California Levels Up Rules to Reduce Fuel Carbon Intensity

The California Air Resources Board (CARB) has bucked concerns about increases in transport fuel prices to pass requirements that accelerate fuel carbon intensity reduction.

The changes to the Low-Carbon Fuel Standard (LCFS), in place since 2011, set targets to cut the carbon intensity of transportation fuels in the state by 30 percent by 2030 and 90 percent by 2045, CARB confirmed in a statement. The final amendments, which had undergone consultations with various stakeholders, have yet to be published.

“The amendments also increase support for zero-emissions infrastructure, including for medium- and heavy-duty vehicles, and make more transit agencies eligible to generate credits”, it added.

To minimize the potential environmental and food security impact of feedstock production for biomass-based fuels, the updated LCFS now requires producers to track crop- and forestry-based feedstocks to the point of origin. It also requires independent certification to ensure feedstocks for biomass-based diesel and sustainable aviation fuel do not undermine natural carbon stocks. The new LCFS also excludes palm-sourced fuels from qualifying for credits, which can be bought by non-compliant producers to meet the standards.

“The proposal approved today strikes 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”, CARB Chair Liane Randolph said in the online statement.

“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”.

While CARB said the amendments will drive “fuel price competition” by increasing consumer choices, the American Fuel & Petrochemical Manufacturers (AFPM) warned the new rules only make fuel more expensive for Californians.

“California continues to deliver a master class in ‘what not to do’ if a state wants to lower costs and make energy more affordable for consumers”, AFPM president and chief executive Chet Thompson said in a statement sent to Rigzone.

“Numerous studies—including one they tried to bury—make this abundantly clear, suggesting gasoline costs could increase as much as 37 to 85 cents per gallon by 2030 because of changes to the LCFS”, Thompson added.

An analysis of the proposed amendments that CARB conducted, released September 8, 2023, projected that gasoline prices would increase by an average of 37 cents per gallon, diesel prices by 47 cents per gallon and fossil jet fuel by 35 cents per gallon upon implementation.

“The irony of today’s CARB vote is that it doubles down on a policy everyone knows will raise costs, and it does so just weeks after California convened a special session focused on price relief”, Thompson added.

On October 14 Governor Gavin Newsome signed into law his proposal mandating minimum stockpiles of transport fuels as a guardrail against price spikes. The legislation also asks that refiners create plans to ensure losses during maintenance are backfilled. It imposes penalties on refiners that fail to maintain spare fuel or demonstrate plans for adequate resupply.

Rejecting the new law, industry groups including AFPM blamed California’s restrictive fossil fuel policies for the high cost of fuels at the pump.

On price concerns about the new LCFS, CARB said, “Affordability remains a key consideration for the Board, and it has directed staff to assess any impacts and potential mitigation from today’s 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, and to collaborate with the California Energy Commission in that effort”.

“The program currently limits the pass-through costs companies can shift to consumers by capping the price of credits that high-carbon-intensity fuel producing entities are required to purchase for compliance and allowing banking of credits bought at lower prices”, it assured.

“Data from third-party commodities markets experts shows the current LCFS pass-through to California consumers is $0.10 per gallon of gasoline. This is consistent with the self-reported data by high-carbon-intensity fuel producers, which reflects an LCFS cost pass-through to consumers of $0.08 to $0.10 per gallon of gasoline”.

Meanwhile the new LCFS is a welcome upgrade for biogas players. “Today’s approval of LCFS program amendments by the California Air Resources Board provides the clear signal to the biogas development market that is needed to facilitate and encourage continued investments in new biogas projects”, Patrick Serfass, executive director of the American Biogas Council, said in a group statement.

“Biogas systems capture potent methane emissions, supply a carbon-negative fuel, and provide real emissions reductions and real results to decarbonize California’s transportation sector”.

However, the industry group rued reduced crediting periods for biomethane projects. “These crediting periods rightly prioritize action on methane, a greenhouse gas that when captured has a positive impact on global warming immediately”, Serfass said. “This action will stifle biogas investments, leaving methane emissions from organic wastes unmitigated”.

The CARB statement said the new LCFS is “phasing out avoided methane crediting associated with the use of biomethane used as a combustion fuel, but extending the use of biomethane for renewable hydrogen to align with goals outlined in the 2022 Scoping Plan – the state’s plan for reducing climate-warming emissions and reaching carbon neutrality”.

To contact the author, email jov.onsat@rigzone.com