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Q&A: California LCFS critical to larger climate effort

10 Jan 2017, 2.16 pm GMT

Q&A: California LCFS critical to larger climate effort

San Francisco, 9 January (Argus) — Sam Wade is the chief of the transportation fuels branch at the California Air Resources Board (ARB) and oversees the state's low-carbon fuel standard (LCFS) program. In this interview, edited for length and clarity, Wade reflects on the program's growth over the past year and its role in helping the state meet its target to reduce greenhouse gas emissions by 40pc from 1990 levels by 2030.

Argus: What were the highlights for the LCFS program in 2016?

Wade: 2016 was about implementing the new regulation that the board adopted at the end of 2015. That meant we had to re-certify all of the fuel pathways in the system and adjust the carbon intensity scores to reflect that new rule.

We also brought the idea of third-party verification to stakeholders and began to get their feedback. That is obviously something we are still working on but that we raised in 2016 and got some good initial dialogue going.

Argus: The LCFS program grew by nearly every metric in 2016, in terms of transfers taking place, volumes traded, and number of participants in the program. To what do you ascribe that growth and do you anticipate further growth in 2017 as targets ratchet down?

Wade: With respect to additional volumes of low-carbon fuels coming into California, that is absolutely something that the program is designed to incent. With respect to credit market activity, we imagine that a liquid and deep credit market supports the goals of the program and we need to see that to provide a transparent price signal about what the credits are worth, so we are always happy to see trades being done and credits moving to those who value them the most. Beyond that, we should expect to see growth in the parties participating in that you need additional suppliers of low-carbon fuels to enter at some point.

Argus: Governor Jerry Brown (D) may try and push for a formal extension of the cap-and-trade program beyond 2020. Some of the negotiations last summer leading up to SB 32, which set the 2030 emissions target, put LCFS on the chopping block. Do you have any concerns that the program could be offered up for sacrifice this year in exchange for cap and trade?

Wade: No. It is not really my place to comment on those discussions that the governor may or may not have had. In general, every signal we receive from the administration is that this program is an important part of the overall portfolio of policies under AB 32 and now SB 32.

Argus: In 2016, ARB raised the idea of shifting the point of regulation from the refiners and fuel importers to the rack, in part to align with the state's cap-and-trade program. Where do those discussion stand?

Wade: That is still something we are going to talk about in this rulemaking and get stakeholder feedback on. It relates to discussions at the federal level, but really we feel like it adds some administrative efficiency to our system and so it is something that we threw out there. We did not hear resounding support for it, so we are going to take more time before we move in that direction — if that is where we end up settling. But it is not off the table. It is something that will be talked about as we prepare this package for the board.

Argus: What else is on your agenda for 2017?

Wade: We are going to build off the work done in the scoping plan process. The scoping plan will set out the framework for hitting the 2030 targets. We will take that back and put the details around the post-2020 LCFS program in that rulemaking, which we aim to have in place and effective for the beginning of 2019.

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