The Low Carbon Fuel Standard programs sets annual Carbon Intensity standards or benchmarks for gasoline, diesel, and the fuels that replace them. Carbon intensity reflects all the Greenhouse Gas (GHG) emissions associated with all the steps of producing, transporting, and consuming the fuel.
Low Carbon Fuel Standard credits are a tradeable compliance instrument, and each credit represents one metric ton of carbon that did not go into the atmosphere. Fuel, gas, or electricity with a Carbon Intensity lower than the benchmarks generate LCFS credits. Fuel, gas, or electricity with a Carbon Intensity higher than the benchmarks generates deficits. Fuel Reporting Entities must surrender to the Sate LCFS credits purchased from low carbon fuel, gas, and electricity suppliers to account for deficits.
Certified Carbon Intensity Owners – Low Carbon Fuel, Gas and Electricity Suppliers
The Low Carbon Fuel Standard Program incentivizes with credits entities suppling low carbon transportation fuel, gas, or electricity. Suppliers of Ethanol, Biodiesel, Renewable Diesel, Compressed Natural Gas and Biogas, Liquefied Natural Gas and Biogas, Hydrogen, and Electricity for Electric Vehicles supply low carbon fuel, gas, or electricity, and generate LCFS credits.
A suspension, revocation, modification, or invalidation of a Certified Carbon Intensity could result in a full or partial loss of already generated and sold LCFS Credits and a total loss of the credits not generated and sold because the CI was suspended or revoked. Material misstatements in the submitted information from multiple parties can invalidate LCFS credits. The Carbon Intensity is calculated with a Life-Cycle or Wells-to-Wheels analysis which relies on volumes of data submitted by the credit generator, the supply-chain entities providing feedstocks, and the verifiers.
LCFS credit buyers – Fuel Reporting Entities
The Fuel Reporting Entity must reconcile with the State if the LCFS credits surrendered for compliance are invalidated or suffer penalties and fines. The Fuel Reporting Entity will have to replace the invalidated credits if the credit generator, or the entity deemed responsible cannot replace the invalidated credits.
Fuel Reporting Entities are fined and penalized for material misstatements in the Fuel Transaction Reports and Crude Oil Volume Reports. Gasoline, diesel, and fuel suppliers must submit annual reports to the Air Resource Board to determine the number of deficits that are required for compliance.
Projects that generate California LCFS credits
Projects that can generate LCFS credits are Refinery Investment, Innovative Crude, Renewable Hydrogen, Carbon Capture, Sequestration, and Utilization Projects. A material misstatement in the Project Data Reports can cause invalidation of LCFS credits. deficits that are required for compliance.