In 2007, the California Public Utilities Commission (CPUC) approved the Low Carbon Fuel Standard (LCFS) under Executive Order S-1-07. The California Air Resources Board (CARB) adopted the Low Carbon Fuel Standard (LCFS) program in 2009 as an effort to lower the carbon intensity (CI) of the transportation fuel industry, which is responsible for 40% of greenhouse gas emissions in California. In 2011, the LCFS underwent amendments made by CARB to streamline certain provisions of the regulation before the program was re-adopted in 2015. At the time, the program called for a reduction of at least 10% in CI of transportation fuel by 2020 from a 2010 baseline. In January 2019, CARB amended the regulation and increased the carbon intensity reduction goal to 20% by 2030. An LCFS Credit is issued per 1MT of CO2 equivalent reduced.
States Eligible for CA LCFS Credits:
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The LCFS applies to the sale or supply of any fuel in California. Fuel producers and importers are the primary regulated parties. Regulated parties that exceed the maximum CI compliance limit may meet compliance by purchasing credits that are issued to regulated parties with an average CI that is below the maximum CI compliance limit. The LCFS enforces a declining CI curve every year to ensure the continuous reduction of the transportation fuel industry’s environmental impact.
Gasoline and diesel fuels are separated by two different CI compliance averages.
|Compliance Year||Carbon Intensity Reduction||Gasoline (gCO2e/MJ)||Diesel (gCO2e/MJ)|
From 2016 to 2019, spot market pricing for CA LCFS credits has ranged from $65 to $200 per credit. Click here to see the recent pricing.
The Credit Clearance Market (CCM) is held at the end of the year, during which all regulated parties that have an end-of-year deficit must purchase sufficient credits pro-rata to meet compliance. The CCM places a price cap on credits that essentially acts as a market cap for all credits sold throughout the year.
Regulated parties must report using the LCFS Reporting Tool and Credit Bank & Transfer System (LRT-CBTS) and Alternative Fuel Portal (AFP) on a quarterly schedule. Quarterly data must be uploaded to the registry within 45 days of the end of each quarter.
As of the 2019 regulation, credits do not expire.