What’s good and what’s missing from biofuel safeguards in California’s updated Low Carbon Fuel Standard
California’s Air Resources Board (CARB) is on the verge of major updates to its Low Carbon Fuel Standard (LCFS), a program established in 2009 to transition the state to low- and zero-carbon transportation fuels.
After a process spanning two-years of analysis, public hearings and comments, CARB is expected to both strengthen and extend the carbon intensity benchmarks out to 2045 when the rule goes before its board on November 8th. CARB is also expected to make additional changes aimed at minimizing adverse impacts posed by the dramatic growth in renewable diesel fuel production. These changes come in response to concerns raised by CATF and other advocates that the use of crop-seed oil feedstocks—which is otherwise grown for food and personal care products—to make transportation fuels will likely lead to expanded land clearing and/or increased palm oil production and associated emissions and ecosystem impacts globally. In short, it’d be bad for the planet.
CARB has taken an important step in this rulemaking by proposing a provision that would limit how many credits crop-seed oil-based biofuel is eligible to generate within the LCFS program. While this limit sends an important short-term signal, CARB will have to make additional updates in the coming years to discourage the ongoing growth of these fuels in the California market in the long term, which will have a diminishing role as the on-road transportation sector electrifies.
What is California’s Low Carbon Fuel Standard?
California’s LCFS is a key pillar of California’s broader strategy for achieving emissions reductions from the transportation sector, which remains the largest contributor to greenhouse gas (GHG) emissions in the state. The LCFS sets a gradually decreasing cap on the carbon intensity of transportation fuels sold in the state, which is intended to incentivize the use of cleaner, low-carbon fuels like electricity, hydrogen, and certain biofuels. Through a market-based credit system, fuel producers and importers can earn credits for exceeding the standards and sell them to regulated parties in need of credits to meet the carbon intensity standard, creating a financial incentive to produce and use cleaner fuels.
The LCFS is designed in part to complement the state’s zero-emissions vehicles (ZEVs) regulations for the light-, medium-, and heavy-duty sectors, such as the Advanced Clean Cars II, Advanced Clean Trucks, and Advanced Clean Fleets rules. Together, these policies aim to phase out fossil fuels and accelerate the deployment of on-road ZEVs across the state over the next couple of decades. There will still be a need for truly low-carbon liquid fuel in offroad sectors like aviation and marine to meet California’s 2045 carbon neutrality goal.
Today, the current fuel market in California is awash with renewable diesel, a liquid fuel made from hydrotreating crop-seed and waste oils and fats. Renewable diesel accounts for the largest and fastest-growing source of LCFS credits in the program. While lower carbon transportation fuel is still needed for the on-road sector as the ZEV regulations phase in, the unsustainable growth of renewable diesel from crop seeds (soy and canola, for example) into the California fuels market has harmful social and environmental impacts. Additionally, subsidizing the use of fuels like renewable diesel for highway transportation could distort and delay the deployment of cleaner options such as ZEVs and ZEV infrastructure. It is critical that CARB take steps to limit the use of crop-seed oil-based fuels in the LCFS.
The rise of renewable diesel and the need for safeguards
By the end of 2023, renewable diesel accounted for 68% of the diesel fuel market in California, with crop-seed oil-based fuels making up a significant and growing portion of this total. Since CARB began tracking feedstock data in 2021, the use of these fuels has increased by over 350%, with 192 million gallons consumed in California in 2023 alone.
The dramatic growth in renewable diesel and increased reliance on crop-seed oils poses risks to global food markets and ecosystems. Diverting these oils from food to fuel production can lead to higher food prices, particularly in countries where these oils are staples in diets. It can also cause substantial indirect GHG emissions as expanded crop production leads to the conversion of forests and other natural landscapes, a process that typically transfers soil carbon to the atmosphere. Finally, it can increase palm oil production, which is the marginal product on the global market that fills the soy and canola oil gap, and the carbon intensity of palm oil can be worse than petroleum. These impacts undermine the very climate goals the LCFS seeks to achieve.
