Flash Report – Board Meeting: CARB Staff Update on 2023 LCFS Amendment Process
On September 28, 2023, the California Air Resources Board (CARB) held a public meeting to hear an update on the Low Carbon Fuel Standard (LCFS). As a non-voting update to the Board, no Board action was necessary nor was a Rulemaking Package made available. The Board update follows the September 8th release of the Standardized Regulatory Impact Assessment (SRIA). In case you missed it, Stillwater’s Flash Report covering the SRIA is available here. While the SRIA contains an overview of the proposed amendments in some detail, today’s Staff presentation to the Board was more open-ended, intended to encourage Board participation or perspective on some of the potential issues under consideration. Importantly, the official regulatory text has yet to be published.
Items to note from the meeting include:
- What’s New? The meeting did not provide additional clarity on what may be contained in the amendments. No additional details were discussed that would further define the provisions that were presented in the SRIA.
- Current Thinking: Staff focused on four potential LCFS amendment provisions that appeared to be unsettled. These issues received the bulk of the public comments, have strong advocates on both sides of the issue, and seem to involve the most uncertainty.
- Increased program stringency – Fundamental to the LCFS program and credit prices, multiple scenarios are still under consideration. Staff mentioned targeting “at least” 30% reduction by 2030 (the recommended scenario published in the SRIA), leading Stillwater to wonder if stringency >30% is still being considered.
- Adding intra-state fossil jet fuel as a covered fuel – This topic received a lot of airtime from Board members and the public. Staff still seems to be grappling with the most effective way to incorporate jet fuel as a deficit generator while avoiding issues of federal pre-emption.
- Crop-based biofuels – Another issue with strong viewpoints on all sides, several Board members asked Staff questions that indicated interest in this topic. Notably, the Staff discussion offered no insights into their thinking about how a crop-based biofuels provision would be structured in terms of timeline, how limits would be determined, or how any constraints would be measured and enforced.
- Biomethane crediting – The phase-out of avoided methane crediting was included as a provision in the SRIA. At the September 28th meeting, much of the Board-Staff discussion revolved around interaction between the LCFS and SB 1383 requirements to reduce methane emissions. This topic, as it applies to dairy digester gas, also proved to be very contentious during the public comment period of today’s meeting with California’s dairies and renewable natural gas (RNG) industry in favor of continued avoided methane crediting and the environmental justice (EJ) community standing in opposition. Staff comments implied that they were firm in their current proposal, but external forces will still need to be considered before anything is finalized.
- Timeline: The schedule for next steps slipped compared to the schedule discussed previously. Now, Staff indicated they will publish the Rulemaking Package in the fourth quarter of 2023 instead of shortly after this Board meeting as previously implied. The publication of this package will include the Initial Statement of Reasons (ISOR), proposed regulatory text, economic and environmental analysis, and supporting documents. This Rulemaking Package, once published, will initiate a 45-day public comment period. A Board hearing to vote on the proposed amendments is indicated for Q1 2024, with an implementation date for the new regulation in 2024. (Note: Staff did not indicate whether 2024 implementation would include all provisions of the amendments). Stillwater anticipates this published schedule will be challenging to meet with the open provisions noted above; as such, we may see the Rulemaking Package closer to the end of Q4 2023 or even early in Q1 2024.
- Board Feedback: Board members asked questions for roughly two hours before switching to the public comment period. Seven Board members attended the meeting in-person, with the remainder participating remotely. At a high level, Board members inquired about how the LCFS program interacts with other California initiatives, specifically those related to methane reduction and zero-emission vehicles. Several questions were asked about data sources, data quality, and potential for additional data being incorporated into the program in the future. Multiple comments and questions about life cycle assessment (LCA) methodology and indirect land use change (ILUC) as they pertain to tackling the crop-based biofuel question.
- Public Feedback: The public comment period was extensive, with 109 in-person comments and an unknown number of remote comments (the Stillwater team was unable to tally all public comments). Two main topics dominated the comments. Nearly 30 airport workers showed up to comment in support of obligating jet fuel and discuss the health impacts they attribute to working around jet fuel. Over 20 advocates for diary digesters spoke about the benefits of methane capture and urged the board to maintain incentives for the methane market. In addition, there were four comments recommending 2030 stringency above 30%, up to as high as 42%.
What about LCFS credit price updates?
Late last month, Stillwater published the Fall Update of our 2023-2024 LCFS Credit Price Outlook including LCFS credit balances and prices through 2035. Our outlook assumptions provide a near match to the proposed program changes outlined in the SRIA and discussed in today’s Board meeting. Our four cases also bracket the CI reduction schedule put forth as the recommended case in the SRIA, offering a valuable view of the potential forward credit price trends. And we are constantly updating our assumptions! Stillwater’s Winter quarterly outlook update, scheduled for release December 12, 2023, will include the specifics of the amended regulatory text if CARB Staff releases the Rulemaking Package in time.
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