Cleaner Fuels, Higher Stakes: Washington’s Bold New CI Reduction Path 

What are the likely consequences of increasing the carbon intensity (CI) reduction schedule for a state low carbon fuel (LCF) program fast or deep enough to make compliance uncertain or unlikely? We may be about to find out!  

HB1409 – a bill recently passed by the Washington state legislature and signed into law by Washington Governor Bob Ferguson on May 17th – increases the CI reduction schedule for the Clean Fuel Standard (CFS) by an additional 3-4% per year beginning in 2026, resulting in a CI reduction of 45%-55% in 2038.[1] The newly enacted CI-reduction targets are shown in Figure 1 alongside the existing (previous) schedule. HB1409 marks a dramatic shift from the existing (previous) CFP targets, and according to Stillwater’s analysis, it will be extremely challenging for the state to meet the new requirements. 

Figure 1. Previous & Current Washington CFS CI Reduction Schedules

To fully appreciate the magnitude of the acceleration Washington is about to implement, consider the fact that the California Low Carbon Fuel Standard (LCFS) required a 12.5% CI reduction in the 14th year of the program while the range for the CFS will be between 39% and 47% according to the new schedule. This accelerated target enables WA to catch up to and possibly surpass California, which is close to adopting new CI-reduction targets for its LCFS.  

But can Washington achieve its new goals? 

Some of the CFS acceleration tracks well with market realities as there is far more RD available today than there was at the start of the LCFS program, and EV adoption has taken hold. However, a closer look at the situation in Washington reveals several challenges that are worth noting.  

First, we examine decarbonization trends in the diesel pool. Since electrifying heavy-duty trucks (which consume most of the diesel fuel in the state) has stalled, the only practical way to lower the CI of the diesel pool is by blending large volumes of RD. This will certainly happen in Washington, but to achieve the CI reductions of 45% to 55% required in 2038 will require nearly all of the diesel consumed to be the lowest carbon RD available. This will prove to be quite challenging because Stillwater projections show there will not be enough feedstocks available to supply the RD required to meet the demand created by the West Coast LCF programs – the California LCFS, Washington CFS, and Oregon Clean Fuels Program (CFP) – in addition to start-up of the New Mexico Clean Transportation Fuel Program (CTFP). So, while reaching the high CI reductions required for the CFS are theoretically possible, it is unlikely that sufficient volumes of the lowest CI RD would be available to be used in Washington given competition with other LCF markets and limited low-CI fuel supply. 

Next, we turn to the gasoline pool in Washington state where achieving the new, ambitious CI reduction schedules is a completely different story. The only renewable fuel that can practically be blended into gasoline is ethanol which currently makes up 10% of the pool. This could very well be increased to 15% in the coming years, but the resulting CI-reduction is small. Without a low-CI liquid fuel replacement for gasoline, electrification of the light-duty fleet is required. But this turns out to be a much bigger challenge than converting to a renewable fuel like ethanol. EV sales have increased to some extent but have many challenges that include the need to massively expand access to charging stations, increase low-carbon power generation, and boost EV production and sales. Stillwater has modelled these and other contributing factors and finds the challenges to be insurmountable for meaningful CI reduction in the time frame considered here (through 2038). As such, the CI reduction requirement of at least 45% in Washington is infeasible.  

Since the fines for non-compliance with the CFS program are severe, petroleum fuel suppliers may choose to reduce sales rather than risk non-compliance due to insufficient renewable fuel availability, which would reduce supply into the market and dramatically increase costs. Accordingly, as the credit bank declines and approaches zero, the Washington Department of Ecology can be expected to ease CI reduction requirements (an authority granted to Ecology in HB1409), preventing costs from escalating to a politically unacceptable level.    

Conclusion 

Washington’s decision to accelerate its carbon intensity (CI) reduction targets through HB1409 represents a significant and ambitious shift in the state’s clean fuels policy. By mandating a much steeper annual reduction beginning in 2026, the state is setting a new national benchmark for climate action in the transportation sector. However, as the analysis and comparison with California’s program highlight, meeting these aggressive new requirements will pose substantial challenges for fuel producers, regulators, and the broader market. Whether Washington can achieve these bold targets will depend on rapid innovation, investment, and policy support, but the state’s commitment signals a clear intent to lead in the transition to cleaner fuels and a lower-carbon future. 

If you’re wondering how this policy shift in Washington will impact your business, reach out to us to discuss. In July, we will also publish an update to our Washington CFS credit price outlook, including the impact of HB1409. Subscribe today to receive the update when it is released.