Institute of Transportation Studies ◦ University of California, Davis 

1605 Tilia Street ◦ Davis, California 95616 

PHONE (530) 752-6548 ◦ FAX (530) 752-6572 

www.its.ucdavis.edu

Research Report – UCD-ITS-RR-15-07 

Status Review of California’s 

Low Carbon Fuel Standard 

April 2015 Issue 

(REVISED VERSION) 

Sonia Yeh 

Julie Witcover 

James Bushnell 
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

1

Status Review of California’s Low Carbon Fuel 

Standard

Sonia Yeh (slyeh@ucdavis.edu)

*

, Julie Witcover (jwitcover@ucdavis.edu)

* and Jim Bushnell+

* Institute of Transportation Studies, University of California, Davis + Department of Economics, University of California, Davis 

April 2015 (Revised version)1

Highlights

• Lifecycle transportation greenhouse gas (GHG) emissions are subject to regulation under the LCFS. 

GHG emissions from refineries and combustion of on-road fuels like motor gasoline, diesel, and 

natural gas are also included in the multi-sector Cap-and-Trade Program. 

• By the end of 2014, regulated parties had generated 67 percent more credits than deficits (i.e., 67

percent over compliance needs), a surplus most likely caused by the temporary freeze of the program

due to litigation. 

• The reported average fuel carbon intensity (AFCI) of all alternative fuels included in the program 

declined 15 percent from 86.4 gCO2e/MJ the first year of the program (2011), to 73.5 gCO2e/MJ in 

2014.

• In-state production accounted for an average of 18 percent of the near 1 billion gasoline gallon 

equivalents (gge) of California ethanol consumption in 2011 – 2013, and roughly 30 percent of the 88 

million gge of California biodiesel consumption in 2013. 

• An estimated 115,000 plug-in electric vehicles (PEVs) were on the road in California by the end of 

2014. We estimate electric vehicle miles traveled (eVMT) for 2014 at 698 million miles, representing 

electricity consumption of 232 gigawatt-hours (GWh), or about 7 million gge. LCFS data on 2014 

transportation electricity is currently 3.95 million gge based on a partial accounting of the year’s nonmetered residential PEV charging. Full data accounting is expected later this year. 

• The LCFS credit price provides an indication of expected compliance cost. It remained around $20–

$25 per credit from the second half of 2014 through early 2015. This price translates to roughly onethird of one cent per gallon of gasoline used for blending in 2014.

• In early January 2015, the gap between retail gasoline prices in California and the neighboring states 

of Arizona and Nevada increased, consistent with an assumption of nearly full pass-through of 

allowance prices of the Cap-and-Trade Program. 

• The California Air Resources Board is expected to vote on re-adoption of the LCFS in July 2015 in 

response to a ruling by California Court of Appeal’s Fifth Appellate District. Re-adoption would 

likely involve a new compliance schedule to 2020, a credit price cap plus provisions for limited 

deficit rollover under special circumstances, adjustments in carbon intensity ratings including indirect 

land use change (ILUC), and a streamlining of fuel pathway certification. 

• In Oregon, Senate Bill 324 became law, allowing continued implementation of that state’s Clean 

Fuels Program requiring a 10 percent reduction of GHG intensity from state transportation fuels over 

a 10-year period. 

 1 Revised on May 20, 2015 to correct for units in Figure 6.
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

2

Introduction

The Low Carbon Fuel Standard (LCFS) is an 

integral part of the overall strategy to reduce 

greenhouse gas (GHG) emissions in California. 

Administered by the California Air Resources 

Board (ARB), it sets an increasingly stringent

carbon intensity standard (measured in gCO2e/MJ) 

that limits the total lifecycle GHG emissions 

intensity from the transportation sector. 

In addition to the LCFS, starting on January 1, 

2015, GHG emissions from on-road transportation 

fuels including gasoline, diesel and natural gas

became covered under the state’s Cap-and-Trade 

Program, which sets caps for emissions from a 

broad range of sectors throughout the state 

economy. More about the Cap-and-Trade Program 

appears in Section 5.

To meet the LCFS, regulated parties can supply

low-carbon fuels to generate credits, purchase

LCFS credits generated by other producers of lowcarbon fuels, or both. The standard requires a 

reduction of 1 percent in GHG emissions intensity 

(or carbon intensity, CI) for gasoline and diesel 

fuel pools in 2015 from 2010 levels, and of 10

percent in 2020. Credits can be banked for use 

later, allowing over compliance in early years to 

aid compliance as the standard grows more 

stringent. The standard has remained at 1 percent

reduction since 2013 due to a court ruling (see 

Section 6), and is expected to be at 2 percent

reduction in 2016 after a formal re-adoption of the 

rule by the ARB in July 2015. 

