California Gas Prices Set to Increase After CARB Vote

CARB updates the Low Carbon Fuel Standard to increase access to cleaner fuels and zero-emission transportation options

SACRAMENTO — The California Air Resources Board today approved updates to the Low Carbon Fuel Standard (LCFS) that channel global, national and local private sector investment towards increasing cleaner fuel and transportation options for consumers, accelerating the deployment of zero-emission infrastructure, and keeping the state on track to meet legislatively mandated air quality and climate targets.

The LCFS reduces air pollution and greenhouse gas emissions by setting a declining carbon intensity target for transportation fuels used in California; producers that don’t meet established benchmarks buy credits from those that do. This system has generated $4 billion in annual private sector investment toward a cleaner transportation sector. These investments provide multiple economic benefits to Californian consumers, including:

• Increasing consumer choices, which drives transportation fuel price competition
• Growing new industries and attracting investments that support jobs and strengthen communities
• Reducing dependence on petroleum and the oil industry, thereby protecting consumers from its associated supply and cost volatility
• Making electric vehicles more affordable
• Expanding access to electric vehicle charging and hydrogen refueling infrastructure
• Reducing the health impacts and health care costs associated with air pollution from fossil fuels

The updates set targets to reduce the carbon intensity of California’s transportation fuel pool by 30% by 2030 and by 90% by 2045. The amendments also increase support for zero-emissions infrastructure, including for medium- and heavy-duty vehicles, and make more transit agencies eligible to generate credits.

The LCFS has been very effective to date, reducing the carbon intensity of California’s fuel mix by almost 13% and displacing 70% of the diesel used in the state with cleaner alternatives. This has displaced 320 million metric tons CO2 of gasoline and diesel emissions since the Program’s inception. That’s an amount equivalent 85% of today’s annual statewide greenhouse gas emissions. The growth in the use of renewable fuel is powering needed emissions reductions in the transportation sector.

“The proposal approved today strikes a balance between reducing the environmental and health impacts of transportation fuel used in California and ensuring that low-carbon options are available as the state continues to work toward a zero-emissions future,” said CARB Chair Liane Randolph. “Today’s approval increases consumer options beyond petroleum, provides a roadmap for cleaner air, and leverages private sector investment and federal incentives to spur innovation to address climate change and pollution.”

The LCFS is designed to provide the most cost-effective path to support clean fuels and infrastructure. Affordability remains a key consideration for the Board, and it has directed staff to assess any impacts and potential mitigation from today’s adopted amendments on retail gasoline prices every six months and to submit an annual report beginning one year from the effective date of these amendments, and to collaborate with the California Energy Commission in that effort. The program currently limits the pass-through costs companies can shift to consumers by capping the price of credits that high-carbon-intensity fuel producing entities are required to purchase for compliance and allowing banking of credits bought at lower prices. Data from third party commodities markets experts shows the current LCFS pass through to California consumers is $0.10 per gallon of gasoline. This is consistent with the self-reported data by high-carbon-intensity fuel producers, which reflects an LCFS cost pass through to consumers of $0.08 to $0.10 per gallon of gasoline.

Supporting Californians

• Making electric vehicles more affordable: “The LCFS has also provided hundreds of millions of dollars of beneficial credits and incentives supporting the build-out of EV charging infrastructure and vehicle rebates which lower the upfront costs for drivers,” said a representative from MN8 Energy, which produces renewable energy, in a letter submitted to CARB.
• Expanding access to charging infrastructure: As of October 10, 2024, there have been a total of 71 hydrogen stations and 749 fast EV charger sites approved under the Hydrogen Refueling Infrastructure (HRI) and (Fast Charging Infrastructure) FCI provisions of LCFS, respectively.
• Reducing health care costs associated with pollution from dirty fuels: CARB estimates $5 billion in savings from avoided health outcomes between 2024 and 2046.
• Increasing consumer choices, which drives price competition: “By using market-based policies that ensure the best ideas succeed, we can also maximize impact by marshaling private capital to invest in climate solutions. Fortunately, California already has an excellent example of this kind of approach in the Low Carbon Fuel Standard (LCFS).”
• Reducing dependence on the oil industry, thereby protecting consumers from its associated supply and cost volatility: The LCFS has displaced more than 30 billion gallons of petroleum fuel.

The LCFS sends long-term market signals to phase out combustion fuels and increase zero emission fuels and transportation options. The LCFS updates adopted by the Board were developed after a rigorous, years-long public rulemaking process that incorporated feedback received from interested parties. Updates include:

• Providing billions of additional dollars to fund zero-emission vehicle charging and hydrogen fueling infrastructure, including new crediting opportunities for medium – and heavy-duty refueling infrastructure, to support implementation of California’s zero emission vehicle regulations.
• Increasing incentives for infrastructure in low-income neighborhoods and remote locations and ensuring that historically underserved communities receive needed investment to reduce emissions and provide equitable access to a clean air future.
• Phasing out avoided methane crediting associated with the use of biomethane used as a combustion fuel, but extending the use of biomethane for renewable hydrogen to align with goals outlined in the 2022 Scoping Plan – the state’s plan for reducing climate-warming emissions and reaching carbon neutrality.

Updated guardrails

The LCFS updates also include new guardrails to avoid land use changes resulting in potential loss of food production or deforestation. The majority of biomass-based diesel and sustainable aviation fuel in the LCFS has historically come from waste feedstocks, such as used cooking oil, animal fat and inedible distiller’s corn oil. To minimize potential land use issues, the program will require fuel producers track crop-based and forestry-based feedstocks to their point of origin. The LCFS will also require independent feedstock certification to ensure biomass-based diesel and sustainable aviation fuel feedstocks are not undermining natural carbon stocks. Palm-derived fuels are also explicitly prohibited from receiving credits.

Californians will benefit from these program updates in numerous ways, including:

• As consumers increase their use of low carbon intensity fuels and more efficient vehicles, fuel costs per mile will be reduced by 42 percent – translating to savings of over $20 billion in fuel expenditures every year by 2045. For light-duty vehicles (cars, pickup trucks, sport utility vehicles, vans, and minivans) these fuel cost savings will be even more pronounced, cutting today’s costs to Californians by more than 50 percent.
• The amount of LCFS proceeds invested in disadvantaged communities for clean fuel and transportation projects is estimated to be approximately $4.8 billion in the next decade.
• Californians are expected to save almost $5 billion in health care costs by avoiding the impacts of air pollution.
• The amendments will reduce greenhouse gas emissions by 558 million metric tons, NOx by more than 25,500 tons and PM 2.5 by more than 4,200 tons between 2025 and 2045.

More Information

Previous Stories:

• May 14, 2024 – California Gas Prices Could Increase by 50 Cents Under “Secret Tax” Proposal
• July 8, 2023 – CARB and Truck Makers Announce Agreement On Zero Emissions Vehicles