Staff Report: Initial Statement of Reasons

California Air Resources Board

Public Hearing to Consider the Proposed Amendments to the Low

Carbon Fuel Standard

Date of Release: December 19, 2023

Scheduled for Consideration:

March 21, 2024

This report has been reviewed by the staff of the California Air Resources Board and approved

for publication. Approval does not signify that the contents necessarily reflect the views and

policies of the California Air Resources Board, nor does mention of trade names or commercial

products constitute endorsement or recommendation for use.

Table of Contents

Public Hearing to Consider the Proposed Amendments to the Low Carbon Fuel Standard ...... 0

Staff Report: Initial Statement of Reasons ................................................................................. 0

Executive Summary ............................................................................................................... 4

I. Introduction and Background .............................................................................................. 6

Overview of the Low Carbon Fuel Standard ..................................................................... 10

History and Current Status of the Low Carbon Fuel Standard .......................................... 13

Overview of the Proposed Amendments .......................................................................... 17

II. The Problem that the Proposal is Intended to Address .................................................... 22

Strengthen the Annual Carbon Intensity Benchmarks Pre- and Post-2030 ...................... 22

Eliminate Exemption for Intrastate Fossil Jet Fuel ............................................................ 26

Expand Zero Emission Vehicle Infrastructure Crediting ................................................... 27

Biomethane Crediting ....................................................................................................... 29

Project-Based Crediting .................................................................................................... 31

Crop-Based Biofuels Sustainability Criteria ...................................................................... 32

Other Proposed Amendments .......................................................................................... 33

III. The Specific Purpose and Rationale of Each Adoption, Amendment, or Repeal ............ 37

IV. Benefits Anticipated from the Regulatory Action, Including the Benefits or Goals Provided

in the Authorizing Statute ..................................................................................................... 38

Summary of Emission Benefits ......................................................................................... 38

Greenhouse Gas Reduction Benefit - Social Cost of Carbon ........................................... 39

Health Benefits ................................................................................................................. 43

Benefits to Typical California Businesses ......................................................................... 52

Benefits to Small Businesses ........................................................................................... 53

V. Air Quality ........................................................................................................................ 54

Baseline Assumptions ...................................................................................................... 54

Total Emissions Benefits .................................................................................................. 55

VI. Environmental Impact Analysis ....................................................................................... 60

VII. Environmental Justice .................................................................................................... 64

Uplifting Equity ................................................................................................................. 65

Conclusion ........................................................................................................................ 67

VIII. Standardized Regulatory Impact Analysis .................................................................... 69

Changes Since the Release of the Standardized Regulatory Impact Assessment ........... 69

The creation or elimination of jobs within the State of California. ..................................... 71

The creation of new business or the elimination of existing businesses within the State of

California. ......................................................................................................................... 74

The expansion of businesses currently doing business within the State of California. ..... 75

Significant Statewide Adverse Economic Impact Directly Affecting Business, Including

Ability to Compete ............................................................................................................ 78

The competitive advantages or disadvantages for businesses currently doing business

within the State ................................................................................................................. 78

The increase or decrease of investment in the state ........................................................ 80

The incentives for innovation in products, materials, or processes .................................. 81

The benefits of the regulation to the health and welfare of California residents, worker

safety, and the state’s environment. ................................................................................. 82

IX. Evaluation of Regulatory Alternatives ............................................................................. 85

Alternatives to the Regulation ........................................................................................... 85

Other Concepts .............................................................................................................. 115

Small Business Alternative ............................................................................................. 128

Performance Standards in Place of Prescriptive Standards ........................................... 128

Health and Safety Code section 57005 Major Regulation Alternatives........................... 128

X. Justification for Adoption of Regulations Different from Federal Regulations Contained in

the Code of Federal Regulations ....................................................................................... 129

XI. Public Process for Development of the Proposed Action (Pre-Regulatory Information) 131

XII. References .................................................................................................................. 135

XIII. Appendices ................................................................................................................. 143

List of Acronyms and Abbreviations

2022 Scoping Plan Update 2022 Scoping Plan for Achieving Carbon Neutrality

AAM Automatic Acceleration Mechanism

AB Assembly Bill

ACC II Advanced Clean Cars II

ACF Advanced Clean Fleets

ACT Advanced Clean Trucks

AFP Alternative Fuels Portal

AFPR Annual Fuel Pathway Report

AJF Alternative Jet Fuel

Btu British Thermal Units

CA-GREET California Greenhouse Gases, Regulated Emissions, and

Energy Use in Transportation

CARB or Board California Air Resources Board

CARBOB California Reformulated Gasoline Blendstocks for Oxygenate

Blending

CATS California Transportation Supply Model

CCM Credit Clearance Market

CCS Carbon Capture and Sequestration

CEQA California Environmental Quality Act

CHC Commercial Harbor Craft

CI Carbon Intensity

Methane

CNG Compressed Natural Gas

Carbon Dioxide

Court State of California Court of Appeal, Fifth Appellate District

DAC Direct Air Capture

DC Direct Current

EIA Environmental Impact Analysis

EER Energy Economy Ratio

eCHE Electric Cargo Handling Equipment

ED Emergency Department

EJ Environmental Justice

EJAC Environmental Justice Advisory Committee

eGRID Emissions & Generation Resource Integrated Database

EMFAC Emissions FACtor Model

eOGV Electric Power for Ocean-going Vessel

eTRU Electric Transport Refrigeration Units

EV Electric Vehicle

FCI Fast Charging Infrastructure

FCV Fuel Cell Vehicle

FSE Fuel Supply Equipment

gCO

e/MJ Grams of CO

equivalent per megajoule

GHG Greenhouse Gas

HEFA Hydroprocessed Ester and Fatty Acid

HRI Hydrogen Refueling Infrastructure

HyCAP Hydrogen Capacity Model

HySCapE Hydrogen Station Capacity Evaluation Model

ICT Innovative Clean Transit

IRA Inflation Reduction Act

ISOR Initial Statement of Reasons

IWG Interagency Working Group on the Social Cost of

Greenhouse Gases

kW Kilowatt

LCA Life Cycle Analysis

LCFS Low Carbon Fuel Standard

LC/LEU Low-Complexity/Low-Energy-Use

L-CNG Liquified Compressed Natural Gas

LD Light-Duty

LDV Light-Duty Vehicle

LRT-CBTS LCFS Reporting Tool and Credit Bank & Transfer System

LUT Lookup Table

MFR Multi-Family Residence

MHD Medium- and Heavy-Duty

MHDV Medium- and Heavy-Duty Vehicle

MW Megawatt

MTCO

e Metric tons in carbon dioxide equivalent

NEVI National Electric Vehicle Infrastructure Formula Program

O Nitrous Oxide

NOx Oxides of Nitrogen

NREL National Renewable Energy Laboratory

OPGEE Oil Production Greenhouse Gas Emission Estimator

PM2.5 Fine Particulate Matter

RFS Renewable Fuel Standard

RNG Renewable Natural Gas

RPS Renewable Portfolio Standard

SAF Sustainable Aviation Fuel

SB Senate Bill

SC-CO

Social Cost of Carbon

SFAP Sustainable Freight Action Plan

SLCP Short-Lived Climate Pollutant

ULSD Ultra Low Sulfur Diesel

U.S. EPA United State Environmental Protection Agency

VMT Vehicle Miles Traveled

ZEV Zero-Emission Vehicle

Executive Summary

California is the midst of a rapid transition to cleaner fuels and carbon neutrality, with just over

20 years to transition from today’s significant fossil fuel usage to a future of clean fuels and

technology. In 2022, the California Air Resources Board (CARB) approved the 2022 Scoping

Plan for Achieving Carbon Neutrality (2022 Scoping Plan Update), which charted a path to

achieving carbon neutrality by 2045 and reducing greenhouse gas emissions 85% below 1990

levels by 2045. Meeting this goal will require the deployment of greenhouse gas (GHG)

emission reduction strategies at an unprecedented scale and pace.

Many of the strategies identified in the 2022 Scoping Plan Update to address climate change

and achieve carbon neutrality are the same strategies needed to drastically improve air quality.

As transportation emissions, primarily from the use of fossil fuels, are California’s single

biggest source of greenhouse gas emissions and contributor to poor air quality, the State is

working to rapidly increase the numbers of zero-emission vehicles on the road and deploy

cleaner fuels to power them. If California is successful in meeting the clean fuel and vehicle

goals identified in the 2022 Scoping Plan Update, we will reduce fossil fuel demand by 94% by

2045. CARB has already taken significant steps to reducing transportation emissions by

adopting regulations such as Advanced Clean Cars II, Advanced Clean Fleets, Advanced

Clean Trucks, Innovative Clean Transit, and other rules that promote and accelerate the

deployment of low and zero-emission technologies.

The Low Carbon Fuel Standard (LCFS) is a key part of California’s transportation

decarbonization strategy and a successful one thus far. The LCFS provides the economic

incentives to produce cleaner fuels like electricity, hydrogen and biofuels that are needed to

displace fossil fuels and reduce transportation sector emissions. The LCFS has supported the

displacement of billions of gallons of petroleum fuels with lower carbon alternatives, and

without these alternative fuels the State risks returning to higher levels of fossil fuel use and

fewer climate and air quality benefits. With clear scientific consensus on the need to rapidly

decarbonize and achieve carbon neutrality by mid-century, the significant health and economic

benefits of phasing down fossil fuel use, and the introduction of federal funding for alternative

fuels and clean energy, now is the time to update and strengthen the LCFS regulation. This

regulatory update proposal, which is described in detail in this staff report, is focused on the

following key concepts:

• Increasing the stringency of the program to reduce emissions and decarbonize the

transportation fuel sector, which will also aggressively reduce our dependence on fossil

fuels;

• Strengthening the program’s equity provisions to promote investment in disadvantaged,

low-income and rural communities;

• Supporting electric and hydrogen truck refueling;

• Incentivizing more production of clean fuels needed in the future, such as low-carbon

hydrogen;

• Supporting methane emissions reductions and deploying biomethane for best uses

across transportation; and

• Strengthening guardrails on crop-based fuels to prevent deforestation or other potential

adverse impacts.

These proposed changes, if adopted, would result in significant GHG reductions as well as air

quality, health, and economic benefits across the State. These benefits include:

GHG Reductions

• 90% reduction in carbon intensity of California’s transportation fuels by 2045.

• 558 million metric tons of life cycle CO

e reductions from the amendments.

Health Benefits

• Almost $5 billion in total avoided health costs resulting from nearly 4,300 tons of PM2.5

reduction and more than 25,000 tons of NOx reductions.

Economic Benefits

• $128 billion in revenue estimated accruing to California businesses from credit

generation/sales.

• Job growth in the electricity and biofuel sectors as demand for these fuels grows.

• Increases the diversity and competitiveness of transportation fueling options for

California consumers, transitioning supply from just ten fossil fuel refiners to hundreds

of individual biofuel, electricity, and hydrogen producers.

The changes would also help support implementation of California’s world-leading

zero-emission vehicle policies, align with the 2022 Scoping Plan Update, and provide a model

for other jurisdictions looking to deploy clean fuel and climate policies. And finally, as

Californians transition away from less-efficient fossil fuels and into more energy efficient

zero-emission vehicles (ZEVs) and lower-carbon fuel alternatives, the fuel costs Californians

pay to travel would also decrease, providing Californians billions of dollars in savings. CARB

staff estimates the amount of money Californians spend on fueling costs across all vehicle

class could be up to 42% lower in 2045 than compared to fuel costs in 2021. This translates

into an annual savings of over $20 billion in fuel expenditures in 2045 alone.

I. Introduction and Background

In this chapter, the California Air Resources Board (CARB or Board) staff provides a brief

overview of the Low Carbon Fuel Standard (LCFS) regulation (California Code of Regulations,

title 17, sections 95480-95503), information on the history and status of the LCFS program,

and an overview of the proposed revisions to the program.

The purpose of the LCFS regulation is to reduce the carbon intensity (CI) of transportation

fuels used in California, thereby reducing GHG emissions, and to incentivize the production of

low-carbon and renewable alternatives, such as low-CI electricity and renewable hydrogen,

and biofuels to displace fossil fuels and allow more energy security in the transportation sector.

It is the most direct tool being deployed to reduce dependence on fossil fuels in the

transportation sector.

The Board approved the LCFS regulation in 2009 as a discrete early action measure under the

California Global Warming Solutions Act of 2006 (Assembly Bill [AB] 32, Núñez and Pavley,

Chapter 488, Statutes of 2006; Healthy and Safety Code sections 38500 et seq.). Since the

passage of AB 32, California has developed bold, creative, and durable policy solutions to

protect our environment and public health. In fact, California met the target established in AB

32—a return of GHG emissions to 1990 levels by 2020—six years ahead of schedule.

Recognizing California’s early successes in achieving GHG emissions reductions and the need

to accelerate climate mitigation efforts, California has continued to enact ambitious goals and

take concrete steps to achieve them. There have been several major new climate statutes

enacted and executive orders issued since the last major LCFS rulemaking in 2018. In 2022,

Governor Gavin Newsom signed several climate bills, including AB 1279 (Muratsuchi, Chapter

337, Statutes of 2022), Senate Bill (SB) 905 (Caballero, Chapter 359, Statutes of 2022), and

SB 1020 (Laird, Chapter 361, Statutes of 2022). AB 1279 requires an 85% reduction in

anthropogenic GHG emissions below 1990 levels by 2045. SB 905 requires CARB to adopt

regulations creating a framework for the development of carbon capture, removal, and storage

projects by 2025. And SB 1020 includes new benchmarks of 90% clean electricity by 2035 and

95% by 2040 ahead of the 100% goal by 2045. A particular focus on the transportation sector

was established through Executive Order N-79-20.

Signed in 2020, Executive Order N-79-20

established a State goal that sales of all new passenger vehicles be zero emission by 2035

and that 100% of medium- and heavy-duty vehicles in the State be zero emission by 2045 for

all operations where feasible and by 2035 for drayage trucks. The 2022 Scoping Plan Update,

approved by the Board in December 2022, lays out a cost-effective and technologically

feasible path to achieve these targets and achieve carbon neutrality by 2045.

The 2022 Scoping Plan Update signals the need for an aggressive reduction of fossil fuel use,

building on and accelerating greenhouse gas reduction programs that have been in place for a

decade and a half, including the LCFS program. This means rapidly moving to zero-emission

State of California Executive Department, Executive Order N-79-20. September 23,

2020. https://www.gov.ca.gov/wp-content/uploads/2020/09/9.23.20-EO-N-79-20-Climate.pdf

California Air Resources Board, 2022 Scoping Plan for Achieving Carbon Neutrality. November 16, 2022.

https://ww2.arb.ca.gov/sites/default/files/2022-12/2022-sp_1.pdf

transportation; transitioning the cars, buses, trains, and trucks that now constitute California’s

single largest source of planet-warming pollution to zero-emission technology. In the

transportation sector, the transition to complete zero-emission vehicle (ZEV) technology will

not happen overnight.

Achieving GHG emissions of 85% below 1990 levels by 2045 will require significant investment

and use of lower carbon opportunities while zero-emission technologies gain market

penetration and achieve interim climate goals. Conventional internal combustion engine

vehicles from legacy fleets will remain on the road for some time, even after all new vehicle

sales have transitioned to ZEV technology. Therefore, it is necessary to ensure there are

reliable and adequate low-carbon fuel supplies available and continue expansion of low-carbon

fuel production in ways that use existing infrastructure where possible, such as transitioning

refineries to clean fuel production.

Meeting this demand requires building out significant new low-carbon energy supply capacity,

which the LCFS incentivizes in the transportation sector. Specifically, a greater demand for

electricity and renewable hydrogen is expected, necessitating the expansion of renewable

electricity and hydrogen production; the transition of low-carbon liquid biofuels from end-uses

from on-road vehicles with many zero-emission options into sectors that are more difficult to

decarbonize like aviation, marine, and other off-road uses; and transition of biomethane used

as compressed natural gas (CNG) in vehicles to a feedstock for hydrogen or an energy source

to decarbonize the broader natural gas system. Successful implementation of the technology

and fuel switching called for in the 2022 Scoping Plan Update results in a 94% reduction in

liquid petroleum demand by 2045 compared to 2022, as shown in Figure 1. For these

outcomes to happen, California must accelerate the pace of clean energy and technology

deployment. Private investments, policy signals such as a more stringent LCFS, and federal

incentives will all need to be leveraged to realize the outcomes in the 2022 Scoping Plan

Update.

State of California Executive Department, Executive Order N-79-20. September 23, 2020.

https://www.gov.ca.gov/wp-content/uploads/2020/09/9.23.20-EO-N-79-20-Climate.pdf

Figure 1: Fossil Fuel Demand Projections in 2045 relative to 2022 (from 2022 Scoping Plan Update)

The LCFS also supports other existing State GHG reduction efforts; notably, the Short-Lived

Climate Pollutant (SLCP) Reduction Strategy, Advanced Clean Cars II (ACC II) regulations,

Advanced Clean Fleets (ACF) regulation, Clean Truck Partnership, Advanced Clean Trucks

(ACT) regulation, 2020 Mobile Source Strategy, Sustainable Freight Action Plan (SFAP),

Commercial Harbor Craft (CHC) regulation, In-Use Locomotive regulation, Innovative Clean

Transit (ICT) regulation, and Renewable Portfolio Standard (RPS). SB 1383 (Lara, Chapter

395, Statutes of 2016) requires a 40% reduction in California’s methane emissions by 2030

and the LCFS facilitates significant private investment in technologies that provide the

methane reductions from dairy, livestock manure, organic waste, and landfill management

operations called for by SB 1383. On the vehicle side, ACC II serves as the primary

mechanism to help deploy ZEVs in the light-duty vehicle (LDV) sector. The LCFS supports

ACC II implementation by incentivizing electricity and hydrogen infrastructure through the ZEV

infrastructure crediting provisions, providing credits for the delivery of low-CI electricity and

hydrogen to vehicles, and through rebate and other transportation electrification support from

the proceeds from LCFS credit sales earned by electric utilities. Similarly, the opportunity to

generate LCFS credits helps to reduce the up-front costs for fleets to purchase new

zero-emission trucks, locomotives, and buses and equipment to achieve the SFAP, ACF, ICT,

In-Use Locomotive, and ACT goals. By recognizing the carbon intensity of renewable

electricity used to produce transportation fuels, the LCFS rewards fuel providers across the

supply chain for the displacement of fossil fuel consumption by biomethane, wind, solar, and

other lower carbon technologies, as well as the use of renewable power for vehicle charging.

Several of these regulations also require the use of renewable fuels during the transition to

zero-emission technology. The ICT regulation requires large transit agencies to use renewable

fuel in remaining combustion-powered buses, and the ICT and In-Use Locomotive regulations

support the use of hydrogen as well. The ACF regulation requires fleet turnovers beginning in

2024; however, this transition is contingent upon the availability of refueling infrastructure,

which this LCFS proposal would incentivize.

The LCFS provides the necessary price signals and incentives to leverage private investment

and scale the low-carbon fuel production needed to displace fossil fuels. This is borne out in

the program’s history. As shown in Figure 2, California has doubled the volume of the State’s

low-carbon fuel consumption in just 10 years and diversified the fuel mix considerably, due in

large part to the LCFS program.

Figure 2: Alternative Fuel Volumes in California between 2011-2022

The 2022 Scoping Plan Update directly identifies that the stringency of the LCFS CI

benchmarks should be increased, both pre- and post-2030, which is the key change staff is

proposing for this rulemaking. The objective is to send clear, long-term market signals to

support investment in low-carbon fuel production and technologies that are needed to achieve

deep emissions reductions in the transportation sector while supporting the broader portfolio of

zero-emission vehicle regulations and climate statutes. Another goal is to align the crediting

opportunities in the LCFS with the fuel and technology pathways identified in the 2022 Scoping

Plan Update. To encourage additional GHG reductions in key areas where decarbonization will

be important to meet long-term climate goals, staff proposes to eliminate the current exemption

for intrastate fossil jet fuel starting in 2028 and expand ZEV infrastructure crediting to the

medium- and heavy-duty vehicle sector under the program. Given the need to quickly scale

low-carbon fuel production in this decade and staff’s experience implementing the program for

over a decade, staff also proposes to update and streamline several quantification methods

and analysis tools so that the program does not unnecessarily slow down the investment or

availability of low-carbon fuels and so other jurisdictions can establish similar programs without

significant administrative needs. As a means of increasing the flexibility of the program to be

able to respond to rapid and unanticipated shifts in the market, such as significant

overperformance of ACC II or ACF implementation, staff also proposes a mechanism that

would automatically accelerate the carbon intensity benchmarks under certain conditions.

Finally, in response to the near-term over-performance, staff has included a step down in the

carbon intensity beginning in 2025.

A. Overview of the Low Carbon Fuel Standard

Transportation plays a key role in California’s economy and lifestyle. The production and use

of traditional petroleum-derived transportation fuels—such as gasoline and diesel—are

responsible for almost 50% of statewide GHG emissions, the largest source of GHG emissions

in 2020.

