California’s new clean-fuel plan makes old problems worse

That’s bad for biofuels. But it’s also bad for public EV-charging stations that earn LCFS credits for every kilowatt-hour of electricity they sell and for the charging capacity they provide. The drop in credit prices has also depleted an LCFS-funded program administered by California utilities to assist first-time EV purchases.

The amendments CARB approved on Friday aim to address this problem by raising the carbon intensity (CI) values of fossil fuels sold in the state over the coming years. That will require companies that refine and sell those fossil fuels to purchase more credits from LCFS-approved alternative fuels to make up their increasing deficits, driving up credit prices to support investments needed to reach the state’s clean transportation goals, according to CARB staff. 

But ratcheting up the demand for credits for fossil fuels without restricting the supply of credits from biofuels and biogas creates several risks, critics say.

The first is that it fails to address the fact that, unlike EVs, vehicles burning biofuels continue to emit carbon and air pollution that are harmful to the environment and to people living in communities with heavy vehicle traffic.

“The LCFS is a failed policy, and the communities most impacted by air pollution in California will be the ones breathing the price for it,” Adrian Martinez, deputy managing attorney at Earthjustice, said in a Friday statement. ​“Most of the program’s billions will go to combustion fuels.”

Privileging biofuels over electricity also provides fossil-fuel companies a pathway to have their cake and eat it too, so to speak. Fossil-fuel companies happen to be some of the biggest investors in renewable diesel refining and in dairy gas projects eligible for LCFS credits in California and across the country. The more biofuels they produce, the more they can use the credits generated by them to offset the rising costs of continuing to sell fossil fuels in the state.

The threat of rising prices at the pump

The third risk — and the one that’s caught the attention of news outlets from across the state — is that increasing demand will drive up the cost of gasoline and diesel fuel. These concerns were fueled by a December CARB staff report that analyzed the new rules and found a maximum ​“pass-through” cost increase of 47 cents per gallon of gasoline in 2025.

California already has some of the highest fuel prices in the country, which oil companies blame on state regulations. Today, the role of the LCFS in California’s higher prices is relatively small at about 10 cents per gallon, according to prior CARB analysis. But under the newly approved higher carbon-intensity targets, that impact could quickly escalate, critics say.

“If you approve this measure, California drivers will pay over $2 more a gallon than other drivers across the country,” state Assemblymember Tom Lackey said at Friday’s meeting. Lackey, a Republican, represents a district centered on the city of Palmdale, where many residents commute about 120 miles per day to jobs in the Los Angeles region.

CARB staff have refused to offer projections on the new rules’ potential impact on prices at the pump, despite growing pressure from the media and lawmakers. In an October online press conference, Steven Cliff, CARB’s executive officer, said that agency staff are ​“not aware of economic models that can accurately predict gas prices with any certainty for many complex reasons.”

CARB board member Florez pushed back against this stance in his op-ed explaining his opposition to the new rule. ​“One of the most pressing issues is the projected economic impact,” he wrote. ​“A former CARB branch director has warned that, while program-related costs to consumers are currently modest, they could rise sharply as stricter targets are enforced.”

Florez was referring to Jim Duffy, a 13-year veteran of the agency who submitted a letter to CARB last month. Duffy served as branch chief of the LCFS program from 2019 to 2020 and retired in 2022.

“Claims that the regulation does not and/​or will not increase the cost of gasoline are, in my opinion, absurd,” Duffy wrote. In his letter, he provided his own estimate, using a ​“reasonable bound for future credit prices” from ​“a low of $60 to a high at the current program price cap, which is approximately $260.”

“Using this credit price range and the minimum targets to be set by the proposed amendments,” he continued, ​“I estimate pass-through ranges of $0.15 to $0.64 in 2025, $0.19 to $0.84 in 2030, and $0.34 to $1.47 in 2035.” An adjustment mechanism built into the new rule, which Duffy described as ​“both poorly written and poorly designed,” could trigger even higher increases. ​“Under such a scenario, pass-through costs near $1.50 per gallon by 2032 are quite possible.”

Danny Cullenward, a climate economist and lawyer and senior fellow at the University of Pennsylvania who serves as vice chair of California’s carbon market advisory committee, wrote in an Oct. 30 op-ed that state legislators ​“should be particularly concerned that CARB staff are being dishonest about LCFS costs.”

“So are biofuel subsidies really a top state priority, and how many billions of dollars should California drivers be asked to pay for them?” Cullenward wrote. ​“According to the staff of the Air Resources Board, no one can tell you.”

The road not taken 

CARB had other options. Last year, CARB’s Environmental Justice Advisory Committee (EJAC), a group created to advise the board on environmental-justice issues, laid out an alternative proposal that would cap the amount of crop-based renewable diesel eligible for credits, and end the negative-carbon-intensity treatment provided to dairy biogas.

By reducing the expansion of credits from these fuels, this alternative approach could restrict supply, and thus increase prices for credits from other sources such as EV-charging stations and renewable diesel made from waste oils and non-food crops, according to analysis from a team of climate scientists led by Michael Wara, director of Stanford University’s Climate and Energy Policy Program. That analysis also found the EJAC plan would drive greater reductions than the CARB staff proposal of harmful local air pollution from large-scale dairy farms and refineries that produce renewable diesel. 

CARB staff rejected the EJAC proposal, saying it would lead to higher price spikes and fail to achieve equivalent carbon reductions. Wara and colleagues involved in the EJAC analysis challenged that finding in comments submitted to CARB in February, and Wara told Canary Media in March that CARB staff have refused to provide information necessary to conduct an independent analysis.

Florez brought up that point as well in his Nov. 7 op-ed, noting that EJAC has ​“raised strong objections, pointing to CARB’s refusal to conduct a comprehensive assessment of emissions. Without transparent analysis, the air board cannot assure the public that its policies will protect California’s most vulnerable residents.” 

Environmental and energy experts say the flawed LCFS program could have ramifications beyond California. Today, two other states — Oregon and Washington — have adopted clean fuel standards largely based on LCFS. New Mexico passed a law this year to establish a clean-fuels program, and eight other states are considering similar legislation. LCFS critics fear those programs will mimic CARB’s problematic biofuels policies.