Calif. LCFS update to support RD, SAF growth

Revisions to the California Low-Carbon Fuel Standard (LCFS) that are on the horizon will continue to drive renewable diesel and sustainable aviation fuel (SAF) growth, the state's top environmental regulator said.

"Getting our LCFS and cap-and-trade program to match the ambition set forth in our 2022 scoping plan is a key focus for us this year," California Air Resources Board (CARB) chairwoman Liane Randolph said today at the BNEF summit in San Francisco. "Upwards of 50pc of diesel in the state is renewable and we want to continue to support that. The quickest way to decarbonize aviation is with SAF and we want the LCFS to support that."

CARB is "looking forward to having an update to the program that provides for more sustainable transportation going forward," she said.

The agency released its proposal on the future of the LCFS last month and has been receiving input from the industry and others. The rulemaking process will continue at least through a hearing date set in late March.

California has a mandate to reduce its overall GHG emissions by 40pc compared with 1990 levels by 2030. But CARB is considering setting a more aggressive 2030 target of either 48pc or 55pc, for the state's cap-and-trade program, to help meet longer term goals.

"If we are going to get to carbon neutrality by 2045, we need to increase ambition to 2030 to get more like 48pc reductions," Randolph said.

Both cap-and-trade and LCFS need to see increased ambition, Randolph said.

The proposed "ratchet mechanism" for the LCFS is intended to stabilize prices and make the program more predictable for investors, Randolph said. "The LCFS has created opportunities to support cleaner fuels and charging infrastructure and it is critical that program gets updated," she said.

The mechanism would automatically toughen targets starting in 2028, if the credit bank more than triples the number of new deficits generated in a quarter, and if credits exceeded deficits in the prior year. New credits have exceeded new deficits since 2021.

Meanwhile, weaker LCFS credit prices have made a challenging environment for hydrogen deployment, California Energy Commission member Patty Monahan said. California spot credits have shed roughly half of their value from a year ago, weighed down by rising credit generation and sluggish CARBOB demand.

Hydrogen has faced more challenges than electric vehicles in California, Monahan said, adding that the policy support for hydrogen through the LCFS was critical in this early stage of the market. "The LCFS price being so low has made it hard for light-duty hydrogen infrastructure to build out. Everyone is waiting to see what happens with the LCFS."

By Jessica Dell

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