California will require credit-draining cuts to road fuel carbon intensity next year and sharper scrutiny on crop-based feedstocks by the end of the decade under regulations approved by the state's Air Resources Board late Friday.
The 12-2 vote begins efforts to rebalance a swollen Low Carbon Fuel Standard (LCFS) credit market blunting the reach of one of the most influential incentive programs in the hemisphere.
The rules impose sharply tougher targets for 2025 and plan tighter restrictions for crop-based feedstocks through the end of the decade. California's Air Resources Board (CARB) also adopted an automatic mechanism to advance to tougher targets beginning in 2028 if credits persistently exceed new deficits.
Board members added language requiring study of updated models on land use change and feedstock competition with food, and wrestled with the treatment of dairy methane capture projects before adopting the measure.
"We cannot afford to continue with the status quo," chairwoman Liane Randolph said at the meeting's opening. "Any action today by the board is not a conclusion, but an important milestone in the evolution of this innovative and critical climate policy."
LCFS programs require yearly reductions in transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limit incur deficits that suppliers must offset with credits generated from the distribution to the market of approved lower-carbon alternatives.
Low-carbon fuels responded to targets last adjusted in 2018 faster than regulators expected. Low-carbon diesel has replaced 75pc of the state's liquid petroleum consumption in roughly a decade. Much of that growth occurred in the past four years, helping to amass the 29mn metric tonne inventory of credits available for future compliance weighing on the market today. California generated 22.4mn new deficits in all of 2023.
CARB approved a 9pc tougher target for 2025 — cuts roughly six times deeper than the usual annual change — and set a 30pc total reduction target by 2030, replacing a previous 20pc target. That, too, could change, under a separate mechanism adopted in the rulemaking that would automatically skip ahead to tougher targets when banked credits exceed three quarters of new deficits.
The vote followed hours of public comment split between companies increasingly wary of the fate of federal incentives for decarbonization and residents frustrated by potentially harmful effects of biofuels and dairy biogas.
Companies often described the proposals as flawed but necessary to advance.
"I don't see how we make this transition away from diesel to zero emissions without this program," said Adam Browning on behalf of Forum Mobility, a company focused on heavy-duty fleet electrification.
Many residents who spoke said they lived near dairies and opposed continued crediting for captured gas from those facilities used as transportation fuel.
"It seems like the dairies are more important than the communities," said Pixley resident Christina Velasquez.
Board members considered further amendments requiring another 15 days of public notice to remove guarantees added late in the process on the length of credit generation regardless of future regulations on methane. The measure failed, 3-11, in part on concerns that pursuing such changes would risk causing the entire proposal to fail. Board member Diane Takvorian, who proposed the change, ultimately voted against the full amendments.
"My best judgment is that we could have done better," Takvorian said. "I don't think this is an end — I think this is a beginning to continue to work together to achieve the zero-emission and environmental justice that we all envision, even if we disagree about how to get there."
Cost concerns that dominated media discussion and many written comments were largely absent from public comments. Dean Florez, a board member who said before the meeting he would vote against the amendments, focused on the expectation that tougher targets would raise compliance costs.
"Do we not think that by increasing the stringency of the carbon intensity, that that is not going to raise gas prices, and it's not going to do it significantly?"
Board members added language directing a review of the program's influence on gasoline prices every six months.
More speakers instead accused the policy of favoring biofuels over zero-emissions vehicles. Board members later emphasized that the program supported the state's ZEV mandates.
"Our commitment to zero emission vehicles is in no way affected by our actions here today," board member Hector de la Torre said.
The regulations must now be submitted to the Office of Administrative Law by 3 January. They could take effect in the first half of 2025, with targets enforced that year.