This issue reviews LCFS compliance metrics from 

2011 through 2014: credits and deficits generated

and transport fuel energy (Section 1), fuel carbon 

intensity (Section 2), and credit trading and prices

(Section 3). We take a special look at California 

in-state biofuel production and consumption

(Section 4), and revisit fuel price impacts of the 

LCFS and the Cap-and-Trade Program, and 

interactive effects of the two (Section 5). We also 

briefly summarize the proposed changes in the 

LCFS re-adoption (Section 6).

1. Credits and Deficits

By the end of 2014, regulated parties had 

generated a total of 10.8 million LCFS credits and 

6.5 million deficits (Figure 1) under the program. 

LCFS credits and deficits are generated based on 

emissions below or above the annual standard,

respectively; credits can be traded or banked for 

later use. Each credit or deficit represents 1 MT 

CO2e. More “net” credits (credits minus deficits) 

per quarter were accumulated in the second half of 

2013 and in 2014 than in previous quarters (green 

line, Figure 1). Total credits generated so far are 

67 percent more than needed to cover deficits 

generated (i.e., beyond compliance targets to date). 

Net cumulative credits (the area under the green 

line, and shown by the red line, right axis) totaled 

4.34 million through the end of 2014. 

Figure 1. California LCFS carbon credits and 

deficits generated per quarter. Also shown are net 

credits per quarter (green line) and cumulative net 

credits (red line) on the secondary y-axis. Source: ARB 

(2015b)

The emission reduction between program baseline

levels and the standard is 5.82 million tonnes CO2e 

from 2011–2014. 1Due to over compliance, the 

reported total emission reduction was 10.2 million 

tonnes below baseline emissions from 2011–2014. 

In this review period (2011–2014), biofuels 

accounted for the majority of the credits generated 

(87 percent) (Figure 2). Ethanol accounted for 57

percent of credits, while biodiesel and renewable 

diesel together accounted for 30 percent of the 

total. Fossil-based natural gas including 

compressed natural gas (CNG) and liquefied 

natural gas (LNG) accounted for 8 percent. Biogas 

and electricity accounted for 3 percent and 2

percent of the total, respectively. The 2014 

Credits

Deficits

Net credits 

Cumulative net credits 

LCFS credits (x1000 metric tons CO2e)

0

2

4

6

8

10

12×105

Cumulative excess credits (000 MT)

0

5

10

15

20

25

30

35

40

45×105

2011 Q2 Q3 Q42012 Q2 Q3 Q42013 Q2 Q3 Q42014Q2 Q3 Q4
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

3

transportation electricity use reported in the LCFS 

program does not include the 3rd and 4th quarters’

non-metered residential charging data. These 

credit shortfalls will be fully accounted in future 

LCFS updates.2 Thus, reported credit balances and 

proportions of credits generated for the 3rd and 4th

quarters will be readjusted in ARB future updates.

Figure 2. Total net LCFS credits by fuel type per

quarter: number of credits (top) and percentage 

shares (bottom). Electricity credits for 2014 Q3 and 

Q4 will be re-adjusted in future updates. Source: ARB 

(2015b).

Among biofuels (here including liquid fuels and 

biogas), credits generated from ethanol contributed 

90 percent in 2011 and 54 percent in 2014. 

Renewable diesel and biodiesel (the latter almost 

entirely from byproduct or waste feedstocks such 

as tallow and used cooking oil) increased from 9

percent in 2011 to 42 percent in 2014 (Figure 3). 

Less than 0.4 percent of ethanol used in 2014 was 

from Brazilian sugarcane. 

Figure 3. LCFS net credits (%) by biofuel feedstock. 