The LCFS is part of the State’s set of policies to meet California’s ambitious climate

goals, which are described in the 2022 Scoping Plan Update. The 2022 Scoping Plan Update

demonstrates that significant increases in low-carbon fuel and technologies are needed in a

faster timeframe than we have historically seen.

The LCFS is designed to decrease the carbon intensity of California’s transportation fuel pool

and provide an increasing range of low-carbon and renewable alternatives, which reduce

petroleum dependency and achieve air quality benefits.

Providers of transportation fuels must cumulatively demonstrate that the mix of fuels they

supply for use in California meets the LCFS carbon intensity standards, or benchmarks, for

each annual compliance period. Regulated entities required to report fuels provided may

demonstrate compliance through a system of credits and deficits. Credits are generated by

supplying fuels with lower carbon intensity than the benchmark. Deficits result from supplying

fuels with higher carbon intensity than the benchmark. This concept is illustrated in Figure 3. A

deficit generator meets its compliance obligation by retiring credits it earns or otherwise

acquires from another party equal to the deficits it has incurred. Credits and deficits are

generally determined based on the quantity of fuel sold, the carbon intensity of the fuel, and

the efficiency by which a vehicle converts the fuel into usable energy.

California Air Resources Board, California Greenhouse Gas Emissions for 2000 to 2020, Trends of Emissions

and Other Indicators. Pages 10-14. 2022. https://ww2.arb.ca.gov/sites/default/files/classic/cc/inventory/2000-

2020_ghg_inventory_trends.pdf. This includes upstream oil extraction and refining emissions.

Carbon Intensity (CI) is a measure of the GHG emissions associated with the various production, distribution,

and consumption steps in the “life cycle” of a transportation fuel, denoted in units of gCO

e/MJ.

Figure 3: Illustration of LCFS Mechanics – How Credits and Deficits are Calculated

There are three ways to generate credits in the LCFS: fuel pathways, projects, and

capacity-based crediting. Under fuel pathway-based crediting, all transportation fuels need a

CARB-certified carbon intensity score to participate in the LCFS, and the fuel type dictates

which process is used to determine that CI. Additionally, there are CARB-approved LCFS

project-based actions that may generate credits, such as by demonstrating carbon capture and

sequestration, using solar-generated steam at oil and gas extraction sites, and investing in

refinery improvements that reduce GHG emissions. Finally, the 2018 amendments added

capacity-based crediting to support the deployment of ZEV refueling infrastructure. Crediting

for ZEV infrastructure is based on the capacity of the hydrogen station or fast charging site

minus the actual fuel dispensed. Credits and deficits are denoted in metric tons of GHG

emissions. Credits may be banked and traded within the LCFS market to meet compliance

obligations.

The LCFS carbon intensity benchmarks are an annually declining standard, which is defined in

the LCFS regulation as a percentage reduction from the historical average carbon intensity of

gasoline and diesel fuel in the year 2010. To determine the carbon intensity value of a

particular fuel, the GHG emissions from the fuel’s life cycle are summed and divided by the

fuel’s energy content (in megajoules). GHG emissions from each step can include carbon

dioxide (CO

), methane (CH

) and nitrous oxide (N

O), which are adjusted by the

Intergovernmental Panel on Climate Change global warming potentials to their CO

equivalent.

Thus, carbon intensity is expressed in terms of grams of CO

equivalent per megajoule

(gCO

e/MJ).

The LCFS is based on the principle that each fuel has life cycle GHG emissions. This life cycle

assessment (LCA) examines the GHG emissions associated with the production,

transportation, and use of a given fuel. The LCA includes direct emissions from the energy and

material inputs for the production, transport, and use of the fuels, as well as significant GHG

emissions from market-driven changes, such as changes in land use for some crop-derived

biofuels, and emissions that may result from market displacement effects (e.g., when a

material is diverted from its historic use in order to produce a fuel, causing increased demand

for another material to substitute the fuel for feedstock). The system of declining benchmarks

that is used to calculate credits and deficits, and the obligation of deficit-generating fuels to be

canceled out by credits, result in a decrease in the total life cycle GHG emissions from the

transportation fuel pool in California.

A more complete description of how the LCFS regulation is designed to work, as well as its

underlying scientific and economic principles, can be found in the initial and final statements of

reasons for the original 2009 rulemaking,

and the 2011,

2015,

2018,

and 2019 LCFS

rulemakings.

California Air Resources Board, Proposed Regulation to Implement the Low Carbon Fuel Standard Volume I

Staff Report: Initial Statement of Reasons. March 5, 2009.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2009/lcfs09/lcfsisor1.pdf

California Air Resources Board, Proposed Regulation to Implement the Low Carbon Fuel Standard Volume II

Appendices, March 5, 2009.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2009/lcfs09/lcfsisor2.pdf

California Air Resources Board, Final Statement of Reasons for Rulemaking. December 2009.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2009/lcfs09/lcfsfsor.pdf

California Air Resources Board, Staff Report: Initial Statement of Reasons for Rulemaking: Proposed

Amendments to the Low Carbon Fuel Standard. October 26, 2011.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2011/lcfs2011/lcfsisor.pdf

California Air Resources Board, Final Statement of Reasons: Amendments to the Low Carbon Fuel Standard

Regulation. October 2012. https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2011/lcfs2011/lcfsfsor.pdf

California Air Resources Board, Staff Report: Initial Statement of Reasons for Rulemaking. Proposed Re-

Adoption of the Low Carbon Fuel Standard Regulation. December 31, 2014.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2015/lcfs2015/lcfs15isor.pdf

California Air Resources Board, Final Statement of Reasons for Rulemaking, Including Summary of Comments

and Agency Response: Re-adoption of the Low Carbon Fuel Standard Regulation. 2015.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2015/lcfs2015/fsorlcfs.pdf

California Air Resources Board, Public Hearing to Consider Proposed Amendments to the Low Carbon fuel

Standard Regulation and to the Regulation on Commercialization of Alternative Diesel Fuels. Staff Report: Initial

Statement of Reasons. March 6, 2018.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2018/lcfs18/isor.pdf?_ga=2.233093594.551189306.169264

1515-1059366641.1629756188

California Air Resources Board, Addendum to the Final Statement of Reasons for Rulemaking: Amendments to

the Low Carbon Fuel Standard Regulation and to the Regulation on Commercialization of Alternative Diesel

Fuels. Final Statement of Reasons. January 3, 2019.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2018/lcfs18/lcfsaddendum.pdf?_ga=2.112540034.74953622

0.1693580753-1565224836.1601474474

California Air Resources Board, Public Hearing to Consider Proposed Amendments to the Low Carbon Fuel

Standard Regulation and to the Regulation on Commercialization of Alternative Diesel Fuels. Staff Report: Initial

Statement of Reasons. October 1, 2019.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/lcfs2019/isor.pdf

California Air Resources Board, Amendments to the Low Carbon Fuel Standard Regulation, Final Statement of

Reasons. April 2020. https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/lcfs2019/fsor.pdf

B. History and Current Status of the Low Carbon Fuel Standard

CARB initially approved the LCFS regulation in 2009 as an early action measure under AB 32

and began implementation in 2010. Throughout the 14 years since the Board’s original

adoption, the basic framework of the current LCFS—including the use of LCA, the LCFS credit

market, and the electronic registry of fuel reporting—has worked well and continues to support

growth in an increasingly diverse and low-carbon transportation fuel pool.

CARB approved revisions to the LCFS in December 2011, which became effective on

November 26, 2012, and were implemented by CARB on January 1, 2013. On July 15, 2013,

the State of California Court of Appeal, Fifth Appellate District (Court) issued its opinion in

POET, LLC versus California Air Resources Board (2013) 218 Cal.App.4

681, resulting in a

stay of the LCFS. The Court held that the LCFS adopted in 2009 and implemented in 2010

(referred to as 2010 LCFS) would remain in effect and that CARB could continue to implement

and enforce the 2013 regulatory standards while taking steps to remedy California

Environmental Quality Act and Administrative Procedure Act issues as required in the ruling.

To address the court ruling, CARB brought a revised LCFS regulation to the Board for

readoption in February 2015. The 2015 rulemaking included many amendments, updates, and

improvements to the program, including a compliance schedule that maintained the 2009

LCFS regulation’s target of a 10% reduction in average carbon intensity by 2020 from a 2010

baseline. On September 24, 2015, the Board approved that revised LCFS regulation, which

became effective on January 1, 2016.

In September 2018, the Board approved amendments to the LCFS regulation, which became

effective on January 4, 2019. The 2018 rulemaking included many amendments, updates, and

improvements to the program, including strengthening the CI reduction benchmarks to a 20%

reduction from a 2010 baseline by 2030, in line with the 2017 Scoping Plan Update and

California’s 2030 GHG target enacted through SB 32 (Pavley, Chapter 249, Statutes of 2016)

and adding a third-party verification provision to enhance the integrity of the program.

As part of the hearings to adopt the amendments proposed in 2018, the Board directed the

Executive Officer to monitor the cost containment provisions of the LCFS program, including

the Credit Clearance Market, and to propose technical adjustments through future rulemaking

to strengthen the cost containment provisions, if needed. The Board also directed the

Executive Officer to work with stakeholders to establish an equity-based framework for the

possible uses of base credit value from residential charging, consistent with legislative

priorities. To address Board direction, CARB brought changes focusing on strengthening the

cost containment provisions of the LCFS program and addressing equity in the use of LCFS

credit value for electricity to the Board through a rulemaking in 2019. In April 2020, the Board

approved the current LCFS regulation. The current regulation became effective on July 1,

2020.

California is receiving significant volumes of low-carbon fuels in response to the LCFS,

including ethanol, biomass-based diesel, biomethane, and low-CI electricity. In addition to

increased volumes, fuel producers have also been successfully reducing the carbon intensity

of their fuels over the past years by using low-carbon feedstocks, improving production

efficiency, and reducing fugitive emissions. The effect of both increasing volumes of

low-carbon fuels and reduced carbon intensity of those fuels has meant that California’s overall

petroleum fuel use has declined by 1.3 billion gallons since 2019, the overall carbon intensity

of California’s transportation fuels has declined by 12.63% relative to 2010 levels, and the

LCFS credit bank of excess credits has grown to its highest level to date with 15 million credits,

as shown in Figure 7. The financial benefits are distributed among providers of various

alternative fuels (as illustrated in Figure 3), geographically across California,

and across the

participating credit generators.

Figure 4: Quarterly Credits and Deficits for All Fuels Reported and Cumulative Credit Bank (Q1 2011 through Q4

2022)

By decarbonizing the transportation fuel sector, the LCFS has resulted in increased

diversification of transportation fuel options in California and less dependence on fossil fuels.

Before the LCFS, the only alternative fuels with market share were natural gas and ethanol.

Since the inception of the LCFS, California has doubled the volume of low-carbon fuel

consumption and diversified the fuel mix considerably. Collectively, alternative fuels supported

by the LCFS displaced over 3.9 billion gallons of petroleum fuel in 2022 in California. More

recently, renewable diesel and electricity have taken on an increasingly larger share of the fuel

pool, as shown in Figure 8. Electric vehicle (EV) charging has increased substantially in the

last few years, and it is expected that electric vehicles will be an increasing portion of the

market share, driven in part by California’s vehicle regulations, including ACC II, ICT, and ACF

regulations in conjunction with recent federal incentives. Renewable diesel capacity also

increased by over 500% between 2013 and 2020, and many U.S. fuel producers have made

Beneficiaries include California municipal transit agencies, fueling facilities, equipment service providers,

utilities, as well as fuel producers and project developers across the United States and abroad.

California Air Resources Board, LCFS Data Dashboard Figure 9: LCFS Credit Market Net Position Histogram.

(Updated on July 31, 2023).

https://ww2.arb.ca.gov/resources/documents/lcfs-data-dashboard

announcements for expanded production in the coming years. Nearly half of California’s diesel

pool was composed of alternative fuels in 2022.

Figure 5: Annual Alternative Fuel Volumes and Credit Generation by Fuel Type

In addition to increases in renewable diesel and electricity, hydrogen and alternative jet fuel

(AJF) quantities reported to the LCFS have increased as well. Since 2019, when AJF became

eligible as an opt-in fuel in the LCFS, volumes have increased from about 1.8 million gallons in

2019 to about 11.6 million gallons in 2022, and those volumes continue to increase as

momentum builds in the aviation sector and with new federal incentives. Hydrogen quantities,

although still relatively small, nearly doubled from 2018 to 2019, and have more than

quadrupled since 2018.

The program is also supporting refueling infrastructure needed to

refuel ZEVs. The 2018 LCFS amendments added the Hydrogen Refueling Infrastructure (HRI)

and Direct Current (DC) Fast Charging Infrastructure (FCI) provisions. These provisions are

designed to support the buildout of publicly-available ZEV refueling infrastructure for light-duty

vehicles in California in the early years while refueling demand is low, with the expectation that

vehicle demand will increase as refueling availability increases. Crediting is provided for

eligible infrastructure based on the unused refueling capacity, and credit generation phases

out naturally as fueling throughput increases and unused capacity decreases. The provisions

limited infrastructure crediting to 5% of deficits and required applications to be submitted prior

to 2026. To date, CARB has approved 75 hydrogen stations and over 3,200 DC fast chargers

at 511 sites.

Over 30 million LCFS credits were sold or traded in approximately 3,100 transactions in 2022,

demonstrating an active credit market with an annual transactional value of nearly $4 billion.

California Air Resources Board, LCFS Quarterly Data Spreadsheet. (Updated on July 31, 2023).

https://ww2.arb.ca.gov/resources/documents/lcfs-data-dashboard

Ibid.

California Air Resources Board, LCFS ZEV Infrastructure Crediting webpage. (Accessed on April 18, 2023).

https://ww2.arb.ca.gov/resources/documents/lcfs-zev-infrastructure-crediting

Credits in 2022 were generated primarily from renewable diesel (36%), electricity (24%),

biomethane (16%), and ethanol (14%). More than 522 active entities are registered for

reporting in the LCFS Reporting Tool and Credit Bank & Transfer System (LRT-CBTS), and

more than 1,300 individual alternative fuel pathways have been approved with carbon

intensities below the current benchmarks.

The current LCFS targets a 20% reduction in fuel carbon intensity by 2030 and maintains that

benchmark for all subsequent years. A primary objective of this rulemaking is to strengthen the

carbon intensity benchmarks of the LCFS regulation both pre- and post-2030 so that the LCFS

continues to serve as a key policy to reduce GHG emissions from the transportation sector.

Achieving the GHG reduction goals of the 2022 Scoping Plan Update will require significant

changes in every sector of the State’s economy. California’s transportation industry remains

the largest contributing sector to the GHG Inventory,

and transitioning to ZEVs and deploying

low-carbon fuels is critical for achieving California’s climate and air quality targets.

Federal policy support plays a role in the fuels and technologies that come to California

through the LCFS. The U.S. Environmental Protection Agency (U.S. EPA) implements a

Renewable Fuel Standard (RFS) program (Code of Federal Regulations, title 40, part 80,

sections 1100 et. Seq.) that mandates the blending of specific volumes of renewable fuels into

gasoline and diesel sold in the U.S. to achieve a specified ratio for each year. As defined,

“renewable fuels” under the RFS resemble the list of transportation fuels subject to the LCFS.

The two policies are complementary and support a reduction in fossil fuel consumption and

diversification of the fuel pool. In addition to the RFS, the Inflation Reduction Act (IRA) of

2022

provides tax incentives and financial support for biofuel and hydrogen production. The

newly created Hydrogen Production Tax Credit (45V)

incentivizes the domestic production of

clean hydrogen, which will make this emerging low-carbon fuel source more cost-competitive

and help the country meet the ambitious goals of the Hydrogen Shot

, an effort to accelerate

breakthroughs in hydrogen technology and cut the cost of clean hydrogen by 80% to $1 per

kilogram in one decade. This federal support represents a once-in-a-generation investment in

clean fuel production and infrastructure, and California is poised to leverage the existing LCFS

mechanism to bring investment to California. The LCFS also supports use of carbon capture

and sequestration (CCS) in connection with transportation fuel production, and direct air

capture (DAC) with carbon sequestration projects. These capital-intensive projects are also

supported by the federal government through the 45Q tax credit for CCS

20,21

and research and

California Air Resources Board, Current California GHG Emission Inventory Data (2022 Edition).

https://ww2.arb.ca.gov/ghg-inventory-data

117

Congress, Inflation Reduction Act of 2022. Pub.L. No. 117-169. August 16, 2022.

https://www.congress.gov/bill/117th-congress/house-bill/5376/text

The White House, Building a Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments

in Clean Energy and Climate Action. 74-76. January 2023. https://www.whitehouse.gov/wp-

content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf

United States Department of Energy Office of Energy Efficiency & Renewable Energy, Hydrogen Shot:

Overview. (Accessed on December 13, 2023). https://www.energy.gov/eere/fuelcells/hydrogen-shot

Congressional Research Service, Carbon Storage Requirements in the 45Q Tax Credit. IF11639. June 28,

2021. https://crsreports.congress.gov/product/pdf/IF/IF11639

The Inflation Reduction Act of August 2022 expands and enhances the 45Q credit for CCS. Pub.L. No. 117-169

(August 16, 2022).

deployment grants from federal agencies.

22,23

Investments in California leveraging federal

support will be key to achieving the deep emissions reductions called for in AB 1279 and the

2022 Scoping Plan Update.

Like so many of CARB’s innovative programs, the success of California’s LCFS program is

inspiring other jurisdictions to adopt their own clean fuels programs. CARB works closely with

other jurisdictions that have chosen to adopt similar programs, including Oregon, Washington,

and British Columbia. CARB also collaborates closely with other states and is seeing growing

interest from several jurisdictions. Other jurisdictions including Japan, New Zealand, Australia,

and the European Commission also continue to seek information and technical experience on

the LCFS. As interest in the LCFS grows and other jurisdictions consider their own programs,

CARB continues to improve efficiency and maintain program integrity to ensure that the LCFS

remains an exportable policy.

C. Overview of the Proposed Amendments

This section provides a broad overview of amendments staff is proposing for adoption. Chapter

II provides a more in-depth description of the purpose of the rulemaking and the problems that

the proposal is intended to address. Appendix E provides a summary, purpose, and rationale

for each proposed regulatory modification.

The most significant change in this proposal is to strengthen the CI reduction benchmarks both

pre- and post-2030 in support of California’s goal for achieving carbon neutrality by 2045 and

achieving an 85% reduction in GHG emissions by 2045, as called for by AB 1279 and the 2022

Scoping Plan Update. The 2022 Scoping Plan Update, which identifies the outcomes needed

to achieve carbon neutrality by 2045, was approved by the Board in December 2022. The

State must accelerate the pace of clean energy and technology development, and the LCFS is

one of the primary mechanisms for transforming California’s transportation fuel pool with

low-carbon alternatives. The benchmarks provide the basis for calculating credits for

low-carbon fuels and deficits for high carbon fuels.

If adopted, the proposed amendments would require a 30% reduction in fuel CI by 2030 and a

90% reduction in fuel CI by 2045 from a 2010 baseline, as shown in the proposed CI

benchmark schedule for gasoline and gasoline substitutes listed in Table 1, below, and shown

in Figure 6. To accommodate rapid advances in transportation fuel production and use, the

proposed amendments also include a near-term step-down and an Automatic Acceleration

Mechanism (AAM). The step-down is a one-time 5% reduction in the CI benchmark in 2025

that increases the stringency of the CI target. The AAM is another tool to increase the

stringency of the CI benchmark, but is activated only when specific regulatory conditions are

United States Department of Energy, U.S. Department of Energy Announces $131 Million for CCUS

Technologies. April 24, 2020. https://www.energy.gov/articles/us-department-energy-announces-131-million-ccus-

technologies

United States Department of Energy, Funding Opportunity Announcement 2515, Carbon Capture R&D for

Natural Gas and Industrial Point Sources, and Front-End Engineering Design Studies for Carbon Capture

Systems at Industrial Facilities and Natural Gas Plants. October 6, 2021.

https://www.energy.gov/fecm/articles/funding-opportunity-announcement-2515-carbon-capture-rd-natural-gas-

and-industrial

met. These triggered reductions in the CI benchmark would help bolster market stability in the

event that transportation fuel decarbonization is growing rapidly and outpacing deficit

generation in the program.

Table 1: Proposed Carbon Intensity Benchmarks for Gasoline and Fuels Used as a Substitute for Gasoline

Year

Average Carbon

Intensity

(gCO

e/MJ)

2010 Reporting Only

2011 95.61

2012 95.37

2013 97.96

2014 97.96

2015 97.96

2016 96.50

2017 95.02

2018 93.55

2019 93.23

2020 91.98

2021 90.74

2022 89.50

2023 88.25

2024

87.01

2025

80.73

2026 78.50

2027 76.26

2028

74.03

2029

71.79

2030

69.55

Benchmarks for years 2011, 2013, 2016, 2019, and 2024 reflect reductions from revised base year (2010) CI

values for California Reformulated Gasoline that were calculated using the CI for crude oil supplied to California

refineries. For more information, see Table 1 in Appendix A.

