Group suggests making refineries pay to cut greenhouse gases from cars and trucks

A recommendation to make oil refineries and other petroleum producers pay to reduce planet-warming pollution from cars and trucks is being opposed by four environmental groups that see it propping up the ethanol industry to the detriment of the climate.

Under the proposal sent to the Legislature on Thursday, the state would grant credits to clean fuel producers, such as power companies that support electric vehicle charging, and make the producers of polluting fuels buy those credits.

The plan shows that ethanol would get a share of the credits generated under the new system, though it would decline significantly by 2040. In the short term, particularly in the early 2030s, renewable diesel would gain the most credits of any fuel type. Renewable diesel is created by a different chemical process than ethanol, but it can use similar ingredients, including leftover cooking oil or soybean oil.

Renewable diesel generates so many credits in part because it would be used to reduce emissions for heavy-duty vehicles, according to Shannon Engstrom, clean transportation standard director at the Minnesota Department of Transportation. It's been a bigger challenge to convert industrial machinery to electric than passenger vehicles. By 2040, electricity would outpace almost all other fuels, generating the most credits for its use in passenger cars and industrial vehicles.

"Things could change" before 2040, Engstrom said. "There's a lot of innovation that could happen, but this is just our best guess."

Still, the report is "based on a presumption that ethanol is helping the planet," said Peter Wagenius, legislative director of the North Star chapter of the Sierra Club. He pointed to a 2022 study that found federal incentives actually made ethanol at least 24% worse than gas in producing carbon emissions, driven in part by changes in land use spurred by more farmers planting corn. That study is part of a heated debate over ethanol's contributions to greenhouse gases; other older studies found the fuel was actually less polluting than gasoline.

Brian Werner, executive director of the ethanol industry group Minnesota Biofuels Association, said the group's members have been working to reduce carbon emissions that come from their ethanol production. But ethanol is part of the solution, Werner said.

"We don't meet the targets without the use of all technologies," he said.

Lawmakers last year created the 40-person workgroup behind the new recommendation to examine how to reduce climate-changing pollution from the biggest source in Minnesota, transportation. Composed of environmental groups, agricultural associations, fuel producers and transportation providers, the task force took the example of similar laws already passed in California, Washington and Oregon, but added some incentives for certain agricultural practices that could make biofuels less damaging to the environment.

Like in those states, a petroleum refinery or gas importer would have to buy credits to meet the standard, because they're marketing a fuel that doesn't meet the rule for how much carbon can be emitted. A producer of electricity for EVs — or a fuel like renewable diesel for heavy-duty trucks — would be able to sell credits because their fuels are under the state limit.

The group has also recommended that lawmakers lower their expectations for how quickly greenhouse gas emissions could go down. Instead of reducing carbon pollution from fuels by a quarter by 2030, the report says a target of 13% to 17% is more feasible. A deadline for removing all carbon from transportation by 2050 should be scrapped and re-evaluated later, it said, because of uncertainty in new technologies that might develop.

Wagenius was joined in his dissent to the plan by the environmental group CURE, the Latino advocacy group COPAL and Health Professionals for a Healthy Climate, who created an alternate report they plan to give to lawmakers. He said the plan wouldn't reduce emissions, and wouldn't meet the timeline that the United Nations has said would help avert the worst effects of climate change. He also said the nationally developed model in the plan doesn't do enough to consider all the environmental effects of biofuels.

Engstrom countered that the model in the plan, developed by Argonne National Laboratory and dubbed GREET, is also used by the three Western states with similar laws. She also said that a fuel standard was just one strategy to reduce pollution. Reducing the miles traveled is another one, she said.

The clean transportation standard is separate from Gov. Tim Walz's Clean Cars initiative, which mandates tailpipe emissions limits and a requirement for auto dealers to offer electric vehicles. The Minnesota Auto Dealers Association sued the administration twice over the rule, but it survived the challenges.

Unlike the Clean Cars program, retailers would not be affected by the proposed clean transportation standard. Gas stations wouldn't have to pay any new taxes for selling gas. Nor would they receive credits for installing EV chargers. That credit would instead go to the utilities providing the power, Engstrom said.

Whitney Clark, executive director of environmental nonprofit Friends of the Mississippi River, said he saw the plan as one that would be able to make it into law. Under the proposal, "carbon polluters are paying to electrify our buses, electrify our transit, to install EV charging all over Minnesota," he said.

"It's maybe not as fast as everybody would like, but I think it's a realistic pathway," Clark said.