The perennial debate returns, this time at a symposium on the Low Carbon Fuel Standard

Do environmental regulations boost innovation and job creation, or do they just make the state a more expensive place in which to live and do business?

The Low Carbon Fuel Standard (LCFS), the section of California’s landmark 2006 global warming act that deals with the decarbonization of transport fuels, has become the latest focus of that debate.

The enforcement element of LCFS begins January 1, 2013. But the standard—complex and 5 years in the making—remains largely unknown to the public.

In Sacramento Tuesday, stakeholders and transportation experts sought to bring more attention to the LCFS at symposium sponsored by Fueling California, an industry trade group whose board members include United Airlines, Walmart, Chevron and the Automobile Club of Southern California.

The standard calls for a 10% reduction in the “carbon intensity” of gasoline and diesel by 2020. It’s the first in the United States to use a “life cycle” evaluation for counting carbon, meaning that every stage of production from drilling (or cultivation in the case of biofuel) to combustion is tallied—an approach called “seeds to wheels.”

The oil industry is opposed to the standard in its current form, arguing there simply won’t be enough biofuels on the market to achieve compliance (many biofuels have a lower carbon intensity than conventional fuels and blending is a favored solution). Cathy Reheis-Boyd, president of the Western States Petroleum Association, says the supply of Midwestern corn ethanol has already been tapped out. And the next go-to source—sugarcane ethanol from Brazil—won’t be available in sufficient quantities to meet increasingly stringent requirements, she says.

The trucking industry is also balking, complaining that California’s diesel prices are already high, and will only go higher.  But environmental groups and the California Air Resources Board, counter that the standard will drive innovation in the state’s biofuels sector. They add that LCFS does not mandate how oil companies should reduce carbon intensity, leaving them myriad options of how to do so.

Despite industry top-heaviness in Fueling California, Simon Mui of the National Resources Defense Council had a place at the table, as did Timothy O’Connor of the Environmental Defense Fund and Daniel Sperling, director of the Institute for Transportation Studies at UC Davis.

Sperling pointed out that the oil industry is lagging far behind the automobile industry on greenhouse gas reductions, proof that it needs a nudge.

Cellulosic ethanol, a blend-in biofuel made from wood chips and other plant matter, is considered the holy grail of ethanols because it doesn’t compete with the food supply. But development of low-cost cellulosic ethanol has eluded researchers to date. Reheis-Boyd says without cellulosic ethanol, compliance with LCFS becomes impossible around 2015.