“Corn+” pathways include fuels using mixed 

feedstocks: corn, wheat slurry, and sorghum. “BD oil 

seed” includes biodiesel from soy and canola. “BD/RD 

byproducts” includes biodiesel and renewable diesel

from used cooking oil, tallow and corn oil. “Other 

ethanol” includes ethanol from molasses and waste 

beverage. Source: ARB (2015b)

Alternative fuels contributed 6.2 percent of 

California’s transportation fuels by energy content 

reported under the LCFS for 2011 and 2012 and 

7.2 percent in 2014 (Table 1). Transportation 

electricity use in the LCFS was reported as 3.95 

million gasoline gallon equivalents (gge) in 2014 

(Table 1). This translates to 131 GWh or 395 

million electric miles traveled (eVMT), assuming 

the efficiency of electric miles was 100 miles-pergallon (mpg) on average. Full accounting of nonmetered residential charging credits generated in 

2014 Q3 and Q4 (and upward adjustment of the 

year’s transportation electricity use under the 

program) are expected after the utilities submit 

their annual reports (due April 30).

In collaboration with UC Davis Institute of 

Transportation Studies Plug-in Hybrid & Electric 

Vehicle Research Center experts, we estimate 

eVMT for 2014 was 698 million miles or about 7 

million gge, 77 percent higher than the reported 

volumes. The estimate is based on the number of 

battery electric vehicles (BEVs) and plug-in 

hybrid electric vehicles (PHEVs) on the road in 

California and an estimate of their average annual 

eVMT. PEVs in California grew from about 

60,000 at the beginning of 2014 to 115,000 at the 

Electricity

Fossil NG

Biogas

Renewable Diesel

Biodiesel

Ethanol

LCFS credits (x1000 metric tons CO2e)

0

2

4

6

8

10

12×105

2011 Q3 2012 Q3 2013 Q3 2014 Q3

LCFS Credits

Percentage

0

10

20

30

40

50

60

70

80

90

100

2011 Q3 2012 Q3 2013 Q3 2014 Q3

LCFS Credits (%)

Biogas

BD/RD-Waste

BD-oil seed

Ethanol-other

Sorghum Ethanol

Cane Ethanol

Corn+

Corn Ethanol

Percentage

0

20

40

60

80

100

2011 Q3 2012 Q3 2013 Q3 2014 Q3

Credits by Feedstock Type
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

4

end of the year. The fleet composition was 55

percent BEV, 15 percent PHEV10 (with a 10-mile 

electric range, i.e., vehicle that can be driven 

solely by an electric motor for 10 miles without 

consuming gasoline), 9 percent PHEV20, and 20

percent PHEV40.3 The average annual eVMT was 

estimated at 2,910 miles for PHEV10; 4,203 miles 

for PHEV20; 9,112 miles for PHEV40 and 9,642 

miles for BEVs, based on data collected nationally 

from 21,600 vehicles. The national data came 

from eight PEV models tracked between 2011 and 

2013.4 The total 2014 eVMT is estimated to be 

around 698 million miles.5

Table 1. Total transportation energy use reported in California’s LCFS program (million gge).

2011 2012 2013 2014

CARBOB (gasoline) 12,948 13,089 12,788 13,064

ULSD (ultra-low sulfur diesel) 3,905 4,026 3,802 3,823 

Ethanol 1,015 1,006 1,009 1,011 

Biodiesel 13.95 22.45 88.20 85.47 

Renewable diesel 1.97 9.56 106.50 115.44 

CNG/LNG 82.41 94.84 100.98 91.79

Biogas 1.77 1.79 11.51 23.79 

Electricity 0.36 1.27 3.49 3.95*

Total 17,968 18,250 17,910 18,219*

Alt Fuel 1,115 1,136 1,319 1,331*

Alt Fuel (percent of total energy) 6.2% 6.2% 7.4% 7.3%*

Non-biofuel portion of alt fuel 7.6% 8.6% 8.8% 8.2%*

* The 2014 transportation electricity use reported in the LCFS program does not include the 3rd and 4th quarters’

non-metered residential charging data. These credit shortfalls will be fully accounted in future LCFS updates.

Values are not adjusted using energy efficiency ratios (EER), which capture on-road efficiency of the vehicle using 

the fuel relative to a conventional internal combustion engine, and are used by ARB to calculate program credits.

Source: ARB (2015b)

2. Carbon Intensity of Fuels

The reported average fuel carbon intensity (AFCI) 

of all alternative fuels included in the program

declined from 86.4 gCO2e/MJ in the program’s 

first year (2011), to 73.5 gCO2e/MJ in 2014, a 15

percent reduction (Figure 4).

