Multi-objective regulations on transportation fuels: Comparing renewable fuel mandates and emission standards

- Biofuel mandates and fuel GHG emission standards are analyzed from a multiple criteria perspective
- An emission-standard always results in lower global emissions while requiring less biofuel relative to a biofuel mandate
- An emission-standard results in higher fuel price in the home region relative to a biofuel mandate
- Emission standards lead to more shuffling of both fossil fuels and biofuels between home and abroad
- The relative impact of the policies on fuel imports depends on the relative cost-effectiveness of domestic & imported biofuel
- Recent developments oil production and fuel economy increase the net benefits of an LCFS approach relative to RFS

We compare two types of fuel market regulations - a renewable fuel mandate and a fuel emission standard - that could be employed to simultaneously achieve multiple outcomes such as reduction in fuel prices, fuel imports and greenhouse gas (GHG) emissions. We compare these two types of regulations in a global context taking into account heterogeneity in carbon content of both fossil fuels and renewable fuels. We find that although neither the ethanol mandate nor the emission standard is certain to reduce emissions relative to a business-as-usual baseline, at any given level of biofuel consumption in the policy region, a mandate, relative to an emission standard, results in higher GHG emissions, smaller expenditure on fuel imports, lower price of ethanol-blended gasoline and higher domestic fuel market surplus. This result holds over a wide range of values of model parameters. We also discuss the implications of this result to a regulation such as the US Renewable Fuel Standard given recent developments within the US such as increase in shale and tight oil production and large increase in average vehicle fuel economy of the automotive fleet.