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California to expand Low Carbon Fuel Standard to 2030 with more stringent targets

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California to expand Low Carbon Fuel Standard to 2030 with more stringent targets


California plans to expand its first-in-the-nation Low Carbon Fuel Standard with more aggressive emissions-reduction rules through 2030, even as the current program faces a possible US Supreme Court challenge.

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The California Air Resources Board announced its intention to extend the LCFS in a proposed update to its agency-wide scoping plan, released late Monday, though it did not provide any details or timeline.

The LCFS requires companies selling transportation fuel in California to reduce the fuels' "carbon intensity" by 10% by 2020, with the percentage ratcheting up each year.

In the scoping plan, which outlines how CARB plans to meet the state's economy-wide goal of an 80% reduction in greenhouse gas emissions by 2050, the agency said it needs to extend the LCFS beyond 2020 to ensure that advanced alternative fuels, such as hydrogen, and transportation technology, such as electric vehicles, continue to be developed.

Achieving the state's GHG reduction goals would require a renewables portfolio "well beyond the current policy trajectories," CARB said. "Accordingly, in 2014, [CARB] will consider extending the LCFS, with more aggressive targets for 2030."

The announcement comes as the LCFS faces an uncertain legal future, with opponents saying the law could lead to higher transportation fuel prices in California or fuel shortages.

The law was upheld in January by the 9th Circuit Court of Appeals in San Francisco against challenges by Midwest ethanol producers and the oil industry, which had claimed that the LCFS violates the interstate commerce clause of the US Constitution by assigning higher carbon intensity scores to fuels made in other states.

Under the LCFS, each type of fuel is given a carbon intensity score, as measured by the life cycle emissions of the fuel, and out-of-state fuels were given higher scores partly because of transportation costs but also, in the case of ethanol, land-use calculations that the industry had challenged.

In rejecting the challenges, the court ruled that California was merely regulating commerce within its borders.

Ethanol groups and the oil industry have said they are evaluating their legal options, including petitioning the Supreme Court to review their case.

CARB also is addressing objections raised by California's 5th District Court of Appeals in Fresno, which ordered the agency to make some technical tweaks to the LCFS, though it did allow the state to continue implementing the standard. CARB WILL MOVE AHEAD

CARB spokesman David Clegern said even with the legal uncertainty, the agency still intends to move forward with 2030 targets, though he said no timeline has been set.

"We're definitely at a point where we want to look at how this would best be done," he said in an email.

The LCFS includes a credits trading component, under which refiners and other obligated parties can generate credits for blending in alternative fuels with lower carbon intensity than conventional gasoline or diesel. Those credits can then be sold to obligated parties who have fallen short of their LCFS requirements.

In a separate announcement, CARB said Tuesday that the average price of an LCFS credit was $51 in January, down from $79 in December and $71 in November.

Credits averaged $17 in 2012, before beginning their rise in price in 2013, as fuel producers and importers sought to bank credits for when the carbon-reduction requirements ramp up in future years, according to market watchers.

--Herman Wang,
--Edited by Kevin Saville,