Nationwide Low-Carbon Fuel Standard (LCFS) Would Send Gasoline and Diesel Prices Skyrocketing, Wipe Out Millions of American Jobs

Charles River report quantifies real-world impacts on U.S. consumers and workers

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 today 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 also projected that a nationwide LCFS program starting in 2015 would:

• Cause an estimated net loss of 2.3 million to 4.5 million American jobs by 2025 from baseline levels. As many as 1.5 million of these jobs would be in the manufacturing sector, while as many as 3 million would be in the service sector. These job cuts reflect the cumulative impact businesses would face from reduced consumer demand and higher costs for goods and services caused by an LCFS.

• Drive down household annual purchasing power by between $1,400 and $2,400 by 2025.

• Cause the U.S. Gross Domestic Product to decline by approximately 2 to 3 percent, or $410 billion to $750 billion, by 2025.

Charles River Associates, a Boston-based global research firm that specializes in economic modeling and analysis, conducted the study for Consumer Energy Alliance (CEA).

“Any way you slice the data, the future projected by this study is a frightening one – higher fuel prices, fewer jobs, and lower consumer purchasing power,” said Michael Whatley, vice president of CEA and a leading policy expert on the LCFS. “This nightmare scenario is clearly one that policymakers in the United States should avoid at all costs.”

Added Whatley: “Intuitively, it’s always made sense that policies such as the Low-Carbon Fuel Standard, which seeks to restrict Americans’ access to secure and affordable sources of energy, would result in higher fuel costs and fewer jobs. But with the release of this study, we can now quantify those impacts under several different scenarios, and understand how they apply to different regions across the United States.”

The LCFS would prevent certain sources of reliable, affordable petroleum from being converted into fuels such as gasoline, diesel fuel, kerosene and heating oil. 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 stated purpose of the Low-Carbon Fuel Standard is to be technology forcing, and to bring new fuels into the market,” the report’s authors write. “But the LCFS becomes a policy that drives large changes in consumer behavior and in new vehicle fuel economy because the targets are beyond reach with foreseeable fuel technology. … Thus the LCFS is turned into a policy that in effect rations gasoline until the required improvement in emissions per gallon is met.”

A federal LCFS was added to the Lieberman-Warner climate change bill in 2008 and proposed as part of the Waxman-Markey climate change bill in 2009 (although the LCFS provision was removed before the bill was passed by the House). Supporters of a national LCFS continue to work for its enactment, even as proposed programs are being developed in several states and regions.

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