Abstract:A multi-period optimization model is used to analyze how changes in the U.S. ethanol market may affect California’s low carbon fuel standard (LCFS). The six market conditions analyzed include 1) a reference scenario in which the development of the lignocellulosic ethanol industry proceeds according to the Environmental Protection Agency’s current industry forecast, 2) a five-year delay in the development of the lignocellulosic ethanol industry, 3) immediate and rapid growth of the lignocellulosic ethanol industry, 4) removal of the $0.54/gallon ethanol import tariff, 5) removal of the ethanol blenders’ and producers’ tax credits, and 6) removal of both the tariff and tax credits. Removing the import tariff on ethanol has little effect on the cumulative costs to fuel providers but decreases a total of 34.7 million metric tonnes of CO₂-equivalent (CO₂e) in California by 2020. Removing the domestic ethanol tax credits has less of an effect on CO₂e emissions but increases the total production cost to fuel providers within California by an average of $1.2 billion per year. Additionally, if the lignocellulosic ethanol industry develops rapidly over the next ten years, Brazilian ethanol imports need to increase by a modest 20% per year to satisfy carbon constraints in the LCFS. Lastly, a delay in the development of the lignocellulosic ethanol industry an additional five years to 2017 would require unreasonably large volumes of Brazilian ethanol to satisfy average carbon constraints.