CARB Raises Carbon Intensity Reduction Targets of LCFS to 30% in 2030 and 90% by 2045

The California Air Resources Board on Friday voted to approve updates to the Low Carbon Fuel Standard (LCFS). The updates raise the carbon intensity reduction targets from 20% to 30% in 2030 and to 90% by 2045. 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.

The new ruling also limits credit generation for virgin oil feedstocks and prioritizes waste-based fuels and phases out avoided methane credits from dairies that provide fuel for combustion trucks and buses.

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The LCFS to date has reduced the carbon intensity of California’s fuel mix by almost 13% and displaced 70% of the diesel used in the state with cleaner alternatives. This has displaced 320 million metric tons CO2 of gasoline and diesel emissions since the program’s inception.

The LA Times noted that last September, CARB estimated that the change could lift gasoline prices 47 cents a gallon, or $6.4 billion a year. Other analysts put the resulting price hike even higher at 65 cents a gallon, or $8.8 billion a year.

CARB is backing off any price hike forecasting, saying that its policy comparison model does not predict gas prices. LCFS requires polluters pay, and how compliance costs are passed down is a business decision. CARB also noted that it is responsible for finding solutions to achieve legislatively mandated climate and air quality targets, and that increased stringency is needed to achieve required emissions reductions.

The Board directed staff to assess any impacts and potential mitigation from the newly 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. 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.