California regulators late Thursday declined to immediately regulate dairy methane but committed to advance research needed to impose such requirements on a politically thorny pollution source and potent credit generator under the state's Low Carbon Fuel Standard (LCFS).
California Air Resources Board (CARB) staff denied a petition to immediately begin a rulemaking to establish state livestock methane reduction mandates. The agency instead opted to hold an August 2024 workshop on the pace of methane reduction so far and advance other state prerequisites needed before establishing any dairy requirements, staff said.
California's reliance so far on incentives, rather than mandates, to address dairy methane has helped spur out-sized LCFS credit generation from renewable natural gas (RNG) into a market already smothered with supplies. The participation has angered opponents who have argued in state hearings and workshops that the policy has encouraged larger, consolidated dairy operations that worsen living conditions for the surrounding communities and for the animals on the farms.
Petitioners Climate Action California could not be immediately reached for comment.
LCFS requires yearly reductions of transportation fuel carbon intensity. Higher-carbon fuels that exceed the annual limits incur deficits that suppliers must offset with credits generated from the distribution to the state of approved, lower-carbon alternatives.
Methane harvested from dairy lagoons — often out of state — and treated to pipeline quality can generate credits for offsetting other natural gas sources for compressed natural gas vehicles and in some fuel production applications. RNG credits surpassed those generated from ethanol in 2022 and were the second-largest source of new credits in 2023, generating 17pc of all new credits last year. That production far outpaces the physical diesel it was credited with replacing, at 12,600 b/d during the fourth quarter of 2023. Biodiesel, which replaced 19,000 b/d of diesel fuel during the same quarter, generated less than a fifth of the credits produced during the period by RNG.
Much of that out-sized credit generation comes from the regulatory concept of "avoided methane". Other methane sources, such as landfills and wastewater treatment plants, also harvest and treat their methane. But because California requires those sources to do so, they may only generate LCFS credits for going beyond the state mandates.
Dairies have no such mandate in California, so the state credits all of the captured gas. State law specifically prohibited CARB from establishing dairy methane regulations before 2024. California instead set overall and dairy-specific methane reduction targets for 2030 of a 40pc reduction from 2013 levels.
Spot LCFS credits traded near $200/metric tonneas dairy methane projects began ramping up output in 2021, and near $150/t as credits from that source overtook ethanol. A collection of opponents concerned with animal welfare, community living conditions near dairies and the continued use of internal combustion transportation have increasingly pressed CARB to curb dairy participation in the LCFS.
CARB's written response to the petition noted that state law required the state to determine the feasibility of dairy methane mandates and prevent the displacement of pollution to other states or countries, among other requirements. That work continued but was not ready to begin a rulemaking, staff said.
Staff granted parts of the petition to continue evaluation of a livestock and dairy methane regulation, incentives to capture methane, and research on associated and enteric emissions.
Regulators have separately continued work on changes to the LCFS that would phase out dairy RNG participation at a slower pace than opponents had sought. Draft language would effectively end transportation RNG crediting beginning in 2040. CARB earlier this month set an 8 November hearing on that rulemaking, and will release final language ahead of that date.
Participants have sought tougher targets and other responses to a collapse in credit prices. LCFS credits do not expire. California's program at the end of last year had 23.6mn t of credits available for future compliance — more than all the new deficits generated and then settled that year.
