United States Department of Transportation
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Mandating green: on the design of renewable fuel policies and cost containment mechanisms : a national center for sustainable transportation research report.
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2015-10-01
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Abstract:Policymakers typically favor renewable fuel mandates over taxes and cap and trade programs to
reduce greenhouse gas emissions from the transportation sector. Because of delays in the development
of commercially viable renewable fuels and important constraints on their use and distribution, fuel
mandates are susceptible to sudden increases in compliance costs as policies become more stringent. We
study the effects and efficiency of two fuel mandates, a renewable share mandate and a carbon intensity
standard, as well as the effects of two cost containment provisions, a credit window price and a renewable
fuel multiplier. We show using a numerical model of the US fuel market that when the mandates are
set optimally, they can lead to modest efficiency gains over business as usual; however, when combined
optimally with a credit window price, the efficiency of both mandates increases substantially. In contrast,
optimally combining a mandate with a renewable fuel multiplier that indirectly relaxes the standard
results in only modest efficiency gains over the optimal mandates alone.
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