CARB’s 2024 regulatory amendments to the LCFS, including safeguards for crop-seed oil-based fuels
In recognition of these risks, CARB has taken an important step by proposing amendments to the LCFS that include a limit for the first time on the number of credits that can be generated from crop-seed oils used to produce renewable diesel. The current proposal states that 20% of a company’s volumes of soy, canola, and sunflower biomass-based diesel can generate credits; the volume in excess of the cap is assigned the applicable annual carbon intensity benchmark (i.e., the target value for the carbon intensity of transportation fuels for a given year) and do not generate further credits.
Recommendations to strengthen proposed safeguards
While the proposed credit limit on crop-seed oil-based fuels is a step in the right direction, the proposal includes the following several exemptions that hamstring its effectiveness in reducing net GHG emissions.
- Exclusion of alternative jet fuel from credit limit. The same rationale that justifies establishing a limit on crop-seed oils supports including, not excluding, jet fuel in the program: limiting these feedstocks is critical to staunching the growth of unsustainable and climate-harmful transportation fuels. The refineries that make renewable diesel can also make jet fuel and gasoline. Without a credit limit on using crop-seed oil to make alternative jet fuel, these refineries can simply allocate the crop-seed oil they are no longer incentivized to use for renewable diesel to alternative jet fuel production (which can use 100% crop-seed oil feedstocks). And with a new federal tax credit for clean aviation and other fuels, California will be a preferred market for alternative jet fuel, as aviation fuel producers can currently opt into the LCFS program and earn credits.
The proposal exempts from the 20% credit limit all existing biomass-based diesel pathways until January 2028, further weakening its implementation. This will give fuel producers plenty of time to arrange potentially multiyear feedstock contracts to shift and scale up crop-seed oil-based jet fuel production.
- Carbon intensity of surplus crop oil fuels. The volume of crop-seed oil-based fuel that exceeds the 20% credit limit should be assigned the carbon intensity of fossil diesel, rather than CARB’s current proposal that uses the applicable annual carbon intensity benchmark. Assigning the fossil diesel score to excess crop oil-based fuels would better reflect the reality that, as explained above, over-use of such fuels drives indirect GHG emissions.
By setting the carbon intensity at the benchmark instead of at the diesel equivalent (which, at carbon intensity of 105.76gCO2/MJ, would generate deficits), fuel producers may continue to produce excess crop-seed oil fuels and avoid generating deficits that are expected to become more expensive to retire, especially with CARB’s strengthening of the carbon intensity benchmarks. Defaulting to the applicable annual carbon intensity benchmark will effectively sunset the crop seed oil credit limit whenever the CI benchmark equals or is below the carbon intensity for the individual feedstock––which is expected to happen within five or so years. Setting surplus crop-seed oil-based fuels to the fossil diesel carbon intensity would create a more effective long-term signal to discourage ongoing growth of crop-seed oil fuels in the California market.
Looking ahead: The need for additional action in California and at the federal level
A percentage-based limit on credit generation will still allow substantial growth in the use of crop-seed oil-based fuels, even if CARB makes the above recommended changes. As a result, the risk of indirect impacts on food markets, land-use change, and associated emissions will remain. A more comprehensive framework of safeguards is needed, including:
- An overall limit on all crop-seed oil-based fuels in the LCFS;
- Analysis of the impact of the California LCFS on the global crop-seed oil markets, incorporating available data, pathway applications and reports; and,
- Based on this analysis, criteria for suspending crop-seed oil-based fuel pathways based on adverse impacts on food markets and ecosystems and removing high-risk feedstocks from LCFS eligibility (as CARB has already proposed to do with palm oil).
Other states that already have low carbon fuel standards should implement these safeguards. And while California’s LCFS and similar policies in other states play a critical role in driving low-carbon fuel use, federal action is also necessary because the rest of the country needs to eliminate transportation emissions. A national Zero-Carbon Fuel Standard could help harmonize policies across states and provide broader market incentives for clean fuels, particularly if the federal standard applies to all transportation energy carriers (including electricity) used in the United States—on-road and off-road fuels as well as those consumed by aircraft and marine vessels.
The proposed updates to the LCFS represent a positive step toward limiting the negative global environmental and social impacts of crop-seed oil-based fuels, but further changes are needed to ensure the policy fully aligns with California’s climate goals. By setting an overall limit on crop-seed oil-based fuels, setting appropriate carbon intensity values, and monitoring global impacts, CARB can help safeguard the LCFS against unintended consequences, while federal action can provide the broader support necessary for a successful transition to a low-carbon transportation future.
