(California Air Resources Board) The approved program amendments will catalyze private sector investment in decarbonizing California’s transportation sector to support climate action and cleaner air. -- The California Air Resources Board today approved updates to the Low Carbon Fuel Standard (LCFS) that channel global, national and local private sector investment towards increasing cleaner fuel and transportation options for consumers, accelerating the deployment of zero-emission infrastructure, and keeping the state on track to meet legislatively mandated air quality and climate targets.
The LCFS reduces air pollution and greenhouse gas emissions by setting a declining carbon intensity target for transportation fuels used in California; producers that don’t meet established benchmarks buy credits from those that do. This system has generated $4 billion in annual private sector investment toward a cleaner transportation sector. These investments provide multiple economic benefits to Californian consumers, including:
- Increasing consumer choices, which drives transportation fuel price competition
- Growing new industries and attracting investments that support jobs and strengthen communities
- Reducing dependence on petroleum and the oil industry, thereby protecting consumers from its associated supply and cost volatility
- Making electric vehicles more affordable
- Expanding access to electric vehicle charging and hydrogen refueling infrastructure
- Reducing the health impacts and health care costs associated with air pollution from fossil fuels
The updates set targets to reduce the carbon intensity of California’s transportation fuel pool by 30% by 2030 and by 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 LCFS has been very effective to date, 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. This has displaced 320 million metric tons CO2 of gasoline and diesel emissions since the Program’s inception. That’s an amount equivalent 85% of today’s annual statewide greenhouse gas emissions. The growth in the use of renewable fuel is powering needed emissions reductions in the transportation sector.
“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,” said “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.”
The LCFS is designed to provide the most cost-effective path to support clean fuels and infrastructure. 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. 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.
Supporting Californians
- Making electric vehicles more affordable: “The LCFS has also provided hundreds of millions of dollars of beneficial credits and incentives supporting the build-out of EV charging infrastructure and vehicle rebates which lower the upfront costs for drivers,” said a representative from MN8 Energy, which produces renewable energy, in a letter submitted to CARB.
- Expanding access to charging infrastructure: As of October 10, 2024, there have been a total of 71 hydrogen stations and 749 fast EV charger sites approved under the Hydrogen Refueling Infrastructure (HRI) and (Fast Charging Infrastructure) FCI provisions of LCFS, respectively.
- Reducing health care costs associated with pollution from dirty fuels: CARB estimates $5 billion in savings from avoided health outcomes between 2024 and 2046.
- Increasing consumer choices, which drives price competition: “By using market-based policies that ensure the best ideas succeed, we can also maximize impact by marshaling private capital to invest in climate solutions. Fortunately, California already has an excellent example of this kind of approach in the Low Carbon Fuel Standard (LCFS).”
- Reducing dependence on the oil industry, thereby protecting consumers from its associated supply and cost volatility: The LCFS has displaced more than 30 billion gallons of petroleum fuel.
The LCFS sends long-term market signals to phase out combustion fuels and increase zero emission fuels and transportation options. The LCFS updates adopted by the Board were developed after a rigorous, years-long public rulemaking process that incorporated feedback received from interested parties. Updates include:
- Providing billions of additional dollars to fund zero-emission vehicle charging and hydrogen fueling infrastructure, including new crediting opportunities for medium - and heavy-duty refueling infrastructure, to support implementation of California’s zero emission vehicle regulations.
- Increasing incentives for infrastructure in low-income neighborhoods and remote locations and ensuring that historically underserved communities receive needed investment to reduce emissions and provide equitable access to a clean air future.
- 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.
Updated guardrails
The LCFS updates also include new guardrails to avoid land use changes resulting in potential loss of food production or deforestation. The majority of biomass-based diesel and sustainable aviation fuel in the LCFS has historically come from waste feedstocks, such as used cooking oil, animal fat and inedible distiller’s corn oil. To minimize potential land use issues, the program will require fuel producers track crop-based and forestry-based feedstocks to their point of origin. The LCFS will also require independent feedstock certification to ensure biomass-based diesel and sustainable aviation fuel feedstocks are not undermining natural carbon stocks. Palm-derived fuels are also explicitly prohibited from receiving credits.
