Implementation Mechanisms

Implementation Mechanisms

Create a Green Fuel Retailers program (tax incentives for low carbon fuels) consisting of several mechanisms to improve the distribution of low carbon fuels throughout the region. Some elements of this program might include:

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  Recognize retail and wholesale outlets that attain benchmarks in the sale of low carbon fuels as “Green Retailers.”
  
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  Establish incentives to support the infrastructure development needed for low carbon fuels and help ensure the retailer is able to provide value-based pricing (based on the energy content of the fuel) for sustainable consumer use. Incentives might include the following elements and mechanisms:
  

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  Reduce payment of motor fuel tax on all fuel sold at a facility, based on achieving a minimum level of low-carbon fuel sales.
  
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  Create a fund that would provide Green Fuel Retailers with an incentive (rebate) for sales of low carbon fuels. One option would be an increase in motor fuel tax, initially starting at 0.01/gallon and increased as needed to achieve the program’s goal.
  

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  Provide incentives for the installation of refueling infrastructure including E85 pumps, blender pumps, hydrogen refueling infrastructure, and electric vehicle recharging infrastructure. Incentives could include reimbursements for investments or tax rebates.
  
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  Fund public education efforts that include mapping low carbon fuel refueling stations throughout the Midwest, providing resources for refueling of government vehicles and university fleet vehicles, and providing clear definitions of what constitutes low carbon fuels and vehicles. A public sponsored branding effort might be used to develop a “Green Fuel” logo that could be used by qualifying retailers and vehicles.
  
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  Fund research that helps bring low carbon fuels to market is a recent study exploring the optimal blend of ethanol for fuel economy in different vehicles, and studies exploring the impact of higher blends of ethanol on engines.
  
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  Encourage Underwriters Laboratory (UL) to develop standards for low carbon fuel refueling infrastructure (such as the recent standards released for biodiesel blends). All new fueling systems being installed throughout the region should be UL certified to be able to legally dispense any fuel blend up to E85. This enables pump infrastructure to stay in place while blend ratios increase, meeting renewable supply gains.
  
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  Provide incentive payments for consumers, both individuals and fleet managers, based on the quantity of fuel sold. These financial incentives could be in the form of post-purchase manufacturers’ coupons at filling stations or tax rebates.
  
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  Include a sunset provision for all incentive programs for advanced fuels and vehicles so that any technologies that are not achieving the required levels of GHG reduction by the specified target dates are phased out of public funding programs.
  

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  Ensure public sector-owned flex-fuel vehicles are actually filled with E85. Possible mechanisms might include:
  
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    Reduce barriers such as requiring that public employees fill-up at commercial stations where the organization has an E85 pump, or an E85 pump is available near-by. Typically drivers are required to fill the fuel tank prior to returning fleet vehicles.
    
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    Track E85 use through the use of government issued payment cards.
    
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  Pool funds for increased purchasing power for flex fuel vehicles by counties, state, local governments, and universities across the region. Encourage or mandate:
  

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  Local governments purchase flex fuel vehicles, which could be accomplished through state revenue sharing with local governments.
  
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  State universities purchase flex fuel vehicles.
  

Explore the technology of distributed biofuels systems to increase the local (on-farm, small community) production and use of biofuels. For example, Imerjent (www.imerjent.com)

Related Policies/Programs in Place

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  Iowa’s bioenergy incentives apply to biogas, hydrogen, and other low carbon fuels.
  
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  Michigan’s Green Retailers proposed program would provide incentives to retail and wholesale outlets that attain benchmarks for the sale of biofuels (E85 and B20).
  

Type(s) of GHG Reductions

The target of this policy option is to reduce the emissions of CO₂ by encouraging the substitution of low-carbon intensive fuels for traditional fossil fuels in the transportation sector.

Estimated GHG Reductions and Net Costs or Cost Savings

Quantification for this policy option will require a complete and discrete set of data for each state. It is necessary to know the gallons of fuel used by fuel type and location of use (on-road and off-road) as well as market data for existing retail filling stations in terms of fuels dispensed by type and quantity.

Key Uncertainties

The volatility of the fuels market requires flexibility in market-based incentives that respond to changing conditions and allow retailers and consumers some degree of certainty in pricing and availability. Other Bioeconomy and Transportation policy options address availability of biomass for fuel and other energy uses but would need to be implemented in tandem with market-related measures.

One formidable barrier to the introduction of advanced technology fuels (hydrogen, liquefied petroleum gas or compressed natural gas) and vehicles (PHEV and FCV) into new markets is a “chicken and egg” problem, whereby filling stations will not add alternative fuels to their mix where there is no existing market, particularly if doing so would require large investments in infrastructure build-out, and vehicle dealerships are reluctant to sell vehicles that require an advanced fuel in a market where there is no refueling infrastructure. One possible way to overcome this barrier is by linking infrastructure development funds to vehicle purchase—for example, by setting aside a portion of tax revenues from advanced vehicle sales for the development of alternative fuel infrastructure—in order to send a message to filling stations that the market for both advanced fuels and vehicles is growing in the region.

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