oil demand prevents investments due togrowing comerical interests of NOCs

short term

Internalization of external costs: Strict global climate protection objectives

Lack of internalization of external costs: Weak global climate protection objectives

Scenario 2: Lower production of deep sea oil, Artic oil , EOR, GTL

medium and long term


C. Results of the analysis: 1. Biofuels replace fossil fuels

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direct effects

indirect effects







short term






2. Biofuels don´t replace the most expensive fossil fuel in the short term

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2. Biofuels don´t replace the most expensive fossil fuel in the short term

• Instead a higher biofuel supply would result in OPEC production cuts

• The most expensive oil (such as tar sands or deep water oil) will continually be produced as long as the retail price is higher than the operating costs

• National oil companies (NOCs) secure mainly risky and marginal oil reserves

• Oil supply increasingly depends on credit agreements, such as the delivery of 0,5 million barrel/day from Venezuela to China (Equity Oil).

• National energy supply objectives – example: Jordan and Morocco are highly interested in exploiting their oil shale reserves to become more independent of oil imports









direct effects

indirect effects







short term






3. Biofuels replace the most expensive fossil fuel in the medium and long term

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3. Biofuels replace the most expensive fossil fuel in the medium and long term

• OPEC cutbacks are only temporarily possible: – Bilateral contracts between OPEC-countries and NOCs will increase– OPEC countries depend on income from oil export – OPEC have to compensate for their own national increase in oil consumption.

• Biofuel objectives will prevent future investments in very expensive oil technologies of international oil companies (IOCs): – Profit chances on very expensive and risky marginal oil sources decrease due to

biofuel objectives.

• In the future biofuel objectives will also prevent investments in very expensive oil technologies of national oil companies (NOCs): – the yield orientation of demand-NOCs increases– When biofuels can create an alternative to marginal oil, NOCs will participate in

biofuel markets

4. But the most expensive oil is not the dirtiest oil

25Source: ERA 2009









direct effects

indirect effects







short term






5. The most expensive oil is only the dirtiest oil when costs are completely internalized

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6. Greenhouse gas emissions does not suffice for evaluating the indirect effects of fossil fuels

What is the dirtiest oil?

Photo: U.S. Coast Guard Photo: Suncur

• Improvement of current LCA methodology is necessary to evaluate environmental effects of catastrophes like in the Mexican gulf and in the Niger Delta. • Further indicators such as aquatic toxicity are needed.

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E. Conclusion• The replacement of marginal fossil fuels with biofuels is an indirect effect which depends on many factors• The replacement of the fossil fuel with the highest greenhouse gas emissions and environmental impact with biofuels depends on the internalization of costs and therefore on political decisions. • The biggest environmental benefits that biofuels can provide through indirect effects, will only be achieved in cooperation with international climate and environment protection objectives. • The opposite is also true: international climate and environmental policy can only be achieved when alternatives to conventional and unconventional oil resources are created.

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Thank you for your attention!

www.energy-research-architecture.com

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Sub-group report out

Indirect Effects of Oil and Gas

Summary of Lifecycle Associates Report

Developed for New Fuels AllianceLCA.6004.3P.2009

February 2009

Impact of Persian Gulf Conflict

Considerations regarding displacement of gasoline (and diesel)

ILUC and displacement of gasoline

• Indirect land use change: A market-mediated effect taking place outside the biofuel production chain (life cycle). The change in (global) land use determines the ILUC factor.

• Displacement of gasoline: The market-mediated change in demand is likely to cause a change in crude oil refining. Should the change in refining or the new average impact (CI) of gasoline production be considered in the LCFS?

Crude oil refining - distillation

Petroleum gas

Fractional distillation

Naphta or ligroin

Gasoline

Kerosene

Gas oil or diesel distillate

Lubricating oil

Heavy gas or fuel oil

Residuals

Crude oil ”Distillation co-products”

• The ratio between distillation is ”fixed” and depending on the specific crude oil• There are many different types of crude oil with very different characteristics• The ratio between distillation co-products is unlikely to fit the market demand for petrochemical products• Chemical conversion of some co-products into others are therefore required (next slide)

Crude oil refining - chemical conversion

Examples• Coking

Residuals → heavy oil, gasoline and naphtha• Fluid catalytic cracking

Heavy gas oil → gasoline and diesel • Hydrocracking

Heavy gas oil → gasoline and kerosene

The refining steps mentioned above can all be used to increase the output of gasoline from a crude oil refinery

Implications for the LCFS• If gasoline constitutes 40% of the distillation

output but 50% of the aggregate demand for petrochemical products, chemical conversion is required to adjust to the market (numbers chosen for illustration only).

• Under those conditions, gasoline displacement will reduce the need for chemical conversion.

• The change will thereby be less chemical conversion -

• …and the average carbon intensity (CI) for gasoline will therefore go down.

Estimating CI Changes from Reduced Gasoline and Diesel Demand

• Given the complexity of modern refineries, such an analysis must be conducted through refinery modeling.

• The RFS 2 rulemaking included a detailed analysis of the U.S. refining sector in response to an increase in biofuels and a decrease in refined product (i.e., gasoline and diesel).

• Initial review of those results show only a small decrease in energy use per bbl of crude as gasoline and diesel demand decreases (e.g., a decrease from 554 to 552 MBTU/bbl average in the U.S. under ‘Control Case A’ – 34 BGY ethanol).

Additional Potential Responses toReduced Gasoline and Diesel Demand• Lower refinery utilization rates – this has been

observed over the last several years (EIA data indicate 89% in 2007 and 83% in 2009).

• Decreased imports/exports of finished product – EPA’s RFS 2 analysis assumed 2/3 of the gasoline reduction would be from reduced imports.

• Refining capacity reduced.

Question for discussion

• Should the new (lower) average CI of gasoline be used as the number to which other alternative transportation fuels should be compared?

OR -

• Should the change in refining emissions (i.e. the marginal impact) be ascribed to the displacement of gasoline?

Conclusions/Next Steps

• We have taken a two-tiered approach to defining prioritized targets of indirect effects of other fuels as a function of type

• Currently working on defining gaps in existing data sets• There are numerous potential indirect effects that will

have significant difficulties in developing robust values and attribution

• Dynamic response to supply and production changes will be an essential element of this effort

• Displacement of gasoline and crude sources should be evaluated as a function of type

sub-group 6: indirect effects of other fuels

Documents

list of indirect effects

indirect effects of

significant effects

gravecoproduct effects

indirect effectsneed

listpetition input

arb staffblake simmons

arb staffmanisha singh