As of March 2015, the LCFS program included a

list of 286 available transportation fuel pathways 

(plus the two reference fuels), with each listed 

fuel’s carbon intensity. Of that number, 53 were 

from ARB and 233 were submitted by regulated 

parties. 6 For biofuels, 368 physical routes to 

California originating in 170 individual facilities 

were registered and approved.7 Figure 5 shows 

ranges of CI ratings for available pathways and 

“pathways in use” for biofuels (from ARB data on 

registered and approved physical routes and 

facilities, applicable only to biofuels). It also 

shows average CIs used for each fuel pathway 

category (for biofuels, the average of individual 

pathways in use as just described; for other fuels, 

based on CI information depicted in Figure 4).

Figure 4. Average fuel carbon intensities (AFCI) of 

gasoline, diesel and alternative fuels. Source: ARB 

(2015b)

ULSD

Ethanol

Fossil NG

Biogas

Electricity

Bio/renewable diesel

All alt fuels

CARBOB

Fuel Carbon Intensity (gCO2e/MJ)

10

20

30

40

50

60

70

80

90

100

110

2011 Q3 2012 Q3 2013 Q3 2014 Q3
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

5

Figure 5. Carbon intensity (CI) ratings of feedstock/fuel combinations in California’s LCFS as of March 

2015. White circles represent reference fuel values currently used for California Reformulated Gasoline Blendstock 

for Oxygenate Blending (CARBOB) and Ultra-Low Sulfur Diesel (ULSD) pathways calculated accounting for 

country of crude oil origin. Dark blue bars represent ARB-derived ratings (pathway defaults). Light blue bars 

represent pathways submitted by regulated parties (via Methods 2A and 2B). Green bars, relevant just for biofuels, 

represent pathways with physical routes established in the program. Green circles represent average CI ratings for 

biofuel pathways in use (not weighted by fuel volume). Yellow circles show average CI ratings for non-biofuel 

pathways calculated from ARB data (displayed in Figure 4). Submitted values can be higher than defaults for a 

particular feedstock/fuel combination due to differences in technologies used. CI values are adjusted using the 

regulatory energy efficiency ratios (EERs) of 3.4 for electricity and 2.5 for hydrogen. “BD/RD byprod” is biodiesel 

and renewable diesel from animal fat or used cooking oil. “BD/RD veg oil” is biodiesel and renewable diesel from 

soy, canola, or corn oil. “Grain mix” ethanol pathways include corn/sorghum, corn/sorghum/wheat mixes. “Other 

ethanol” uses as feedstocks sorghum, molasses, waste beverages, or agricultural residue. Sources: ARB (2012, 

2014b, 2015a).

3. Credit Trading and Credit Prices

LCFS credits are used to meet program 

compliance; they can be generated, bought, or sold 

by regulated parties as well as banked for 

compliance in future years. ARB is not involved 

with LCFS credit sales; however, transfers of 

credits must be reported to ARB (price reporting is 

optional). The number of LCFS credits traded 

increased by just over 90 percent from 2013 to 

2014 (Figure 6). The credit market participation 

rate (number of regulated parties who sold, 

bought, or both sold and bought credits) through 

February 2015 was around 60 percent (of 176

regulated parties). Figure 6. LCFS credits generated and traded per 

quarter. Source: ARB (2014-2015)

CARBOB

Corn ethanol 

Sugarcane ethanol

Grain mix ethanol

Other ethanol 

Electricity

Hydrogen 

ULSD 

BD/RD veg oil

BD/RD byprod

CNG/LNG 

Biogas 

ARB Defaults

Submitted Pathways

Pathways in Use

Fuel Pathways

EER Adjusted Carbon Intensity (gCO2e/MJ)

−30 −20 −10 0 10 20 30 40 50 60 70 80 90 100 110 120 130

Credits generated

Traded credits

LCFS credits (MTs CO2e), millions

0

0.2

0.4

0.6

0.8

1.0

1.2

2011 Q3 2012 Q3 2013 Q3 2014 Q3Q4
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

6

The LCFS credit price fluctuated between $15 and 

$80/credit in 2013 and 2014 (left axis, Figure 7). 

The range of credit prices reported to ARB 

narrowed considerably in August through 

December 2014, and averaged around $20–$25 

per credit in the second half of 2014. This 

translates to cost for unblended gasoline in 2014 of

roughly one-third of one cent per gallon (right 

axis, Figure 7). The fuel price impacts of the 

LCFS are discussed in more detail in Section 5. 

