New analysis shows that a Midwestern clean fuels policy (CFP) can deliver positive economic benefits while reducing carbon emissions in the region. This is the conclusion of an ICF study commissioned by the Great Plains Institute in partnership with the American Coalition for Ethanol, and with support from the Union of Concerned Scientists and the McKnight Foundation. ICF was commissioned to investigate the economic impacts of a Midwestern CFP, and used Minnesota and Iowa as representative states of the region. Legislators in Minnesota are considering the Future Fuels Act, a proposed CFP.
Key takeaways:
- The positive economic impacts of a CFP are accompanied by a reduction in greenhouse gas emissions.
- The analysis concluded that a 15 percent carbon intensity reduction in transportation fuels over a period of ten years through a CFP has net positive impacts. These impacts increase by 19 percent every year that the program is in effect.
- A CFP could contribute an annual average of over $197 million to gross domestic product (GDP).
- A CFP could generate an annual average of 1,500 jobs and $95 million in labor income.
ICF conducted the study using the IMPLAN model, an input-output platform that models the economic impact of specific changes to the economy of given region. For the purposes of this study, the IMPLAN model assumed a market credit price of $100 per ton of carbon dioxide equivalent greenhouse gas emissions based on historical price trends in existing fuel markets. The model offsets compliance costs for gasoline and diesel users by keeping fuel prices neutral through lower-cost clean fuels. Additionally, the study assumes that economic benefits occur because of the following:
- The increased use of lower-cost, low-carbon fuels increases fuel savings for consumers, which in turn increases household income and cost-savings for fleet operators.
- Expanding and modifying the production of biofuels to meet higher blend targets and investing in reducing the carbon intensity of biofuel production increases expenditures.
- The increased sale of various biofuel blends is supported by increased expenditures in fuel distribution and retail infrastructure.
- The expanded production of electricity for electric vehicles increases expenditures.
- The increased purchases of feedstock and payments to farmers for climate smart practices increase income for farmers and reduce greenhouse gas emissions.
Over a ten-year period, a clean fuels policy could deliver the following benefits, detailed in table 1:
- Contribute $1.98 billion to regional GDP
- Contribute $10.3 billion in regional economic output
- Generate $946 million in labor income
- Generate 14,975 job years in Minnesota and Iowa
- Produce $33 million in annual federal tax revenue
- Produce $13 million in annual state and local tax revenue
A job year is the equivalent of one full-time job (FTE) for one year. Annually, this equates to 1,500 jobs, $95 million in labor income, and over $197 million to GDP.
A clean fuels policy could deliver benefits to various sectors, as detailed below in table 2:
As legislators in Minnesota and other Midwestern states consider clean fuels policies, it’s important to investigate the economic impacts of a potential policy. This study examines the potential economic impacts for a CFP in Minnesota and Iowa and concludes that the impacts could be overwhelmingly positive.
Download Economic Benefits of a Clean Fuels Policy in Minnesota and Iowa here.
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