Evolution of Carbon Intensity Targets

The LCFS Regulation specifies the annual carbon intensity benchmark for fuels, with an annual decline ensuring that California’s transportation fuels are getting cleaner. CARB has updated this over time to align with new climate legislation, market conditions, and other factors.

The chart to the right shows the progression of carbon intensity reduction goals through the 2015, 2018, and proposed 2024 regulatory updates.

The Concept of the Automatic Acceleration Mechanism

The LCFS market has evolved rapidly over the past few years. The COVID-19 pandemic, a surge in renewable diesel production, and unprecedented zero-emission vehicle adoption have led to significantly more credits in the market than expected. In the past, staff have adjusted the benchmarks through rulemakings. In the current proposal, staff include a concept allowing schedule changes outside of a rulemaking. The concept is termed an Automatic Acceleration Mechanism (AAM), which would be triggered based on specified market conditions. Staff proposed a two-condition trigger mechanism: The credit bank must exceed three quarters of deficits, and annual credit generation must exceed annual deficit generation. If both conditions are met, the AAM is triggered.

Implementation of the AAM

CARB staff are not simply relying on the AAM; they are proposing updates to the benchmark schedule. Under what I call the “standard” schedule (the schedule to be implemented with no AAMs triggered), staff propose an initial 5% step down in 2025 with benchmark stringency increases of 2.25% per year in 2026 through 2030 and 4.5% per year beginning in 2031, until a 90% carbon intensity reduction goal is met in 2045.

The proposed implementation of the AAM involves shifting the entire benchmark schedule forward a year when triggered. For example, a trigger implemented in 2028 would use the proposed 2029 target in 2028, the 2030 target in 2029, and so on. The graph below shows how this looks if a target were triggered once, either in 2028, 2030, or 2035. The timing of when a trigger is implemented could affect the percent change implemented.

Under a trigger implemented in 2028, the benchmark would increase 4.5% from 2027. That is because the 2029 standard would apply in 2028 and both 2028 and 2029 had standard increases of 2.25% (2.25% x 2 = 4.5%).

Under a trigger implemented in 2030, the benchmark would increase 6.75% from 2029. That is because the 2031 standard would apply in 2030. The standard increase in 2030 is 2.25% and the standard increase in 2031 is 4.5% (2.25% + 4.5% = 6.75%).

Any triggers implemented after 2030 would yield a 9% increase in the trigger year because the standard annual increase is 4.5% beginning in 2031, so advancing the schedule by a year would yield a 4.5% x 2 increase. For context, this single-year reduction would be equal to what took the program its first 10 years to accomplish.

If the trigger occurs only once, the 90% reduction target is met in 2044, one year earlier than the standard schedule, regardless of when the schedule is adjusted.

Consideration of Multiple AAM Triggers

Staff’s proposal for an AAM includes a prohibition on the AAM being triggered two years in a row but there is no proposed limit on the number of triggers.

If multiple triggers occur, such as in 2028 and 2030, the benchmark could increase in stringency by over 20% in just four years, demonstrating the accelerated impact of successive triggers on the schedule. In such a case, the target would be 23.25% in 2027 and 43.5% by 2031.

The effect of multiple triggers on a part of the benchmark schedule is shown to the right.

Data Availability Considerations in AAM implementation

In addition to outlining trigger mechanisms, the proposal incorporates two restrictions on when the AAM can be activated: first, an AAM cannot occur prior to 2028, and second, consecutive-year AAM activations are prohibited. These restrictions are designed to allow the market time to adapt to new benchmarks and leverage data from the implementation of these benchmarks as an evaluation criterion for subsequent AAM decisions. Given that data for a particular year are reported and verified in the following year, with target adjustments taking effect in the subsequent year, triggering the AAM before evaluating the data under the adjusted schedule could be premature, potentially leading to overcorrecting the schedule. Therefore, the proposed restrictions serve to ensure an evaluation informed by relevant data.

Overall, the AAM is meant to help provide certainty in an uncertain future by aligning the benchmark schedule to the evolving market landscape, and to potentially be more responsive than a rulemaking process.

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