Introduction
The California Low Carbon Fuel Standard (LCFS) is a program designed to reduce greenhouse gas (GHG) emissions from transportation fuels using a market-based mechanism that caps the carbon intensity (CI) of fuels. Oregon, Washington, and Canada have implemented similar programs modeled after LCFS.
How the LCFS works
Each year, regulators set a CI benchmark for transportation fuels. Fuels that emit less than the benchmark generate LCFS credits, with one credit equal to one metric ton of avoided greenhouse gas emissions. Fuels exceeding the benchmark create deficits. Obligated parties must acquire enough credits to offset their deficits annually.
Hydrogen and RNG
Hydrogen from renewable sources and biomethane injected into pipelines are also eligible pathways. Recent rule changes aim to eventually phase out the benefits RNG receives when used in vehicles, favoring its use as feedstock or process fuel for hydrogen or other fuels like renewable diesel.
The Role of EV Charging Stations
EV charging stations can generate LCFS credits based on the amount of energy they deliver to electric vehicles and the carbon intensity of the electricity used. If the electricity comes from renewable sources, like wind or solar, it has a lower carbon intensity which generates more LCFS credits. The owner of charging stations can designate who owns the LCFS credits. Additional credits can be generated by “pairing” 1 MWh of Renewable Electricity Certificates (RECs) with 1 MWh of electricity used to charge vehicles. The amount of additional credits changes over time as the reference CI comes down.
Accessing the LCFS Market
Credit Sellers
Fuel producers, utilities and fleet operators generate credits through low-CI fuel use. These credits can be sold to obligated parties, creating a revenue stream that supports investment in clean technologies.
Credit Buyers
Refiners, importers and other obligated parties purchase credits to meet their annual compliance obligations. Pricing is driven by supply-demand fundamentals, CI reduction targets and policy updates.
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Note: on August 11, 2025, CARB also published a FAQ sheet to answer some questions on implementation of the new rule. 2025 LCFS Amendment Implementation FAQ
