After hearing from both proponents and opponents of a handful of proposed changes to the state’s Low Carbon Fuel Standard (LCFS), the California Air Resources Board (CARB) ruled in favor of the updates, striking a “balance between reducing the environmental and health impacts of transportation fuel used in California and ensuring that low-carbon options are available as the state continues to work toward a zero-emissions future,” according to CARB Chair Liane Randolph.
“Today’s approval increases consumer options beyond petroleum, provides a roadmap for cleaner air, and leverages private sector investment and federal incentives to spur innovation to address climate change and pollution,” she added in a statement.
After reviewing hundreds of public comments and listening to hours of testimony, the Board adopted the following updates:
- Adoption of Resolution 24-14: CARB approved key amendments to the LCFS regulations, aimed at accelerating the shift to low-carbon fuels and supporting zero-emission vehicle (ZEV) growth in line with California’s decarbonization targets. Key initiatives include:
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- Livestock Methane Regulation: CARB will begin developing rules to reduce methane emissions from livestock by 2025, with implementation planned by 2030.
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- Enhanced Monitoring: The Executive Officer will oversee essential metrics, including alternative fuel and hydrogen supply and ZEV infrastructure, with regular updates to track climate goal progress.
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- Public Transparency: CARB will make LCFS data, including carbon reduction progress and fuel credit details, available to the public, distinguishing in-state and out-of-state sources.
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- Future Exploration: CARB will consider expanding LCFS to include ocean-going vessel fuels and will host a public forum within the next year on land use impacts related to fuel production.
- Policy Impact Monitoring: CARB’s newly approved provisions mandate tracking and reporting of key metrics to guide California’s clean fuel transition and ensure transparency. The metrics include:
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- Alternative Fuel Availability: Monitoring sustainable supply of alternative fuels like biofuels.
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- Hydrogen Fuel Supply and Incentives: Evaluating hydrogen supply and alignment with federal incentives to meet demand.
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- Low-Carbon Electricity Technology: Supporting deployment of new low-carbon technologies, such as linear generators, for EV charging.
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- Electricity Fueling Verification: Ensuring accurate data for low-carbon electricity credits in EV charging.
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- Hydrogen and Fast-Charging Infrastructure: Tracking expansion and capacity to meet ZEV needs.
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- RNG Deliverability Requirements: Assessing whether to expedite RNG supply for ZEVs.
- Pricing Impact Monitoring: In response to concerns over potential fuel price increases (estimated to be up to 37 cents per gallon for gasoline and up to 47 cents per gallon for diesel), CARB included provisions requiring biannual assessments of the LCFS’s impact on gasoline prices, with an annual report on findings. Within 120 days of each report, the Executive Officer may propose actions to the board to mitigate any adverse pricing impacts, as an added measure to balance environmental goals with economic considerations.
CARB also outlined core concepts of the recent rulemaking amendments, detailed after the release of the second modified amendment text, including:
- Increasing the carbon intensity reduction targets starting with a 9% reduction in 2025, increasing the 2040 reduction target from 20% to 30%, and ultimately aiming for a 90% reduction by 2045.
- Certification of new biomass-based diesel pathways will cease in 2031.
- An Automatic Acceleration Mechanism will be implemented, with quarterly evaluations and triggers to accelerate CI reduction targets as needed.
- The 20% cap per company on biomass-based diesel derived from soybean and canola oils now includes sunflower oil to support a diversified approach to biofuel sourcing.
- RNG eligibility for book-and-claim accounting will be limited to gas injected into pipelines serving California.
- Non-metered residential charging credits may be made available to OEMs of electric and plug-in hybrid electric vehicles.
- Book-and-claim accounting can now be applied to low-carbon electricity used in direct air capture and hydrogen production.
- RNG and biomethane can now use book-and-claim accounting not only for transportation fuels and hydrogen production but also for generating electricity via fuel cells for EV charging applications.
CARB plans on submitting these amendments to the Office of Administrative Law by January 3, 2025.
Market Response
LCFS credit market rallied in the weeks leading up to the board meeting rising 5%. This follows a decline in prices over the past few years which saw pricing bottom out near $40/MT this year, from a high of over $200/MT in 2020. The price escalation reflects heightened market confidence of the future of the program based on the anticipated board meeting outcomes.
