THE IMPORTANCE OF the Low Carbon Fuel Standard (LCFS) - Learn more now

California’s Low Carbon Fuel Standard (LCFS) is a pioneering clean fuel program administered by the California Air Resources Board.

Established in 2007 through a Governor’s Executive Order, it uses a market-based cap and trade approach to lowering the greenhouse gas emissions from petroleum-based transportation fuels like gasoline and diesel. 

The LCFS requires producers of petroleum-based fuels to reduce the carbon intensity of their products, beginning with a quarter of a percent in 2011 and targeting a 20% reduction in 2030.

This program has been proven to have a positive impact on our environment, with LCFS incentives helping to rapidly defossilize California’s transportation supply in recent years. Lower-carbon biofuels like RNG and other diesel alternatives now comprise more than 50% of the state’s diesel supply, hinting at the powerful impact our industry can have in cleaning up statewide transportation emissions.

These positive strides have inspired other U.S. states to follow California’s lead. Oregon and Washington have in recent years passed their own versions of LCFS programs, while 2024 saw New Mexico join this vanguard of American climate leadership when it passed an LCFS. Given the common-sense environmental and economic proposition of LCFS programs, it is simply a matter of time until more states join this movement.

DO LCFS PROGRAMS LEAD TO HIGHER CONSUMER GAS PRICES? 

Contrary to what some political interests might suggest, the LCFS has a minimal impact on the prices California consumers pay at their local gasoline pump.

A 2022 study from the consultancy Bates White (Bates White, 2022) illustrated that:

• The volumes of alternative transportation fuels that LCFS has induced help mitigate the program's price impacts by increasing the total volume of fuel in the California market.

• CA LCFS credit prices have no historical correlation with retail gasoline prices.

• Crude oil, state taxes and other regulatory programs comprise over 90% of a gallon of California gas, even before considering profit margins for gasoline refiners.

Gasoline prices are the result of an array of factors, with the geopolitically sensitive market price of crude oil representing more than 50% of the cost of each gallon of gasoline consumed by California drivers (California Energy Commission). 

Other factors also contribute to consumers paying higher pump prices than other areas of the U.S., including:

• California's shrinking refining footprint, which dwindled considerably following COVID-19 pandemic shutdowns.

• California's relative geographic isolation, thousands of miles away from oil-producing hotspots like Texas' Permian Basin or Canada's oil sands region.

• California's nation-leading state excise taxes on consumer gasoline, which help fund road and highway maintenance.

• Profits taken by oil refiners and marketers, which in recent years have swelled to record levels.

Simply put: there is not a significant correlation between LCFS compliance cost and consumer prices (RMI 2023).

more on LCFS Benefits

LCFS-linked GHG reductions offer long-term benefits such as reduced air pollution, improved public health, and economic savings from reduced reliance on highly polluting fossil fuels. A 2022 study from UC Davis concluded that Oregon’s own CFS will reduce air pollution-linked deaths and avoid up to $87.7 billion in healthcare costs per year.

The energy security benefits of clean fuels are also important to consider. LCFS programs encourage output of domestic, clean fuels from our own waste and agriculture— reducing our dependence on foreign oil in the process. This dynamic is particularly important in California, where state oil refineries still rely on foreign suppliers like Iraq, Saudi Arabia and Ecuador for almost half of all crude oil supplies (US EIA). California’s LCFS replaces that foreign petroleum with low-carbon fuels produced here in the U.S. — the program has thus far displaced 25 billion+ gallons of petroleum fuels since its implementation (CARB).

And while the LCFS is known as a clean-fuel program, it is important to note that the program simultaneously offers support for EVs and electrification. The non-profit Rocky Mountain Institute has published research highlighting how the LCFS can support the growth of public EV charging networks by providing credits to EV charging providers. The clean energy think tank said the LCFS “has contributed to California’s high EV adoption” by offsetting charging costs, perhaps helping to explain why California has the largest fleet of EVs on the road in all of North America.

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View the Air Resources Board LCFS Homepage

View the LCFS Program Meeting and Workshop Schedule