Airline, Trucking Industry At Odds Over Low-Carbon Fuel Standard

A proposed low-carbon fuel standard in Washington state highlights a divide in the transportation industry over regulations aimed at reducing carbon emissions that contribute to global warming.

Earlier this month, for example, Alaska Airlines ALK endorsed the use of sustainable aviation fuels on an opt-in basis in Washington's proposed clean fuels program.

By federal law, states are prohibited from regulating jet fuel. But sustainable jet fuel suppliers — and their numbers are growing — could voluntarily opt in to the program and earn credits they could sell or trade to other regulated entities.

Washington's trucking industry, generally excluded from the financial benefits of a credit-trading system, opposes the standard.

"Our argument is pretty simple," said Sherri Call, executive vice president of the Washington Trucking Associations. "Cost, fairness and lack of alternatives."

Washington has failed several times to pass a low-carbon fuel mandate. The law, similar to those in California and Oregon, would reduce the carbon intensity of fuels by 10% below 2017 levels by 2028. It would continue to reduce carbon intensity to 20% below 2017 levels by 2035.

Proponents say the policy is necessary to reduce the state's transportation emissions, representing nearly 45% of Washington emissions. They also tout the policy's financial incentives and its role in developing sustainable fuel supply chains.

In a letter sent to the Seattle Port Commission earlier this month, Diana Birkitt Rakow, Alaska Airlines' vice president of external relations, outlined the Seattle-based company's support for the clean fuel program.

"Cost parity is critical to reduce emissions from airline fuels on a life cycle basis," Rakow wrote. "And we need positive policy incentives to help overcome the significant cost barriers that disincentivize local sustainable airline fuel (SAF) production."

Businesses that opt in to the standard can generate credits when they provide transportation users with a lower carbon intensity fuel.

Among those that stand to benefit are Gevo, a Colorado-based maker of biofuels. Gevo supplied wood-based fuel to Alaska Airlines in 2016 and more recently was awarded a contract with the city of Seattle providing the city's fleet vehicles with a fossil fuel alternative.

The Washington legislation would make the market in the Pacific Northwest more attractive for low carbon fuel providers, Patrick Gruber, Gevo's CEO, said in an email to FreightWaves.

It "would drastically increase the probability" that Gevo would invest in production facilities" in the Pacific Northwest, he said.

As regulators crack down on emissions from aircraft, more airlines are seeking sustainable solutions. Earlier this month Jet Blue said it will power flights departing San Francisco International Airport with sustainable jet fuel from the Finnish company Neste.

Trucking alternatives to diesel are cost prohibitive; nor are there mechanisms in place to compensate for the higher fuel prices that would result from the implementation of a clean fuel mandate, said Call, who spoke to FreightWaves from the state legislature in Olympia, where lawmakers were holding a hearing on the standard.

Along with logging and agriculture, truckers are "price takers, not price makers," she said.

Noting the rule's exemptions for rail, air and ocean-going vessels, Call said the freight industry is "at odds" over emissions regulations and carbon reduction initiatives.

The trucking sector itself is divided on the subject — "it's hard even for my board to agree how to reduce carbon," Call said. But generally speaking the association's members believe "market forces are the best solution," according to Call, and that any emissions regulation should be enacted at the federal level to ensure a level playing field for trucking companies.

Washington's clean fuel proposal is one of several carbon emissions bills up for a vote in Northwest state legislatures. Notably, Oregon is trying once again to pass a cap-and-trade emissions law, following a high profile walkout by Republican legislators that derailed a similar proposal in 2019.

In addition to the Washington bill, four counties in the state have proposed their own low-carbon fuel standard. That proposal, aimed at putting pressure on state lawmakers, would create even more inequities for truckers, whose fuel costs would vary depending on their geographical location, according to Call.

"If the standard is bad for industry on a statewide level, it's even worse on a local level," she said.

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