Californians will benefit from these program updates in numerous ways, including:
- As consumers increase their use of low carbon intensity fuels and more efficient vehicles, fuel costs per mile will be reduced by 42 percent - translating to savings of over $20 billion in fuel expenditures every year by 2045. For light-duty vehicles (cars, pickup trucks, sport utility vehicles, vans, and minivans) these fuel cost savings will be even more pronounced, cutting today’s costs to Californians by more than 50 percent.
- The amount of LCFS proceeds invested in disadvantaged communities for clean fuel and transportation projects is estimated to be approximately $4.8 billion in the next decade.
- Californians are expected to save almost $5 billion in health care costs by avoiding the impacts of air pollution.
- The amendments will reduce greenhouse gas emissions by 558 million metric tons, NOx by more than 25,500 tons and PM 2.5 by more than 4,200 tons between 2025 and 2045.
More Information
CARB's mission is to promote and protect public health, welfare, and ecological resources through effective reduction of air pollutants while recognizing and considering effects on the economy. CARB is the lead agency for climate change programs and oversees all air pollution control efforts in California to attain and maintain health-based air quality standards. READ MORE
Related articles
- Clean Fuels Applauds CARB's Commitment to the LCFS, Emphasizes Ongoing Collaboration (Clean Fuels Alliance America)
- California Air Resources Board passes amendment that could impact gas prices (ABC 10; includes VIDEO)
- California Air Resources Board approves controversial emissions program changes that could raise gas prices (CBS News)
- California air board member: Why I can’t back the proposed fuel standard changes (Cal Matters)
- California Air Resources Board approves new clean air rules that are expected to raise gas prices (KCRA; includes VIDEO)
- California votes for 30 percent carbon intensity reduction by 2030 in effort to boost LCFS (Biofuels Digest)
- CARB Vows To Monitor, Mitigate Fuel Price Hikes Due To LCFS Overhaul (Inside EPA)
- What They Are Saying About California’s Groundbreaking Low Carbon Fuel Standard: It’s Working (Alliance for Low Carbon Fuels)
- California Toughens Climate Fuel Rules Despite Possible Cost (Bloomberg/Governors' Biofuels Coalition)
- California votes to update its low-carbon fuel standard (E&E News/Governors' Biofuels Coalition)
- CARB votes to adopt LCFS updates (Ethanol Producer Magazine)
- California updates LCFS program, moves forward with 20% cap on biofuels from crop oils (Biobased Diesel Daily)
- California’s proposed LCFS cap on soy, canola biofuels ‘far worse than anticipated’ (Biobased Diesel Daily)
- CARB Updates Low Carbon Fuel Standard, Expands Access to Cleaner Transportation (NGT News)
- California biofuel restrictions limit farms’ role in renewable energy transition -- New changes to the state’s low carbon fuel standard cap incentives for soybean oil in renewable diesel and give a timeline to phase out subsidies for dairy methane digesters. (Agriculture Dive)
- Engine Technology Forum Calls on Legislators to Recognize Renewable Diesel (Engine Technology Forum)
- California Boosts EV Charging Sector at the Expense of Biofuels: Updates to the Low Carbon Fuel Standard could fund 40% of state’s charging needs. (Bloomberg)
Excerpt from Clean Fuels Alliance America: Clean Fuels Alliance America commends the California Air Resources Board (CARB) for passing the amendments to the state’s Low Carbon Fuel Standard (LCFS), a move that marks another step forward in California’s decarbonization leadership. Clean Fuels acknowledges CARB’s continued commitment to a cleaner future, while recognizing there is more work ahead to ensure crop-based renewable fuels are recognized as a long-term solution.
“Clean Fuels has enjoyed a long partnership with CARB and is committed to working with staff to ensure that the updated regulation can meet California’s aggressive carbon reduction targets while supporting the agricultural community that is the backbone of our sustainable, clean fuels,” said Cory-Ann Wind, Director of State Regulatory Affairs at Clean Fuels Alliance America.
Since the LCFS was adopted in 2009, California fleets have used increasing amounts of biomass-based diesel to lower emissions and lessen reliance on fossil fuels. Fifteen years later, 75% of the state’s diesel pool is renewable and responsible for 45% of California’s progress under the LCFS. The biodiesel and renewable diesel industries are creating jobs, improving air quality, and providing sustainable options for fleets to reduce their carbon footprint today and at a lower cost than other options. Looking to the future, sustainable aviation fuel can do more of the same.
