California regulators will resume talks later this month on the future of the state's Low Carbon Fuel Standard (LCFS) with an eye toward implementing changes next year.
The California Air Resources Board (CARB) set a 22 February workshop to discuss a credit generation and fuels outlook that will influence a future rulemaking process. Market participants and fuel producers have anxiously awaited CARB's proposed changes to the program to address towering supplies of unused credits and prices that have lingered near six-year lows reached in late September.
The full-day workshop will include preliminary regulatory language to solicit feedback without formally starting CARB's process to implement tougher targets, change the fuels that may generate program credits or deficits or make other revisions to the program. Staff expect to implement program changes in 2024 but do not yet have a specific timeline, the agency said today.
Low-carbon fuel standard (LCFS) programs require yearly reductions in the carbon intensity of road transportation fuels. Conventional, higher-carbon fuels that exceed the annual limit incur deficits that suppliers must offset with credits generated from the distribution of approved, low-carbon alternatives.
The California program today requires a 20pc reduction in carbon intensity by 2030.
Credits may be traded to obligated parties and do not expire. The volume of unused and available credits has climbed as rising supplies of low-carbon fuels have more than outpaced tepid demand for CARBOB gasoline, the chief source of new LCFS deficits. Unused credits available for compliance rose in October to more than 13.4mn t, up by 54pc from a year earlier.
CARB staff focused on completing the broader, five-year scoping plan process last year. But a series of workshops in 2022 hinted at some of the ideas under consideration for the LCFS update. Staff in July sought comment on tougher 2030 reduction targets of 25pc or 30pc and later contemplated a 35pc cut. CARB also solicited feedback on whether to drop credit generation from electric forklift charging, whether to reconsider the generation of credits from crop-based fuels and modifications that could reduce credit generation from biogas. Forklift charging generated 5.6pc of all new credits in the third quarter, corn oil- and soybean-derived renewable diesel generated 14pc of new credits and agriculture-derived renewable natural gas generated another 16pc of new credits.