Year

Average Carbon

Intensity

(gCO

e/MJ)

2031

65.08

2032

60.61

2033

56.14

2034

51.67

2035

47.20

2036

42.73

2037

38.26

2038

33.78

2039

29.31

2040

24.84

2041

21.86

2042

18.88

2043

15.90

2044

12.92

2045

9.94

The benchmark for years 2024 through 2045 reflect reductions from revised base year (2010) CI Values for

CaRFG (99.15).

The benchmark schedule in 2025 has been updated to include a 5% increase in stringency, achieving an

18.75% CI reduction compared to the 13.75% CI reduction specified in the 2018 adopted regulation.

δ These CI targets may be accelerated by the Automatic Acceleration Mechanism based on the regulatory criteria

specified in section 95484(b) in the proposed Regulation Order (Appendix A).

The process for determining the annual carbon intensity benchmarks is detailed in Chapter VIII

and Appendix C-1. Other proposed changes are identified in Table 2 below and include

eliminating the current LCFS exemption for intrastate fossil jet fuel starting in 2028, expanding

ZEV infrastructure crediting to the medium- and heavy-duty (MHD) sector, and adding

hydrogen-based and electricity-based transaction types to be included in the third-party

verification program for data reported under LCFS.

Additionally, amendments are proposed to further streamline existing requirements of the

LCFS regulation and to update program tools and data.

Table 2 provides a summary of the proposed changes to the regulation. Staff began

conceptually discussing many of these items through public workshops initiated in October of

2020, hosting nine workshops and two community meetings through August 2023. The

pre-rulemaking public process is detailed in Chapter XI.

Table 2: Summary of Proposed Regulatory Amendments to the LCFS Regulation

Topic Proposed Regulatory Updates

General

Minor updates for typographical errors and specifications that do not

materially affect requirements

Update terminology for Data Management System

Compliance, Program

Benchmarks, and Credit

Generation

Strengthen the carbon intensity benchmarks both pre- and post-2030

Include a step-down of the CI benchmark in 2025 and a mechanism to

automatically strengthen the carbon intensity benchmarks based on defined

market conditions

Eliminate exemption for intrastate fossil jet fuel, beginning in 2028

Modify crediting potential for zero-emission forklifts with lift capacities less

than 12,000 lbs

Allow all fuels to be added to buffer account, instead of only liquid fuels

Equity-Focused Improvements

Focus and increase investment requirements of residential base credit

proceeds in ways that provide benefits for disadvantaged, low-income, rural,

and tribal communities

Extend and focus ZEV infrastructure crediting for light-duty vehicles in

disadvantaged, low-income communities, or rural communities

Expand ZEV infrastructure crediting to the medium- and heavy-duty sector to

support ZEV infrastructure needed for medium- and heavy-duty ZEVs

operating in heavily-impacted freight corridors

Entities and Eligibility Include Multi-Family residences as Non-Residential

Modify definition of fuel supply equipment (FSE) for electric transport

refrigeration units

Fuel Pathway Applications and

CI Determination

Update LCA modeling tools and emission factors

Include a Tier 1 Calculator for hydrogen

For projects breaking ground after December 31, 2029, add deliverability

requirement for pipeline-injected biomethane and phase out pathways for

avoided methane crediting by 2040 for biomethane used for transportation

and 2045 for biomethane used for hydrogen production

Add provisions for indirect accounting of low-CI hydrogen injected into

hydrogen pipelines

Add sustainability requirements for crop- and forestry- based feedstocks

Topic Proposed Regulatory Updates

Petroleum and Project-Based

Credits

Update crude oil Lookup Table

Update the Oil Production Greenhouse Gas Emission Estimator (OPGEE)

Model and process for future updates

Phase out petroleum project credit generation by 2040

Specify that direct air capture projects must be located in the United States to

generate LCFS credits

Verification Program

Add third-party verification for hydrogen and electricity data types and deferral

threshold considerations

Require third-party validation of all applications for project-based crediting.

Update deferral eligibility requirements to clarify that joint applicants are not

eligible to defer verification

Include meter calibration requirements for project and pathway applications

II. The Problem that the Proposal is Intended to Address

In order to implement the 2022 Scoping Plan Update, California needs to reduce emissions by

driving down fossil fuel demand in transportation, transitioning to zero-emission technology

wherever feasible, and increasing the supply of low-carbon alternative fuels as quickly as

possible. In this chapter, staff provides a description of the purpose of this rulemaking and how

the proposed amendments to the LCFS support the State’s climate and air quality targets. A

description, purpose, and rationale for each of the proposed updates and revisions are

provided in Appendix E.

To implement these objectives, staff is proposing a suite of amendments to the regulation to:

• Improve California’s long-term ability to support the production and use of increasingly

lower-CI transportation fuels and to improve the program’s overall effectiveness;

• Update the annual carbon intensity benchmarks through 2030 and establish more

stringent post-2030 benchmarks in alignment with the 2022 Scoping Plan Update;

• Increase the flexibility of the program to adjust for potential future market

overperformance by including a mechanism that would automatically accelerate the

compliance targets under certain conditions;

• Include a step-down in the near-term CI target to further support ambition;

• Incentivize fuel production and refueling infrastructure buildout needed to meet

California’s long-term climate goals and reduce dependence on petroleum fuels,

including opportunities to leverage federal funding for low-carbon hydrogen production

and ZEV fueling, and support the transition of biomethane fuel pathways for combustion

out of transportation;

• Update standard values in the regulation, including emission factors, as well as life

cycle assessment (LCA) modeling tools to use more detailed or recent data;

• Streamline implementation of the program; and

• Make minor updates for typographical errors and clarifying specifications.

A. Strengthen the Annual Carbon Intensity Benchmarks Pre- and Post-2030

Staff last revisited the annual carbon intensity benchmarks in 2018, following the approval of

the 2017 Scoping Plan Update, which focused on achieving the 2030 SB 32 GHG reduction

target. Through the 2018 rulemaking, the Board extended the carbon intensity benchmarks

from a 10% reduction in 2020 to a 20% reduction in 2030 to align with SB 32 and the 2017

Scoping Plan Update. The climate policy landscape has continued to evolve since the 2018

rulemaking. In 2022, the Governor signed AB 1279, which requires an 85% reduction in

anthropogenic GHG emissions below 1990 levels by 2045. The 2022 Scoping Plan Update

lays out a path to achieve these targets and achieve carbon neutrality by 2045. Staff is

proposing to update the LCFS program in response to current legislative direction and the

2022 Scoping Plan Update. Along with this high-level policy direction and technology-forcing

emission standards and other policies adopted by the Board, low-carbon technology uptake is

accelerating. Renewable diesel capacity has grown substantially and far exceeds what was

previously modeled in 2018 when the current CI benchmarks were established. Electricity and

hydrogen used as vehicle fuels have increased over 50% between 2019 and 2022 and are far

outpacing the projections staff used to establish the existing CI benchmarks during the

previous 2018 rulemaking. This trend is expected to continue, as California implements the

ACC II, ACT, ACF, Innovative Clean Transit, Cargo Handling Equipment, Ocean Going

Vessels at Berth, Clean Miles Standard, Transport Refrigeration Unit, and In-use Locomotive

regulations.

There is also much progress in the liquid and gaseous alternative fuel spaces. Biofuel

production capacity has increased substantially in recent years, with many announcements

nationwide and in California for new or expanded capacity. Momentum for alternative fuels is

growing at the national level, as well. Biomethane supplies have also increased as more

methane capture projects are developed.

Taken together, these trends suggest that the market is outpacing previous fuels and crediting

projections used for the 2018 LCFS benchmark modeling and that re-evaluation of near-term

targets is needed to accelerate action and plan beyond 2030. Staff recommends strengthening

the pre- and post-2030 carbon intensity benchmarks to accelerate GHG reductions in

transportation fuel. As part of this overall strengthening of the benchmarks, staff also

recommends a near-term step-down of the 2025 benchmark and an acceleration mechanism

to adjust the CI benchmarks if market conditions warrant.

Achieving California’s mid- and long-term GHG and air quality goals will require a portfolio of

low-carbon transportation fuels in amounts well beyond the current amounts. The

transportation sector remains the largest contributing source of GHG emissions in the State

inventory. The LCFS has been an effective measure for increasing the use of low-carbon

alternatives to fossil fuels in California by providing significant economic benefits to the

credit-generating entities who participate in the program, including municipal transit agencies,

alternative fueling facilities, equipment service providers, fuel producers, and project

developers across the United States and abroad. For example, the 2020 California GHG

Emissions Inventory

shows that California continues to stay below its 2020 target for

emissions. The data shows a decline in emissions from transportation, supported by the LCFS,

which is driving increasing use of alternative fuels in the transportation sector.

The proposed amendments are expected to reduce life cycle GHG emissions of transportation

fuels consumed in California by about 558 million metric tons in carbon dioxide equivalent

(MMTCO

e) cumulatively from 2024 to 2046 as compared to business as usual (see Chapter

IV of this Staff Report for additional discussion of the projected GHG benefits). Greater

diversification of the State’s fuel portfolio will also support California’s ongoing efforts to

improve ambient air quality by displacing demand for fossil fuels. Chapter V of this Staff Report

summarizes the air quality and public health benefits of the proposed regulation.

The LCFS regulation defines a carbon intensity benchmark for each year. The current LCFS

benchmark schedule was designed to help California achieve the statutory target of 40% GHG

emissions reduction by 2030, in line with the 2017 Scoping Plan Update and SB 32. However,

the 2022 Scoping Plan Update calls for an accelerated deployment of fuels and ZEVs in

support of achieving a 48% reduction of GHGs by 2030 and 85% below 1990 levels by 2045.

California Air Resource Board, Latest GHG Inventory shows California remains below 2020 emissions target.

October 19, 2020. https://ww2.arb.ca.gov/news/latest-ghg-inventory-shows-california-remains-below-2020-

emissions-target

Using market data and techno-economic models to evaluate a variety of transportation fuel

pathways, staff conducted a scenario analysis that informed the pre- and post-2030 target and

annual benchmarks for carbon intensity reduction through 2045. This analysis helps staff

explore possible compliance outcomes and facilitates an improved understanding of LCFS

economics and compliance feasibility for different policy choices in each scenario.

Staff developed the California Transportation Supply (CATS) model to evaluate the California

fuel market and estimate an optimal fuel supply that may be delivered to California under

various scenarios. Since CATS, and really no modeling tool, can fully capture all real-world

conditions, the tool is primarily being used to compare results of different policy changes

across the different scenarios. The CATS model is an optimization model that seeks to

minimize the cost of supplying all defined fuel pools such that fuel demand constraints are met.

The CATS model selects the fuel mixes likely available for California that minimize the cost of

supplying all transport fuel demand in the State while meeting technology and policy

constraints. The outputs from the CATS model do not constitute a forecast of credit prices, but

rather how the market may evolve in response to different policy changes that may, or may

not, be implemented.

The optimization model is constrained by a set of policies, technologies, and cost

considerations that are intended to approximate current and future market conditions under

different scenarios. Anticipated mobility demand each year is used to estimate energy demand

by vehicle technology type (e.g., light-duty electric vehicle, gasoline vehicle, etc.), and the

model then identifies a variety of fuel production pathways that could be optimally used to meet

that demand given costs and policy considerations. Staff developed feedstock supply curves

and feedstock to fuel conversion pathways for the model that are detailed in the California

Transportation Supply (CATS) Model v0.2 – Technical Documentation.

Based on feedback received from stakeholders, staff evaluated a wide range of CI benchmark

trajectories. Scenarios modeled both in-house by CARB and by external stakeholders indicate

that a reduction of at least 30% by 2030 and 90% by 2045 is achievable and necessary to

accelerate decarbonization of the transportation fuels sector and support the State’s broader

climate goals. Figure 6 shows staff’s proposed benchmarks as compared to the benchmarks in

the current regulation for the years 2024 through 2045. When considering the full period from

2024 through 2046, staff’s proposal achieves 558 MMT more cumulative reductions relative to

the current regulation. Chapter VIII and Appendix C-1 of this Staff Report provide additional

details on the data sources and methodology that staff has relied on to evaluate feasible LCFS

compliance scenarios.

California Air Resources Board, California Transportation Supply (CATS) Model v0.2 – Technical

Documentation for August 2023 Example Scenario. August 2023. https://ww2.arb.ca.gov/sites/default/files/2023-

08/CATS%20Technical_1.pdf

Figure 6: Current and Proposed Annual Carbon Intensity Benchmarks

Additionally, the transportation fuels market is evolving quickly due to technological and

economic breakthroughs, regulatory requirements, new federal incentives, and other

jurisdictions implementing similar programs. This has resulted in rapid shifts in the market,

particularly from rapidly growing ZEV market and conversion of fossil refineries to biofuel

production, which have resulted in rapid and significant credit generation. To accommodate

documented rapid advances in transportation fuel decarbonization that have already occurred,

and which could occur again due to these rapid changes, the proposed amendments include

both a near-term step-down in CI benchmark stringency in 2025, and an Automatic

Acceleration Mechanism (AAM).

A step-down in stringency was strongly supported by feedback provided by stakeholders,

particularly in response to February and May 2023 technical workshops. The step-down

reflects the current effectiveness of the program, which suggests that the pace of CI reductions

can be increased through the benchmarks.

Staff is proposing to include an AAM to increase the stringency of the CI benchmarks of the

program when specific regulatory conditions are satisfied. Under the current staff proposal, the

AAM would advance the upcoming year’s CI benchmark, and all subsequent years by one

year. The acceleration mechanism provides a clear signal regarding how and when the

benchmarks would be adjusted. An AAM can support the deeper transportation sector

decarbonization needed through mid-century by increasing regulatory clarity for the market,

acting alongside existing provisions that also help to provide program certainty, such as the

maximum credit price

and the Credit Clearance Market (CCM).

Cal. Code Regs., tit. 17, § 95487(a)(2)(D).

Cal. Code Regs., tit. 17, § 95485(c).

An AAM would operate to potentially increase program stringency, using regulatory criteria, to

accommodate documented rapid advances in transportation fuel decarbonization. An AAM

would operate in a way that is predictable and easy to understand, based on publicly available

data, and would bolster market stability during periods where credit generation rapidly and

consistently outpaces deficit generation. Similar to maximum price and CCM provisions, an

AAM would play an important role in supporting LCFS implementation, deterring market

manipulation, and providing the certainty necessary for the long-term investments required to

meet the State’s decarbonization goals.

Staff engaged extensively with stakeholders to develop an AAM, including holding a dedicated

workshop for this topic in May 2023. An AAM would only be activated by specific market

conditions defined in the LCFS regulations that result in a specified imbalance in the number of

credits versus deficits over a certain time period. Under staff’s proposal, the AAM would be

triggered when the credit bank to average quarterly deficit ratio exceeds three and credit

generation exceeds deficit generation based on the prior year’s reporting. If triggered, the AAM

would accelerate all subsequent CI benchmarks by one year.

B. Eliminate Exemption for Intrastate Fossil Jet Fuel

Staff is proposing to eliminate the exemption for intrastate fossil jet fuel from the LCFS

regulation starting in 2028. The aviation sector has historically relied on jet fuel produced from

fossil fuels, and fossil jet fuel is currently exempted from generating deficits in the LCFS

program. However, to achieve the deep emissions reductions called for in AB 1279 and the

2022 Scoping Plan Update, California must reduce GHG emissions from aviation.

In California, intrastate jet fuel constitutes about 10% of total jet fuel consumption and is

responsible for 2% of GHG emissions in the California transportation sector. As emissions

from other vehicle types decline, this percentage is expected to increase. Alternative jet fuel

(AJF) production has increased since it became an eligible LCFS opt-in fuel in 2019, and with

11.6 million gallons produced in 2022. This provision would be limited to flights that take off

and land within the State of California.

Momentum is growing for AJF, an alternative liquid fuel that can displace fossil jet fuel without

engine modifications, along with interest in zero-emission technologies for aviation. At the

federal level, a tax credit of up to $1.25 per gallon is available to sustainable aviation fuel

(SAF) producers.

In alignment with the federal support available for SAF, Governor Newsom

highlighted the need to transition to low-carbon alternatives in his July 2022 letter to the CARB

Chair, in which he directed CARB to adopt a 20% clean fuels target for the aviation sector.

The 2022 Scoping Plan Update anticipates a major shift away from fossil jet fuel by 2045,

including 20% zero-emission aviation.

Internal Revenue Service. Sustainable Aviation Fuel Credit webpage. (Updated on January 31, 2023).

https://www.irs.gov/credits-deductions/businesses/sustainable-aviation-fuel-credit

California Office of the Governor, Governor’s Letter to Chair Randolph. July 22, 2022.

https://www.gov.ca.gov/wp-content/uploads/2022/07/07.22.2022-Governors-Letter-to-CARB.pdf?emrc=1054d6

Several airlines have also announced GHG emission reduction targets, as well as multi-year

agreements to source SAF for their operations. For example, United Airlines,

Southwest

Airlines,

and American Airlines

have released plans to achieve carbon neutrality by 2050.

Additionally, Alaska Airlines set new climate goals that include net-zero carbon emissions by

2040.

Finally, Delta Airlines has a goal to replace 10% of its fossil jet fuel with SAF by the

end of 2030.

Production is ramping up to meet the increasing demand for low-carbon

incentives. For example, multiple refineries in California are transitioning their existing facilities

to produce bio-based alternative fuels, including AJF. AJF is a viable low-carbon alternative

that can further reduce aviation carbon dioxide emissions and currently generates credits in

the LCFS program. Adding fossil jet fuel as a required fuel under the program will build on the

momentum in the aviation industry.

C. Expand Zero Emission Vehicle Infrastructure Crediting

During the 2018 rulemaking, the Board adopted the HRI and FCI provisions. These two

crediting opportunities were designed to incentivize zero-emission light-duty vehicle (LDV)

refueling infrastructure ahead of anticipated ZEV demand. The intent of these provisions was

to help remove the “chicken-and-egg” issue of vehicle demand waiting on refueling

development, and refueling infrastructure waiting on vehicle demand, by incentivizing rapid

buildout of public refueling infrastructure. Dispensed fuel receives crediting in the LCFS, and

these provisions added crediting for unused capacity at approved stations. The provisions

have supported the buildout of dozens of hydrogen stations and thousands of fast chargers in

California and play a key role in supporting the overall transition to ZEV technology, driven in

large part by the ACC II regulation. New applications for these crediting provisions sunset at

the end of 2025.

Staff is proposing amendments to expand the current ZEV infrastructure crediting provisions

by adding crediting for MHD infrastructure and extending the LD crediting. As the State

transitions to widespread ZEV deployment, it is imperative that all individuals in the State have

access to cleaner technologies. Therefore, staff is proposing to continue the HRI and FCI

incentivization for light-duty vehicle refueling in low-income, rural, or disadvantaged

communities. This focused eligibility requirement aligns with identified priorities in the Clean

Transportation Incentives Funding Plan

, which provides funding for ZEVs deployed in these

regions. Staff is also proposing to allow new light-duty FCI (LD-FCI) applications be located

United Airlines, Our sustainable aviation fuel program. (Accessed on October 10, 2023).

https://www.united.com/en/us/fly/company/responsibility/sustainable-aviation-fuel.html

Southwest Airlines, Environmentally Sustainable Goals. (Accessed on October 10, 2023).

https://www.southwest.com/citizenship/planet/

American Airlines, Pathway to net zero. (Accessed on October 10, 2023). https://news.aa.com/esg/climate-

change/pathway-to-net-zero/

Alaska Airlines, Flying with Purpose: Alaska Sets New Climate Goals, Including Net-zero carbon Emission by

2040. April 21, 2021. https://news.alaskaair.com/sustainability/alaska-airlines-net-zero-carbon-goals/

Delta Airlines, Committed to Sustainability. (Accessed November 22, 2023). https://www.delta.com/us/en/about-

delta/sustainability

California Air Resources Board, Proposed Fiscal Year 2023-24 Funding Plan for Clean

Transportation Incentives. 59-60. October 6, 2023. https://ww2.arb.ca.gov/sites/default/files/2023-

10/Proposed%20Funding%20Plan%20Fiscal%20Year%202023-24.pdf

more than 10 miles away from the nearest fast charger to help fill refueling gaps in the State.

These provisions are designed to accelerate deployment of ZEV infrastructure in regions that

support equitable access to low-carbon technology. The provisions would be limited to 0.5%

each of deficits from the prior quarter.