Clean Fuels also appreciates the Board’s direction to convene a public forum on the latest science on land use change related to transportation fuel and the impact on greenhouse gas emissions. It is imperative that the most current data is used to calculate the carbon intensity of fuels used in the LCFS, and we support this effort to get it right. READ MORE
Excerpt from CBS News: The program has a wide swath of critics -- from environmentalists to the oil industry -- with some analysts estimating changes to the state's low carbon fuel standard, or LCFS, could increase prices at the pump by as much as 65 cents a gallon.
The plan approved late Friday at the end of a 12-hour meeting will increase the state's emission reduction targets and fund charging infrastructure for zero-emission vehicles. It also will phase out incentives for capturing methane emissions from dairy farms to turn into fuel.
Environmental groups have criticized the program for stimulating the production of biofuels, which are derived from sources including plants and animal waste, when they say the state should focus more on supporting power for electric vehicles. They argue the proposal fails to adequately address those concerns.
The oil industry, state lawmakers and others have said the agency hasn't been transparent about how the proposed updates could increase gas prices.
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Agency staff released a cost-benefit analysis last year estimating that the initial proposal could have led to an increase in gas prices by 47 cents per gallon by 2025. But staff has not repeated the analysis since later updating the proposal, and the agency contends it cannot accurately predict gas prices.
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Gas prices in California are on average $1.47 a gallon higher than the national average mainly because of its gas taxes, the highest in the country.
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A CARB spokesperson issued a statement that read, in part: "The Low Carbon Fuel Standard is an effective climate and air quality program that has successfully reduced the use of fossil diesel in the state by 70% by incentivizing the development of cleaner fuels that give consumers increased options."
"In fact, we estimate that the program will reduce transportation costs 42% over the next 20 years through increased options that are also better for the environment and public health," the statement added. "That is good for consumers and good climate action."
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The Trump administration in 2019 revoked California's ability to enforce its own tailpipe emissions standards. President Joe Biden later restored the state's authority, which was upheld in federal court.
Future challenges from the Trump administration could lead to long court battles, said David Pettit, a senior attorney with the Center for Biological Diversity's Climate Law Institute. READ MORE
Excerpt from Alliance for Low Carbon Fuels: As California prepares to make key decisions on the future of its Low Carbon Fuel Standard (LCFS), a broad coalition of stakeholders from across the transportation and energy sectors has voiced strong support for maintaining and expanding this critical program. The LCFS, under the guidance of the California Air Resources Board (CARB), has proven essential in driving down greenhouse gas emissions, promoting cleaner fuel adoption, and supporting the state’s ambitious climate goals. Leaders from diverse industries, including transportation, renewable energy, biogas, hydrogen, and dairy, are coming together to highlight the importance of the LCFS in advancing California’s efforts to reduce pollution, improve public health, and foster economic growth. Their unified message is clear: by supporting the LCFS, California can continue to lead the way in sustainable innovation and set a powerful example for the nation and the world.
Sam Wade, Director of State Regulatory Affairs, The Coalition for Renewable Natural Gas California has a decades-long history of climate leadership that is embodied today in its Low Carbon Fuel Standard — a nation-leading clean fuel program that has in just a few years fueled the displacement of more than 60% of state diesel supplies with cleaner alternatives. CARB's proposal to update this program will increase overall programmatic ambition while continuing to recognize the dual emissions reduction benefits of renewable natural gas (RNG) projects, which displace fossil fuels while capturing methane from organic waste sites. Due in part to support from the LCFS, California today boasts more dairy RNG projects than any other U.S. state, offering hope that we can tackle the environmentally pressing problems of transportation-linked pollution and agricultural methane emissions within our lifetimes.
A vote for this proposal will allow our industry to move forward with investments critical to California's long-term greenhouse gas (GHG) reduction goals, catalyzing a growing effort to address climate change and protect our communities through sound policy and clean energy innovation.
Katrina Fritz, President & CEO, California Hydrogen Business Council California's low carbon fuel standard is critical to build the markets for decarbonized fuels, including hydrogen. As the requirements expand for lower and zero-emission transportation and goods movement, the LCFS provides an economic pathway for innovation and investment to begin the transition now.
