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Allen Schaeffer

The New Frontier for Carbon Policy in 2025


The new Trump administration will mute the relentless federal advocacy for electrification of transportation, which may inspire states to take the lead with new initiatives.

 

“Recalculating.” That’s the voice coming from the car navigation system in response to changing course from a carefully programmed and optimized route to an exact destination. It is also one we can safely apply to our energy and environmental policy in the next four years. Chances are the other routing notifications will ring true as well: “Accident reported ahead,” “speed camera in 0.4 miles,” “delays in traffic … you’re still on the fastest route.” Buckle up, it’s going to be an interesting ride.

 

The “whole-of-(federal)-government” Biden approach to climate policy is over. The Trump energy policy is world energy dominance, one based on boosting domestic production and energy security, with a heavy emphasis on fossil fuels. The relentless federal-government advocacy and funding for electrification of the transportation sector of the past four years will be silenced. This will be a welcome change for advocates of advanced engines and renewable fuels, and it sets up a new frontier for carbon policy.

 

This sea-change in policy will take place across government, but it may first manifest in energy policy and vehicle-emissions regulations. Significant revisions are expected from the Trump administration, boosting the continued use of internal-combustion engines (ICE) and the fuels they use. In 2024, the climate-driven automotive and commercial truck emissions policies that were a major feature of the Biden administration ran into the reality of moving too fast without adequate charging infrastructure and consumer markets unready and unwilling to adopt them. Manufacturers though remain heavily invested in electrification of passenger vehicles and heavy-duty commercial trucks but are now seeking relief from the previous approach that required them to produce fewer gasoline or diesel-powered cars and trucks and instead sell more zero-emission electric vehicles.

 

Muting the carbon conversation in the federal government will inspire states to take the lead with bolstered policies and new initiatives. That and the steady business-driven commitments of individual corporations will make up the new frontier for carbon policy in the United States.

 

California has long laid claim to the mantle of climate leadership and now will be compelled to do more, and to engage other states as well. Twenty-four states and the District of Columbia have already adopted specific greenhouse-gas emissions targets, with that list likely growing in the next four years.

 

With automotive policy being a relative indicator of state approaches to emissions and fuels policies, it is important to note that there are a dozen states—so-called section 177 states—that follow California’s light-duty auto-emissions policies. Together these states make up about 40 percent of the nation’s car market.

 

At least a dozen states have made moves to restrict the sale of ICE vehicles. Nine states are working toward a total ban, possibly following California’s lead seeking to ban sales of new light-duty ICE-powered vehicles by 2035. Opposing that approach are 15 states that have responded by passing their own legislation and resolutions that protect the right of consumer choice of vehicle and fuel type. Last session, Republicans in Congress also introduced legislation to preserve vehicle choice.

 

Heavy-duty vehicle policy of the states is still evolving. There are now 24 states in court challenging U.S. EPA’s most recently issued rules requiring an increasing percentage of our future commercial trucks to be zero-emission vehicles.

 


Low carbon fuel standard (LCFS) policy at the state level continues its slow growth of recent years. In 2024, New Mexico became just the fourth state to enact LCFS legislation. There is expanding interest, however, as a dozen others are in some phase of consideration (discussion or legislation). This could get a boost resulting from the incoming Trump administration as states look for ways to fill the gap of diminished federal policy to achieve greenhouse-gas reductions from the transportation sector.

 

California’s LCFS program and its influence on U.S. biofuels policy is significant, with the longest-standing and most aggressive state program, such that more than 75 percent of the diesel fuel sold in California now is renewable diesel. In November, the California Air Resources Board approved revisions to the longstanding LCFS, adopting a more aggressive carbon-intensity reduction of 9 percent in 2025 and 20 percent to 30 percent in 2040, with an ultimate goal of 90 percent reduction in 2045. The impact of these changes on fuel prices at the pump remains to be seen but was a principal concern expressed during the hearing.

 

These adopted amendments further cap the biobased diesel derived from soybean, canola and sunflower oils to 20 percent per company. The amendments close the door on certifying new biobased diesel pathways in 2031 and feature an automatic acceleration-mechanism review each quarter that could further accelerate carbon-intensity reductions.

 

More aggressive carbon-intensity reductions will boost the biofuel sector by bringing more renewable fuels into the transportation pool in California. The industry will have to work through the new caps on soy and canola-oil feedstocks, as well as engage in the upcoming public forum on land-use impacts related to fuel production. Land-use impacts are controversial and one area some stakeholders see as the means to cut off future growth in renewable fuels.

 

As for the next four years of federal policy on renewable fuels, much is on the table. First and foremost is ensuring the new administration and Republican-controlled Congress have a mindset and take action that values the contribution of renewable fuels to our domestic energy portfolio. Hopefully, that means the past years of EPA policy establishing lackluster growth targets through weak renewable volume obligations are over. Tax policy is at the very heart of the success of the renewable fuels sector, and the blenders and producers tax credits must be preserved or expanded to ensure the success of the sector. Hopefully, the long-awaited tax-credit guidance from the U.S. Department of the Treasury has been issued and is favorable to industry.

 

As for their part of the “new frontier for carbon policy,” leading businesses and corporations that are committed to sustainability and reducing emissions will continue to pursue their own efforts, regardless of political leadership. Reviewing operations and supply chains for opportunities to boost efficiency and reduce emissions makes sense no matter which administration is in charge because these reduce costs. Those committed to technologies associated with the transition to cleaner energy will have a harder time and must assess and evaluate those investments and products in the face of likely less supportive government policy.

 

The administration may have changed but the benefits of biobased diesel fuels have not. These fuels help support a productive agricultural sector and diversify our energy supply. And one thing they are not is electric. That fact alone may speak to some policymakers and be reason to more fully embrace all that renewable fuels have to offer.

 

With a new administration and thousands of new policymakers in Washington, D.C., and the states, we’ll have to talk about the benefits and advantages of advanced engines and biobased diesel fuels in different ways, with different emphases than in the past four years. We’ll need to step up our education and outreach efforts while fighting for the policies the industry needs and deserves. We’re ready for more action at the state level, guarded reactions from business leaders, and a very dynamic and just emerging new federal environment. This is our new normal and our new frontier of carbon policy.

 



Author: Allen Schaeffer

Executive Director

Engine Technology Forum

301-668-7230

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