California’s Low Carbon Fuel Standard History
For over ten years, California’s Low Carbon Fuel Standard (“LCFS”) Program has evolved and expanded in scope and scale
California LCFS Timeline
The LCFS program was one of the key elements of California’s AB 32, or California Global Warming Solutions Act passed in 2006. The LCFS program, implemented in 2011, aims to reduce the carbon intensity of the state’s transportation fuel pool by 10% by 2022 and 20% by 2030. The California Air Resources Board places carbon intensity targets on all transportation fuels with an aim to diversify the state’s fuel mix and reduce petroleum-based fuel usage. Low carbon intensity fuels such as ethanol and biodiesel, among others generate credits while higher carbon intensity fuels create deficits. Firms that generate deficits may buy credits to make up for the shortfall. Here’s how it all happened. The program has survived several court challenges and it has grown each year in terms of fuels produced and used, as well as the number of LCFS credits generated.
The Full Version
California’s AB 32, or California Global Warming Solutions Act passes in the state legislature – cuts greenhouse gas (GHG) emission and other smog-forming and toxic air pollutants by improving vehicle technology, reducing fuel consumption, and increasing transportation mobility options.
Biofuels manufacturer POET LLC, files a suit, challenging that CARB violated the California Environmental Quality Act (CEQA) and the California Administrative Procedure Act (APA) in a case known as POET I.
Renewable Fuels Association and Growth Energy file suit against CARB challenging constitutionality of LCFS.
2011JANUARY 1, 2011
LCFS becomes effective and amendments were made by December 2011 (See January 1, 2013).
The court denies POET’s petition and rules in favor of CARB, which was appealed.
Federal judge grants preliminary injunction against the California LCFS, stating the LCFS violates the Dormant Commerce Clause of the US Constitution in Rocky Mountain Farmers Union v. Goldstene.
A Federal District Court rules that LCFS is in violation of the Commerce Clause of the US Constitution, in the Renewable Fuels Association and Growth Energy file suit. The case is appealed to the Ninth Circuit Court.
CARB amends the program allowing credits for innovative crude oil production technologies, CCS, solar thermal generation.
Ninth Circuit Court of Appeals issues stay of the injunction, allowing the LCFS program to move forward.
2013JANUARY 1, 2013
CARB amendments are implemented.
Ninth Circuit Court of Appeals rules the LCFS did not violate Commerce Clause in ethanol or crude oil, and dismissed plaintiff claims that included the Renewable Fuels Association and Growth Energy in Rocky Mountain Farmers Union v. Corey, or Rocky Mountain I. (See Rocky Mountain II in January 2019).
LCFS is re-adopted with a new version of LCFS to fix deficiencies in the program, plus updated crude oil provisions, new CI calculation and establishment of a credit clearance process.
2016JANUARY 1, 2016
The re-adopted LCFS becomes effective.
2016SEPTEMBER 8, 2016
SB 32 is approved by California Governor Jerry Brown, changing the state target for greenhouse gas reductions to 40% below 1990 levels by 2030.
POET continues its challenge of CARB in the case, known as POET II. The Fifth District Court of Appeals ruled that CARB’s revised regulations fell short in its baseline for NOx emissions, but left the LCFS in effect while CARB repeats the CEQA process a third time. The POET II case was appealed in March 2018 but has been largely dormant since then.
California AB 398 passes, extending the LCFS and carbon cap-and-trade program from January 1, 2021 to December 31, 2030.
CARB approved amendments are reset to a 6.25% CI reduction in 2019, 7.5% in 2020, 10% by 2022 (instead of 2020) and 20% by 2030.
Ninth Court of Appeals upheld the second challenge against LCFS, in Rocky Mountain Farmers Union v. Corey, or Rocky Mountain II. The ruling affirms California’s ability to address climate risks without violating the Commerce Clause.
CARB puts a new cap on LCFS prices, setting a maximum credit price in line with the yearly Credit Clearance Market (CCM) rate, at $200 in 2016 US dollars, adjusted for inflation. This price cap is set to take effect June 1, 2020
For a little more about the LCFS legislation, litigation and arguments the lawsuits are based upon, here are few short explanations to fill you in.
AB32 or the California Global Warming Solutions Act essentially created the LCFS and the state carbon cap-and-trade programs to lower greenhouse gas emissions.
The Dormant Commerce Clause
The Dormant Commerce Clause (or Commerce Clause) is a law in the US Constitution that prohibits states from discriminating against or improperly burdening interstate commerce.
The California Environmental Quality Act
The California Environmental Quality Act (CEQA), passed in 1970, “generally requires state and local government agencies to inform the state and the public about the potential environmental impacts of proposed projects, and to reduce those environmental impacts to the extent feasible,” according to the California Governor’s Office of Planning and Research.
The California Administrative Procedure Act
The California Administrative Procedure Act (APA) allows the public to participate in the adoption of state regulations so they are clear, necessary and legal. The Office of Administrative Law was established to handle “the orderly review of adopted regulations” to “reduce the number of administrative regulations and to improve the quality of those regulations which are adopted.”