California LCFS may aim beyond 30pc by 2030

California regulators may push for even greater carbon intensity reductions when it updates its Low Carbon Fuel Standard (LCFS) this fall.

The California Air Resources Board (CARB) recently floated the idea of requiring a 30pc reduction in carbon intensity by 2030, compared with the current 20pc. But that may serve as just a floor for the agency's formal proposal, which will be released this autumn.

"It's going to call for an increase in stringency of at least 30pc by 2030," CARB executive officer Steven Cliff said today at the Argus North American Biofuels, LCFS & Carbon Markets Summit in Monterey, California.

Cliff declined to say how far beyond 30pc CARB might push for in its proposal, but noted that Oregon last year updated its LCFS program with a target of 37pc by 2035.

"Of course, we can't be outdone here in California," he said.

CARB last week published a Standardized Regulatory Impact Assessment (SRIA) that said the agency is planning to propose a 30pc by 2030 target with new, more aggressive reductions beginning in 2025. It also says the agency intends to propose a mechanism to automatically adjust the program to tougher targets based on yet-to-be-defined market conditions — an idea meant to more quickly respond to the record volumes of unused credits now weighing on the program.

But over the past two days, agency leaders have said those plans are not set in stone, with more-stringent targets potentially taking effect in mid-2024.

"Nothing is locked in," Cliff said.

The LCFS requires yearly reductions in the carbon intensity of transportation fuels. Fuels that exceed those limits incur deficits that suppliers must offset with credits generated from the distribution of approved, low-carbon alternatives.

California LCFS credits have sunk from near $200/metric tonne in January 2021 to $60/t in February. Spot credits have moved between $85/t and $70/t since May.

CARB says it is not aiming for a particular price level with its program changes. While it sets a price cap and not a price floor, the agency is working to set its CI targets to an "ambitious level" to balance credits and deficits in the future, said Jordan Ramalingam of CARB's industrial strategies division. The intent of the planned auto-acceleration mechanism is to increase the stringency "if that is needed," he said. "That would also have an impact on the [LCFS] price in the future and it doesn't serve as a price floor, but could help in that direction."

Cliff said CARB staff hope to have a proposal ready sometime in the "November timeframe," and it would go to the board next spring.

By Michael Ball