California still eyeing 2025 start to LCFS changes

: Biofuels, Emissions, Oil products
24/09/17

California regulators plan to propose changes to the state's Low Carbon Fuel Standard (LCFS) in coming days in hopes of ensuring updates to the program take effect in early 2025.

The California Air Resources Board (CARB) will soon issue a new rulemaking package for a 15-day public comment period, Rajinder Sahota, the agency's deputy executive officer, said today at the Argus North American Biofuels, LCFS & Carbon Markets Summit in Monterey, California.

"We will be working very hard to ensure we have the targets in place" by 1Q, she said.

On a practical level, CARB will have to adopt any amendments to the LCFS by early January or will be forced to start over. California law requires the agency to wrap up a rulemaking within 12 months of the first proposal.

Sahota declined to say what changes, if any, to the most recent language would be part of the next 15-day package. The previous language included a 9pc "step down" in the carbon intensity requirement in 2025 and also contemplated a 20pc/yr cap on a company's credit generation from soybean- and canola-oil-based biodiesel or renewable diesel to begin in 2028.

That new language "is coming very shortly," she said.

The agency's board is scheduled to hold a hearing on the proposed changes on 8 November and could adopt the new language at that session.

The LCFS requires yearly reductions in the carbon intensity of on-road transportation fuels. Fuels with scores above the targets produce deficits, which must be offset with credits generated from distribution to the market of approved, lower-carbon alternatives.

California currently requires a 20pc drop in carbon intensity by 2030. The ongoing rulemaking could bump that carbon intensity reduction up to 30pc.

Surging use of renewable diesel and outsized credit generation from renewable natural gas have overwhelmed deficit generation to create a glut of credits available for future compliance. LCFS credits do not expire, and 26.1mn metric tonnes of credits — 16pc more than all the new deficits generated in 2023 — were available for future compliance by the end of March.

Credits fell in May to trade at $40/t, the lowest level for current quarter credits since June 2015, but have since rebounded as the CARB process has played out. But credit prices are still well below their historical highs. Argus on Monday assessed spot LCFS credits at $58/t.

By Michael Ball

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