1 Time Accounting Sub-Group Jeremy Martin (Chair) Jesper H. Kløverpris (Co-Chair) Keith Kline Steffen Mueller Michael O’Hare

Consensus Findings The production period is an especially uncertain parameter and time accounting methodologies that can ignore it are attractive Any time accounting methodology is only as good as the modeling results that go into it. Choice of discount rate in a regulation is a policy choice that combines value judgments and inferences with technical factors It is possible to consider the impact of a biofuels policy as a temporal shift of the complex dynamics which drive land use change and vary widely at local scales:  In regions with an expanding agricultural area (typical for the developing world), ILUC could cause land to come into production sooner than it otherwise would.  In regions with a contracting agricultural area (typical for the developed world), ILUC could cause land to stay in production longer than it otherwise would. The timing of emissions are important and, as a general goal, policy should differentiate based on timing where possible

Recommendations Near Term –CARB should apply consistent time horizon boundaries for computing GHG emissions associated with LUC under the LCFS –CARB should clarify and justify the choice of a 30-year simple averaging approach that is now applied, or adjust it based on contributions from the EWG and other new information. Longer Term –Consider alternative methodologies for time accounting as research results become available in the peer-reviewed literature. –Decisions on new approaches should be based on their ability to improve the accuracy, transparency and flexibility of an approach for emission accounting over time –CARB should also seek to clarify the assumptions about time scales and time preferences that are embedded within the LCFS accounting structure and justify these decisions. Our panel did not reach consensus on other recommendations for changes to the time accounting methodology used by CARB in the LCFS.

Individual Sub-Group Member Recommendations Recommended topics for subgroup to include (October EWG Minutes): 1.Discussion of whether chosen time horizon for LUC emissions must be consistent with GWP time horizon used for direct emissions. 2.Factors that must be considered when choosing an appropriate discount rate.

Kline - Recommendations 1.Apply consistent time horizons 2.Recognize that “appropriate discount rate” is impossible to determine when costs and damage functions are unknown 3.CARB is commended for consultation & adaptive learning – –Consider implications of other LUC theories and disciplines –Design regulations to achieve policy goals and send right signals to key actors Improve land management, accelerate forest recovery Focus on reduced emissions, today and tomorrow –Apply measurable and verifiable approaches for GHG time accounting Consider alternative methods for assessment Focus on major forces of change –Use empirical evidence and long-term monitoring plan to Document improvements over time (adaptive management) Test projections Agree with others: No discounting, Incorporate accurate baseline dynamics, Transparency, Keep it Simple…

Kløverpris - Recommendations At the overall level –Aim for consistency (everywhere): The ILUC factor must be as consistent with ’direct emissions’ as possible. You cannot add apples and pears. –Avoid arbitrary choices: No need for a detailed technical analysis if the end result is determined by arbitrary choices of production period and discount rate. –Think long-term: A policy resulting in a cooler world for our grand children is better than a policy resulting in a cooler world for us (and a warmer world for our grand children) –Acknowledge uncertainty, don’t ignore it: Uncertainty about e.g. reversion and future yield changes is no excuse for not making reasonable assumptions More concretely… –CARB should conduct an analysis of ‘the fate’ of abandoned agricultural land as this is important for the carbon implications of (indirectly) keeping land in production in regions with a declining agricultural area (see slide 3). The analysis should consider what happens to abandoned agricultural land ‘after retirement’ (reversion to nature, urbanization, or something else) and what this means for potential long-term carbon sequestration.

O’Hare - Recommendations Simple administrative protocols are better than complicated rules, other things being equal. Policy affecting phenomena that unfold over time must include a discount rate or absurd results follow. Thinking carefully about emissions timing forces policy analysis to attend to objectives –Minimizing GHG release now, –Minimizing  T at some point in the future, –Minimizing cumulative social cost from warming up to a point in the future, and –Minimizing social cost from all effects imply different policies for the LCFS and different biofuels policies generally.

Martin - Recommendations The choice of timeframe or discount rate is ultimately a policy judgment about time preference that should reflect the context and goals of the regulation –The use of a the conventional 100 year GWP timeframe to compare GHGs is not an adequate replacement for a well informed policy judgment on timeframe/time preference –A year timeframe (effectively a 5-7% discount rate) would better match cost benefit analyses and provide a market signal to encourage biofuels to use land efficiently More sophisticated treatments of emissions over time are possible, but in light of the uncertainty of the underlying analysis, the added complexity is not worth the loss of transparency

Mueller - Recommendations CARB Needs to Adopt Methodology that Considers “Baseline” Global Land Use Trends such as a) 30 year biofuels production period, 50 year analytical horizon Considers land use after biofuels production: reversion, urbanization, food-production, bio-based chemicals b) Baseline Time Accounting Considers land expansion/reversion. Assessment independently of Production Period No Discounting: Discounting is Arbitrary and Introduces Anomalies –in Support of Fuels with High Future Costs such as gasoline and –in Neglect of Fuels with dynamic efficiency improvements such as corn ethanol (plant energy improvements, double cropping, stover removal)

Questions & Discussion