California Needs a Petroleum Phaseout Plan

August 24, 2022 | 4:11 pm
Emmett Institute/Flickr, CC BY-NC 2.0
Jeremy Martin
Senior Scientist and Director of Fuels Policy

The California Air Resources Board is close to finalizing an updated scoping plan that will guide the implementation of policies aimed at meeting its commitment to becoming carbon neutral by 2045. Reaching carbon neutrality as quickly as possible is essential to limit global temperature rise to 1.5C and doing so requires a transformation of how we produce and use energy, how we get around, and much more. There is lots to say about this plan, and my colleagues and I have been weighing in on drafts of the scoping plan for months (here are our most recent comments).

But for all the good things in the scoping plan, which we hope will be even better when the plan is finalized, the draft is missing a key element: a clear petroleum phaseout plan. The extraction, refining and use of petroleum has shaped California for almost 150 years. The scoping plan implicitly makes it clear that the era of oil is ending, and California is embarking on a profound transformation of the state’s transportation system, from one built on oil and gasoline to one powered primarily by renewable electricity.

This transition from oil to renewable electricity has major implications for California’s policies and its communities, especially the communities that live near the state’s oil fields and refineries. But while the scoping plan talks a lot about the low carbon technologies we need, it also should be clearer about the implications for the technologies we are leaving behind, so everyone can plan for what comes next.

What is a petroleum phaseout plan and why does California need one?

California’s own analysis clearly implies that the transition to electric vehicles (EVs) means the phaseout of the petroleum industry in California. Based on the analysis the State prepared as part of the scoping plan, demand for liquid transportation fuels like gasoline, diesel and jet fuel will be cut in half by 2034 (compared to 2021) and cut by three quarters by 2041 and by 85 percent in 2045. Gasoline and diesel are not the only things made from petroleum, but they account for the majority of petroleum products, and without demand for them, the state’s oil extraction and refining industry makes no economic sense.

The petroleum industry is complicated, interconnected, and depends not only on oil fields and refineries, but pipelines and terminals. All of this infrastructure won’t disappear overnight. It will take a couple more decades to complete the transition to EVs, and during that transition people and businesses will still need gasoline and diesel fuel. But the majority of the state’s refining capacity will be redundant in 20 years, well within the planning horizon for the affected communities.

It is understandably hard for people raised in an era in which oil was synonymous with transportation fuel to grasp that the oil industry won’t be around forever. But that’s the fact, and it’s time to start planning to wind it down in an orderly manner that protects communities and workers, minimizes pollution from ongoing operations, and makes strategic decisions about where to invest to support low carbon technologies.

The petroleum phaseout plan should inform the Low Carbon Fuel Standard and other policies, limiting support for dead-end technologies

A detailed petroleum phaseout plan is needed to inform the implementation of policies such as the Low Carbon Fuel Standard, (LCFS) a policy I have worked on for the last 15 years. The LCFS is sometimes touted as technology neutral, and while flexibility can sometimes be an asset, the fact is California has made the clear choice to move away from petroleum and shift to renewable power as the core source of transportation energy. In light of this choice, it does not make sense to provide unlimited support to dead-end technologies just to keep oil refineries or oil fields operating for a few more years. There are three clear examples of dead-end technologies being supported in the LCFS:

  • Vegetable oil based renewable diesel – In the last few years there has been a rush by oil companies to reconfigure oil refineries to refine vegetable oils and animal fats instead of petroleum into diesel and other fuels. This might sound like an improvement, but there is nowhere near enough vegetable oil to meet this demand, and the surge of oil companies buying up vegetable oil is contributing to price spikes in the short term. Longer term increased use of vegetable oil for fuel will drive expansion of oil producing crops like palm oil around the world. For more details, see my recent collaboration with the International Council on Clean Transportation on setting a lipids fuel cap under the California LCFS.
  • Biomethane – Just as vegetable oils are used by oil companies to greenwash oil refineries, biomethane serves a similar role greenwashing natural gas. Methane pollution from manure lagoons at dairies and other confined animal feeding operations (CAFOs) is a big problem, and regulators in California have been using the LCFS as a mechanism to support the capture of this methane for use in the transportation sector. This sounds like solving two problems at once, and I have been supportive of this approach. However, detailed analysis of how this approach has been working over the last decade suggests some serious problems that need to be addressed to avoid having a poorly designed transportation fuel policy create perverse incentives to maximize the production of methane pollution so that dairies can be paid extravagantly to destroy it. (See my comments for more details and suggestions).
  • Carbon capture at oil refineries and CO2 used for enhanced oil recovery– The CARB scoping plan finds that carbon sequestration technologies, especially used to remove CO2 from the atmosphere (sometimes called Carbon Dioxide Removal or CDR) will be important to achieve carbon neutrality. Our own analysis also finds that this technology will be needed at some level, but we believe the scoping plan leans too heavily on untested CDR technologies and should rely more heavily on directly reducing emissions, especially in the electricity sector (see our scoping plan comments for details). But beyond CDR, the scoping plan also suggests that California should support massive investments in Carbon Capture and Sequestration (CCS) at oil refineries and elsewhere in the petroleum supply chain. As described in more detail in our scoping plan comments, this investment is an obvious dead end, since the rest of the scoping plan lays out the rapid collapse of demand for petroleum products. The LCFS should also stop supporting the use of captured CO2 for “enhanced” oil recovery and limit support to sequestration that does not involve additional oil extraction.

Centering the needs of communities most affected by oil industry pollution and workers affected by the phaseout

A petroleum phaseout plan will help regulators appropriately target climate policies, but it is also essential to help communities and workers plan for the future. Oil companies are not the only parties that will be affected by the end of the oil era, and decisions about which investments merit support from state policies and the broader future of the industry and should be informed by all the affected groups, especially those that have born the brunt of fossil fuel pollution for decades and the workers and communities who will be affected by the phaseout of petroleum.

Developing a petroleum phaseout plan through an inclusive and equitable process guided by science and centering the needs of the people and communities most affected is essential to guiding California toward an equitable carbon neutral future.