Come Clean, Part 2 - California's Low Carbon Fuel Standard and Why It Matters

As governments and corporations around the world evaluate methods of decarbonization across sectors, one focus area has been transportation, since the petroleum fuels used to mobilize economies are significant contributors to greenhouse gas (GHG) emissions. California’s Low Carbon Fuel Standard (LCFS) is one of the longest-running programs for carbon intensity (CI) reduction targeting the transportation sector and provides an ideal case study to review for a better understanding of how one type of GHG reduction policy is anticipated to work. As many of the principles in this pioneering program are being evaluated for replication elsewhere, its results and consequences are still in the making. In today’s blog we’ll provide an overview of the Golden State’s groundbreaking LCFS, looking at its history, how it functions, and its effectiveness at meeting its goals to date.

This is Part 2 in a blog series on low carbon fuel policies, the mechanisms being evaluated to meet increasingly stringent GHG-related regulations, and the impact these rules could have on refined-products markets. In Part 1, we provided an overview of various policies that have been adopted and are being discussed to reduce GHG emissions from on-road transportation fuel use. We also noted some of the more popular approaches being taken, including fuel economy standards, renewable blending requirements, zero emission vehicle mandates, and clean fuel standards like LCFS programs in California and Oregon, the Canadian province of British Columbia, and the proposed Canadian Clean Fuel Standard. Such LCFS programs are usually established and measured based on the carbon intensity (CI) of fuels used. As we said in Part 1, CI is a measure of the lifecycle GHG emissions associated with producing, distributing, and consuming a fuel, which is measured in grams of carbon dioxide equivalent per megajoule (gCO2e/MJ). (That’s the simple version.) Typically, LCFS policies establish downward-sloping carbon-intensity benchmarks for the jurisdiction’s total transportation fuel pool, and incentivize the production and blending of lower-CI fuels to meet the benchmarks.

Today, we focus on California’s program. We should note up front that the nation’s most populous state has been a frontrunner on environmental policies for many decades. Back in 1965, California was the first state to regulate vehicle exhaust by setting limits on carbon monoxide and other hydrocarbon emissions — younger readers may not remember when Los Angeles was as well-known for smog as it was for movie-making. In 1967, the Federal Air Quality Act allowed California to enforce more stringent pollution standards than the federal government, and in the 54 years since, the state has generally had the tightest standards for ozone and particulate emissions. Then came the 2002 enactment of Assembly Bill (AB) 1493, which required the California Air Resources Board (CARB) to begin regulating GHG emissions from cars, SUVs, and pickup trucks. There have been many other laws and regulations since then, including the state’s LCFS.