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California’s Low Carbon Fuels Standard: A Policy OverviewFloyd Vergara, Chief, Industrial Strategies Division, CARB ISCC Regional Stakeholder Committee North AmericaLas Vegas, NV (USA)December 5, 2017
California’s Climate Strategy2
California’s GHG Reduction Goals
Return to 1990 level of GHG emissions by 2020
40% below 1990 level by 2030
Over $3 billion appropriated for climate investments
3
How Will We Reach the GHG Goals?
Comprehensive GHG Planning Effort Major Programs:
Cap and Trade (Economy Wide Reductions)
Renewable Portfolio Standard (Promotes Renewable Power)
Advanced Clean Cars (Promotes Vehicle Efficiency and Zero Emission Vehicles)
Low Carbon Fuel Standard (Promotes Clean Fuels)
Short-Lived Climate Pollutants Program https://www.arb.ca.gov/cc/scopingplan/scopingplan.htm
4
Addressing Transportation Emissions:A 3-Pronged Strategy for GHGs, Criteria, Toxics5
Transportation Emissions
VM
T/La
nd U
se
Multiple Benefits of Mobile Source Strategy Beyond GHGs
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LCFS Objectives
Reduce carbon intensity (CI) of transportation fuels
Transform and diversify fuel pool and allow alternative fuels to compete in the fuels market
Reduce petroleum dependency
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Main Design Elements of LCFS
Fuel Neutral - Promotes all low carbon fuels Life Cycle Accounting - Ranks fuels with Carbon Intensity
(CI) scores according to the greenhouse gas emissions resulting from each fuel’s production and consumption
Flexible - Regulated parties can comply by:Innovating to reduce the CI of their fuels, Buying lower-CI fuels from other producers, orTrading credits
LCFS Rule: https://www.arb.ca.gov/regact/2015/lcfs2015/lcfsfinalregorder.pdf
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-2.6%
-2%
-3.5%
-5%
-7.5%
-10%-10.0
-9.0
-8.0
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.02011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Perc
ent R
educ
tion
in C
arbo
n In
tens
ity
Historic Compliance Targets
Historic Reported % CI Reduction
Future Compliance Targets
How Does LCFS Work?9
Fuels above standard generate deficits
Fuels below standard generate credits
Program continues post-2020 @ to-be-determined stringency
LCFS Credits Continue to Exceed Deficits in Every Quarter, Leading to a Growing Bank
10
LCFS Credit Price History
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
$0
$20
$40
$60
$80
$100
$120
$140
J2013
FMAMJ JASOND J2014
FMAMJ JASOND J2015
FMAMJ JASOND J2016
FMAMJ JASOND J2017
FMA
Volu
me
Tran
sact
ed (m
etric
tons
CO
2e)
Cre
dit P
rice
($/M
etric
Ton
)
Volume of Credits Transacted (MT)ARB Monthly Average Credit PriceArgus Media Monthly Index Credit PriceOPIS Monthly Average Credit Price
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LCFS Supports Growth in Low Carbon Fuels
Renewable diesel grew from less than 2 million to 247 million gallons per year
Biodiesel grew from 12 million to 163 million gallons per year
Renewable natural gas use in vehicles grew from 2 million to 87 million diesel gallons equivalent – now makes up over 60 percent of all gaseous fuels used in Californian vehicles
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0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016
Mill
on G
allo
n Eq
uiva
lent
s (G
GE)
Biodiesel
Renewable Diesel
Biomethane
Sources of Credits Are Evolving
Carbon intensity of each fuel is decreasing to remain competitive as more low-carbon alternatives emerge (more credits per unit of fuel)
Diesel substitutes continue strong credit growth
Electricity emerging as a significant contributor
Indirect land use change adjustments increased ethanol credits in 2016 (but also made the gasoline pool baseline more stringent)
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0
1
2
3
4
5
6
7
8
9
10
2011 2012 2013 2014 2015 2016M
illio
n M
etric
Ton
s (M
T)
EthanolBiodieselRenewable DieselBiomethaneElectricity
Conclusions
LCFS remains California’s key climate program for transportation fuels through 2030
More stringent CI targets (current proposal is 18% CI reduction by 2030)
Credit integrity = continued market stability, certainty, and investments
Credit sources are evolving International feedstocks play increasingly important role Verification enhances LCFS Continued dialogue with stakeholders needed (e.g., role of
certification systems)
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LCFS Third-party VerificationUrsula Lai, Air Pollution Specialist, Substance Evaluation Section, CARBISCC Regional Stakeholder Committee North AmericaLas Vegas, NV (USA)December 5, 2017