LCFS credit prices reflect the gap in cost between 

conventional fuels and low-carbon fuels needed to 

comply with the policy (more exactly, the cost of 

the last gallon of low-carbon fuels needed for 

compliance). Because LCFS credits are bankable, 

the current credit price should also reflect future 

expected compliance costs as assessed by the 

market. The expectation likely also incorporates 

uncertainties, including proposed changes in the 

re-adoption package that will affect the standard’s 

stringency and program carbon intensity ratings 

(hence the credits fuel pathways can generate).

Figure 7. Range and average LCFS credit prices 

reported to ARB (left axis), translated into cost to 

unblended gasoline (right axis). Source: ARB (2014-

2015; 2015b)

ARB began monthly reports on LCFS credit 

market data in 2014. Other sources also provide 

credit trade and price information: Oil Price 

Information Service (OPIS) reports on daily 

bid/ask spreads; Progressive Fuels Limited (PFL), 

an independent broker in physical biofuel 

wholesale markets, compiles similar information 

in a daily market report; and Argus (Argus Media 

Limited) reports information on transactions. In 

previous Status Reviews, we found gaps between 

the media reports on credit prices (PFL, Argus and 

OPIS) and prices reported to ARB. Gaps in 

average prices narrowed starting in July 2014.

4. California In-state Biofuel Production and 

Consumption

California ethanol use increased markedly from 

2000–2014, to about one billion gge. In-state 

ethanol production averaged 8 percent of 

consumption from 2000–2010, and about 18 

percent from 2011–2013 (Figure 8) (EIA 2014a, 

2014b; CEC 2012 and Government of Nebraska 

2014).8 California consumed about 88 million gge 

biodiesel in 2013 (ARB 2015b), and produces 

roughly 30 percent of the state’s biodiesel 

consumption (CEC 2014). Data on in-state biofuel 

production, particularly biodiesel and renewable 

diesel, lacks a consistent source. Of registered 

physical pathways for biofuels (“pathways in use,” 

Section 2), 7.5 percent are California based. We 

will revisit this topic in a future issue.

Figure 8. Consumption and production of biofuel in 

California by fuel type from 1995–2013.

9

Price: CARB (High, Low) 

Price: CARB- Average

2013 2014 2015

LCFS credit price ($/credit)

0

10

20

30

40

50

60

70

80

Carbon cost to unblended gasoline (cents/gal)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Jan Jul Jan Jul Jan

LCFS Credit Prices

Ethanol production 

Ethanol consumption 

Biodiesel consumption

Renewable diesel consumption

Biodiesel production

Million gallons gasoline-eq

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

2000 2005 2010
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

7

5. Impacts of LCFS and Cap-and-Trade on 

Fuel Prices and the Interactive Effects

This section discusses the individual effects of the 

Cap-and-Trade and LCFS programs on California 

fuels markets and potential interactions of the two.

The Cap-and-Trade Program and LCFS are 

separate regulations, and there is no trading of 

compliance credits between the two.10 The Capand-Trade Program’s Phase I compliance period 

(effective January 1, 2013) placed a cap on GHG 

emissions from large electricity providers and 

large industrial sources in the state, including 

refineries. As stated above, starting January 1, 

2015, GHG emissions from on-road transportation 

fuels including gasoline, diesel and natural gas 

came under the state’s Cap-and-Trade Program, 

which exempts biofuels carbon emissions. In 

contrast, LCFS covers the lifecycle GHG 

emissions (both combustion and non-combustion 

emissions) of all on-road transportation fuels in 

the program whether the emissions occur inside or 

outside the state. 

LCFS is revenue-neutral through crosssubsidies and its ultimate cost depends on the 

fuel mix; Cap-and-Trade can raise revenue and 

adds costs to covered fuels. Since the LCFS adds 

to the cost of fuels with CI above the standard 

(such as gasoline and diesel) and reduces the cost 

of fuels with CI below the standard, the program 

involves a transfer from high to low CI fuel 

producers. The overall cost of compliance is 

determined by any additional cost from alternative 

fuels needed to assure compliance. The LCFS 

credit price will be set by the marginal cost of 

bringing the last unit of low-carbon fuel to meet 

compliance. 

The Cap-and-Trade Program, on the other hand, 

adds a cost to each tonne of CO2e combusted from 

gasoline, diesel and natural gas (Yeh and 

Witcover, 2014). Under the Cap-and-Trade 

Program, California refineries are among several 

industries that receive free allowances; these 

allowances are unlikely to have price impacts on 

fuels. 11 In both the first (2013-2014) and the 

second compliance period (started on January 1, 

2015), the refineries received allowance 

allocations at 100 percent of their expected 

emissions.12 

Figure 9. Daily average regular gasoline prices in 

California, Nevada and Arizona, top panel. The 

bottom panel shows daily average price gaps between 

California and Arizona, and California and Nevada for 

several months prior to and after January 1, 2015.

