Assembly Bill 32 (AB32) and Senate Bill 32 (SB32) requires California to reduce its overall greenhouse gas (GHG) emissions to 1990 levels by 2020 and 40% below 1990 levels by 2030. As the transportation sector accounts for almost half of the GHG emissions being emitted into the air, reductions in GHG emissions from this sector will be critical to achieving the goals in AB32 and SB32. Here’s how California's Low Carbon Fuel Standard (LCFS) aims to help achieve these goals.

Reducing GHG Emissions in the Transportation Sector

In an attempt to reduce GHG emissions from the transportation sector, California, along with others such as Oregon and British Columbia, passed the Low Carbon Fuel Standard (LCFS), which will set annual carbon intensity (CI) standards that gradually reduce over time for various types of transportation fuels. The goal is to reduce the CI of the transportation fuel population in California by at least 20% by 2030. The CI of a fuel is essentially a measure of how much GHG emissions are emitted per unit of energy provided by that fuel (i.e., grams CO2e emitted per megajoule of energy). This CI takes into account the full life cycle of that fuel so activities such as producing, distribution, and consumption are all taken into account. 

These compliance limits, also regarded as benchmarks, will be used to compare the CI of various fuels being utilized in the California transportation sector. Fuels that have a higher CI than the benchmarks will generate deficits whereas fuels that have a lower CI will generate credits. Annual compliance is met when the provider uses credits to match its deficits. The regulation is set up in a way where the path to compliance is eased in. For example, credits will be generated during the initial years of the regulation for use during later years when it will be harder to generate credits.

What fuels are subject to California’s LCFS?

Transportation fuels that are sold, supplied, or offered for sale in California are subject to this rule, including:

• California reformulated gasoline (“gasoline” or “CaRFG”)

• California diesel fuel (“diesel fuel” or “ULSD”)

• Fossil compressed natural gas (CNG), liquified NG (LNG), or liquified compressed NG (L-CNG)

• Bio-CNG, bio-LNG, or bio-L-CNG

• Electricity

• Compressed or liquified hydrogen (“hydrogen”)

• Fuel blend with >10% ethanol by volume

• Fuel blend with biomass-based diesel

• Denatured fuel ethanol (E100)

• Neat biomass-based diesel (B100 or R100)

• Alternative jet fuel

• Propane

• Any other liquid or non-liquid fuel

How to Generate Credits in the LCFS

There are various ways for a regulated entity to generate credits. A brief summary of those ways are:

• Fuel Pathway Crediting

  • Transportation fuels need a CI to participate in the LCFS. Providers of low CI fuels will generate credits through CI reporting. Credits are calculated relative to the benchmark and will be subject to verification.

• Project Based Crediting

  • Entire projects will be analyzed to determine if credits can be issued. A type of project is carbon capture sequestration (CCS). The amount of credits will be subject to verification.

• Zero Emission Vehicle Infrastructure Crediting

  • Infrastructure projects to support the use of zero EV projects can generate credits.

LCFS Applications & Reporting

The LCFS sets up specific ways to report and verify fuels subject to this rule. A web-based portal, called the Alternative Fuel Portal (AFP) will be utilized to manage an entity’s fuel pathway application and annual reports. Reporting and credit banking will be managed from the LCFS Reporting Tool (LRT) and Credit Bank and Transfer System (CBTS), respectively. There are many reports that need to be prepared by this rule, including:

• Fuel Pathway Applications

• Annual Fuel Pathway Reports

• Quarterly Fuel Transaction Reports

• Crude Oil Quarterly & Annual Volumes Report

• Low-Complexity/Low-Energy-Use Reports

• Project Reports

LCFS Verification Requirements

A third-party verification process will also be implemented to maintain the integrity of the rule and data that is submitted and used for compliance.  Entities that are required to contract for LCFS verification are:

• Alternative liquid fuel producers and importers

• Alternative and fossil liquid fuel exporters if fuel previously reported

• Reporters of bio- and fossil propane and CNG/LNG

• All fuel pathway holders with site-specific CI data

• All fuel pathways holders with biomethane book-and-claim accounting, including renewable hydrogen (SMR) for fueling hydrogen vehicles

• Petroleum refineries

• Reporters of project-based credits

Guidance on California LCFS

The LCFS rule is extremely complicated and may cause massive confusion among those players who are impacted by this regulation. There are also talks that a federal standard will be put in place following the principles of the California LCFS regulation, so it is critical that any affected facilities understand the regulation to prepare for the future.

KERAMIDA is well versed in California’s LCFS rule concepts. KERAMIDA is also staffed with a California Accredited LCFS Verifier who can help clients navigate the rule’s requirements. If you have any questions about the regulation and how it may impact your facility, please contact us today.

Blog Author

Albert Chung, Ph.D., P.E.
Senior Project Manager,
Air, Climate Change & GHG
KERAMIDA Inc.

Contact Albert at achung@keramida.com.