California’s ZEV goals are not limited to LDVs. The Innovative Clean Transit,

Advanced

Clean Truck,

and Advanced Clean Fleet

rules, which have all been adopted since 2018,

along with the Clean Truck Partnership,

will drive a rapid transformation to ZEV technology in

the MHD sector in the very near future. As noted earlier, transitioning to ZEVs is critical for

achieving California’s climate and air quality targets, and California’s path is established in the

ACT and ACF regulations and the Clean Truck Partnership. Incentivizing early build-out of

ZEV infrastructure will support the transition to MHD ZEVs required by the ACF regulation.

ACF fleet turnovers begin in 2024 and transition drayage fleets to ZEV technology the fastest

of any vocation, but this transition is contingent upon availability of refueling infrastructure for

successful operation of these vehicles. Staff expects that LCFS support for ZEV truck refueling

infrastructure will help provide significant air quality improvements to communities adjacent to

major ports, distribution centers, and freight corridors.

To achieve fleet turnovers within this timeframe, refueling infrastructure suitable for MHD

trucks must be available to maintain operations and provide certainty of fueling availability to

truck and fleet owners. Staff is, therefore, proposing to create a version of the HRI and FCI

provisions that incentivize MHD ZEV refueling infrastructure during the early years when

refueling demand is low. Similar to the light-duty (LD) provisions, the MHD provisions will

provide LCFS credits for the unused refueling capacity at eligible stations and sites, which will

naturally phase out as more vehicles become operational and vehicle refueling demand

increases. LCFS ZEV fueling infrastructure credits for the MHD sector will play a key role in

supporting California’s ZEV goals, and in particular the technology transition under the ACF

regulation. Staff is proposing that MHD-HRI and MHD-FCI infrastructure must be sited within

one mile of a ready or pending Federal Highway Administration Alternative Fuel Corridor—for

hydrogen or electricity, respectively—where the majority of truck refueling is expected to occur,

or adjacent to existing truck parking, to accommodate overnight charging. Locating ZEV

refueling stations within one mile of major freight corridors and at existing truck parking is

California Air Resources Board, Innovative Clean Transit. (Accessed on October 10, 2023).

https://ww2.arb.ca.gov/our-work/programs/innovative-clean-transit

California Air Resources Board, Advanced Clean Trucks webpage. (Accessed on October 10, 2023).

https://ww2.arb.ca.gov/our-work/programs/advanced-clean-trucks

California Air Resources Board, Advanced Clean Fleet webpage. (Accessed on October 10, 2023).

https://ww2.arb.ca.gov/our-work/programs/advanced-clean-fleets

California Air Resources Board, CARB and truck and engine manufacturers announce unprecedented

partnership to meet clean air goals. July 6, 2023.

https://ww2.arb.ca.gov/news/carb-and-truck-and-engine-

manufacturers-announce-unprecedented-partnership-meet-clean-air

expected to bring cleaner air for communities living adjacent to these areas currently heavily

impacted by diesel truck pollution.

41,42

Unlike the existing LD-HRI and LD-FCI provisions, which support only public infrastructure,

staff is proposing to extend eligibility for the MHD-HRI and MHD-FCI provisions to private

infrastructure as well. Staff focused on public infrastructure for the existing LD infrastructure

crediting provisions because the LD market lacked a robust publicly available refueling

network. The MHD sector is fundamentally different and needs significant support to meet the

refueling needs of both trucks utilizing public refueling infrastructure and private fleet refueling.

Truck fleets rely heavily on both public and private refueling based on the duty cycles and

vocations of the vehicles. Stakeholders have expressed that private refueling should also

receive an incentive from the MHD infrastructure crediting provisions to support the early

capital costs of installing ZEV refueling infrastructure. Private infrastructure has the advantage

of being designed for a known refueling demand and can be sized accordingly to minimize

costs, but still faces steep initial costs associated with the initial buildout of the infrastructure. In

addition, fleets may transition their vehicles to ZE technology over the course of several years

and will likely need support during the interim years while their fleet ramps up to the full

capacity the refueling infrastructure was designed for. Due to the different levels of support

needed for private refueling infrastructure compared to the public infrastructure without a

known refueling demand, staff is proposing to provide half as many credits for private refueling

infrastructure as public per charger or station. As with the existing infrastructure crediting

provisions, staff is proposing to limit total credits available to the charging and hydrogen

refueling provisions to 2.5% of prior quarter deficits, to provide a sufficient incentive without

inflating overall credit supply.

D. Biomethane Crediting

Methane is a harmful short-lived climate pollutant (SLCP) that has an outsized impact on

climate change in the near term. The United Nations Environment Programme’s Global

Methane Assessment

advises that achieving the least-cost pathways to limit warming to

1.5°C requires global methane emission reductions of 40% to 45% by 2030 alongside

substantial simultaneous reductions of all climate forcers, including CO

and SLCPs. Action to

reduce these powerful emissions sources today will provide immediate benefits—both to

human health locally and to reduce warming globally—as the effects of our policies to

transition to low-carbon energy systems and achieve carbon neutrality further unfold.

Biomethane

has played a role in contributing to the overall decrease in carbon intensity of

the transportation fuel pool. With support from the LCFS and Renewable Fuel Standard (RFS)

California Office of Environmental Health Hazard Assessment, Impacts of Greenhouse Gas Emission Limits

Within Disadvantaged Communities: Progress Toward Reducing Inequities. February 2022.

https://oehha.ca.gov/media/downloads/environmental-justice//impactsofghgpoliciesreport020322.pdf

California Office of Environmental Health Hazard and Assessment, CalEnviroScreen 4.0. (Updated October

2021). https://oehha.ca.gov/calenviroscreen/report/calenviroscreen-40

United Nations Environment Programme and Climate and Clean Air Coalition, Global Methane Assessment:

Benefits and Costs of Mitigating Methane Emissions. Summary for Policymakers. 2021.

https://wedocs.unep.org/bitstream/handle/20.500.11822/35917/GMA_ES.pdf

When methane is derived from biogas, it is referred to as biomethane.

programs, in 2022 compressed natural gas (CNG) represented 5% of total MHD fuel demand

and renewable natural gas (RNG) was 97% of the CNG fueling in California.

However, CNG

transportation fuel demand is only about 3% of overall natural gas demand in California, and

achieving deep GHG reductions will have to include displacing fossil gas in sectors of the

economy beyond transportation.

Capturing methane from California’s methane sources (e.g.,

landfills, dairies, and wastewater) is critical for achieving California’s climate targets, including

the targets identified by SB 32, SB 1383, and AB 1279. The 2022 Scoping Plan Update

reinforces the message that while there is clearly a role for biomethane in decarbonizing

California’s energy use in the long term (particularly as a feedstock for renewable hydrogen

production), biomethane used as an end-use vehicle fuel will decline as ZEVs penetrate the

market, and this resource should be transitioned to other sectors. Biomethane can play a key

role in decarbonizing stationary sources or other energy applications, and the 2022 Scoping

Plan Update identifies additional end uses in the industrial, commercial, and residential

sectors; production of hydrogen; and electricity generation by displacing the need for fossil

gas. For the fuel to transition to other sectors in the long term, the existing market signals will

need to transition accordingly to avoid stranded assets and the closure of methane capture

projects. With this background, staff is proposing changes for pathways related to biomethane

as a transportation fuel under the LCFS program. These changes would continue to incentivize

the methane reductions needed in the next decade, while aligning with the 2022 Scoping Plan

Update to shift biomethane to the production of renewable hydrogen or for use in other sectors

by 2045.

Phase Out of Pathways for Biomethane Combustion Crediting

For projects that break ground after December 31, 2029, staff is proposing to phase out

pathways for crediting biomethane used in CNG vehicles after December 31, 2040. Pathways

for biomethane used to produce renewable hydrogen would be eligible to receive credits until

December 31, 2045. This concept aligns with the overall transition to non-combustion

transportation technology highlighted in the 2022 Scoping Plan Update, as well as the shifting

of biomethane resources to hydrogen production. In addition, staff is proposing two other

mechanisms related to biomethane used as a transportation fuel, highlighted below.

Pathways for Avoided Methane Crediting

For projects that break ground after December 31, 2029, staff is proposing that pathways for

avoided methane crediting be available through 2040 for biomethane used as a transportation

fuel, and through 2045 for biomethane used to produce hydrogen.

Deliverability Requirements

Currently, the LCFS regulation allows for indirect accounting of biomethane when injected into

the North American natural gas pipeline. In 2022, a total of about 153 MMBtu of RNG was

California Air Resources Board, LCFS Quarterly Data Spreadsheet. (Updated on July 31, 2023).

https://ww2.arb.ca.gov/resources/documents/lcfs-data-dashboard

California Air Resources Board, Advanced Clean Fleets Resolution 23-13. April 27, 2023.

https://ww2.arb.ca.gov/sites/default/files/barcu/board/res/2023/res23-13.pdf

reported to the LCFS for credit generation, with the majority coming from RNG resources

injected into the North American natural gas pipeline outside of California.

Adding a deliverability requirement would help to ensure that California is making progress on

the State’s methane reduction targets.

For projects that break ground after Dec 31, 2029,

staff is proposing to require deliverability starting January 1, 2041 for pathways that include

biomethane used in CNG vehicles or starting January 1, 2046 for biomethane used as an input

to hydrogen production. In particular, staff proposes to align with the deliverability policy for

biomethane in the California Energy Commission’s Renewables Portfolio Standard (RPS)

program (Public Utilities Code section 399.12.6) and the California Public Utilities Commission

1440 program. Specifically, the concept is to require demonstration that eligible biomethane is

carried through common carrier pipelines that physically flow within California or toward end

use in California. Such pipelines must flow toward California 50% of the time on an annual

basis, as defined by the current RPS eligibility guidebook.

48,49

This requirement encourages

and rewards reducing methane emissions by injecting biomethane that displaces existing

natural gas use in California, rather than rewarding biomethane outside of California that does

not displace existing natural gas use in California or have any other connection to California.

Biomethane fuel pathways that break ground before January 1, 2030 would not be subject to

the deliverability requirements, which would encourage rapid buildout of biomethane capture

projects this decade and supports the need to reduce methane emissions. The proposed

deliverability requirements also would not apply to biomethane matched to hydrogen fuel

pathways participating in the LCFS program.

E. Project-Based Crediting

The 2022 Scoping Plan Update identifies a general trend away from fossil fuel consumption in

California and highlights the need to invest in low-carbon fuels to replace petroleum

consumption in transportation. However, this transition will not happen overnight, and

California must continue to reduce emissions from existing legacy fuel production facilities in

the near term while fossil fuel demand persists. Staff is proposing changes to the

project-based crediting provisions to align with the 2022 Scoping Plan Update to reduce GHG

emissions across the economy while recognizing the broader trend away from fossil fuel

production in tandem with demand.

Phase Out of Petroleum Project Crediting

Staff is proposing to phase out crediting of petroleum projects by 2040. The program currently

supports projects for credit generation from crude using innovative methods,

low-complexity/low-energy-use refineries, refinery investment, and renewable hydrogen

refinery investment. Staff’s proposal to phase out crediting of these projects by 2040 is

consistent with projected reductions in demand for petroleum fuels, while also recognizing

Only methane emissions occurring within California are included in the State’s GHG inventory.

California Energy Commission, Renewables Portfolio Standard Eligibility Guidebook, Nineth Edition. Publication

Number: CEC-300-2016-006-ED9-CMF-REV. 9-10. January 2017.

https://efiling.energy.ca.gov/getdocument.aspx?tn=217317

Staff is not proposing to include the requirement in the RPS eligibility guidebook to demonstrate direct

environmental benefits to California as part of this amendment.

verifiable GHG reductions at existing fuel production facilities. Carbon capture and

sequestration (CCS) projects are highlighted as an important strategy in the 2022 Scoping

Plan Update for achieving the AB 1279 targets, and staff proposes to exclude them from this

phase-out proposal.

Incorporate Location Requirements for Direct Air Capture Projects

Staff is proposing updates to the treatment of DAC with sequestration projects. In the 2018

rulemaking, the LCFS program made DAC with sequestration eligible for project-based CCS

credits. DAC is an emerging technology that has the potential to remove large amounts of CO

already in the atmosphere and could aid in achieving California’s long-term climate goals. It will

continue to need support to be built to scale and to be deployed more broadly.

In an effort to align with federal incentives being provided for DAC projects, and to support the

ongoing technology development needed to reduce future DAC deployment costs, staff is

proposing to limit LCFS credit generation eligibility of DAC with sequestration projects to those

located in the United States. This proposal better supports national efforts to deploy DAC

projects and helps achieve national and State emission reduction goals. This limitation would

not apply to DAC-to-fuel applications submitted as Tier 2 alternative fuel pathways, as the final

fuels from these pathways must be supplied to California to be eligible for LCFS credits.

F. Crop-Based Biofuels Sustainability Criteria

In recognition that demand for crop-based biofuels can indirectly cause land use change

globally, the LCFS regulation currently accounts for land use change emissions associated

with crop-based biofuels assuming they are grown on pre-existing agricultural land. The LCFS

regulation uses land use change emissions estimates by feedstock which were last assessed

between 2013-2015 through an extensive expert workgroup. The existing regulatory provisions

make fuel pathways from crop-based feedstocks more carbon intensive and disincentivizes

sourcing biofuel feedstocks from crops with higher land-use change risks. The inclusion of land

use change emissions in LCFS life cycle methodologies result in stronger incentives for

waste-and-residue-based feedstocks, which are not associated with land use change impacts,

relative to crops. As a result, the majority of biomass-based diesel in the LCFS has historically

come from waste feedstocks like used cooking oil, animal fat and inedible distiller’s corn oil.

The same general trend holds true for sustainable aviation fuel, which utilizes the same

feedstocks as biomass-based diesel. While the majority of biomass-based diesel is still derived

from waste oil, the use of crop-derived, biomass-based diesel has increased in recent years.

Additionally, the CI impact of direct land conversion is not currently assessed in LCFS

pathways, commodity feedstocks are not tracked to their points of origin, and there is no

prohibition on bringing new land into agricultural production in order to grow biofuel feedstocks.

A rapid increase in oil crop demand for biofuel production could potentially add pressure to

convert forested land or other land types into biofuel crop production.

To reduce the risk that rapid expansion of biofuel production and biofuel feedstock demand

could result in deforestation or adverse land use change, CARB staff are proposing additional

guardrails on the use of crop-based feedstocks for biofuel production. Specifically, CARB staff

are proposing to require pathway holders to track crop-based and forestry-based feedstocks to

their point of origin and require independent feedstock certification to ensure feedstocks are

not contributing to impacts on other carbon stocks like forests. CARB staff are also proposing

to remove palm-derived fuels from eligibility for credit generation, given palm oil has been

demonstrated to have the highest risk of being sourced from deforested areas.

Palm-derived

fuel transactions have not been reported under the program or received any credits to-date.

G. Other Proposed Amendments

Additional proposed changes are summarized in Table 2 and detailed in Appendix E. Some of

these changes serve to align with State goals and the 2022 Scoping Plan Update, namely

modifying crediting potential for zero-emission forklifts and allowing indirect accounting for

low-CI hydrogen injected into hydrogen pipelines. Other changes serve to simplify and

streamline application and reporting requirements to encourage greater participation and

improve administrative efficiency.

Electric Forklifts

As mentioned earlier, California is rapidly transitioning to ZEV technology in the transportation

sector. In addition to on-road vehicles, this goal also applies to off-road equipment, including

electric forklifts. The LCFS program has a role to play in implementing the ZEV turnover goals

in Executive Order N-79-20. Given the scale of equipment turnover and technological

transformation needed to achieve the State’s goals, LCFS credits should be used in end-uses

that need the most additional support to transition away from fossil fuel consumption. As part

of this evaluation to understand where the transition is necessary for the forklift fleet, staff has

re-evaluated the forklift baseline.

Battery-electric forklifts have been eligible for LCFS credit generation since the 2015

readoption. Much of the forklift inventory in the State has successfully transitioned to

non-combustion technology, in line with State goals. This success story provides an

opportunity for the LCFS program to re-evaluate the level of crediting appropriate for

battery-electric forklifts. Accordingly, staff is revising the baseline for battery-electric forklifts by

incorporating the 2010 status of forklift electrification into the baseline, and is proposing a 50%

reduction in the Energy Economy Ratio for zero-emission forklifts with lift capacities less than

12,000 lbs. However, since larger forklifts were 100% fossil in the baseline, forklifts with lift

capacities greater than 12,000 lbs. would remain at the established forklift Energy Economy

Ratio.

Additionally, staff is proposing removing the estimation methodology used for reporting

electricity for forklifts and requiring direct metering for all transactions. The requirement for

European Commission, Report from the Commission to the European Parliament, the Council, the European

Economic and Social Committee and the Committee of the Regions on the status of production expansion of

relevant food and feed crops worldwide. Brussels. March 13, 2019. https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX:52019DC0142

European Commission, Annexes to the Report from the Commission to the European Parliament, the Council, the

European Economic and Social Committee and the Committee of the Regions on the status of production

expansion of relevant food and feed crops worldwide. Annexes 1 to 2. Brussels. March 13, 2019.

Searle, S., Defining Low and High Indirect Land-Use Change Biofuels in European Union Policy. The International

Council on Clean Transportation. November 2018.

https://theicct.org/sites/default/files/High%20low%20ILUC%20Fact%20Sheet%2020181113.pdf

metering will improve data accuracy and enable transactions verification while also aligning

forklift reporting with all other reported electricity crediting.

Allow Indirect Accounting for Low Carbon Intensity Hydrogen Injected into Hydrogen Pipelines

physically connected to California and Expansion of Indirect Accounting for Low Carbon

Intensity Electricity for Hydrogen Utilized as a Transportation Fuel.

The 2022 Scoping Plan Update calls for a significant increase in the production of low-carbon

hydrogen to displace fossil fuels. The Scoping Plan scenario projects a significant growth of

renewable and low-CI hydrogen production, particularly for its use as a transportation fuel and

for hard-to-electrify end uses. Given the nascent market and federal incentives to scale

production, staff is proposing book-and-claim of low-CI hydrogen to support the 2022 Scoping

Plan Update energy transition goal by overcoming bottlenecks in hydrogen production and

supply. Currently, low-CI hydrogen must be physically delivered to its end-use for purposes of

LCFS accounting. This provision was included before the 2022 Scoping Plan Update was

completed, which showed the need for significant increased demand for this fuel in the

transportation sector and the additional infrastructure necessary to produce and deliver

hydrogen fuel. This framework is impractical for large-scale production of low-CI hydrogen that

is sent to several off-takers through shared hydrogen pipelines. Book-and-claim of

pipeline-injected hydrogen increases the flexibility of the program by allowing matching of low-

CI hydrogen to transportation end uses, including use as a vehicle fuel for hydrogen fuel cell

electric vehicles, and hydrogen used in the production of low-carbon transportation fuels such

as renewable diesel and AJF. Staff proposes to expand the existing book-and-claim provisions

to include low-CI hydrogen injected into the pipeline network that is physically connected to

California to be credited under the LCFS as a transportation fuel or to produce alternative fuel

for transportation. Staff will evaluate the need to remove book-and-claim for hydrogen in future

rulemakings as the renewable hydrogen market matures.

In order to leverage available federal incentives and ensure the program is supporting

low-carbon hydrogen, staff is proposing to align book-and-claim eligibility with the hydrogen

production incentive eligibility under the Inflation Reduction Act. Specifically, staff is proposing

well-to-wheel CI thresholds of less than or equal to 55 g/MJ for gaseous hydrogen and less

than or equal to 95 g/MJ for liquid hydrogen. Staff is proposing to exclude hydrogen derived

from fossil gas from book-and-claim eligibility unless low CI hydrogen is produced using book

and claim of biomethane or with CCS and used as a transportation fuel.

In further support for low CI hydrogen production, staff is proposing allowing for dedicated

power purchase agreements (PPAs) for low CI electricity to be used to indirectly match to

lower the emissions intensity for both process electricity as well as for hydrogen production.

The use of PPAs for this purpose is limited to hydrogen utilized as a transportation fuel. The

low CI electricity must be new or expanded capacity, must be delivered to the local balancing

authority where the hydrogen is produced, and must be matched on a quarterly basis. These

requirements will help ensure against resource shuffling where existing renewable electricity is

potentially redirected to hydrogen production and backfilled with non-zero electricity.

Other Amendments

A number of amendments are proposed to simplify and streamline application and reporting

requirements in order to encourage greater participation and improve administrative efficiency.

For example, the LCFS currently incorporates by reference Tier 1 CI Calculators designed to

streamline the fuel pathway application review and validation process for pathway types for

which CARB staff have extensive experience evaluating. These calculators have predefined

input fields for entering site-specific data and well-defined CI calculations. Staff is proposing to

update the existing Tier 1 calculators to make them more user-friendly by streamlining inputs,

updating emission factors, and changing the layout of the calculators. Staff also proposes to

create a new Tier 1 CI calculator for hydrogen. The LCFS regulation also contains Temporary

and Lookup Table pathways with fixed carbon intensity values that streamline participation for

certain fuels. Using data gained from certifying hundreds of fuel pathways since the 2018

rulemaking, staff proposes to make revisions to the list of temporary pathways contained in

Table 8 of the regulation. Staff is proposing to update the Lookup Table CI values for the

following fuel pathways:

• California Reformulated Gasoline Blendstocks for Oxygenate Blending (CARBOB),

• Ultra Low Sulfur Diesel (ULSD),

• Compressed Natural Gas,

• Propane, and

• California Grid Electricity.

