The California Air Resources Board (CARB) recently approved a sweeping amendment to the Low Carbon Fuel Standard (LCFS) regulation, set to take effect in early 2025. These changes focus on steepening carbon intensity (CI) reductions, adding caps to biofuel feedstocks for renewable liquid fuels (i.e. renewable diesel), modifying and significantly adding to electricity credit generation opportunities, and updating credit ownership definitions for fuel supply equipment and utilities. While there are major changes across the entire program, let’s take a closer look at what these changes mean for the future of electrification and the impacts on various mobility sectors.
While there were a host of reasons to update the LCFS, the biggest one came down to price. The LCFS was over-performing with enormous amounts of renewable diesel and low-CI natural gas being manufactured or imported in the state, as well as more-than-expected light-duty vehicle electrification in the residential and commercial sectors. An “overperformance” in this context means more credits being generated than expected, outpacing demand, and putting significant downward pressure on the LCFS credit value. Between early 2020 and mid 2024, LCFS prices have dropped by 75-80%, having since recovered a small fraction in the latter half of 2024. A lower LCFS credit price jeopardizes all manner of transportation decarbonization goals and ultimately results in poorer economic possibilities for cleaner mobility solutions.
Other concerns included topics of food vs. fuel, subsidizing livestock/dairy gas systems, intrastate jet fuel emissions, heavy-duty vehicle electrification infrastructure needs, and more. You can review the rigorous and heavy public engagement process as well as read the hundreds of comments submitted to the agency here.
CARB has raised the 2030 CI target from a 20% reduction to 30%, including a one-time 9% CI benchmark reduction in 2025. Furthermore, CARB has extended CI reduction targets to an ambitious 90% by 2045. This extension gives credit generators an additional 15 years to capitalize on credit-earning opportunities as they transition to lower-carbon fuels.
CARB has also introduced an Auto-Acceleration Mechanism (AAM) designed to help stabilize the credit market by automatically advancing CI benchmarks without the need for additional rulemaking if decarbonization accelerates faster than anticipated. This mechanism enables CARB to increase the program’s stringency in response to rapid advancements in low-carbon technologies and market demands.
New limitations on biomass-based diesel, particularly from soybean, canola, and sunflower oils, are introduced with a 20% cap per company, and no new biomass-based diesel pathways will be issued after January 1, 2031. These measures address concerns around the high demand for lipid-based biofuels, aiming to mitigate adverse environmental and economic impacts.
CARB has reclassified non-reserved multi-family unit EV charging as non-residential, meaning credit generation will go directly to charger owners instead of local utilities. This change applies to areas with four or more condominium units or three or more apartment units.
Electric forklifts, eTRUs, electric cargo handling equipment (eCHE), and electric power for ocean-going vessels (eOGVs) now fall under a broader fuel supply equipment (FSE) definition, allowing owners of charging assets at these facilities to be the credit generators and adding sorely needed clarification for credit ownership among a diverse set of asset owners. Additionally, starting in 2026, electricity volume reporting for forklifts must be based on measured, not estimated, volumes. The Energy Economy Ratio for forklifts with <12,000lbs lift capacity has been reduced (we argue unjustly) from 3.8 to 2.4 to address higher market penetration of electric forklifts relative to other electrified categories and the subsequent proportion of forklift crediting.
Up to 45% of base credits from residential EV charging can now be allocated to Original Equipment Manufacturers (OEMs) rather than EDUs, at CARB’s discretion. OEMs will use these funds for initiatives like rebates on new or used EVs, EV charging infrastructure, and multilingual marketing, aiming to broaden EV adoption and awareness.
CARB has introduced a requirement for third-party verification of electricity and hydrogen transactions starting January 1, 2026. Transactions generating more than 10,000 credits per year will now need to undergo independent verification to ensure compliance and data accuracy.
CARB will be expanding infrastructure credits for EV fast charging. Allowing most, if not all of the initial capital investment to be recouped.
The new amendments introduce five distinct FCI pathways:
These new pathways differ in terms of eligibility criteria, credit calculations, and capacity thresholds. The nameplate power rating requirement for these chargers must be a minimum of 50 kW. The new pathways aim to promote the electrification of commercial fleets, a critical factor in meeting long-term emissions goals.
The crediting period is extended to 10 years, with credits based on a station’s capacity minus actual energy dispensed, encouraging charging station establishment before full utilization rates.
Importantly, entities wishing to participate in the FCI program can now designate a third party, such as FuSE to help with FCI crediting. Previously, seriously burdensome registration requirements applied but with the utilization of the designation provisions, much of this can be alleviated by allowing the help of LCFS professionals and software.
As always if you have any questions about any of these changes and what they mean for your fleet, do not hesitate to reach out to FuSE.