California regulators proposed late Tuesday expanding limits on the Low Carbon Fuel Standard (LCFS) credits certain oilseeds may generate while keeping the program's tougher targets and adoption schedule unchanged.
The latest proposed California Air Resources Board (CARB) revisions add sunflower oil — a feedstock with no current approved users or previous indicated use in the program — to restrictions first proposed in August on canola and soybean oil feedstocks for biomass-based diesel. The new language maintained a proposal to make the program's annual targets 9pc tougher in 2025 and to achieve by 2030 a 30pc reduction from 2010 transportation fuel carbon intensity levels.
CARB staff's latest proposals, published a little before midnight ET on 1 October, offer comparatively minor adjustments to the shock August revisions that spurred a nearly $20 after-hours rally in LCFS prompt prices. Prompt credits early in Wednesday's session traded higher by $3 than they closed the previous trading day.
LCFS programs require yearly reductions in transportation fuel carbon intensity. Higher-carbon fuels that exceed these annual limits incur deficits that suppliers must offset with credits generated from the distribution to the market of approved, lower-carbon alternatives.
California's program has helped spur a rush of new US renewable diesel production capacity, swamping west coast fuel markets and inundating the state's LCFS program with compliance credits. CARB reported more than 26mn metric tonnes of credits on hand by April this year — more than double the number of new program deficits generated in all of 2023. Staff have sought through this year's rulemaking to restore incentives to more deeply decarbonize state transportation than thought possible during revisions last made in 2019.
California formally began this rulemaking process in early January after publishing draft proposals in late December. Regulators initially proposed adjusting 2025 targets lower by 5pc for 2025 — a one-time decrease called a stepdown — to work toward a 30pc reduction target for 2030.
CARB set its sights on 21 March for adoption. But staff pulled that proposal in February as hundreds of comments in response poured in.
Updated language released on 12 August proposed a steeper stepdown for 2025 of 9pc while keeping the 30pc target for 2030. The proposal also added a limit on credit generation from certain crop-based feedstocks, to 20pc of the associated volume delivered to California in certain cases.
Respondents generally supported the tougher targets, though fuel suppliers warned of higher prices and some credit generators argued that the state should be even more ambitious.
No one praised the proposed limits on credit generation. Environmental advocates said the proposal fell short of the protections they sought against crop conversion and other risks; agribusiness warned that the concept distorted the LCFS and could spark lawsuits.