Additionally, staff is proposing to allow hydrogen production facilities (including renewable

hydrogen) not co-located with refineries but supplying hydrogen directly to the refineries to

implement eligible GHG reduction projects. Staff is also proposing to streamline reporting

requirements to allow quarterly or annual submission of project reports, as is currently

permitted for Refinery Investment Projects and Renewable Hydrogen Refinery Credit Projects.

In addition, staff is proposing to update the displacement emission factor for innovative crude

projects using solar electricity to align with the updated Emissions & Generation Resource

Integrated Database (eGRID) emission factor for California grid electricity, for consistency with

the treatment of electricity as a process energy for other fuel pathways.

Successful greenhouse gas reduction programs require a system to monitor, report, and verify

data to maintain the integrity of the reduction program. Currently, the LCFS supplements the

existing work of CARB staff with a verification system that requires regulated entities of certain

credit generating types to retain the services of independent third-party verifiers. Fuel

pathways are currently validated by third-party verifiers prior to CARB approval, and staff is

proposing to apply this requirement to project-based crediting applications as well to align and

streamline the approach between the two provisions with the accompanying benefits of

validation for project-based crediting applications. Additionally, staff is proposing to align the

verification requirements for electricity crediting types with other verification provisions. With

the expected expansion of electrification in the transportation sector, staff is proposing to add

verification requirements, which would newly require entities to verify their annual reports for

the following transaction types:

• EV Charging Transaction Types;

• Electric Transport Refrigeration Units (eTRU), Electric Cargo Handling Equipment

(eCHE), and Electric Power for Ocean-going Vessel (eOGV) Fueling;

• Forklift Electricity/Hydrogen Fueling;

• Fixed Guideway Electricity Fueling; and

• Fuel Cell Vehicle (FCV) Fueling transaction types, not limited to hydrogen from

book-and-claim biomethane.

The current regulation requires CARB to regularly update the OPGEE Model and the Crude

Lookup Table. CARB held two workshops in 2021 and 2022 to request feedback on the

updated OPGEE model to the public. The model was subsequently updated based on

stakeholder feedback and staff recently finalized the OPGEE model update. Staff used the

updated OPGEE model to update the 2010 baseline crude CI, as well as the Crude Lookup

Table, and proposes to incorporate the latest OPGEE model by reference into the regulation.

Staff is also proposing changes to the allocation and uses of base credits representing

non-metered residential EV charging. The scope of these changes include:

• Changing the scope of the statewide Clean Fuel Reward from a light-duty rebate to a

medium and heavy-duty rebate;

• Altering the minimum base credit contribution required to fund the Clean Fuel Reward

along with the specific utility requirements for funding the program;

• Expanding the proportion of credit proceeds required to be invested in disadvantaged,

low-income, rural, and tribal communities (holdback equity credits); and

• Enhancing the pre-approved projects eligible for funding of holdback equity credits.

The Clean Fuel Reward will change from a universal new light-duty EV rebate to be focused

on new and used rebates for medium- and heavy-duty trucks that are exempted from the

Advanced Clean Fleets regulation. This rebate will jumpstart the transition for a harder to

transition segment of the truck sector that is not otherwise covered by other CARB regulations.

The proportion of residential base credits will change to reflect this change in rebate from 60%

of total base credits to 40% with a corresponding increase in “holdback credits.” As a result of

this increase in holdback credits, staff is proposing increasing the requirements for investments

in equity communities for the IOUs to 75% (from 50%) to match the requirements set by the

Public Utilities Commission. Staff is also proposing new pre-approved categories for

investment of holdback equity proceeds.

III. The Specific Purpose and Rationale of Each Adoption, Amendment,

or Repeal

California Government Code section 11346.2(b)(1) requires a description of the specific

purpose for each proposed adoption, or amendment, the problem the agency intends to

address with the proposed LCFS regulation, and the rationale for determining that each

proposed adoption and amendment is reasonably necessary to both carry out the purposes of

CARB staff’s proposed LCFS regulation and to address the problems for which it is proposed.

The overarching purpose of the proposed LCFS regulation is to decarbonize transportation

through increasing the supply of low-carbon alternative fuels. The problems that LCFS needs

to address are described above in Chapter II. Appendix E: Purpose and Rationale for LCFS

Amendments presents the summary of each proposed amendment and describes its purpose

and rationale for its role in increasing low-carbon alternative fuel supply.

IV. Benefits Anticipated from the Regulatory Action, Including the

Benefits or Goals Provided in the Authorizing Statute

CARB anticipates that the proposed amendments will have the following general benefits to

California businesses and individuals:

• Reduced GHG emissions near and long-term. The LCFS is specifically designed to

reduce GHG emissions in the transportation sector, which is responsible for nearly half

of GHG emissions in California. This will contribute to California’s efforts to address

climate change.

• Increased use of lower CI fuels and alternative fueled vehicles including renewable

diesel, biomethane, and lower CI electricity and hydrogen for ZEVs. In addition to

reducing GHG emissions, this will in many cases lower levels of localized air pollutants,

which are the cause of many deleterious health effects on California residents,

especially in priority communities and communities of color.

• Greater opportunities for California businesses to invest in the production of low-CI fuels

and other credit generating opportunities.

• Reduced dependence on fossil fuels through decarbonizing the transportation fuel

sector and supporting a diversified transportation fuel pool.

In the following sections, staff describes the estimated benefits of the proposed amendments

to California businesses, small businesses, and individuals.

A. Summary of Emission Benefits

1. Greenhouse Gases

Staff expects the proposed amendments to reduce GHG emissions relative to the baseline by

558 million metric tons in carbon dioxide equivalent (MMTCO

e) from 2024 through 2046. It is

important to note that because the LCFS calculates emission reductions on a full life cycle

basis, the GHG emission reductions occur both in California and out-of-state.

These GHG reduction estimates are derived from CATS outputs of the fuel quantities and

average annual CI associated with each fuel, as well as GHG reductions associated with oil

and gas extraction emissions.

2. PM2.5 and NOx

The proposed amendments would affect air quality through four main categories: 1) changes in

tailpipe emissions for on-road and off-road vehicles, 2) changes in aircraft emissions at

airports, 3) changes in emissions at stationary sources from fuel production, and 4) changes in

upstream emissions associated with oil and gas extraction where quantified.

Cumulatively from 2024 to 2046, the proposed amendments achieve reductions of 4,281 tons

of PM2.5 and 25,586 tons of NOx as compared to the business-as-usual baseline.

Chapter V provides a detailed summary of the air quality benefits of the proposed

amendments.

B. Greenhouse Gas Reduction Benefit - Social Cost of Carbon

The benefit of GHG reductions achieved by the proposed amendments can be estimated using

the social cost of carbon (SC-CO

), which provides a dollar valuation of the damages caused

by one ton of carbon pollution and represents the monetary benefit today of reducing carbon

emissions in the future.

The U.S. Council of Economic Advisors and the Office of Management and Budget convened

an Interagency Working Group on the Social Cost of Greenhouse Gases (IWG) to develop a

methodology for estimating the SC-CO

. The methodology relies on a standardized range of

assumptions and can be used consistently when estimating the benefits of regulations across

agencies and around the world.

Staff used the current IWG-supported SC-CO2 values to

consider the social costs of actions taken to reduce GHG emissions. This is consistent with the

approach presented in the 2022 Scoping Plan Update, is in line with U.S. Government

Executive Orders including 13990 and the Office of Management and Budget Circular A-4 of

September 17, 2003.

52,53

The IWG describes the social cost of carbon as follows:

“The social cost of carbon (SC-CO

) for a given year is an estimate, in dollars, of the

present discounted value of the future damage caused by a 1-metric ton increase in

carbon dioxide (CO

) emissions into the atmosphere in that year, or equivalently, the

benefits of reducing CO

emissions by the same amount in that year. The SC- CO2 is

intended to provide a comprehensive measure of the net damages – that is, the

monetized value of the net impacts – from global climate change that result from an

additional ton of CO

These damages include, but are not limited to, changes in net agricultural productivity,

energy use, human health, property damage from increased flood risk, as well as

nonmarket damages, such as the services that natural ecosystems provide to society.

Many of these damages from CO

emissions today will affect economic outcomes

throughout the next several centuries.”

United States Government Interagency Working Group on Social Cost of Greenhouse Gases, Technical

Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order

13990. February 2021. https://www.whitehouse.gov/wp-

content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf

California Air Resources Board, 2022 Scoping Plan for Achieving Carbon Neutrality. 27-28. November 16,

2022. https://ww2.arb.ca.gov/sites/default/files/2022-12/2022-sp_1.pdf

Office of Management and Budgets. Circular A-4. September 17, 2023.

https://www.transportation.gov/sites/dot.gov/files/docs/OMB%20Circular%20No.%20A-4.pdf

National Academies of Sciences, Engineering, and Medicine, Valuing Climate Damages: Updating Estimation

of Carbon Dioxide. National Academies Press, Washington DC. 2017.

https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-

of https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-

cost-of

The SC-CO

is year-specific and is highly sensitive to the discount rate used to adjust the

value of the damages in the future due to CO

. The SC-CO

increases over time as systems

become more stressed from the aggregate impacts of climate change and future emissions

cause incrementally larger damages. A higher discount rate decreases the value today of

future environmental damages. This analysis uses the IWG standardized range of discount

rates from 2.5 to 5% to represent varying valuation of future damages. Table 3 shows the

range of IWG SC-CO

values (Consumer Price Index adjusted) used in California’s regulatory

assessments which reflect the societal value of reducing carbon emissions by one metric ton.

Table 3: SC-CO

Discount Rates (in 2021$ per Metric Ton of CO2)

Year 5% Discount Rate 3% Discount Rate 2.5% Discount Rate

2020 $16 $57 $85

2025 $19 $63 $93

2030 $22 $68 $100

2035 $25 $75 $107

2040 $29 $82 $115

2045 $31 $88 $122

2050 $36 $94 $130

The GHG reductions due to the proposed amendments are calculated in CO

e which includes

reductions in carbon, methane, and other GHGs. As the CI of a fuel is based on a life cycle

assessment of GHG emissions from the use of a fuel converted to CO

e units, there is not a

simple way to assess the breakdown of emissions reduction by GHG (i.e., CO

, methane, or

other GHG) due to the proposed amendments.

As there is no Social Cost of CO

e, there is not a straightforward metric to estimate the

benefits of the proposed amendments. If all GHG reductions under the proposed amendments

are assumed to be carbon dioxide reductions, the cumulative estimated benefits from the

proposed amendments would range from approximately $14 billion to $61 billion (in 2021$). In

Table 4 staff calculated the avoided SC-CO

values (2021$) by applying values in Table 3 to

the annual GHG emissions change.

United States Government Interagency Working Group on Social Cost of Greenhouse Gases, Technical

Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order

13990. 2021. https://www.whitehouse.gov/wp-

content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf

Table 4: Avoided Social Cost of CO

from Proposed Amendments 2024-2046

Year

GHG Emission

Reductions (MMT)

5% Discount Rate 3% Discount Rate

2.5% Discount

Rate

2026 13 $254 $852 $1,250

2030 20 $438 $1,368 $1,997

2034 29 $716 $2,149 $3,065

2038 34 $921 $2,670 $3,775

2042 33 $1,008 $2,794 $3,939

2046 21 $680 $1,841 $2,550

Total 558 $14,544 $43,045 $61,099

It is important to note that the SC-CO

, while intended to be a comprehensive estimate of the

damages caused by carbon globally, does not represent the cumulative cost of climate change

and air pollution to society. There are additional costs to society outside of the SC-CO

including costs associated with changes in co-pollutants and the social cost of other GHGs

including nitrous oxide. The IPCC has stated that the Interagency Working Group on the Social

Cost of Greenhouse Gases (IWG) SC-CO

estimates are likely underestimated due to the

omission of significant impacts that cannot be accurately monetized, including important

physical, ecological, and economic impacts.

As mentioned, the SC-CO

calculation incorporates GHG emission reductions associated with

methane reductions from the regulation. The LCFS supports CARB’s work to meet Short Lived

Climate Pollutant (SLCP) targets set by Senate Bill 1383 (Lara, Chapter 395, Statutes of 2016)

by incentivizing dairies to capture and convert methane-rich biogas into transportation fuels

(compressed natural gas, hydrogen, and electricity). Methane is a potent climate pollutant with

a Global Warming Potential 25 times higher than CO

. CARB staff used the SC-CH

values

provided by the IWG, adjusted to 2021$, shown in Table 5 to estimate the avoided social cost

of in-state methane converted to fuel. These values are consistent with the 2021 IWG interim

numbers but adjust for inflation using the California Consumer Price Index. Staff use

conversion factors from the Livestock Offset Protocol

and U.S. Energy Information

United States Environmental Protection Agency, Social Cost of Carbon Fact Sheet. December 2016.

https://www.epa.gov/sites/default/files/2016-12/documents/social_cost_of_carbon_fact_sheet.pdf

California Air Resources Board, Compliance Offset Protocol Livestock Projects. November 14, 2014.

https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2014/capandtrade14/ctlivestockprotocol.pdf

Administration

to calculate the methane emission reductions associated with in-state dairy

biogas volumes from the California Transportation Supply (CATS) model outputs, resulting in a

conversion factor of 0.020 metric tons of methane per million British thermal unit

(0.020MT/MMBtu).

Table 5: Social Cost of Methane Discount Rates (in 2021$ per Metric Ton of CH4)

Year

5% Discount Rate 3% Discount Rate

2.5% Discount

Rate

2020 $739 $1,641 $2,188

2025 $889 $1,915 $2,462

2030 $1,039 $2,188 $2,735

2035 $1,231 $2,462 $3,146

2040 $1,368 $2,735 $3,556

2045 $1,641 $3,146 $3,830

2050 $1,778 $3,419 $4,240

Table 6 presents a sampling of years of avoided social cost of instate methane, and the

cumulative total avoided social cost instate from 2024 to 2046, from the proposed

amendments. The cumulative estimated benefits from the proposed amendments would range

from approximately $6 billion to $16 billion (in 2021$).

Table 6: Avoided Social Cost of Methane from Proposed Amendments 2024-2046 (million 2021$)

Year

Emission

Reductions (MT)

5% Discount Rate 3% Discount Rate

2.5% Discount

Rate

2026 314,024 $288 $601 $816

2030 292,597 $304 $640 $800

2034 389,068 $468 $958 $1,171

2038 447,125 $605 $1,223 $1,529

United States Energy Information Administration, Energy Conversion Calculators. (Updated June 16, 2023).

https://www.eia.gov/energyexplained/units-and-calculators/energy-conversion-calculators.php

Year

Emission

Reductions (MT)

5% Discount Rate 3% Discount Rate

2.5% Discount

Rate

2042 0 0 0 0

2046 0 0 0 0

Total 5,350,641 $6,146 $12,593 $15,990

C. Health Benefits

The proposed amendments to the Low Carbon Fuel Standard regulation would reduce fine

particulate matter (PM2.5) and oxides of nitrogen (NOx) emissions, resulting in health benefits

in California. CARB analyzed the value of health benefits associated with 12 health outcomes,

most of which were added or updated through CARB’s recent expansion of the health

analysis

: cardiopulmonary mortality, acute myocardial infarction, lung cancer incidence,

asthma onset, asthma symptoms, hospitalizations for cardiovascular illness, hospitalizations

for respiratory illness, hospitalizations for Alzheimer’s disease, hospitalizations for Parkinson’s

disease, cardiovascular emergency department (ED) visits, respiratory ED visits, and work loss

days.

These health outcomes have been identified by U.S. EPA as having a causal or likely causal

relationship with exposure to PM2.5 based on a substantial body of scientific evidence.

60,61

U.S. EPA has determined that both long-term and short-term exposure to PM2.5 plays a

causal role in premature mortality, meaning that a substantial body of scientific evidence

shows a relationship between PM2.5 exposure and increased risk of death. This relationship

persists when other risk factors such as smoking rates, poverty, and other factors are taken

into account. U.S. EPA has also determined a causal relationship between non-mortality

cardiovascular effects (e.g., acute myocardial infarction) and short- and long-term exposure to

PM2.5, a likely causal relationship between non-mortality respiratory effects (including

worsening asthma) and short- and long-term PM2.5 exposure, and a likely causal relationship

between non-mortality neurological effects and long-term PM2.5 exposure.

CARB staff evaluated health impacts associated with exposure to PM2.5 and NOx emissions

from the proposed amendments. NOx includes nitrogen dioxide, a potent lung irritant, which

California Air Resources Board, California Air Resources Board Updated Health Endpoints Bulletin. 2022.

https://ww2.arb.ca.gov/sites/default/files/2022-

11/California%20Air%20Resources%20Board%20Updated%20Health%20Endpoints%20Bulletin%20-

%20Edited%20Nov%202022_0.pdf

United States Environmental Protection Agency, Integrated Science Assessment for Particulate Matter.

December 2019. https://cfpub.epa.gov/ncea/isa/recordisplay.cfm?deid=347534

United States Environmental Protection Agency, Estimating PM2.5- and Ozone-Attributable Health Benefits.

March 2021. https://www.epa.gov/sites/default/files/2021-03/documents/estimating_pm2.5-_and_ozone-

attributable_health_benefits_tsd.pdf

can aggravate lung diseases such as asthma when inhaled.

However, the most serious

quantifiable impacts of NOx emissions occur through the conversion of NOx to fine particles of

ammonium nitrate aerosols through chemical processes in the atmosphere. PM2.5 formed in

this manner is termed secondary PM2.5. Both directly emitted PM2.5 and secondary PM2.5

are associated with adverse health outcomes. As a result, reductions in PM2.5 and NOx

emissions are associated with reductions in these adverse health outcomes.

CARB staff’s analysis of health outcomes from the proposed amendments is limited to fuel

changes incremental to the baseline. The baseline includes implementation of technology

changes expected from implementation of the on-road light duty (ACC II) and on-road heavy

duty (ACT and ACF) regulations, and therefore the conservative LCFS analysis does not

reflect the health benefits of transitioning to zero emission vehicles. However, the proposed

amendments to the LCFS are expected to play a key role in supporting implementation of

these vehicle-focused regulations, by reducing the cost of electricity and hydrogen used as

vehicle fuels, supporting installation and operation of charging and hydrogen refueling stations,

and promoting investment in transportation electrification in disadvantaged, low-income and

rural communities. Although not quantified in the health outcomes analysis conducted by

CARB staff, the LCFS program remains a key tool in supporting the transition to ZEV

technology and the concurrent air quality and GHG benefits.

1. Incidence-Per-Ton Methodology

CARB uses the incidence-per-ton (IPT) methodology to quantify the health benefits of

emissions reductions in cases where dispersion modeling results are not available. A

description of this method is included on CARB’s webpage. CARB’s IPT methodology is based

on a methodology developed by U.S. EPA.

63,64

Under the IPT methodology, it is assumed that changes in emissions are approximately

proportional to changes in health outcomes. IPT factors are derived by calculating the number

of health outcomes associated with exposure to PM2.5 for a baseline scenario using measured

ambient concentrations and dividing by the emissions of PM2.5 or a precursor. The calculation

is performed separately for each air basin using the following equation:

Equation 1: Incidence-per-ton calculation

United States Environmental Protection Agency, Integrated Science Assessment for Oxides of Nitrogen –

Health Criteria. January 2016. https://cfpub.epa.gov/ncea/isa/recordisplay.cfm?deid=310879

Fann N., Fulcher C.M., & Hubbell B.J., The influence of location, source, and emission type in estimates of the

human health benefits of reducing a ton of air pollution. Air Quality, Atmosphere & Health, 2:169-176. June 9,

2009. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2770129/

Fann, N., Baker, K. R., Chan, E. A., Eyth, A., Macpherson, A., Miller, E., & Snyder, J. Assessing human health

PM2. 5 and ozone impacts from US oil and natural gas sector emissions in 2025. Environmental Science &

Technology, 52(15), 8095-8103. July 13, 2018. https://pubs.acs.org/doi/full/10.1021/acs.est.8b02050

https://pubs.acs.org/doi/full/10.1021/acs.est.8b02050

Multiplying the emissions reductions from the proposed amendments in an air basin by the IPT

factor then yields an estimate of the reduction in health outcomes achieved by the proposed

amendments. For future years, the number of outcomes is adjusted to account for population

growth. CARB’s current IPT factors are based on a 2014-2016 baseline scenario, which

represents the most recent data available at the time the current IPT factors were computed.