Since January 2015, California gasoline prices 

have diverged from neighboring states for a 

variety of reasons, including a refinery accident at 

the ExxonMobil facility in Torrance on February 

18, 2015. It is difficult to deconstruct all the 

causes of the California gasoline price premium. 

Since January 1, 2015, when transport fossil fuels 

were included under the cap, Cap-and-Trade 

allowance prices have been reported at or near 

their floor price of around $12.50 per allowance. 

Under an assumption of full pass-through of that 

cost onto fuel price, the impact that Cap-and-Trade 

would have on unblended gasoline is around 10 

cents per gallon, or about 9 cents per gallon of 

E10—10 percent ethanol and 90 percent 

gasoline—blended fuel. A narrow focus on the 

period surrounding January 1st indicates that a gap 

of roughly 10–20 cents per gallon for California 

gasoline above the typical price gap between 

California and its neighboring states13 opened up 

in the first four weeks of the year (Figure 9). 

While we did not perform any statistical analysis, 

CA Avg

NV Avg

AZ Avg

CA-AZ

CA-NV 

Price gap ($/gallon)

0

0.5

1.0

Gas price ($/gallon)

2.0

2.5

3.0

3.5

Nov Dec Jan Feb Mar Apr

2014 - 2015

Daily Average Gas Prices (Regular Gasoline)
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

8

the gap is consistent with an assumption of full 

pass-through of allowance prices. 

The impact of LCFS and Cap-and-Trade on 

fuel prices is likely to be additive. At current 

levels of LCFS credit price and Cap-and-Trade 

allowance price, the interactive effect of the two 

policies is likely to be low. A good approximation 

of the combined effect of the two policies is 

simply the two individual impacts added together 

(Yeh and Witcover, 2014). The interactive effect 

of the two policies could be much higher around 

the boundary conditions (i.e., when the 

credit/allowance prices of one or both programs 

are high)(Lade and Lin, 2013). If LCFS 

compliance results in a substantial shift in the 

market share of biofuels, this will reduce 

emissions under the cap and start to reduce 

allowance prices as well as the share of fuels with 

emissions that require allowances.

In light of the cost containment mechanisms in 

place for the Cap-and-Trade Program (a $40–

$50/ton price reserve) and expected to go into 

effect next year for the LCFS (a proposed credit 

clearance market price of $200/credit 14 ) the 

interactive effects of the two programs are likely 

to be small at current levels of allowance/credit 

prices. Nevertheless, they should continue to be 

monitored. 

The impact on fuel prices is likely to be 100 

percent passed through. The impacts of the 

LCFS and Cap-and-Trade on fuel prices depend 

on two things: (1) the relative elasticity of fuel 

supply (i.e., the availability of fuel in response to 

price changes); and (2) consumer responsiveness 

to fuel price changes. Given that supplies of 

gasoline and diesel are fairly elastic (do respond to 

price changes), the supply elasticity of low-carbon 

fuels (how much will be available with a high 

price) is likely to determine the fuel price on the 

margin. Since consumer demand is relatively 

inelastic to fuel price changes (consumers are not 

so responsive to fuel price changes), any added 

fuel cost due to the programs is likely to be passed 

through to consumers. Note that prices of some 

low-carbon fuels including electricity and fossil 

natural gas are much lower than gasoline and 

diesel; consumers of these alternative fuels pay 

lower fuel prices compared to gasoline and diesel 

fuel consumers, and may also benefit from 

lowered cost due to LCFS credits earned by the 

fuels.

