Comment Log Display

Dear California Air Resources Board,

Thank you for the opportunity to submit comments on the proposed
amendments to the Low Carbon Fuel Standard (LCFS). We have been
actively engaged in researching how to promote aviation
decarbonization in California, focusing on both technical
feasibility and policy implications. Sustainable aviation fuel
(SAF) or alternative jet fuel is one of our main areas of focus.
Based on our research, our comments on the proposed amendments to
the LCFS are twofold, addressing both policy analysis and legal
considerations.

Policy Analysis
We conducted policy analyses for both 2030 and 2035 using a supply
and demand framework. The jet fuel price forecast is $16.44 per
million Btu for 2030 and $17.77 per million Btu for 2035, based on
EIA forecasts. Our supply model for alternative jet fuel use (SAF)
is based on the California Transportation Supply Model (CATS),
while the demand curve is established using a log-log model
incorporating total jet fuel demand and fuel prices, along with
fuel price elasticities. We considered two scenarios for jet fuel
price elasticity: -0.03 for short-term price responses and -0.35
for long-term responses.

Three scenarios were evaluated: the baseline scenario, consistent
with the existing design of the LCFS without eliminating the jet
fuel exemption from fossil jet fuels; the proposed scenario, based
on proposed amendments to the LCFS with the elimination of the jet
fuel exemption from intrastate fossil jet fuels; and the enhanced
scenario, considering the elimination of the jet fuel exemption
from domestic fossil jet fuels (both intrastate and interstate).
Under the proposed and enhanced scenarios, we evaluated both cases
where the carbon intensity standard (benchmark) reduces as stated
in the proposal (Low CIstandard ) and cases where the carbon
intensity standard does not reduce (High CIstandard) , reflecting
the current policy.
The following tables show the change in the total demand, SAF
consumption, CO2e emission, and environmental impacts under various
scenarios and assumptions regarding jet fuel elasticity.

Based on the results, our main three observations are as follows:
1.	Effectiveness of carbon intensity standards: Strengthening the
annual carbon intensity benchmarks in the aviation sector as
proposed may not be as effective as maintaining the current higher
carbon intensity standard.
2.	Scope of exemptions for fossil jet fuel: Eliminating the
exemption for domestic fossil jet fuel (both intrastate and
interstate) appears to be more beneficial than eliminating it for
intrastate only.
3.	Influence of jet fuel elasticity: Jet fuel elasticity
significantly influences the outcomes, highlighting its importance
in policy formulation.

Legal Considerations
While we are not trained lawyers, our research background includes
several studies that involved understanding legal constraints
pertaining to taxes and fees imposed on airlines and air
transportation. Based on this knowledge and a review of relevant
case law, we offer a few observations:
The LCFS is sometimes viewed as an "implicit tax." If extending the
LCFS to incorporate jet fuel were considered a form of airline
taxation, then it would be subject to strict limitations. According
to 64 Fed. Reg. 7696, which implements the several federal
statutes:
"State or local taxes on aviation fuel (except taxes in effect on
December 30, 1987) are considered to be airport revenue subject to
the revenue-use requirement. However, revenues from state taxes on
aviation fuel may be used to support state aviation programs or for
noise mitigation purposes, on or off the airport."
This would seem to preclude the use of LCFS revenue to pay for
credits. Notably, this restriction would apply irrespective of
whether the LCFS was applied to fuel for intrastate flights only or
a larger set of flights.
If the LCFS is not considered a form of airline taxation, then the
most significant legal constraint is the Dormant Commerce Clause. 
Here, the application of the LCFS to interstate flights might be
considered to violate the DCC. However, the issue is by no means
clear cut. Since the LCFS has been held not to be discriminatory
against out-of-state businesses, the question would be whether the
state interests it promotes offset the burden it places on
interstate commerce. There is ample precedent that controlling
global warming is a legitimate state interest, which increases the
possibility that an LCFS that applies to all domestic flights would
survive a DCC challenge.

Sincerely,

Professor Mark Hansen
Department of Civil and Environmental Engineering, UC Berkeley
Co-Director, National Center of Excellence for Aviation Operations
Research

Yati Liu, Ph.D. Student
Department of Civil and Environmental Engineering, UC Berkeley