California adopts major revisions to Low Carbon Fuel Standard
9 November 2024
The California Air Resources Board (CARB) approved major updates to the Low Carbon Fuel Standard (LCFS), intended to accelerate the reduction of carbon intensity of transportation fuels and the deployment of zero-emission infrastructure in the state. The LCFS—a key component of the state’s climate policy—sets a declining carbon intensity target for transportation fuels used in California. Fuel producers that don’t meet the established benchmarks must buy credits from those that do.
The updates increase the LCFS target to reduce the carbon intensity of California’s transportation fuel pool from the current 20% to 30% by 2030, and introduce a new target of 90% by 2045. (The reductions are relative to the 2010 baseline.)
The LCFS has been very effective to date, CARB said in a news release, reducing the carbon intensity of California’s fuel mix by almost 13% and displacing 70% of the diesel used in the state with cleaner alternatives. The actual emission reductions under the current program have been exceeding the mandatory targets.
The approved amendments also increase support for zero-emissions infrastructure and make more transit agencies eligible to generate credits. Billions of additional dollars will fund zero-emission vehicle charging and hydrogen fueling infrastructure, including new crediting opportunities for medium- and heavy-duty refueling infrastructure. Increasing incentives will be provided for infrastructure in low-income neighborhoods and remote locations.
The amendments also introduce several important updates to California biofuel policy. Some of these changes are:
- New LCFS guardrails are introduced to avoid land use changes resulting in potential loss of food production or deforestation. The program will require that fuel producers track crop-based and forestry-based feedstocks to their point of origin. The LCFS will require independent feedstock certification to ensure biomass-based diesel and sustainable aviation fuel feedstocks are not undermining natural carbon stocks.
- Credits for biomass-based diesel (BBD) produced from virgin soybean and canola oil are limited to 20% of annual BBD reported on a company-wide basis. BBD from virgin soybean and canola oil in excess of 20% will be assessed the carbon intensity of the applicable diesel pool benchmark for that year. Palm-derived fuels are explicitly prohibited from receiving LCFS credits.
- Credits for avoided methane emissions associated with the use of biomethane fuel will be phased out. However, the amendments extend the use of biomethane for renewable hydrogen production.
The LCFS amendments have raised concerns among multiple stakeholders, from environmental groups to oil companies. The key concern is the effect of the LCFS amendments on the cost of transportation fuels and the price of gasoline in California. In the initial proposal for the LCFS updates, released last year, CARB staff estimated that the amendments could cause an increase in gasoline prices by 47 cents per gallon by 2025.
The agency has not confirmed or updated these estimates during later stages of the rulemaking process. CARB staff has been directed to assess any impacts and potential mitigation from the adopted amendments on retail gasoline prices every six months and to submit an annual report beginning one year from the effective date of these amendments, in collaboration with the California Energy Commission (CEC).
The additional costs of LCFS compliance may lead to accelerated closures of the aging California refineries. Chevron and Valero, which manage nearly half of California’s refining capacity, have both warned about impending refinery closures. Arizona and Nevada, which rely on California for fuel, may be already facing shortages from the Los Angeles refinery shutdown announced by Phillips 66.
The approved LCFS amendments will likely have an adverse effect on the biofuel market. The Engine Technology Forum (ETF) issued a statement, saying that the amendments “seem certain to deter further progress from renewable fuel producers and their suppliers while undermining the viability of transportation fuel providers.” In particular, the ETF criticized a “significant deficiency” in the scope of the current CEC Renewable Portfolio Standard Guidebook that is lacking appropriate recognition of hydrotreated vegetable oil (HVO), a.k.a. renewable diesel (RD) as a distinct qualifying renewable fuel.
Source: CARB