6. Court Cases Involving the LCFS and the 

Recent Proposal for Rulemaking

In July 2013, the California Court of Appeal’s 

Fifth Appellate District ruled that the LCFS could 

remain in effect while ARB corrects certain 

procedural aspects of the original standard, and readopts the program (Figure 10). Due to this ruling, 

the Standard’s 2013 CI reduction level of 1 

percent will remain in effect for 2014 and 2015 

until the regulation is re-adopted with the 

procedural correctives. The Board is expected to 

decide on the re-adoption in July 2015. Program 

amendments under consideration during the readoption would take effect in 2016 and include: 

• Credit clearance provision that effectively sets 

a $200 cap on credit price and, in any year of 

system-wide credit shortage, allows deficits to 

roll over (with interest) for a period of time;15

• Credit generation by refineries that reduce 

GHG emissions through capital investments or 

use of renewable feedstocks to produce 

gasoline or diesel, and by crude oil producers 

that reduce GHG emissions through the use of 

innovative technologies (and supply crudes to 

California refineries); 

• Modification of compliance curves (the 

proposal maintains the 10 percent target for 

2020);

• Streamlined two-tiered fuel pathway 

certification system that separates 

conventional fuel pathways and advanced, 

innovative fuel pathways;

• Revised indirect land use change (ILUC) 

values for most crop-based feedstocks (lower) 

and fuel lifecycle carbon intensity ratings 

(slightly higher for gasoline and diesel), and 

updated tools for lifecycle analysis; 

• Credit generation from certain off-road 

transportation fuel uses. 
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

9

Figure 10. Major court decisions on LCFS cases.

Acknowledgement

We appreciate the editorial support provided by 

Jamie Knapp and Stephen Kulieke. We 

acknowledge Geoff Morrison for compiling 

historical data on California biofuel production 

and use (Section 4), and Gil Tal for the estimates 

of eVMT (Section 1). The financial support of the 

report comes from Sustainable Transportation 

Energy Pathways (STEPS) Program; the analysis 

and preparation of this report are ours. 

References

ARB (2012). Low Carbon Fuel Standard Program -

LCFS Lookup Tables as of December 2012. 

http://www.arb.ca.gov/fuels/lcfs/lu_tables_11282

012.pdf.

ARB (2014a). Low Carbon Fuel Standard Program -

LRT Registered Parties. 

http://www.arb.ca.gov/fuels/lcfs/regulatedpartiesr

eporting20141030.pdf

ARB (2014b). Low Carbon Fuel Standard - Method 2 

Carbon Intensity Applications. Method 2A/2B 

Applications and Internal ARB Developed 

Pathways. Summary of all Pathways Table. 

http://www.arb.ca.gov/fuels/lcfs/2a2b/112514lcfs

_apps_sum.pdf. 

ARB (2014c). Staff Report: Initial Statement of 

Reasons for Proposed Rulemaking. Proposed Readoption of the Low Carbon Fuel Standard. 

http://www.arb.ca.gov/regact/2015/lcfs2015/lcfs1

5isor.pdf

ARB (2014- 2015). Low Carbon Fuel Standard Credit 

Trading Activity Reports. Various issues.

http://www.arb.ca.gov/fuels/lcfs/lrtmonthlycreditr

eports.htm

ARB (2015a). Low Carbon Fuel Standard Program -

Carbon Intensities from Registered Facilities. 

http://www.arb.ca.gov/fuels/lcfs/reportingtool/regi

steredfacilityinfo.htm

ARB (2015b). Low Carbon Fuel Standard Reporting 

Tool Quarterly Summaries. 

http://www.arb.ca.gov/fuels/lcfs/lrtqsummaries.ht

m

California Energy Commission. 2012. Statistics and 

Data on Ethanol and E85 as Transportation Fuels. 

http://energyalmanac.ca.gov/transportation/ethano

l.html. Accessed March 2015.

California Energy Commission. 2013. 2013 Integrated 

Energy Policy Report. Publication Number: CEC100-2013-001-CMF.

http://www.energy.ca.gov/2013publications/CEC600-2013-003/CEC-600-2013-003-CMF.pdf

California Energy Commission. 2014. 2014 Integrated 

Energy Policy Update. Publication Number: 

CEC-100-2014-001-D.

http://www.energy.ca.gov/2014publications/CEC100-2014-001/CEC-100-2014-001-D.pdf

Energy Information Agency, US Department of 

Energy (EIA) (2014a). State Energy Data System 

(SEDS): 1960-2012 (Complete). California State 

Profile and Energy Estimates. June 2014 release. 

http://www.eia.gov/state/seds/seds-datacomplete.cfm?sid=CA#Production. Accessed 

March 2015.

EIA (2014b). Table F4: Fuel Ethanol Consumption 

Estimates, 2013. State Energy Data System 

(SEDS): 2013 (Updates by Energy Source).

Revised December 2014. 