IPT factors are computed for the two types of PM2.5: primary PM2.5 and secondary PM2.5 of

ammonium nitrate aerosol formed from precursors.

2. Reduction in Adverse Health Impacts

CARB recently initiated an expanded health analysis to include additional health endpoints in

order to provide a more comprehensive analysis of the benefits of the agency’s plans and

regulations. A description of the updated and new health outcomes was provided in CARB's

Updated Health Endpoints Bulletin, released November 2022. This expansion was based on

U.S. EPA’s Technical Support Document for the Final Revised Cross-State Air Pollution Rule

Update for the 2008 Ozone Season NAAQS and is associated with U.S. EPA’s Environmental

Benefit Mapping and Analysis Program – Community Edition version 1.5.8.

CARB staff estimates that the total number of cases statewide that would be reduced (from

2024 to 2046) from implementation of the proposed amendments are as follows:

• 364 (201 - 519) fewer cases of cardiopulmonary mortality;

• 74 (54 - 94) fewer cases of hospitalizations for cardiovascular illness;

• 97 (-37 - 227) fewer cases of cardiovascular ED visits;

• 41 (15 - 109) fewer cases of nonfatal acute myocardial infarction;

• 11 (0 - 22) fewer cases of hospitalizations for respiratory disease;

• 219 (43 - 457) fewer cases of respiratory ED visits;

• 27 (8 - 45) fewer cases of lung cancer incidence;

• 852 (818 - 884) fewer cases of asthma onset;

• 73,433 (-35,816 – 178,171) fewer cases of asthma symptoms;

• 53,427 (45,055 – 61,482) fewer cases of work loss days;

• 174 (133 - 212) fewer cases of hospitalizations for Alzheimer's disease;

• 25 (13 - 36) fewer cases of hospitalizations for Parkinson's disease;

These reductions in adverse health cases are expected to be seen across all ages in the

State. Children in particular will benefit from the reduced cases of asthma onset and symptoms

due to the proposed amendments. This may lead to better health outcomes in these children

when they become adults since studies have shown that childhood asthma puts individuals at

United States Environmental Protection Agency, Technical Support Document (TSD) for the Final Revised

Cross-State Air Pollution Rule Update for the 2008 Ozone Season NAAQS Estimating PM2.5- and Ozone-

Attributable Health Benefits. March 2021. https://www.epa.gov/sites/default/files/2021-

03/documents/estimating_pm2.5-_and_ozone-attributable_health_benefits_tsd.pdf

greater risk for respiratory disease and lower respiratory function in adulthood.

66,67

Adults are

also expected to benefit from the proposed amendments due to fewer lost work days, nonfatal

acute myocardial infarctions (heart attacks), lung cancer incidences, and reduced

cardiopulmonary mortality. Seniors may benefit from reduced cases of hospitalizations for not

just cardiovascular and respiratory diseases, but also neurological conditions (Alzheimer’s and

Parkinson’s diseases). And there will be fewer ED visits for both cardiovascular and respiratory

diseases across all ages in the population.

Table 7 shows the air basin distribution of avoided health endpoints for the proposed

amendments for 2024 through 2046 in California, relative to the baseline.

Sears, M. R., Greene, J. M., Willan, A. R., Wiecek, E. M., Taylor, D. R., Flannery, E. M., Cowan, J.O., Herbison,

G.P., Silva, P.A, & Poulton, R., A longitudinal, population-based, cohort study of childhood asthma followed to

adulthood. New England Journal of Medicine, 349(15), 1414-1422. October 9, 2003.

https://www.nejm.org/doi/full/10.1056/nejmoa022363

McGeachie M.J., Yates K.P., Zhou X., Guo F., Sternberg A.L., Van Natta M.L., Wise R.A., Szefler S.J., Sharma

S., Kho A.T., Cho M.H., Croteau-Chonka D.C., Castaldi P.J., Jain G., Sanyal A., Zhan Y., Lajoie B.R., Dekker J.,

Stamatoyannopoulos J., Covar R.A., Zeiger R.S., Adkinson N.F., Williams P.V., Kelly H.W., Grasemann H., Vonk

J.M., Koppelman G.H., Postma D.S., Raby B.A., Houston I., Lu Q., Fuhlbrigge A.L., Tantisira K.G., Silverman

E.K., Tonascia J., Weiss S.T., & Strunk, R.C., Patterns of growth and decline in lung function in persistent

childhood asthma. New England Journal of Medicine, 374(19), 1842-1852. May 12, 2016.

https://www.nejm.org/doi/full/10.1056/nejmoa1513737

Table 7: Avoided Mortality and Morbidity Incidents per Air Basin from 2024 to 2046 under the Proposed Amendments*

Air Basin SC SCC SJV SFB SD Statewide

Cardiopulmonary

Mortality

208 (115 - 296) 8 (5 - 12) 56 (31 - 79) 38 (21 - 54) 18 (10 - 26) 364 (201 - 519)

Hospitalizations for

Cardiovascular Disease

42 (31 - 54) 2 (1 - 2) 11 (8 - 14) 8 (6 - 10) 5 (3 - 6) 74 (54 - 94)

Cardiovascular ED Visits 56 (-22 - 132) 2 (-1 - 5) 13 (-5 - 31) 11 (-4 - 26) 5 (-2 - 12) 97 (-37 - 227)

Acute Myocardial

Infarction

24 (9 - 63) 1 (0 - 2) 6 (2 - 15) 5 (2 - 13) 2 (1 - 5) 41 (15 - 109)

Hospitalizations for

Respiratory Disease

7 (0 - 13) 0 (0 - 0) 2 (0 - 3) 1 (0 - 2) 1 (0 - 1) 11 (0 - 22)

Respiratory ED Visits 119 (23 - 247) 4 (1 - 9) 36 (7 - 74) 28 (5 - 58) 9 (2 - 19) 219 (43 - 457)

Lung Cancer Incidence 15 (5 - 25) 1 (0 - 1) 3 (1 - 6) 4 (1 - 6) 2 (0 - 3) 27 (8 - 45)

Asthma Onset 471 (452 - 489) 21 (20 - 22) 102 (98 - 105) 134 (128 - 139) 45 (43 - 47) 852 (818 - 884)

Asthma Symptoms

40,494 (-19,758 –

98,213)

1,840

(-898 – 4,459)

9,106 (-4,447 –

22,068)

11,227

(-5,469 – 27,274)

3,798 (-1,850 –

9,226)

73,433 (-35,816 –

178,171)

Work Loss Days

29,258 (24,676 –

33,666)

1,251 (1,055 –

1,439)

6,991 (5,897 –

8,043)

7,677 (6,472 –

8,837)

3,110 (2,622 –

3,580)

53,427 (45,055 –

61,482)

Hospitalizations for

Alzheimer’s Disease

101 (78 - 123) 3 (2 - 4) 26 (20 - 32) 18 (13 - 22) 14 (11 - 18) 174 (133 - 212)

Hospitalizations for

Parkinson’s Disease

14 (7 - 20) 1 (0 - 1) 3 (2 - 5) 3 (2 - 5) 2 (1 - 2) 25 (13 - 36)

* Numbers in parentheses throughout this table represent the 95% confidence interval.

** Air Basins listed: South Coast, South Coast Central, San Joaquin Valley, San Francisco Bay, San Diego County

Table 7 continued

Air Basin SS SV NP NC NCC Statewide

Cardiopulmonary

Mortality

6 (4 - 9) 9 (5 - 14) 0 (0 - 1) 1 (0 - 1) 3 (2 - 4) 364 (201 - 519)

Hospitalizations for

Cardiovascular Disease

1 (1 - 1) 2 (1 - 2) 0 (0 - 0) 0 (0 - 0) 1 (0 - 1) 74 (54 - 94)

Cardiovascular ED Visits 2 (-1 - 5) 2 (-1 - 5) 0 (0 - 0) 0 (0 - 0) 1 (0 - 2) 97 (-37 - 227)

Acute Myocardial

Infarction

1 (0 - 2) 1 (0 - 3) 0 (0 - 0) 0 (0 - 0) 0 (0 - 1) 41 (15 - 109)

Hospitalizations for

Respiratory Disease

0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 11 (0 - 22)

Respiratory ED Visits 6 (1 - 12) 6 (1 - 12) 0 (0 - 1) 1 (0 - 1) 2 (0 - 5) 219 (43 - 457)

Lung Cancer Incidence 1 (0 - 1) 1 (0 - 1) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 27 (8 - 45)

Asthma Onset 16 (15 - 16) 22 (21 - 22) 1 (1 - 1) 2 (2 - 2) 10 (9 - 10) 852 (818 - 884)

Asthma Symptoms

1,414 (-688 –

3,436)

1,863 (-908 – 4,527) 96 (-47 - 233) 154 (-75 - 375) 827 (-403 - 2010)

73,433 (-35,816 –

178,171)

Work Loss Days 1,063 (896 - 1224) 1,449 (1221 - 1668) 58 (49 - 67) 117 (99 - 135) 577 (486 - 664) 53,427 (45,055 – 61,482)

Hospitalizations for

Alzheimer’s Disease

2 (2 - 2) 2 (2 - 3) 0 (0 - 0) 0 (0 - 0) 1 (1 - 1) 174 (133 - 212)

Hospitalizations for

Parkinson’s Disease

0 (0 - 1) 1 (0 - 1) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 25 (13 - 36)

Table 7 continued

Air Basin MC MD LT LC GBV Statewide

Cardiopulmonary Mortality 1 (1 - 2) 14 (8 - 20) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 364 (201 - 519)

Hospitalizations for

Cardiovascular Disease

0 (0 - 0) 3 (2 - 4) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 74 (54 - 94)

Cardiovascular ED Visits 0 (0 - 1) 4 (-1 - 9) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 97 (-37 - 227)

Acute Myocardial

Infarction

0 (0 - 0) 2 (1 - 4) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 41 (15 - 109)

Hospitalizations for

Respiratory Disease

0 (0 - 0) 0 (0 - 1) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 11 (0 - 22)

Respiratory ED Visits 1 (0 - 2) 8 (2 - 16) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 219 (43 - 457)

Lung Cancer Incidence 0 (0 - 0) 1 (0 - 1) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 27 (8 - 45)

Asthma Onset 4 (4 - 4) 24 (23 - 25) 1 (1 - 1) 0 (0 - 0) 1 (0 - 1) 852 (818 - 884)

Asthma Symptoms 352 (-171 - 855)

2,140

(-1,042 – 5,199)

45 (-22 - 108) 28 (-14 - 68) 49 (-24 - 120)

73,433 (-35,816 –

178,171)

Work Loss Days 256 (216 - 295)

1,527 (1,287 –

1,758)

41 (35 - 48) 17 (14 - 20) 34 (29 - 40) 53,427 (45,055 – 61,482)

Hospitalizations for

Alzheimer’s Disease

0 (0 - 0) 6 (4 - 7) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 174 (133 - 212)

Hospitalizations for

Parkinson’s Disease

0 (0 - 0) 1 (0 - 1) 0 (0 - 0) 0 (0 - 0) 0 (0 - 0) 25 (13 - 36)

3. Uncertainties Associated with the Mortality and Illness Analysis

Although the estimated health outcomes presented in this report are based on a

well-established methodology, they are subject to uncertainty. Uncertainty is reflected in the

95% confidence intervals included with the central estimates in Table 7. These confidence

intervals take into account uncertainties in translating air quality changes into health outcomes.

Other sources of uncertainty include the following:

• The relationship between changes in pollutant concentrations and changes in

pollutant or precursor emissions is assumed to be proportional, although this is

an approximation.

• Emission reductions are reported at a state level and do not capture local

variations.

• Future population estimates are subject to increasing uncertainty as they are

projected further into the future.

• Fuel use projections from the CATS model are estimates based on

technoeconomic analysis, which approximates but does not capture all real-world

conditions.

• Baseline incidence rates can experience year-to-year variation.

4. Monetization of Health Benefits

The reductions in adverse health impacts described above can be assigned monetary values

so the health benefits can be directly compared to other costs and savings associated with the

proposed amendments. These values are derived from economics studies and are based on

the expenses that an individual must bear for air pollution related health impacts such as

medical bills and lost work, or willingness to pay metrics, which in addition to capturing the

direct expenses of the health outcomes also capture the value that individuals place on pain

and suffering, loss of satisfaction, and leisure time. For more information on the methodology

used to determine the monetary value of health outcomes, see Appendix C-1. The value per

incident is shown in Table 8 below.

Table 8: Valuation per Incident for Avoided Health Outcomes (2021$)

Category Endpoint

Value Per

Incident

(2021$)

Valuation

Methodology

Notes

Premature Mortality Premature Mortality $12,483,845 WTP

Shown at 2021 income levels.

The estimate will grow annually

proportional to income growth

using U.S. EPA’s central

estimate for income elasticity of

0.40, and income growth

forecast from BenMAP-CE.

Category Endpoint

Value Per

Incident

(2021$)

Valuation

Methodology

Notes

Hospitalizations

and ER Visits

HA, Parkinson’s

Disease

$15,520 COI

Direct cost of hospitalization

incident.

Hospitalizations

and ER Visits

HA, Respiratory-2 $11,815 COI

Direct cost of hospitalization

incident.

Hospitalizations

and ER Visits

HA, Alzheimer’s

Disease

$14,539 COI

Direct cost of hospitalization

incident.

Hospitalizations

and ER Visits

HA, Cardio-, Cerebro-

and Peripheral

Vascular Disease

$18,696 COI

Direct cost of hospitalization

incident.

Hospitalizations

and ER Visits

ER visits, All Cardiac

Outcomes

$1,403 COI Direct cost of ER visit.

Hospitalizations

and ER Visits

ER visits, respiratory $1,057 COI Direct cost of ER visit.

Health Endpoint

Onset/Occurrence

Incidence, Asthma $53,753 COI

Present value of lifetime

healthcare cost and productivity

losses using a 3% discount

rate.

Health Endpoint

Onset/Occurrence

Asthma Symptoms,

Albuterol use

$253

WTP for

symptoms +

COI for

Albuterol use

Willingness to pay plus cost of

albuterol.

Health Endpoint

Onset/Occurrence

Incidence, Lung Cancer $30,377 COI

Direct medical cost of lung

cancer. Cost discounted to

present value at 3%.

Health Endpoint

Onset/Occurrence

Acute Myocardial

Infarction, Nonfatal

$94,334 COI

Present value of 3 years

medical cost and earnings lost

over a 5-year period. Using a

3% discount rate.

Health Endpoint

Onset/Occurrence

Work Loss Days $204 COI

Based on county-level median

daily wages.

The statewide valuation of health benefits from 2024-2046 are shown in Table 9. The total

statewide health benefits derived from criteria emissions reductions is estimated to be

approximately $5 billion, with $4.9 billion resulting from reduced premature cardiopulmonary

mortality and $85 million resulting the reductions in other adverse health impacts. The spatial

distribution of these benefits across the State follows the distribution of the health impacts by

air basin as described in Table 7. These monetized benefits from all COI based endpoint

valuations are included in the macroeconomic modeling.

Table 9: Statewide Valuation from Avoided Health Outcomes (million 2021$)

Avoided Health Incident 2026 2030 2034 2038 2042 2046 Total

Cardiopulmonary Mortality 138 127 203 279 264 268 4,892

Hospitalizations for Parkinson’s

Disease

<1 <1 <1 <1 <1 <1 <1

Respiratory ED Visits <1 <1 <1 <1 <1 <1 <1

Hospitalizations for Alzheimer’s

Disease

<1 <1 <1 <1 <1 <1 3

Hospitalizations for

Cardiovascular Disease

<1 <1 <1 <1 <1 <1 1

Cardiovascular ED Visits <1 <1 <1 <1 <1 <1 <1

ER visits, respiratory <1 <1 <1 <1 <1 <1 <1

Asthma Onset 2 1 2 3 2 2 46

Asthma Symptoms 1 1 1 1 1 1 19

Lung Cancer Incidence <1 <1 <1 <1 <1 <1 1

Acute Myocardial Infarction <1 <1 <1 <1 <1 <1 4

Work Loss Days 0 0 0 1 1 1 11

Total Valuation 141 129 206 284 268 273 4,977

D. Benefits to Typical California Businesses

LCFS incentives may encourage California firms, as well as other firms doing business in

California, to invest early in innovative, low-CI fuel technologies and develop mature

businesses earlier than firms not participating in the California market. Early investment may

result in competitive advantages to these businesses as other state, federal, or international

jurisdictions adopt similar carbon intensity standards.

The proposed amendments will also

Currently Oregon, Washington, British Columbia, Canada, Brazil, and the European Union have LCFS-like

policies in place.

help promote a wider range of clean fuels and vehicles for California businesses to choose

from, including vehicles operating on electricity, hydrogen, and biomethane.

The proposed amendments also benefit California fuel providers that have compliance

obligations under the Cap-and-Trade Program. As the LCFS reduces the CI of fuels, it

changes the composition of the State’s transportation fuel mix and dependence on traditional

petroleum-based fuels. CARB designed the LCFS and Cap-and-Trade Programs to

complement one another. Investments made to comply with one of the programs may result in

reduced compliance requirements for the other program. Increased use of low-carbon fuel due

to the LCFS will reduce fuel suppliers’ GHG emissions covered by the Cap-and-Trade

Program, reducing the Cap-and-Trade Program compliance obligation of these firms. Similarly,

selling cleaner fuels or investing in emission reduction projects at California refineries and oil

fields to comply with the Cap-and-Trade Program may also generate credits under the LCFS.

Cumulatively, from 2024 through 2046, the proposed amendments are estimated to increase

total revenue for credit generating businesses as compared to the baseline scenario by $149

billion, of which approximately $128 billion is estimated to accrue to California businesses.

See Chapter VIII and the Standardized Regulatory Impact Analysis (Appendix C-1) for further

discussion of benefits to typical California businesses.

E. Benefits to Small Businesses

Staff defines small businesses as independently owned businesses located in California, with

100 employees or less and annual revenues under $10 million.

In addition to the benefits already discussed for California businesses, CARB estimates that

small businesses will see benefits from the proposed amendments. Many of California’s

biodiesel producers, hydrogen producers, electric charging stations, hydrogen stations, and

natural gas stations are small businesses. Staff identified the following small businesses in

California, which represented 16% of the LCFS parties registered in the LCFS in September

2021:

• Three biodiesel providers

• Six natural gas (CNG and LNG) fueling station operators

• 21 electric charging station operators

• One propane provider

In total, these small businesses generated approximately 119,000 LCFS credits in 2021, which

provided an estimated $22 million in credit revenue as estimated using the 2021 average

LCFS credit price of $188.

The proposed amendments will increase the demand for low-CI fuels and are anticipated to

increase the prices for LCFS credits relative to the baseline, thereby increasing revenue to

these small businesses. In addition, larger potential revenue resulting from the proposed

amendments may allow other small businesses to enter the market. Therefore, staff kept the

2021 credit total of 119,000 as a static proxy for future small business credit generation.

V. Air Quality

A. Baseline Assumptions

The economic and emissions impacts of the proposed amendments are estimated against a

baseline scenario. As the proposed amendments retain the market flexibility of the current

LCFS, it is not possible to predict the exact path or fuels used for future compliance.

The LCFS is a flexible policy tool to reduce emissions by encouraging the development and

use of low-carbon transportation fuels to meet increasingly stringent annual carbon intensity

benchmarks, similar to the Renewable Portfolio Standard for the electricity sector. The LCFS

interacts with many different State and federal regulations. Estimating the baseline fuel

demand requires accounting for compliance with existing regulations and standards, changes

in fuel consumption as the fleet turns over to vehicles that meet more stringent emission

standards, and the expected price of fuels in the future.

The baseline reflects the changing transportation fuel mix from implementation of State and

federal laws and regulations that impact future on-road transportation fuel demand that existed

or had been adopted as of Summer 2023, which include the ACF regulation, and both the

existing ACC II and ACT regulations. The baseline also includes the newly signed Clean Truck

Partnership. The baseline does not include any light-duty vehicle transportation fuel demand

reductions that would result from successful implementation of vehicle-miles traveled (VMT)

reductions. The baseline energy demand for medium- and heavy-duty sectors includes the

same vehicle sales and population growth, VMT, and zero-emission technology assumptions

currently reflected in CARB’s latest version of its emission inventory tool, EMission FACtor

2021 (EMFAC2021). The light-duty vehicle energy demand is calculated using a combination

of vehicle populations and growth modeled for the 2022 Scoping Plan Update, VMT from the

Department of Motor Vehicles, and fuel efficiencies from EMFAC2021.

The most important policies that drive change in fuel demand and/or carbon intensity that are

represented in the baseline are the following:

• Low Carbon Fuel Standard: Under the current LCFS, a 20% reduction in average

fuel CI will be achieved by 2030. This target then remains constant for years

2030 and beyond.

• Advanced Clean Cars II: ACC II requires 100% of new vehicle sales to be

zero-emission or plug-in hybrid electric by 2035 for manufacturers producing

passenger cars, trucks, and SUVs.