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Scope of LCFS Verification Program
Mandatory for LCFS participants starting in 2019 Third-party verification is intended to supplement CARB’s staff work Entities subject to verification (Frequency) include:
Entities submitting a fuel pathway application and those generating site-specific CI data (One-time) and annually thereafter to maintain certification of fuel pathways
Entities reporting liquid fuels, and entities reporting natural gas, propane, and hydrogen fueling (Annually)
Entities reporting crude oil volumes (Annually)
Entities submitting project data (Flexible)
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Scope of LCFS Verification Program
Verification services would include: Site visit to fuel production facility (or locations where site-specific CI
data is generated), location of data management, location of project for project reports, and risk-based site visits to specified source feedstock suppliers
Facility-wide material balance
Verifier calculation (CA-GREET) of CI using verified data, as applicable
Interview with key personnel, review of data management systems, data capture systems, accounting practices, FPC allocation methodology, and supporting evidence for CI and fuel quantity reports
Verifiers providing LCFS services must be able to conduct validations and verifications of all report types
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CARB accreditation process for Verification Bodies
Modeled after MRR Application submittal
CARB Training and examination
Accreditation with re-accreditation required every 3 years
CARB accredited VBs and Lead Verifiers are then subject to CARB’s oversight program
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Initial Thoughts on Verification Structure19
California Air Resources Board
Certification Systems
Certification Bodies
Accreditation Schemes
Surveillance
Accreditation andOversight
Selection and Oversight
Accreditation andSurveillance
Point of Origin
First Collection
Point
Trader/Storage
Fuel Production
FacilityImporter Marketer/
Blender Exporter
Completes full LCFS verification or portion of supply chain
Surveillance
CooperationContracts
Verification Bodies
Staff continues to explore different ways Certification System’s can participate20
California Air Resources Board
Certification Systems
Certification Bodies
Accreditation Schemes
Surveillance
Accreditation andOversight
Selection and Oversight
Accreditation andSurveillance
Point of Origin
First Collection
Point
Trader/Storage
Fuel Production
FacilityImporter Marketer/
Blender Exporter
Completes full LCFS verification or portion of supply chain
Surveillance
CooperationContracts
Verification Bodies
Selection Criteria for Certification Systems
Recognition by the European Union Renewable Energy Directive (EU RED)
Multi-stakeholder process for vetting of additional requirements
Transparency demonstration
Auditor training program
Oversight program
Grievance mechanism
Sanction mechanism for fuel production facility operators, imports, feedstock suppliers, and certification bodies
Capabilities to perform full supply chain certification from point of origin to fuel production facility to importer
Policies and mechanisms to monitor and prevent conflict of interest (COI) between members of the system, audited entities, and members of the certification bodies
21
Verification Timelines
Two Board hearings in 2018; 2019 Implementation Implementation Timing:
CARB plans to conduct verifier training and accreditation in 2019
First third-party validations in 2019
First third-party verifications in 2020
A verification statement must be submitted to the Executive Officer annually by August 31 for each report subject to verification
Existing FPCs need to have their certification renewed in 2019 to reflect updates to the CA-GREET
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Join the LCFS email list to receive meeting invitation and posting announcementshttps://public.govdelivery.com/accounts/CARB/subscriber/new?topic_id=lcfs
Draft Regulationhttps://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/092217_draftregtext.pdf
White Paperhttps://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/verification_whitepaper_102116.pdf
Concept Paperhttps://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/080717conceptpaper.pdf
Thank You!23
Contact
Floyd Vergara, Esq., P.E.Chief, Industrial Strategies DivisionCalifornia Air Resources [email protected](916) 324-0356
Ursula Lai, M.S.Air Pollution SpecialistSubstance Evaluation SectionIndustrial Strategies [email protected](916) 323-2790
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