Policy Solutions

Low-Carbon Fuels

US Federal
Transportation

Research and Development

Federal investment in research and development (R&D) supports economic growth, drives down costs for key technologies that can be used domestically and exported abroad, and promotes U.S. leadership on clean energy and climate. Investment in R&D for low-GHG transportation fuels is driven primarily by the U.S. Department of Energy’s (DOE’s) Office of Energy Efficiency and Renewable Energy (EERE). Further R&D for low-carbon fuels comes from DOE’s National Labs and Advanced Research Projects Agency-Energy (ARPA-E), as well as from the U.S. Department of Agriculture (USDA) and, in the case of clean aviation fuels, the Federal Aviation Administration (FAA).

Federal policymakers should increase investment and enact programmatic reforms to ensure federal agencies focus on advancing R&D for:

  • Advanced biofuels and innovative conversion technologies (biochemical, thermochemical, and catalytic)
  • Fuel cells and electrochemical conversion technologies; and
  • Low-GHG hydrogen, ammonia, and synthetic hydrocarbons (e.g. solar fuels, electrofuels).

Validation and Early Deployment

Demonstration

Before we can deploy promising clean energy technologies at scale, we must demonstrate and validate their cost and performance in real-world conditions. Since demonstration projects reduce the economic and institutional risks of new technologies, DOE should develop a robust portfolio of these projects for low-carbon fuels, including production of advanced biofuels, low-GHG hydrogen, and synthetic hydrocarbons.

Fiscal Incentives

Advanced biofuels have a much smaller carbon footprint than conventional fuels, but they still struggle to gain traction in the fuel market. Today, they comprise less than 1 percent of total liquid-fuel demand in the U.S. Federal incentives like grants, loans, and tax incentives can help drive investment, production, and deployment of these advanced clean biofuels.

Procurement

Federal procurement policies can reduce costs and drive private sector demand for the next generation of low-GHG fuels. Procurement targets based on a fuel’s relative carbon intensity can remain technology neutral, while incentivizing both advanced biofuels and continued innovation.

In addition, long-term federal contracts for low-GHG fuel procurement can create consistent revenue streams for producers. This, in turn, can finance further capital expenditures in the development and deployment of advanced biofuels.

Driving Market Penetration

Despite decreasing green premiums in low-GHG fuels, consumer hesitation about relatively new technologies remains a major barrier to their widespread deployment. Corporations and policymakers also often lack information on both the performance of low-GHG fuels and the economic benefit of expanding markets for advanced biofuels. Federal funding to increase consumer awareness and maximize impact of federally supported investments can help mitigate these market barriers and encourage faster consumer adoption of low-carbon fuels.

Rapid, Large Scale Deployment

Carbon Pricing

In transportation, carbon pricing, whether through a carbon tax or a cap-and-trade system, aims to reflect the true costs of fossil-based fuels and reduces the green premium of low-GHG alternatives. This, in turn, increases their supply and demand. In the transportation sector, carbon pricing can augment reductions achieved through other deployment policies such as a clean fuel standard or Zero-Emission Vehicle (ZEV) mandate to drive deeper decarbonization.

Clean Fuel Standard

A clean fuel standard can offer an alternative or complementary approach to a carbon price for the transportation sector. Replacing gasoline and diesel fuels with low-GHG substitutes can help reduce transportation emissions while light-duty and medium-duty vehicles transition towards electrification. They can also decarbonize areas of transportation, such as shipping and aviation, where electrification is not yet practical.

By providing certainty to producers making near-term capital investments, a clean fuel standard can propel long-term deployment of the lowest-carbon fuels, including electrofuels and advanced biofuels. This deployment of clean alternatives can in turn improve air quality and provide direct economic benefits to historically disadvantaged communities.

Additional Transportation Policies

More Federal Transportation Policies