Top Emerging Trends

California issues draft of low carbon fuel standard as part of GHG program

Prior posts have followed the implementation of AB 32 [see http://www.leginfo.ca.gov/pub/05-06/bill/asm/ab_0001-0050/ab_32_bill_20060927_chaptered.html for a copy of the legislation]. The Air Resources Board has now issued a draft of its proposed low carbon fuel standard [see http://www.arb.ca.gov/fuels/lcfs/lcfs.htm], one of the six so-called core programs that will make up the so-called AB 32 scoping plan. The objective of the standard is to reduce the carbon intensity of the covered fuels by 10% by 2020. The standard covers all fuels used in a "motor vehicle", other than racing fuel; it also includes diesel used in nonvehicular devices, other than locomotives and nonharborcraft marine vehicles. Thus, the standard applies to "standard" gasoline and diesel fuels, compressed natural gas, liquefied petroleum gas, electricity, hydrogen, any fuel blend containing ethanol, any fuel blend containing biomass-based diesel, pure ethanol, pure biomass-based diesel, and any other liquid or non-liquid fuel. No transportation fuel covered by the regulation can be sold in California unless a review by ARB has been done as part of the normal regulatory process, or done separately and approved by ARB. An annual exemption is provided for all "alternative fuels" distributed by an otherwise covered party below a specified volume. Alternative fuels for this purpose are all the fuels listed in this paragraph other than gasoline, diesel, and biofuels. The regulation is slated to go into effect 2010. For gasoline the "base year intensity" is 96.7 grams/CO2 equivalent per megajoule [for a definition of a joule, see http://en.wikipedia.org/wiki/Joule]. By 2020 the "intensity" must be reduced 10.5% to 86.5 g/CO2e/MJ. The extra 0.5% is intended to account for E10 (90% gasoline; 10% ethanol) becoming the standard fuel by 2010. For diesel, the numbers are 95.8g/CO2e/MJ as the 2010 baseline, and the 10% reduction in "intensity" by 2020 is 86.2g/CO2e/MJ. Suppliers of biomass-based diesel fuels must meet the diesel fuel schedule. There is a separate complex schedule for mixed fuel vehicles. The carbon intensity of a fuel can be determined by a lookup table, or by submitting data and calculations to and receiving approval from the ARB. The standard applies to all fuel producers and importers, or any recipient of same prior to receipt by the final "distribution facility" [e.g., gas station]. Of course there are record-keeping, reporting, and auditing requirements and procedures. Finally, the draft allows for the generation and use of credits. Credits may be "exported" for compliance with other GHG reduction initiatives, including other AB 32 programs. However, credits generated outside of the low carbon fuel program (LCFP) cannot be used in the LCFP. Further, a party not covered by the LCFP cannot purchase or sell LCFP credits; however, entities that are subject to the annual exemption aspect can opt into the program, and thus can purchase or sell credits. Credits can be banked without expiration.