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Home Low Carbon Fuel Standard California Finalizes Major Changes to Low Carbon Fuel Standard (LCFS)

California Finalizes Major Changes to Low Carbon Fuel Standard (LCFS)

What Renewable Fuel Producers Need to Know

Photo of a renewable energy plant with smoke and pipes

On November 8, 2024, the California Air Resources Board (CARB) approved significant amendments to the state’s Low Carbon Fuel Standard (LCFS). These changes introduce new compliance requirements and opportunities, significantly impacting renewable fuel producers operating in California’s low-carbon fuel market. Below, we break down the key amendments and their implications for the industry.

Key Changes to the LCFS

Sustainability Requirements

  • Third-Party Certification: Crop-based feedstocks will have to secure third-party sustainability certification from the point of origin to the first gathering point.
  • Land Use Restrictions: Feedstocks can only come from land cultivated prior to 2008, ensuring no recent land conversions.
  • Broad Criteria for Audits: Feedstocks will be subject to environmental, social and economic sustainability criteria during certification.

These requirements pose challenges for biofuel producers relying on crop-based feedstocks, as they may face additional compliance burdens and risks, including invalidation of credits for non-compliance.

The amendments introduce phased sustainability certification for biomass:

  • 2026: Initial attestation required for non-waste biomass fuels.
  • 2028: Partial certification of no deforestation.
  • 2031: Full certification with chain-of-custody documentation.

These stringent requirements could discourage participation from some farmers and elevators, potentially reducing feedstock availability for biofuels.

The sustainability requirements are expansive, encompassing biodiversity, soil quality, water quality and pollution management. Additionally, new obligations for geographical data (e.g., shapefiles) and compliance audits could impose operational and financial burdens, particularly for smaller producers.

Addition of Specified Source Feedstocks (SSFS)

Corn stover and forest waste have been added as SSFS, expanding the range of feedstocks eligible for credits. However, attestation letters will now be required for all SSFS.

Requirements for Specified Source Feedstock (SSFS) Attestation Letter 

Each specified source feedstock supply chain entity must maintain a specified source feedstock supplier attestation letter.  

The specified source feedstock supply chain entities include points of origin, collectors, aggregators, traders, distributors and storage facilities that participate in the supply chain from point of origin to the fuel producer for specified source feedstocks. 

Specified Source Supply Chain attestations must include the following:

  • The specified source feedstocks have not undergone additional processing, such as drying or clean up except as explicitly included in the pathway life cycle analysis and pathway CI. 
  • All data and information supplied are true and accurate in all areas, including, but not limited to the following:  
    • Specified source feedstocks meet the applicable definitions under 95481 or as a specified source feedstock approved by the Executive Officer during fuel pathway validation and certification 
    • Deliveries of the specified source feedstock(s) consist entirely of what is documented on the feedstock transfer documents and are not mixed with any other materials that do not meet the definition of specified source feedstock 
    • The specified source feedstocks were not intentionally produced, modified or contaminated to meet the definition 
  • The signed specified source feedstock supplier attestation letter must:  
    • Be maintained by the specified source feedstock supplier, and submitted as an electronic copy upon request by a CARB accredited verifier or verification body or the Executive Officer 
    • Be on company letterhead 
    • Be maintained separately for each specified source feedstock 
    • Be signed by an authorized representative employee of the specified source feedstock supplier 

Land Use Change (LUC) Adjustments

CARB has gained the authority to revise LUC values upward.

Caps on Biomass-Based Diesel Credits

  • Biomass-based diesel from soybean, canola and sunflower oil will be capped at 20% of total credits per producer.
  • Credits exceeding this threshold will be assigned default carbon intensity (CI) scores starting in 2025 for new pathways and 2028 for existing pathways.

Less Intensive Verification for Electric Reporting

CARB has introduced less intensive verification, allowing site visits once every 3 years instead of annually, for electric reporting but has not extended this approach to renewable fuels, raising concerns about the program’s “technology-neutral” mandate.

Carbon Intensity Benchmarks

CARB has adjusted CI benchmarks to increase stringency:

  • 2025: A 9% reduction from 2018 levels, resulting in a 22.75% CI reduction.
  • 2030: The target increases from 20% to 30% decarbonization, intensifying the program’s goals.
  • Automatic Acceleration Mechanism: Starting May 2027, CARB will announce quarterly whether the mechanism has been triggered to accelerate CI reductions further.

GREET4.0 Model Adoption

  • 2024 Reports: Existing pathways must transition to the CA-GREET4.0 model or associated Tier 1 calculators.
  • New Applications: Pathways certified after January 1, 2025, must use the GREET4.0 model.
    • Fuel pathway holders who demonstrate the verified operational CI exceedances are solely due to calculator updates are exempt from deficit obligation for the 2025 and 2026 compliance years. To make this demonstration, fuel pathway holders must submit both CA-GREET 3.0 and 4.0 modeling tools with the operational data for the same reporting period for annual verification in the AFP. 
    • Upon receiving a positive or qualified positive verification statement for each 2024 annual Fuel Pathway Report, the Executive Officer will update and adjust the CIs for each previously certified pathway to be the verified operational CI with an added conservative margin of safety if requested by the pathway holder. The adjusted CIs will be effective and available for reporting for fuel transition occurring on and after January 1, 2026. 
  • Land Use Change Values: CARB may assign more conservative LUC values based on empirical data, impacting feedstocks not listed in the standard table.
  • Fuel Pathway Credit True-Up
    • Credit True-Up: Beginning with the 2025 annual Fuel Pathway Report data, CARB’s Executive Officer may perform credit true-up for a fuel pathway (including a temporary pathway used by an entity that subsequently receives fuel pathway certification for the associated production facility) that has a lower verified operational CI upon receiving a positive or qualified positive verification statement for the associated annual fuel pathway report and quarterly fuel transaction reports, notwithstanding the prohibition on retroactive credit generation.  
  • Calculation of Deficit Obligation
    • Beginning with the 2025 reporting year, a non-provisional fuel pathway holder generates a 4-1 deficit obligation following a verified CI exceedance. 
      • A verified CI exceedance occurs if the verified operational CI of a fuel pathway for a given compliance period exceeds the certified CI used for reporting that fuel pathway. 
      • The quantity of deficits generated by CI exceedance is calculated as four times the difference between the verified operational fuel pathway CI and the reported CI, multiplied by the quantity of fuel reported using that fuel pathway during the applicable year.  
  • A margin of safety should be considered, so a producer does not incur a 4x deficit obligation. Additionally, CARB will true up the regulated party’s account for operational CI’s that come in below the certified CI.  

Verification and Reporting Updates

  • Site visits for quarterly fuel transaction reports must now occur at the central records location, adding logistical considerations.
  • Updated sampling plans and sustainable biomass certificates will be required to verify compliance.

Looking Ahead

The finalized LCFS amendments underscore California’s commitment to aggressive decarbonization. While these changes aim to enhance sustainability and market efficiency, they impose significant new compliance challenges for renewable fuel producers.

Action Steps for Producers

  • Review and update your compliance strategies to meet sustainability certification requirements.
  • Transition to the GREET4.0 model for reporting by the specified deadlines.
  • Engage with suppliers and stakeholders to align on the new attestation and documentation requirements.

For detailed guidance on navigating these changes and ensuring compliance, our team at Christianson is here to help. Contact us today to discuss how we can support your compliance needs under the updated LCFS program.