British Columbia extends LFCS to 2030

British Columbia is setting more aggressive targets for its low-carbon fuel standard in a bid to grow its market for alternatives to conventional gasoline and diesel fuel and reduce greenhouse gas (GHG) emissions from the transportation sector.

The provincial government this week finalized a 10-year extension of its LCFS and related renewable fuel regulations, with a new mandate for a 20pc reduction in the carbon intensity of transportation fuels by 2030. The rule also sets an average 5pc renewable content in gasoline and 4pc in diesel fuels.

The LCFS extension includes an easing of this year's compliance target, originally set at 10pc, to account for the Covid-19 pandemic's contribution to an historic decline in global crude oil prices and lower demand for transportation fuels. The new 2020 mandate is set at a 9.1pc reduction, equivalent to about 86.15g CO2 equivalent per megajoule for diesel and 80.13g/MJ for gasoline. After this year, the targets increase by about 1.09pc/yr.

The province is also expanding the coverage of its LCFS and renewable fuel regulation. This year, the regulation allows companies supplying less than 75mn liters of fuel to apply for exemption from the fuel requirements. That threshold will be reduced to 25mn liters next year and 200,000 liters in 2022.

The British Columbia LCFS measures compliance with a system of credits and debits. Fuels with carbon intensity scores lower than targeted levels generate credits; fuels with higher scores generate debits. Credits can be banked for future transactions or traded between suppliers. At the end of each compliance period, suppliers must have zero or more credits to avoid penalties.

The extension of British Columbia's LCFS is an indication that policymakers and fuel industry participants intend to stay the course on emissions reduction targets even in the midst of a dramatic downturn in energy markets.

British Columbia's new LCFS rules align closely with Oregon's and California's LCFS programs, but do not link with the US programs.

The province ended up not adding alternative jet fuel as an eligible credit generation, a step the two US programs took last year and that British Columbia had considered following.

Aviation and marine transportation account for 28pc of global transportation emissions, but the cost of producing renewable jet fuel is prohibitively high for many producers. British Columbia's omission of sustainable aviation fuel reflects the nascent nature of the fuel market and the lack of policy consensus around the issue in Canada's energy and aviation industries.

As renewable aviation fuel is a relatively small, discrete market, policy incentives like those created by California's program are vital for market viability. Aviation fuel is not subject to California's LCFS mandate but does generate credits that regulated refiners and fuel suppliers may use for compliance. California requires sustainable aviation fuel to beat certain carbon intensity benchmarks in order to generate credits.

Last year, alternative jet fuel generated only 11,100 California LCFS credits, out of nearly 14.8mn from all fuels in the program, from roughly 1.9mn USG of the fuel used in the state. Sustainable aviation fuels generated no credits for Oregon's program, which targets a 10pc cut in the carbon-intensity of fuels by 2025.

By Solomon Moore