On April 23, 2009, the California Air Resources Board (ARB) approved its proposed low carbon fuel standard (LCFS) regulations, which would implement a program to reduce the carbon intensity of transportation fuels. The program is designed to decrease the quantity of greenhouse gases emitted per unit of energy consumed by California’s transportation sector 10 percent by 2020. The new regulations stem from Governor Schwarzenegger’s January, 2007 Executive Order (S-1-07), which directs ARB to develop the LCFS. The LCFS is also a critical component of ARB’s Scoping Plan for achieving the GHG reductions required by the Global Warming Solutions Act of 2006 (AB32).

The new regulations include preliminary carbon intensity ratings for a variety of transportation fuels. Such ratings will determine the compliance obligations for fuel providers. ARB’s controversial decision to account for indirect land use changes, such as tropical deforestation, due to increased production of crop-based biofuels results in most types of corn ethanol having carbon intensity ratings comparable to or greater than that of traditional gasoline.

The LCFS regulations allow providers that supply fuel with carbon intensities below the prescribed intensity standard for that year to receive credits that may be sold to providers that do not meet their requirements. If they choose to opt in to the program, local distribution companies would likely be the recipients of such credits for any electricity they provide for the transportation sector. Fuel providers must begin monitoring and reporting the carbon intensity of their fuels starting in 2010, with mandatory intensity reductions beginning the subsequent year.

To view ARB’s press release announcing approval of the LCFS, click here. here.

More detailed information on the LCFS regulations can be found here.