• Advanced Clean Trucks: ACT requires truck manufacturers to sell ZEVs as an

increasing percentage of their annual California sales from 2024 to 2035. By

2035, zero-emission truck/chassis sales must be 55% of Class 2b – 3 truck

sales, 75% of Class 4 – 8 straight truck sales, and 40% of truck tractor sales.

• Advanced Clean Fleets: ACF requires trucking fleets to turn over their fleets to

ZEV technology starting in 2024, with specific transition timelines based on fleet

types. The ACF rule includes an end to combustion truck sales in 2036.

• U.S. Environmental Protection Agency’s (U.S. EPA) Renewable Fuel Standard:

The U.S. EPA’s RFS mandates minimum volumes of renewable fuels, which are

required to be blended into transportation fuels. Staff assumes that the RFS will

continue to operate, providing monetary incentive for biofuels such as ethanol,

biodiesel, renewable diesel, renewable natural gas, and electric vehicle

deployment. While the U.S. EPA recently proposed mandated volumes for the

RFS program through 2025, the program does not expire or sunset in 2025. In

addition, the costs and supply variability provided across scenarios yield

estimates and ranges that can account for the uncertainty in the post-2025 RFS.

• U.S. EPA Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse

Gas Emission Standards and National Highway Traffic Safety Administration

(NHTSA) Corporate Average Fuel Economy standards for Model Years 2024-

2026 Passenger Cars and Light Trucks: These regulations require vehicle

manufacturers to comply with new GHG vehicle emission standards and fuel

economy standards through 2026. U.S. EPA and NHTSA have also separately

proposed more stringent GHG vehicle emission and fuel economy standards,

respectively, for later model years.

• Inflation Reduction Act of 2022: This bill revised Section 45 of the Internal

Revenue Code to establish and/or increase the tax credits available for

production of low-carbon fuels and CO2 capture and storage/sequestration.

• California Phase 2 GHG Standards for On-Road Medium- and Heavy-Duty

Vehicles: This regulatory program primarily establishes greenhouse gas (GHG)

emissions standards for new medium- and heavy-duty vehicles and engines.

• The requirements of Clean Energy, Jobs, and Affordability Act of 2022

that

dictates retail electricity be supplied by zero-carbon sources equal to 90% of

supply in 2035, 95% in 2040, and 100% by 2045, with State agencies required to

procure 100% zero-carbon electricity in 2035.

• The longer-term requirements of the 100 Percent Clean Energy Act of 2018

that requires electricity be supplied by zero-carbon sources by 2045. This

requirement will affect the CI of electricity.

B. Total Emissions Benefits

The proposed amendments will reduce GHG emissions and smog-forming and toxic air

pollutants from the transportation sector by shifting to low-CI fuels which, in many cases, also

release fewer pollutants when combusted than fossil fuels. Reductions in GHG emissions and

improvements in California air quality under the proposed amendments are anticipated to

result in fewer damages due to climate change and in health benefits for California individuals.

These health benefits result in cost savings to individuals, businesses, and government

agencies due to fewer premature mortalities, fewer hospital and emergency room visits, and

fewer lost days of work. When combusted, transportation fuels emit harmful pollutants, which

this proposal would help to eliminate. These pollutants include NOx and fine particulate matter

(PM2.5). NOx is a precursor to ozone and secondary particulate matter formation. Exposure to

ozone and to PM2.5, which are inhalable particles with diameters that are generally 2.5

micrometers and smaller, is associated with increases in premature death, hospitalizations,

California Legislature, Senate Bill 1020 Clean Energy, Jobs, and Affordability Act of 2022. Signed September

16, 2022. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB1020

California Legislature, Senate Bill 100 California Renewables Portfolio Standard Program: emissions of

greenhouse gases. Signed September 10, 2018.

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB100

visits to doctors, use of medication, and emergency room visits due to exacerbation of chronic

heart and lung diseases and other adverse health conditions.

The baseline includes the technology changes that are expected from implementation of

on-road light-duty (ACC II), on-road heavy-duty (ACT and ACF), and off-road (At-Berth and

TRU) regulations. In the Standardized Regulatory Impact Analysis (Appendix C-1), staff

analyzed the benefits from the proposed changes to the LCFS regulation incremental to the

baseline. Those benefits from the proposed changes to the LCFS regulation incremental to the

baseline include quantification of the upstream emissions benefits of reduced California oil and

gas extraction, which staff estimates will come from reduced demand for petroleum fuels in the

future. During the COVID-19 pandemic and the stay-at-home orders, there was a drastic

reduction in demand for petroleum fuels as residents stayed home. Data collected under the

Regulation for the Mandatory Reporting of Greenhouse Gas Emissions for 2020 and 2021

show a reduction in oil and gas sector GHG emissions relative to previous years driven

primarily from the reduced demand for petroleum fuels that occurred during 2020.

The 2022

edition of the AB 32 Annual GHG Inventory also shows a 13% reduction in oil and gas sector

emissions from 2019 to 2020.

As such, a reduction in GHG, criteria, and toxic emissions from

oil and gas extraction is expected to result from corresponding petroleum fuel demand

reductions, further expanding the benefits of this regulation. The methodology used to estimate

the emissions impact and the incremental impacts of the proposed amendments (relative to

the baseline) are detailed in Appendix C-1.

1. Greenhouse Gas Emissions Benefits of the Proposed Amendments

Figure 7 summarizes the annual life cycle greenhouse gas emissions reductions under the

baseline and the proposed amendments scenario. Staff expects the proposed amendments to

reduce GHG emissions relative to the baseline by 558 million metric tons in carbon dioxide

equivalent (MMTCO

e) from 2024 through 2046. It is important to note that because the LCFS

calculates emission reductions on a full life cycle basis, the GHG emission reductions occur

both in California and out-of-state.

These GHG reduction estimates are derived from the California Transportation Supply (CATS)

outputs of the fuel quantities and average annual CI associated with each fuel, as well as GHG

reductions associated with oil and gas extraction emissions.

California Air Resources Board, Mandatory Greenhouse Gas Reporting 2021 Emissions Year Frequently Asked

Questions. November 4, 2022. https://ww2.arb.ca.gov/sites/default/files/classic/cc/reporting/ghg-rep/reported-

data/2021mrrfaqs.pdf

California Air Resources Board, California Greenhouse Gas Emissions for 2000 to 2020 Trends of Emissions

and Other Indicators. October 26, 2022. https://ww2.arb.ca.gov/sites/default/files/classic/cc/inventory/2000-

2020_ghg_inventory_trends.pdf

Figure 7: Annual GHG Emissions of Baseline and Proposed Amendments

2. Criteria Pollutant Emission Benefits of Proposed Amendments

The proposed amendments would affect air quality through four main categories: 1) changes in

tailpipe emissions for on-road and off-road vehicles, 2) changes in aircraft emissions at

airports, 3) changes in emissions at stationary sources from fuel production, and 4) changes in

upstream emissions associated with oil and gas extraction where quantified.

Fossil fuels contain benzene, toluene, ethyl benzene, and xylenes (BTEX compounds), which

can be emitted to the air and contaminate soil and water. Gasoline engine exhaust contains

benzene, 1,3-butadiene, formaldehyde, and acetaldehyde. Diesel engine exhaust contains

diesel particulate matter, which is a toxic air contaminant. Generally, all exhaust from the

combustion of hydrocarbon fuels contains benzene as a product of incomplete combustion

(PIC). Staff expects reductions in these criteria pollutants and toxics due to decreased use of

fossil fuels in regions with heavy use of motor vehicles and diesel engines, such as big

population centers (e.g., South Coast) and areas with heavy truck use (San Joaquin Valley),

and regions with commercial airports. Converting from fossil jet fuel to alternative jet fuel yields

significant benefits, averaging an annual reduction of 346 tons of NOx and 28 tons of PM2.5

from the proposed amendments.

Reducing criteria pollutants and toxic emissions from fuel combustion in line with California’s

air quality goals requires deploying ZEVs and ensuring the availability of fueling infrastructure

to support ZEV deployment. In the Standardized Regulatory Impact Assessment (SRIA),

CARB staff estimated air quality benefits attributable to the proposed amendments. The

emissions analysis includes expected reductions in emissions from upstream oil and gas

extraction that would be expected to result from corresponding petroleum fuel demand

reductions. First, staff estimated upstream extraction-based criteria pollutant emission changes

associated with reduced petroleum demand. To estimate the emission benefits of reduced

upstream oil extraction, staff focused on the proportion of demand reduction associated with

fossil diesel declines expected from the LCFS proposal, given that staff expects diesel demand

may persist longer than gasoline demand in California and future in-state extraction reductions

may be limited by the pace of diesel demand reductions. The reductions shown in Table 10

also include estimated changes in emissions that occur from changes in renewable fuel use in

vehicles, feedstock and fuel transport, and changes in renewable fuel production.

In summary, the proposed amendments achieve reductions of PM2.5 and NOx through 2046,

shown in Table 10. These emissions reductions are driven in part by increased use of

renewable diesel and alternative jet fuel, which displace fossil diesel and fossil jet fuel. As

noted earlier, emissions reductions from phasing down oil extraction and refining operations in

tandem with petroleum demand reductions are included in this analysis. In total, the proposed

amendments achieve reductions of 4,281 tons of PM2.5 and 25,586 tons of NOx in aggregate

through 2046.

Table 10: NOx and PM2.5 Emission Changes under the Proposed Amendment Scenario (tons per day)

Year NOx (tpd) PM2.5 (tpd)

2024 -0.4 -0.1

2025 -2.2 -0.3

2026 -2.2 -0.3

2027 -2.5 -0.3

2028 -2.7 -0.4

2029 -2.5 -0.4

2030 -2.1 -0.3

2031 -2.8 -0.4

2032 -3.0 -0.4

2033 -3.0 -0.4

2034 -3.0 -0.4

2035 -3.1 -0.5

2036 -3.2 -0.5

2037 -3.4 -0.5

2038 -3.8 -0.6

2039 -3.9 -0.6

2040 -4.0 -0.8

2041 -4.0 -0.8

2042 -3.6 -0.7

2043 -3.7 -0.7

Year NOx (tpd) PM2.5 (tpd)

2044 -3.7 -0.8

2045 -3.6 -0.7

2046 -3.7 -0.8

VI. Environmental Impact Analysis

CARB is the lead agency for the proposed regulation and has prepared an environmental

impact analysis (EIA) pursuant to its certified regulatory program (title 17, CCR, sections

60000 through 60008) to comply with the requirements of the California Environmental Quality

Act (CEQA). CARB’s regulatory program, which involves the adoption, approval, amendment,

or repeal of standards, rules, regulations, or plans for the protection and enhancement of the

State’s ambient air quality has been certified by the California Secretary for Natural Resources

under Public Resources Code section 21080.5 of CEQA (title 14, CCR, section 15251(d)).

Public Resources Code section 21080.5 allows public agencies with certified regulatory

programs to prepare a “functionally equivalent” or substitute document in lieu of an

environmental impact report or negative declaration, once the program has been certified by

the Secretary for the Resources Agency as meeting the requirements of CEQA. CARB, as a

lead agency, prepares a substitute environmental document (referred to as an “Environmental

Impact Analysis” or “EIA”) as part of the Staff Report to comply with CEQA (title 17, CCR,

section 60005).

The Draft EIA for the proposed amendments is included in Appendix D. The Draft EIA provides

a programmatic environmental analysis of an illustrative, reasonably foreseeable compliance

scenario that could result from implementation of the proposed amendments.

For the purpose of determining whether the proposed LCFS regulation would have a potential

adverse effect on the environment, CARB evaluated the potential physical changes to the

environment resulting from reasonably foreseeable compliance responses.

Reasonably foreseeable compliance responses associated with the proposed amendments

include the following responses, which could result in changes to the existing physical

environment: modifications to cultivation volume and transport of feedstock; changes to

location and types of feedstock; new or modified processing facilities for feedstock and finished

fuel production; increased transportation of finished alternative fuels to blending terminals or

retail fuel sites; construction and operation of new facilities to produce renewable diesel,

renewable gasoline, AJF, and renewable propane; construction of biomass gasification and

pyrolysis systems for hydrogen and renewable natural gas production; construction of new

anaerobic facilities to digest manure from dairies, sewage from wastewater treatment plants,

and organic waste diverted from landfills; construction of infrastructure to collect biogas and

produce methane; construction of stand-alone and bolt-on cellulosic processing units for

renewable fuels production; increase in collection of yard waste or removal of forest litter and

agricultural residues; construction of electrolysis units and substitution of renewable natural

gas for fossil gas in production of hydrogen; construction of solar and wind electricity

generation projects; modification to existing or new industrial facilities to capture CO2

emissions; construction of new infrastructure such as pipelines, wells and other surface

facilities; construction and operation of additional refueling hydrogen stations and EV charging

stations; modifications to electricity distribution and transmission infrastructure; modifications to

existing crude production facilities to accommodate solar and wind electricity, solar heat,

and/or solar steam generation; electrification of equipment and installation of renewable

electricity and battery storage systems at petroleum refineries and alternative fuel production

facilities; expansion of public transit systems; and land use changes and changes to fuel-

associated shipment patterns.

While many impacts associated with the compliance responses identified for the proposed

amendments could be reduced to less-than-significant levels through conditions of approval

applied and mitigation measures to project-specific development, the authority to apply that

mitigation lies with land use agencies or other agencies approving the development projects,

not with CARB. Consequently, if a potentially significant environmental effect cannot be

feasibly mitigated with certainty, the EIA takes a conservative approach and identifies the

impact as significant and unavoidable while disclosing the impact for CEQA compliance

purposes. As such, reasonably foreseeable compliance responses associated with the

proposed amendments could result in potentially significant and unavoidable environmental

impacts. Table 11 summarizes the potential environmental impacts of the proposed

amendments.

Table 11: Summary of Potential Environmental Impacts

Impact

Number

Resource Area Impact Significance

1-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts on Aesthetics

Potentially Significant

and Unavoidable

2-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts on Agriculture and Forest Resources

Potentially Significant

and Unavoidable

2-2

Agricultural and Forest Resource Impacts Related to Feedstock

Cultivation

Potentially Significant

and Unavoidable

3-1, 3-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts on Air Quality

Potentially Significant

and Unavoidable

3-3

Short-Term Construction-Related and Long-Term Operational

Impacts from Odors

Less than Significant

4-1, 4-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Biological Resources

Potentially Significant

and Unavoidable

5-1

Short-Term Construction-Related and Long-Term Operational-

Related Effects to Cultural Resources

Potentially Significant

and Unavoidable

6-1, 6-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Energy Resources

Less than Significant

7-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Geology and Soils

Potentially Significant

and Unavoidable

Impact

Number

Resource Area Impact Significance

7-2

Long-Term Operational-Related Impacts to Geology and Soil

Associated with Land Use Changes

Potentially Significant

and Unavoidable

8-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Greenhouse Gas Emissions

Beneficial

9-1, 9-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts Related to Hazards and Hazardous Materials

Potentially Significant

and Unavoidable

10-1, 10-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Hydrology and Water Quality

Potentially Significant

and Unavoidable

11-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts on Land Use

Potentially Significant

and Unavoidable

11-2

Long-Term Operational Impacts on Land Use Related to Feedstock

Production

Potentially Significant

and Unavoidable

12-1 Short-Term Construction-Related Impacts to Mineral Resources Less than Significant

12-2 Long-Term Operational-Related Impacts on Mineral Resources

Potentially Significant

and Unavoidable

13-1, 13-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Noise and Vibration

Potentially Significant

and Unavoidable

14-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Population and Housing

Less than Significant

15-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Public Services

Less than Significant

16-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Recreation

Less than Significant

17-1, 17-2

Short-Term Construction-Related and Long-Term Operational-

Related Impacts to Transportation

Potentially Significant

and Unavoidable

18-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts on Tribal Cultural Resources

Potentially Significant

and Unavoidable

19-1

Long-Term Operational-Related Impacts to Utilities and Service

Systems

Potentially Significant

and Unavoidable

20-1

Short-Term Construction-Related and Long-Term Operational-

Related Impacts on Wildfire

Less than Significant

Staff prepared a Notice of Preparation and made it available for review and comment for 30

days, per the CEQA Guidelines (Cal. Code Regs., tit. 14, § 15082(b)). The comment period for

the Notice of Preparation began on February 13, 2023 and ended on March 15, 2023. Written

comments on the Draft EIA will be accepted starting January 5, 2024 through February 20,

2024. The Board will consider the Final EIA and responses to comments received on the Draft

EIA before taking action to adopt the proposed amendments. If the proposed amendments are

adopted, a Notice of Decision will be posted on CARB’s website and filed with the Secretary of

the Natural Resources Agency for public inspection (Cal. Code Regs., tit. 17, § 60004.2(d)).

VII. Environmental Justice

State law defines environmental justice (EJ) as the fair treatment and meaningful involvement

of people of all races, cultures, incomes, and national origins with respect to the development,

adoption, implementation, and enforcement of environmental laws, regulations, and policies

(Gov. Code, § 65040.12, subd. (e)(1)). The advancement of state and federal law on

environmental justice was greatly influenced by the Principles of Environmental Justice.

Environmental justice includes, but is not limited to, the following:

• The availability of a healthy environment for all people;

• The deterrence, reduction, and elimination of pollution burdens for populations and

communities experiencing the adverse effects of that pollution, so that the effects of the

pollution are not disproportionately borne by those populations and communities;

• Governmental entities engaging and providing technical assistance to populations and

communities most impacted by pollution to promote their meaningful participation in all

phases of the environmental and land use decision making process; and

• At a minimum, the meaningful consideration of recommendations from populations and

communities most impacted by pollution into environmental and land use decisions

(Gov. Code, § 65040.12, subd. (e)(2)).

The Board approved its Environmental Justice Policies and Actions (Policies) on December

13, 2001, to establish a framework for incorporating environmental justice into CARB's

programs consistent with the directives of State law. These policies apply to all communities in

California but are intended to address the disproportionate environmental exposure burden

borne by low-income communities and communities of color. Environmental justice is one of

CARB’s core values and fundamental to achieving its mission for all Californians.

CARB continues to integrate environmental justice into its rulemaking, policy development and

other key decision-making and implementation activities, including the LCFS. In October 2022,

the Board laid out a Vision for Environmental Justice and Racial Equity that reaffirms the

Board’s goal to create and implement policies, regulations and programs that address

environmental justice and provide tangible and immediate gains for historically oppressed

people.

With the passage of AB 32, CARB was charged with developing a Scoping Plan that outlines

how California will achieve its climate goals and to update it every five years. The Board was

also required to convene an Environmental Justice Advisory Committee (EJAC) to advise the

Board during the development and subsequent updates of the Scoping Plan, and any other

Delegates to the First National People of Color Environmental Leadership Summit, The Principles of

Environmental Justice (EJ). 1991. https://www.ejnet.org/ej/principles.html

California Air Resources Board, Vision for Environmental Justice and Racial Equity. October 24, 2022.

https://ww2.arb.ca.gov/sites/default/files/2023-04/CARB%20Vision%20Racial%20Equity%20Final%20ENG.pdf

pertinent matter in implementing AB 32. The EJAC consists of representatives of communities

in the State with significant exposure to air pollution, including disadvantaged communities with

minority or low-income populations. Four iterations of the Committee have been convened.

The first EJAC advised on the initial 2008 Scoping Plan, the second was convened in March

2013 to advise the Board on the 2013 Scoping Plan Update, the third in 2015 to advise on the

2030 Target Scoping Plan Update, and the fourth in 2021 to advise on the 2022 Scoping Plan

Update.

More than five dozen of the EJAC’s recommendations were incorporated into the

2022 Scoping Plan Update.

In September 2022, Governor Newsom issued Executive Order N-16-22, which directs

California agencies and departments developing or updating strategic plans from 2023 to 2026

to reflect the use of data analysis and inclusive practices to more effectively advance equity

and respond to identified disparities with changes to the organization’s mission, vision, goals,

data tools, policies, programs, operations, community engagement, tribal consultation policies

and practices, and other actions as necessary to serve all Californians. The Order also directs

departments to gather input from disadvantaged and underserved communities as part of this

process.

A. Uplifting Equity

CARB hosted 11 public workshops to discuss potential future changes to the LCFS program

since 2020, including two community-oriented meetings in May and June 2023. Environmental

justice advocates have attended all the workshops and provided verbal or written feedback on

behalf of their organizations and community members. LCFS staff has also met with advocates

throughout the informal pre-rulemaking process and the EJAC approved a resolution with

recommendations for the LCFS program in August 2023.

The input of advocates and

community members has helped staff refine many proposed LCFS amendments.

The central goals of the LCFS program are to reduce greenhouse gas emissions from the

transportation sector and improve air quality by incentivizing the production of zero- and low-

carbon energy fuels and infrastructure. Environmental justice advocates and community

members have shared support for these fundamental goals throughout the public process and

there is an ongoing recognition that many frontline communities are located adjacent to ports,

rail, and major freight paths such as freeways. This section highlights program design features

and proposals that align with EJ requests.