Dan Gage, President, The Transport Project For years now California’s Low Carbon Fuel Standard program has shepherded the reduction of planet-warming emissions and transitioned in-state fleets to cleaner motor fuels. To do so, California Air Resources Board members guided by Chair Liane Randolph have relied on incentives and public-private partnerships to encourage, foster, and build out this green adoption. The Board should follow that sage approach by resisting calls to change course and adopt overly prescriptive and less collaborative policies. By approving these proposed amendments, CARB members will ensure that every fleet stakeholder will continue to have the ability to participate in and contribute to California’s emission reduction success by embracing a clean technology that works for their application and operation.
The Transport Project is a national coalition of roughly 200 fleets, vehicle and engine manufacturers and dealers, servicers and suppliers, and fuel producers and providers dedicated to the decarbonization of North America’s transportation sector. Through the increased use of gaseous motor fuels including renewable natural gas and hydrogen, the United States and Canada can help achieve ambitious climate goals and greatly improve air quality safely, reliably, and effectively without delay and without compromising existing commercial business operations. Find out more at: transportproject.org.
Robin Vercruse, Executive Director, The Low Carbon Fuels Coalition This proposal strikes a balance to accelerate progress on climate goals, while reducing health impacts, decreasing pollution exposure disparities, fostering electrification, and promoting market competition—all at relatively lower cost and with less consumer disruption than a more restrictive approach.”
Dan Bowerson, Vice President, Energy & Environment, Alliance for Automotive Innovation: California’s leading the nation in the transition to automotive electrification, but even at 25 percent market share, more can be done to help the state meet ACC II and EV sales requirements in the years ahead. The LCFS will support (actually accelerate) the switch to electrification and reduce the carbon intensity of liquid fuels still used in a majority of vehicles operating on California roads. Eliminating LCFS now will make the state’s climate goals more challenging and divert revenue that should be invested in low-carbon transportation and EV adoption.
Republic Services Republic Services is committed to operating responsibly and sustainably. With 17,000 trucks on the road throughout North America, we are working hard to improve our environmental footprint through the use of EVs and lower-carbon fuels, such as renewable natural gas (RNG).
We also support sound regulations that promote reduced vehicle emissions, including the approval of revisions to California’s Low Carbon Fuel Standard. This program provides essential support for the deployment of low emission recycling and waste collection services to the communities we serve throughout the state. The revised regulation also offers a responsible timeline for conversion to a zero emissions future and encourages continued use of the lowest emission fuels available during the transition.
Nicole Rice, President, California Renewable Transportation Alliance CRTA supports the LCFS because it encourages innovative solutions across various industries and establishes California as a leader in sustainability practices. The movement towards low-carbon, renewable fuels has gained widespread support among fleets, reflecting our shared commitment to a greener future. Supporting the LCFS is essential to ensuring we make a successful transition to cleaner, renewable fuels and crucial for continuing our progress towards meeting the state’s carbon neutrality goal by 2045.
Julia Levin, Executive Director, Bioenergy Association of California The LCFS is driving down carbon emissions and helping to build California’s circular economy by providing a market for fuels generated from organic waste that would otherwise be landfilled or burned.
Teresa Cooke, Executive Director, California Hydrogen Coalition The California Hydrogen Coalition strongly supports the Low Carbon Fuel Standard (LCFS). The LCFS sends a cost-effective and critical investment signal supporting the progressive decarbonization of California’s transportation fuels and the deployment of zero-emission vehicle infrastructure like hydrogen fueling stations. This support is necessary to ensure California can meet our zero-emission vehicle goals for cars, trucks, buses, and off-road equipment like forklifts.
WM WM has been a leading adopter of vehicles and infrastructure to transition our traditional diesel fleet to cleaner energy sources. As we continue to grow our alternative fuel fleet, WM also is enabling the circular economy by investing in renewable natural gas (RNG) infrastructure at our landfills while increasingly operating our vehicles on the RNG that we produce. Our long-term and ongoing investments in RNG, coupled with a fleet that can operate on this fuel, serve the dual purpose of reducing landfill methane emissions while moving us closer to a low-carbon collection fleet. These investments in sustainability are made possible through strong, technology-neutral programs like the LCFS. By voting yes, CARB is providing the tools that companies like WM need to support California in reaching its climate ambitions.
