California: Fuels: Low Carbon Fuel Standard

Overview

The Low-Carbon Fuel Standard is a technology-neutral standard that sets GHG emissions limits for transportation fuels and relies on life-cycle analyses to estimate a fuel’s carbon intensity.  It includes a credit trading system that allows providers to generate tradable credits through the use of low carbon fuels, and in turn imposes deficits for the use of higher-carbon fuels.  California was the first to implement such a standard in 2011, and similar models were developed and implemented in British Columbia, the UK, and the EU. 

Standard type
GHG intensity standard for fuels used in motor vehicles

Regulating Body

California Air Resources Board (CARB) within the California Environmental Protection Agency (Cal/EPA)

Applicability
Both renewable and non-renewable fuels in California

History

The California Low Carbon Fuel Standard (CA-LCFS) is a fuel (and technology) neutral, GHG performance-based standard that seeks to reduce GHG emissions from the transport sector by 10 percent by 2020. The CA-LCFS was enacted by Governor’s Executive Order S-01-07 on January 19, 2007 and is in compliance with California Assembly Bill AB 32, however, the regulation was only implemented in 2010 with the compliance period beginning in 2011. The standard would result in an approximate reduction of 16 million metric tons of CO2 equivalent per year compared to 2010 baseline emissions. These savings are expected to come from increasing the use of alternative fuels, including biofuels, compressed natural gas (CNG), hydrogen, and electricity, which all have lower carbon intensities than gasoline and diesel, in the California fuel mix. The CA-LCFS covers both renewable and non-renewable fuels in California and relies on life cycle analysis to estimate the carbon intensity of transportation fuels. Hence, emissions reductions from these fuels are expected across the entire productive chain, including from distribution and transportation within the state.

Lawsuits filed against the CA-LCFS

In November of 2011, Poet LLC filed a lawsuit against the California Air Resources Board. The lawsuit challenged the state’s low carbon fuel standard (LCFS) program on the basis that the environmental impacts of the LCFS were not adequately studied, and therefore the program should be discontinued. On July 15, 2013, California’s Fifth District Court of Appeal issued its opinion in the lawsuit, which essentially upholds the LCFS program, but requires CARB to correct certain aspects of the program’s implementation. As a result, the LCFS regulations for 2013 would remain in effect until these corrective actions were completed.

On December 29th, 2011, a federal judge at the United States District Court for the Eastern District of California ruled against CARB in the case Rocky Mountain Farmers Union v. Goldstene, in which the plaintiffs had argued that California’s LCFS was unconstitutionally in breach of the ‘Commerce Clause’. The judge found that the LCFS discriminates against sources of ethanol from other US states, in particular due to counting the carbon emissions from transport to California, and due to assigning a lower carbon intensity value to grid electricity in California than in Midwestern states. The judge applied an injunction on California to prevent further enforcement of the LCFS pending appeal. On 18 September, 2013, the Ninth Circuit Court of Appeals reversed the District Court’s opinion, ruling that California’s GHG accounting system was intended to accurately assess a fuel pathway’s carbon intensity, and not to protect California’s farmers. The judge’s opinion can be found here.

For additional information on renewable fuels in the US, see the US Renewable Fuel Standard page.

Technical Standards

Credit Trading System

Credits and deficits are calculated relative to the compliance schedule targets for that year. If a fuel used in California has a lower carbon intensity than that year’s target, it generates LCFS credits, while a fuel with a higher carbon intensity than the target results in deficits. For each compliance year, regulated parties need to generate enough net credits to meet the carbon intensity target for that year. The CA-LCFS is a flexible standard that allows compliance through credit trading, so that obligated parties are able to pay for a third party to introduce low carbon fuels to the California market rather than supplying those fuels themselves. For example, regulated parties with excess deficits can purchase credits from other regulated parties with excess credits. However, regulated parties are not allowed to buy credits generated in climate change mitigation programs outside of the CA-LCFS program in California. Excess credits can also be banked for use in future years. Deficits of up to 10 percent may also be carried forward to the next year. If deficits are not remedied within a specified year, the regulated parties will face penalties commensurate with the size of their deficits. Finally, regulated parties can get credits if they demonstrate that the oil is extracted using new ‘innovative’ methods such as carbon capture and sequestration and solar thermal steam generation.

Calculation of Fuel Greenhouse Gas Intensity

To estimate the embedded carbon in Californian petroleum-derived transportation fuels across their life cycle, the CA-LCFS uses the open source Oil Production and Greenhouse Gas Estimator (OPGEE) tool developed by Stanford University. ARB uses OPGEE to calculate an Annual Crude Average Carbon Intensity, and if this is greater than the 2010 Baseline Crude Average Carbon Intensity then incremental deficits are generated.

Greenhouse gas intensity values for biofuels have been determined using a combination of direct and indirect emission calculations. Direct emissions from biofuels production are calculated using GREET (The Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation Model developed by Argonne National Laboratory). Indirect land use change was calculated using the general equilibrium model GTAP (Global Trade Analysis Project).

Compliance Mechanisms

Market-based mechanisms, primarily credit trading and banking, will play a major role in LCFS compliance. The LCFS relies on Life Cycle Analysis (LCA) as a tool to regulate fuels, incorporating GHG emissions from Indirect Land Use Change (ILUC) in its LCA framework. The ‘direct’ emissions from biofuel pathways are calculated using the CA-GREET model, while the ILUC emissions are calculated using GTAP (LCFS modelling tools). Fossil fuel carbon intensities are to be calculated using the OPGEE model from 2013 onwards (proposed final rule). The tables below detail requirements for fuels used as a substitute for gasoline or diesel.

LCFS Compliance Schedule for 2011 to 2020 for Gasoline and Fuels Used as a Substitute for Gasoline

Year Average Carbon Intensity (gCO2E/MJ)
2010 Reporting Only
2011 95.61
2012 95.37
2013 97.96
2014 97.47
2015 96.48
2016 95.49
2017 94.00
2018 92.52
2019 91.03
2020 and subsequent years 89.06
LCFS Compliance Schedule for 2011 to 2020 for Diesel Fuel and Fuels Used as a Substitute for Diesel Fuel
Year Average Carbon Intensity (gCO2E/MJ)
2010 Reporting Only
2011 94.47
2012 94.24
2013 97.05
2014 96.56
2015 95.58
2016 94.60
2017 93.13
2018 91.66
2019 90.19
2020 and subsequent years 88.23

For further information please see the California Air Resources Board Final Regulation Order on the Low Carbon Fuel Standard ([1]).

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