The LCFS program has been successful at increasing the supply of alternative fuels in

California, helping to double the volume of low-carbon fuel consumption in just 10 years and

displacing over 25 billion gallons of petroleum fuels with low-carbon fuels since 2011. Staff is

proposing to increase the stringency of the program with measures that will enable an even

Environmental Justice Advisory Committee, AB 32 Environmental Justice Advisory Committee Charter. 2023.

https://ww2.arb.ca.gov/sites/default/files/barcu/board/books/2023/032323/23-3-4ejaccharter.pdf

Environmental Justice Advisory Committee, Draft Recommendations to the California Air Resources Board

(CARB) on the Low Carbon Fuel Standard Regulation Updates. August 28, 2023.

https://ww2.arb.ca.gov/sites/default/files/2023-

08/EJAC%20DRAFT%20Low%20Carbon%20Fuel%20Standard%20Recommendations%20Version%202%20082

823.pdf

faster transition to zero- and low-carbon fuels, where greater benefits should accrue for

frontline communities:

1. A ‘step down’ in the CI reduction target in 2025 from the current 13.75% to 18.75%;

2. A change in the 2030 CI reduction target from 20% to 30% with a target of 90% CI

reduction in 2045;

3. An acceleration mechanism that will automatically trigger a set increase in the CI

reduction target if certain specified market conditions are met.

Raising the carbon intensity reduction requirement of transportation fuel through the LCFS

incentivizes the use of increasingly lower carbon fuel and is consistent with the EJAC’s 2022

Scoping Plan recommendation to increase the stringency of the LCFS program.

Credits for

low-carbon fuels will support the mobile source regulations that are driving the transition to

zero-emission vehicle (ZEV) technology, such as the Advanced Clean Cars II and Advanced

Clean Fleets regulations. The step-down will also help send a near-term signal to prompt

investment in cleaner fuels.

As California moves toward a zero-emission transportation future, the LCFS is crucial in

supporting the transition from fossil-based fuels. The program also supports other regulations

in California that encourage or require the use of renewable diesel, such as the Innovative

Clean Transit and In-use Locomotive regulations. Since legacy fleets, locomotives and

airplanes will operate for decades more before they are completely replaced with zero-

emission technology, it’s important that the transportation fuel used during this time is

increasingly lower-carbon and reduces the negative health impacts from the combustion of

fossil-based fuels. The growing displacement of fossil-based fuels with renewable biofuels,

supported by LCFS credit revenue, continues to improve air quality through the reduction in

particulate matter and NOx emissions, as explained in Chapter IV. This is especially important

in communities located near major transportation corridors and around airports and ports

where legacy fleets will continue to operate.

In line with EJ recommendations, LCFS staff is proposing to expand incentives for

electrification zero emission vehicles to accelerate the transition to electric and hydrogen-

powered vehicles by extending light-duty vehicle infrastructure crediting and introducing a new

medium- and heavy-duty vehicle (MHD) infrastructure credit.

Staff proposes to accept

applications for public light-duty refueling infrastructure past the current end-date of December

31, 2025, with the provision that all new Fast Charging Infrastructure (FCI) and Hydrogen

Refueling Infrastructure (HRI) applications for light-duty vehicles must be in low-income,

disadvantaged or rural communities or more than 10 miles from the nearest fast charger to

maximize coverage. For MHD FCI and HRI refueling infrastructure, staff is proposing to add

capacity credits for up to 10 years of crediting to support the transition to zero emission

technology in trucking fleets. This policy will incentivize the development of MHD refueling

Environmental Justice Advisory Committee, Environmental Justice Advisory Committee 2022 Scoping Plan

Recommendations: NF44 & NF54. 15-16. September 30, 2022.

https://ww2.arb.ca.gov/sites/default/files/barcu/board/books/2022/090122/finalejacrecs.pdf

Recommendations NF6, NF7, NF8, and NF52. Environmental Justice Advisory Committee, Environmental

Justice Advisory Committee 2022 Scoping Plan Recommendations. September 30, 2022.

https://ww2.arb.ca.gov/sites/default/files/barcu/board/books/2022/090122/finalejacrecs.pdf

infrastructure for battery-electric and hydrogen fuel cell-electric trucks and support the trucking

industry’s transition to ZEVs, reducing emissions and criteria pollutants across the State and in

communities heavily impacted by freight travel.

Staff is proposing changes to the allocation and use of base credits generated by utilities from

non-metered residential electric vehicle charging that will go farther in reducing emissions in

communities near freight corridors. Under the Staff Proposal, the Clean Fuel Reward program

will change from a new light-duty EV rebate to rebates for new and used medium- and heavy-

duty zero emission trucks that are exempted from the Advanced Clean Fleets regulation. This

will help accelerate the transition for this hard-to-transition segment of the trucking sector that

is not covered by other CARB regulations. The proportion of residential base credits will

change to reflect this change in rebate from 60% of total base credits to 40% with a

corresponding increase in “holdback credits.” As a result of this increase in holdback credits,

staff is proposing to increase the requirements for investments in equity communities from

50% to 75% for investor-owned utilities, as well as proposing new pre-approved categories for

investment of these credits. These new categories reflect priorities from the 2022 Scoping Plan

Update as well as community input and include re-skilling and workforce development for

transportation electrification, and transportation projects identified in AB 617 Community

Emission Reduction Plans.

CARB staff are also proposing additional guardrails on the use of crop-based feedstocks for

biofuel production. These changes will help to reduce the risk that rapid expansion of biofuel

production and biofuel feedstock demand could result in deforestation or adverse land use

change, a concern that was raised multiple times during the LCFS and Scoping Plan

Workshops from EJ and environmental organizations.

Staff is also proposing to include deficit-generating fossil jet fuel for intrastate flights in the

LCFS, beginning in 2028. This proposal aligns with the 2022 Scoping Plan Update toward

decarbonizing the aviation sector, and with EJAC’s recommendation to further integrate opt-in

sectors into the regulation.

79,80

The use of alternative jet fuels, which generate credits under

the LCFS, will achieve particulate matter emissions reductions that benefit communities living

near airports. Adding fossil jet fuel as a deficit generator also strengthens the signal to invest in

zero-emission aviation technology, as modeled in the 2022 Scoping Plan Update in the 2040s.

B. Conclusion

Many elements of the Low Carbon Fuel Standard support key environmental justice-related

recommendations, including the reduction of fossil fuel use, promotion of cleaner fuels, and the

incentivization of charging and fueling infrastructure in disadvantaged communities. LCFS

Recommendation NF54 in the Environmental Justice Advisory Committee 2022 Scoping Plan

Recommendations.

Environmental Justice Advisory Committee, Draft Recommendations to the California Air Resources Board

(CARB) on the Low Carbon Fuel Standard Regulation Updates. August 28, 2023.

https://ww2.arb.ca.gov/sites/default/files/2023-

08/EJAC%20DRAFT%20Low%20Carbon%20Fuel%20Standard%20Recommendations%20Version%202%20082

823.pdf

complements other State policies as part of a suite of policies in California’s portfolio of

strategies to support reducing petroleum dependence by 94% by 2045.

VIII. Standardized Regulatory Impact Analysis

This section summarizes the economic impact of the Proposed Regulation as presented in the

Standardized Regulatory Impact Analysis (SRIA), which can be found in Appendix C-1, as well

as on the Department of Finance website. CARB responses to comments received from the

Department of Finance can be found in Appendix C-3.

A. Changes Since the Release of the Standardized Regulatory Impact

Assessment

The proposed amendments have been updated since the release of the SRIA on September 8,

2023. The changes and their potential impacts on the economic analysis are found below.

1. Verification Costs

Staff updated the verification cost estimates to include the expected costs to companies that

own/operate between 1 and 10 fueling supply equipment (FSE), provisions for deferred

verification for companies generating less than 6,000 credits per year, and less intensive

verification requirements for fuel reporting entities reporting only electricity transactions. This

change resulted in approximately $2.25 billion less verification costs over the lifetime of the

regulation.

a) Direct Costs

The total net cost of the proposed regulation from 2024 to 2046 is estimated to be

approximately $32 billion, with total direct costs of approximately $160.5 billion and total

revenue from LCFS credit sales of approximately $128.4 billion. Direct costs of the

amendments include the cost of compliance to in-state high carbon fuel producers that

generate deficits (e.g., Direct costs of the amendments include the cost of compliance to in-

state high carbon fuel producers that generate deficits (e.g., petroleum refiners), changes in

statewide high carbon-intensity fuel expenditures of $7 billion, and the cost of third-party

verification for electric and hydrogen fuel supply equipment, which were not previously subject

to verification before these proposed amendments, of $5.5 billion. petroleum refiners), changes

in statewide high carbon-intensity fuel expenditures of $7 billion, and the cost of third-party

verification for electric and hydrogen fuel supply equipment, which were not previously subject

to verification before these proposed amendments, of $5.5 billion. The highest annual cost

occurs in 2039 with an estimated direct cost of $11.1 billion.

2. REMI Modeling: Correction to References and Update of Population

Projections

The SRIA incorporated Department of Finance’s economic and population projections of U.S.

Real Gross Domestic Product, income, and employment,

as well as California civilian

employment by industry,

released with the 2023-2024 May Revision to the Governor’s

Budget on May 12, 2023 and Department of Finance demographic forecasts for California

population forecasts updated in July 2021.

The text of the SRIA accurately describes the use

of the July 2021 population projections in the SRIA’s macroeconomic analysis, but the footnote

reference number 86 in the SRIA erroneously references the July 2023 interim population

projection. Footnote 86 of the SRIA should instead read:

California Department of Finance, Demographic Research Unit. Report P-3: Population

Projections, California, 2010-2060 (Baseline 2019 Population Projections; Vintage 2020

Release). 2021.

After the completion of the analysis, Finance released a population projection interim series

informed by available 2020 Census data dated July 19, 2023.

The interim projection released

July 2023 has been incorporated into the macroeconomic results presented in the Form 399

and the following sections.

The macroeconomic results presented in the SRIA were presented in a 2021-dollar value. Per

the direction of Department of Finance in their SRIA Comment Letter, the Form 399 presents

the results of the macroeconomic analysis in 2023-dollar values. The economic analysis

contained in the sections below also use 2023-dollar values.

3. Social Cost of Methane

Staff updated the avoided social cost of methane to account for all pathways that have dairy

biogas as their feedstock and to match the years between the CATS model outputs and

Annual SC-CH4 values. Staff also corrected the conversion factor cited in the text to align with

the calculation which used 0.020 metric tons of methane per million British thermal unit

(instead of “per British thermal unit”). This resulted in an approximate doubling of avoided

social cost: the SRIA identified values between 3 billion to 9 billion (2021$), the updated values

are between 6 and 16 billion, depending on the discount rate selected.

California Department of Finance, National Economic Forecast – Annual & Quarterly (Updated in April 2023).

https://dof.ca.gov/Forecasting/Economics/economic-forecasts-u-s-and-california/

California Department of Finance, Economic Research Unit. California Economic Forecast – Annual &

Quarterly (Updated in April 2023). https://dof.ca.gov/Forecasting/Economics/economic-forecasts-u-s-and-

california/

California Department of Finance, Demographic Research Unit, Report P-3: Population Projections, California,

2010-2060 (Baseline 2019 Population Projections; Vintage 2020 Release). 2021.

California Department of Finance, Demographic Research Unit. Report P-3: Population Projections, California,

2020-2060 (Baseline 2019 Population Projections; Vintage 2023 Release). 2023. Zip File.

4. Small Business Benefits

Staff corrected the number of biodiesel producers considered small businesses from two to

three and changed the ratio of small businesses to reflect the number as compared to the

California, not national, total companies in the LCFS. Per this correction, small businesses

represented 16% of the LCFS parties registered in the LCFS in September 2021.

B. The creation or elimination of jobs within the State of California.

REMI Policy Insight Plus Version 3.0.0 is used to estimate the macroeconomic impacts of the

proposed amendments on the California economy including changes to employment demands

and output based on expected costs and benefits by industry.

Table 12 presents the impact of the proposed amendments on total employment in California

across all industries. Employment comprises estimates of the number of jobs, full-time and

part-time, by place of work for all industries. Full-time and part-time jobs are counted at equal

weight. Employees, sole proprietors, and active partners are included, but unpaid family

workers and volunteers are not included. The employment impacts represent the net change in

employment, which consist of positive impacts for some industries and negative impacts for

others.

The statewide employment impacts of the proposed amendments are estimated to have a

slightly positive impact on employment (approximately +0.02% of California employment)

through 2027, followed by a slightly negative impact on employment (approximately 0 to -

0.03% of California employment) through 2046 (Figure 8). The positive impacts on

employment primarily result from the credits generated by low-CI fuels. The demand for these

credits leads to expansion in the industries producing these fuels. After 2040, the CATS model

predicts the costs for DAC will be lower than the costs of obtaining credits directly from low-CI

fuel producers. As a result, the latter years of the assessment are characterized by high

production costs for high-CI fuel producers, but less benefits overall for low-CI fuel producers.

Increases in production costs and reductions in credit revenue for low-CI fuel producers

negatively affect employment projections, as producers must cut employment to compensate

for overall profit losses. Overall, the changes in employment do not exceed 0.05% of baseline

California employment in any one year during the regulatory horizon.

The analysis will not fully capture all employment benefits from the proposed amendments. For

instance: specific employment benefits for direct air capture were not included in the analysis

due to a modeling limitation, the specific fuel pathways’ supply chains are not perfectly

captured in the model but instead modeled at a more aggregate level, and credit revenue to

the electricity industry may be spent in ways that were not modeled, such as increased zero-

emission infrastructure or rebates to EV customers which could result in increases in

construction or consumer spending larger than those shown in this analysis. Importantly, the

analysis of employment benefits captures only the portion that would occur in California, which

is a subset of overall employment benefits for low-CI fuel industries resulting from the

proposed amendments.

Table 12: Total California Employment Impacts

Year California Employment Change in Total Jobs % Change

2026 25,898,820 4,096 0.02%

2030 26,126,846 -5,301 -0.02%

2034 26,441,359 -3,448 -0.01%

2038 27,000,858 -911 0.00%

2042 27,527,827 -9,442 -0.03%

2046 28,102,362 -12,909 -0.05%

Average 26,711,377 -4,085 -0.01%

Figure 8 illustrates employment impacts by major sector. The services and manufacturing

sectors receive the majority of job increases until 2040 when all sectors show a decrease in

job growth. The services and manufacturing sectors are projected to have initial increases in

employment as resources are invested in development of low-CI fuel technologies, and then

experience a decrease in employment over the baseline after the first five years. The decrease

in employment after 2040 corresponds to the more stringent CI targets that increase

operational costs without increasing output, given the stringency of the CI targets and the

increase in direct air capture crediting.

After the completion of the SRIA analysis, Finance released a population projection interim series informed by

available 2020 Census data dated July 19, 2023. The interim projection released July 2023 has been

incorporated into the macroeconomic results presented in this Form 399.

Figure 8: Employment Impacts by Major Sector

Table 13 presents changes in employment for industries directly impacted by the proposed

amendments. Losses in jobs are largest in the petroleum and coal products manufacturing

industry and are caused by reduced demand for these high-CI fuels as demand increases for

low-CI fuels and increased production costs from the deficits generated by fossil gasoline and

diesel fuels, with an average annual loss of 1,168 jobs when compared to the baseline. Basic

chemical manufacturing employment increases by an average of 429 jobs annually, driven by

credits generated by hydrogen, renewable diesel, ethanol, and alternative jet fuels and

additional demand for these fuels. The electrical power generation, transmission, and

distribution industry is expected to increase jobs by 741 positions annually associated with

credit generation from electricity projects. Overall, between 2026 and 2046, California

employment grows by 2.2 million jobs, increasing from 25.9 million jobs in 2026 to 28.1 million

jobs in 2046.

Overall California’s employment continues to grow and averages 26.7 million jobs between

2024 and 2046. On average, across all industries the estimated job impacts are approximately

4,085 fewer jobs created when compared to the baseline, with over a quarter of those job

losses coming from the petroleum sector. This net decline in employment, similar to the net

cost of the Proposed Alternatives, is because all of the deficit generating businesses – and

therefore the cost of the proposed amendments – are within California, while job growth

associated with credit-generating businesses and revenues from low-CI fuel credits are

distributed across the U.S. The decreases in employment for high-CI fuel producers is

countered by increases in employment growth in industries that include producers of low-CI

fuels. These industries include basic chemical manufacturing, natural gas distribution, and

electrical power generation, transmission, and distribution. For example, between 2026 and

2046, California employment grows by 2.2 million jobs, going from 25.9 million jobs in 2026 to

28.1 million jobs in 2046.

Table 13: Employment Changes of Proposed Regulation 2024-2046

Industry Units 2026 2030 2034 2038 2042 2046 Average

Petroleum and coal

products

manufacturing (324)

Change

in jobs

-665 -864 -1230 -1561 -1591 -1176 -1,168

Petroleum and coal

products

manufacturing (324)

Percent

Change

-5.13% -6.78% -9.81% -12.57% -12.82% -9.43% -9.31%

Basic chemical

manufacturing

(3251)

Change

in jobs

417 409 486 535 373 246 429

Basic chemical

manufacturing

(3251)

Percent

Change

6.36% 6.06% 6.95% 7.43% 5.08% 3.28% 6.13%

Natural gas

distribution

(2212)

Change

in jobs

37 28 21 -2 226 283 81

Natural gas

distribution

(2212)

Percent

Change

0.27% 0.21% 0.17% -0.02% 1.91% 2.47% 0.68%

Electric power

generation,

transmission,

and distribution

(2211)

Change

in jobs

295 354 883 1,361 1,037 434 741

Electric power

generation,

transmission,

and distribution

(2211)

Percent

Change

0.72% 0.92% 2.41% 3.87% 3.09% 1.35% 2.09%

C. The creation of new business or the elimination of existing businesses

within the State of California.

The proposed amendments are not expected to directly result in business creation or

elimination; specifically, the proposed amendments do not require any new businesses to be

created nor do they require closure of any existing businesses.

However, the LCFS program has supported the creation or expansion of many businesses in

California and the U.S., as shown by the hundreds of credit-generating participants in the

program. The proposed amendments are anticipated to also support business creation or

expansion in the areas of low-CI fuels. In industries that experience increased costs, the

proposed amendments may also contribute to business contraction or eliminations. However,

due to the variety of businesses that participate in the LCFS and the breadth of their business

models, staff cannot predict a specific number of businesses created nor eliminated.

The macroeconomic modeling of the proposed amendments can also be used to understand

some of the potential impacts to business creation and elimination. REMI Policy Insight Plus

Version 3.0.0 is used to estimate the macroeconomic impacts of the proposed amendments on

the California economy. Although the REMI model cannot directly estimate the creation or

elimination of businesses, the model does estimate impacts to California jobs and output which

can be used to understand some of the potential impacts to businesses. Reductions in output

could indicate elimination of businesses within an industry. Conversely, increased output within

an industry could signal the potential for additional business creation if existing businesses

cannot accommodate all future demand. There is no threshold that identifies the creation or

elimination of business.

The Statewide jobs and output impacts of the proposed amendments are small relative to the

total California economy suggesting the proposed amendments will have a minimal impact on

overall business expansion or contraction. The largest employment increase is estimated to be

0.02% for 2025 compared to the baseline. The largest employment decrease is estimated to

be 0.05% for 2044 through 2046 compared to the baseline. Output is expected to decrease for

the lifetime of the regulation compared to the baseline. The largest output decrease in the

State is estimated to be 0.16% for 2040 through 2045. However, impacts to specific industries

are larger or smaller as described in the previous sections.

D. The expansion of businesses currently doing business within the State

of California.

The proposed amendments will increase the demand for low-carbon fuels, which provides an

opportunity for businesses, both in-state and out-of-state, to increase revenue from the sale of

low-carbon fuels in California. The sale of LCFS credits provides an additional revenue stream

for these firms, enabling them to increase their market share and increase their

competitiveness against high-CI fuels such as fossil gasoline or diesel.

In Table 15, staff

monetized the value of the revenues generated by both in-state and out-of-state low-CI fuels.

The value will vary based on the actual credit price.

Moreover, LCFS incentives may encourage California firms, as well as other firms doing

business in California, to invest early in innovative, low-CI fuel technologies and develop

mature businesses earlier than firms not participating in the California fuel market. Early

investment may result in competitive advantages to these businesses as other state, federal,

The LCFS incentive is incremental to incentives created by federal biofuel/low-carbon fuel policy, including the

RFS.

or international jurisdictions adopt similar carbon intensity standards.

The proposed

amendments will also help promote a wider range of clean fuels and vehicles for California

businesses to choose from, including vehicles operating on electricity, hydrogen, and

biomethane.