Carlos Gutierrez, Executive Director, California Advanced Biofuels Alliance California Advanced Biofuels Alliance (CABA) supports the LCFS amendments, which are crucial in expanding biofuel access and reducing California's reliance on imported oil. Biofuels are not only a lower-cost, domestically produced alternative, but they also play a vital role in reducing greenhouse gas emissions and improving air quality across the state. Although there is still work to be done in this rulemaking process, these amendments represent a strong first step toward a low-carbon future that benefits both our environment and consumers.
ChargePoint On November 8 the California Air Resources Board (CARB) will vote on proposed amendments to the Low Carbon Fuel Standard (LCFS) program. The LCFS has been critical to reducing transportation emissions in California, which account for the largest share of emissions by sector. The LCFS also incentivizes innovative, cost effective decarbonization within the transportation value chain. The LCFS has also helped build out the charging infrastructure that California will need to meet its zero-emission vehicle (ZEV) goals.
Patrick Serfass, Executive Director of the American Biogas Council Thanks to the Low Carbon Fuel Standard, California has led the nation in cutting greenhouse gas emissions from transportation. Biogas systems in the LCFS capture potent methane emissions, supply a carbon-negative fuel, and contribute significantly to reduced emissions from vehicles in California. We remain committed to working with California to expand this vital program that recycles waste material and uses it to strengthen the state's economy while fighting climate change.
Janice Linn, Founder and President, Green Hydrogen Coalition The Green Hydrogen Coalition is glad to see California increase its ambition to transition away from fossil fuels. The Air Resources Board’s adoption of this update to the regulation will send clear signals that will catalyze more investment in non-fossil fuels like renewable hydrogen which will translate into good jobs, cleaner air, and set an example for the rest of the globe to follow. Now is the time to implement and the Green Hydrogen Coalition is ready to support the development of California’s renewable hydrogen economy.
Michael Boccadoro, Executive Director, Dairy Cares The LCFS is critical to ensuring ongoing investment in dairy methane reduction efforts. Staying the course ensures California will continue important progress toward the state’s ambitious climate goals while leading the world in methane emission reductions
Colin Sueyres, President and CEO, Western Propane Gas Association Market-based mechanisms like LCFS provide Californians with the most affordable and least onerous method to meet the goals of the energy transition, ensuring that California remains economically competitive and minimizes harm to the lowest-income residents of our state. These mechanisms also lead to direct investment into California, developing the fuels of the future that can be exported around the country – and world. The propane industry remains committed as we have always been to providing a safe, reliable, affordable, and clean fuel to keep California moving toward the future.
Vinney Fornesi, South San Francisco Scavenger Company As a family-owned small business, the California Air Resources Board’s Low Carbon Fuel Standard (LCFS) plays a crucial role in supporting our operations. The marketable credits generated under the LCFS help alleviate a portion of the operational costs associated with producing carbon-negative renewable fuels. These credits not only provide immediate financial relief but also serve to incentivize and attract future investment into the development of innovative carbon-negative fuel technologies. By participating in the LCFS, we are able to further our mission of advancing sustainable energy solutions while contributing to California's broader environmental goals.
Veronica Pardo, Executive Director, Resource Recovery Coalition of California Resource Recovery Coalition of California (RRCC) and its members rely on the Low Carbon Fuel Standard (LCFS) to deploy lower-carbon and renewable fueled waste and recycling trucks in the communities they serve. It is through the LCFS program that our members can simultaneously improve local air quality and continue to protect the health and safety of their local communities by managing municipal solid waste. READ MORE
Excerpt from Ethanol Producer Magazine: According to CARB, the LCFS will now require fuel producers to track crop-based and forestry-based feedstocks to their point of origin. The program will also require independent feedstock certification to ensure biomass-based diesel and sustainable aviation fuel (SAF) feedstocks are not undermining natural carbon stocks. Palm-derived fuels are explicitly prohibited from receiving credits.
CARB approved proposed updates to the LCFS that aim to limit the use of soybean oil, canola oil and sunflower oil in the production of LCFS-compliant biobased diesel fuels. The LCFS will now provide credits for biomass-based diesel produced from these feedstocks for up to 20% of annual biomass-based diesel reported on a company-wide basis. Biobased diesel fuel in excess of 20% will be assigned a carbon intensity (CI) equivalent for fossil-based diesel in line with LCFS regulations or the certified CI for the associated fuel pathway, whichever is greater. For companies that already have summitted a biomass-based diesel pathway certification or have an approved pathway under the LCFS, the 20% cap on soybean oil, canola oil and sunflower oil feedstocks take effect Jan. 1, 2028.
