CARB Hints at Stronger LCFS Targets in Draft Scoping Plan

May 10, 2022

The California Air Resources Board (CARB) hinted Tuesday that it plans to strengthen Low Carbon Fuel Standard (LCFS) carbon intensity reduction targets, but it stopped short of going into much detail on what those changes might look like.

In its draft 2022 Climate Change Scoping Plan Update, CARB outlined in a 255-page report how it plans to guide the state's transition to carbon neutrality by 2045 or sooner. Within the report, CARB made 15 references to the LCFS and said it plans to "initiate a public process focused on options to increase the stringency and scope of the LCFS."

CARB said it will evaluate and propose accelerated carbon intensity targets pre-2030 for the LCFS. It added that it will evaluate and propose further declines in the LCFS post-2030 carbon intensity targets to align with the Final 2022 Scoping Plan. It also said it will consider integrating opt-in sectors into the program -- something that sustainable aviation fuel (SAF) advocates have urged -- and will provide capacity credits for hydrogen and electricity for heavy-duty fueling.

LCFS stakeholders in January urged CARB to strengthen the LCFS targets, in response to a December meeting during which the agency asked for feedback on what it should do with the targets as part of its 2022 rule-making process.

The LCFS program now requires a 20% reduction in the CI of transportation fuels from the 2010 baseline by 2030, including a 10% reduction this year. However, with California now aspiring to net-zero carbon emissions by 2045, CARB is considering whether it should adopt more aggressive LCFS targets.

At the OPIS LCFS & Carbon Markets Workshop in San Francisco in December, Colin Murphy, deputy director of the Policy Institute for Energy, Environment and the Economy at the University of California, Davis, said the agency needs to raise its 2030 CI-reduction target to 24% and establish a 54% reduction goal by 2035 to ensure it is on a path to achieve carbon neutrality by 2045.

Low-carbon fuel producers have been alarmed in recent months by sagging LCFS prices that they say reduce the financial incentive to bring lower-CI fuels into the state. OPIS' LCFS assessment averaged $177.77/credit in 2021, down from $200.04/credit in 2020. On April 29, OPIS assessed LCFS credits at $107/credit, a four-year low. Market sources say an increase in the number of planned renewable diesel production facilities last year were mostly responsible for the decline in credit prices.

In 2021, the numbered of banked credits ballooned to 9.45 million credits, up 16.3% from the end of 2020, thanks in large part to a fourth quarter in which 975,292 more credits were generated than deficits, the largest quarterly build in program history.

--Reporting by Jordan Godwin, jgodwin@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com

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