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California floats more stringent LCFS target

22 Feb 2018, 3.23 pm GMT

California floats more stringent LCFS target

San Francisco, 21 February (Argus) — California wants to squeeze more greenhouse gas (GHG) reductions out of the transportation sector in order to meet state climate goals.

The Air Resources Board (ARB) yesterday proposed a 20pc by 2030 target for the Low-Carbon Fuel Standard (LCFS) as part of a series of changes to the program that will take effect next year. That would be 2 percentage points higher than a target the agency's board tentatively agreed to late last year.

The agency said "the basic framework of the program has worked well" to encourage the use of more alternative fuel but that "a more ambitious LCFS is critical" to achieve the level of carbon cuts mandated by law.

To help smooth the transition to the new targets, the amendments would also lower near-term benchmarks for the LCFS, resulting in a 1.25pc/yr increase from 2018-2030. For 2019 and 2020, the targets would be lowered to 6.25pc and 7.5pc, respectively, instead of 7.5pc and 10pc.

ARB said the changes would reduce "the probability of unnecessarily high short-run credit prices."

The Western States Petroleum Association, a longtime critic of the program, said it continues to have concerns that the LCFS is duplicative of other state GHG policies and hurts consumers.

"The proposed increased target would further undermine the state's ability to efficiently meet its climate goals," WSPA president Catherine Reheis-Boyd said.

California aims to reduce GHGs by 40pc from 1990 levels by 2030. Transportation accounts for more emissions than any other sector.

The ARB estimates that the proposed changes would result in 70mn metric tonnes of CO2e reductions beyond what could be expected from the existing regulation, which requires a 10pc reduction in the carbon intensity of transportation fuels by 2020.

The new targets are part of a preliminary draft of program amendments that also includes provisions allowing alternative jet fuel to generate LCFS credits and the addition of a third-party verification system, remain in the proposal.

The LCFS market reacted quickly to the lower carbon intensity targets proposed for 2019 and 2020. The credits traded as low as $90/metric tonne before rebounding to the $120-$130/t range as of the early afternoon.

Argus assessed the LCFS credits at $149.50/t yesterday.

One market participant called the drop "a knee-jerk reaction to a preliminary draft."

The comment period on the draft proposal opens 9 March. The ARB board will hold its first hearing to review the changes in late April before voting on them in September.


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