The amended LCFS also phases out avoided methane crediting associated with the use of biomethane as a combustion fuel but does extend the use of biomethane for renewable hydrogen to align with goals outlined in California’s 2022 Scoping Plan, which is the state’s plan for reducing climate-warming emissions and reaching carbon neutrality.
For RNG projects that break ground after Dec. 31, 2029, LCFS credit generation phases out after Dec. 31, 2040. For hydrogen, effective Jan. 1, 2030, hydrogen dispensed as a vehicle fuel must be at least 80% renewable. Starting Jan. 1, 2035, hydrogen produced using fossil gas as a feedstock is ineligible for LCFS credit generation unless biomethane attributes are matched to the hydrogen production.
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According to the RNG Coalition, the LCFS updates will increase overall program stringency while continuing to recognize the dual emissions reduction benefits of RNG projects, which displace fossil fuels while capturing methane from organic waste sites, like landfills, dairy farms and wastewater treatment facilities.
Due in part to the support of the LCFS, California has more dairy RNG projects than any other state with 133 operational facilities and another 84 projects under development. The RNG Coalition said CARB’s vote will allow investors to move forward with those planned projects with confidence that California’s LCFS market will continue to reward their innovation.
Additional information on the LCFS updates is available on the CARB website. READ MORE
Excerpt from Biobased Diesel Daily: To date, the LCFS has reduced the carbon intensity of California’s fuel mix by almost 13 percent and displacing 70 percent of the diesel used in the state with cleaner alternatives like biodiesel and renewable diesel.
This has displaced 320 million metric tons CO2 of gasoline and diesel emissions since the program’s inception.
To the dismay of biofuel associations and industry stakeholders, the updated LCFS sends long-term market signals to phase out combustion fuels and increase zero emission fuels and transportation options. READ MORE
Excerpt from Bloomberg: The board approved an update to the state’s Low Carbon Fuel Standard, or LCFS, that will make it more difficult for biofuel producers to generate regulatory credits going forward. EV charging will become the program’s leading benefactor by the end of the decade, according to BloombergNEF.
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The program will provide in the range of $500 million to $1.4 billion to the charging sector per year, based on today’s credit prices. This will be funded by fossil-fuel suppliers whose product emissions exceed legislators’ emissions targets.
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Grid operators and automakers can take a share of funds, but biofuels producers including Phillips 66 and Marathon Petroleum will see their funds reduced, potentially hampering the viability of certain projects.
States and countries around the world will be taking note of the updates, as many already have or are planning to introduce similar programs. Like California, some have struggled with an oversupply of credits tanking prices.
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Under the updated rules, transport fuel emissions must now be at least 30% below 2010 levels by 2030, and 90% below by 2045. Previously, the target was a 20% reduction by 2030.
There are also more stringent rules on producers of biogas and biofuels, particularly crop-based fuels. BNEF expects most biofuels, except biomethane, to have a harder time creating any credits by the mid-2030s.
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The analysis shows biofuels will fall from 74% of credits in 2023 to 45% in 2030, with most biofuels generating deficits by 2035. The generation of credits has become stricter as legislators try to reduce crop-based fuels. Soy and canola oil made up at least 26% of biodiesel supply and 19% of renewable diesel in 2023, but going forward, crop-based biofuels will only be able to make up 20% of total bio-based diesel supply. Restrictions begin in 2025 for new projects, and 2028 for existing projects.
The changes will likely push producers to find ways to reduce the carbon intensity of their fuel, such as by using less carbon-intense feedstocks or exploring carbon-capture technologies, which could in turn increase fuel prices for drivers.
Opposition to the generous biomethane crediting system was brought up at the Nov. 8 program hearing. But the new rules barely limit credits for the fuel, as restrictions on methane-avoidance credits are not introduced until the late 2030s. Biomethane credits are generated under the LCFS through the capture of methane from landfills, dairies and waste-treatment facilities. Critics argue that subsidies shouldn’t be given to dairy farms to power natural gas vehicles.
The program will be reviewed regularly and remain a hot political topic as fuel providers battle for subsidies and politicians evaluate how the program affects fuel costs. READ MORE
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