2013 

Ninth Circuit Court of 

Appeal upheld the 

constitutionality of the 

LCFS 

Supreme Court denied petitions to 

review and reverse the Ninth Circuit 

Court of Appeal’s decision. 

Remanded case to lower court to 

decide whether Commerce Clause 

was violated in practice. 

2014 

California Court of Appeal held that LCFS adoption 

process violated the California Environmental Quality 

Act (CEQA) and the California Administrative 

Procedures Act. The court allowed LCFS to remain in 

effect but required ARB freeze the standard at 2013 

level until it readopted the program addressing 

procedural errors 

2015 

Expected LCFS 

Re-adoption 

2011 2012 

A federal judge found LCFS 

violated the federal 

Commerce Clause and 

granted a preliminary 

injunction against the 

implementation of California's 

LCFS 

Ninth Circuit Court of 

Appeals issued a stay of 

the injunction 
Status Review of California’s Low Carbon Fuel Standard April 2015 (Revised)

10

http://www.eia.gov/state/seds/sep_fuel/html/pdf/f

uel_use_en.pdf. Accessed March 2015.

Government of Nebraska. 2014. Ethanol Facilities 

Capacity by State and Plant. 

http://www.neo.ne.gov/statshtml/122.htm.

Accessed March 2015.

Suggested Citation

Yeh, Sonia, Julie Witcover, and James Bushnell (2015) Status Review of California’s Low Carbon Fuel 

Standard, April 2015 Issue. Institute of Transportation Studies, University of California, Davis, Research 

Report UCD-ITS-RR-15-07. 

Endnotes

 1 The calculations include the original 2010 baseline carbon intensities for gasoline and diesel and updated estimates

of 2010 baseline starting in 2013.

2 Personal communication with ARB staff. According to ARB, the lag is not expected to be a regular occurrence.

3 Based on the state’s rebate program statistics, http://energycenter.org/clean-vehicle-rebate-project/rebate-statistics 4 http://policyinstitute.ucdavis.edu/files/eVMT-analysis-results_INL-presentation_Oct2_2014.pdf 5 Sources of uncertainty in the estimate include the representativeness of national samples of eVMT estimates taken 

between 2011 and 2013 for California’s average driving of 2014. California accounts for roughly half of national 

PEV sales. The eVMT per PEV is likely to be higher in 2014 compared to previous years due to increased charging 

infrastructure and changing consumer groups from early adopters and low-VMT drivers to some portion of early 

majority consumer groups. 

6 Of these, 70 have final approval (ARB 2012), and the rest can be used as they await ARB hearings (ARB 2014b). 

As of October 2014, the LCFS had 176 regulated parties (ARB 2014a). 7 Another 209 physical pathways had been submitted with approval pending (ARB 2015a). 

8 In-state ethanol production for 2013 is not yet reported by the Department of Energy. Our estimate uses 2012 data 

from the California Energy Commission (CEC 2012), and data from the Government of Nebraska regarding 

production in 2014 (Government of Nebraska 2014). The two data sources show nearly identical operating 

production for California ethanol plants.

9 Sources: EIA (2014, 2015), Government of Nebraska 2014 for ethanol; CEC (2012) and ARB (2015b) for 

biodiesel and renewable diesel. In-state production of renewable diesel is not shown as data are not publicly 

available. The graphed data may suffer from consistency issues: there is no common data source for all the relevant 

California data (production and consumption for ethanol and biomass-based diesel, up to and including 2013). 10 The LCFS allows its program credits to be imported by other AB32 (or other) programs, subject to that program’s 

rules; thus far there are no such arrangements.

11 Allowances are compliance instruments that act as permits to emit a certain amount of carbon within the cap. 12 Expected refinery emissions are based on the total annual output of all primary products produced including 

aviation gasoline, motor gasoline, kerosene-type jet fuel, distillate fuel oil, renewable liquid fuels and asphalt. The 

formula for calculating refinery allocations was adjusted for Phase II (starting January 1, 2015). Emission 

allowances for an individual facility operator are determined by calculating the product of the output and the 

emissions benchmark for petroleum, multiplied by the cap adjustment and assistance factors. For more details, see 

http://www.arb.ca.gov/cc/capandtrade/allowanceallocation/refineryallocation.htm. 13 The observed price gap between California and Nevada averaged about 12 cents in the two months prior to Jan 1, 

2015 and 40 cents between California and Arizona. Arizona and Nevada are chosen for comparison because 

“California refiners supply most of the transportation fuels for Nevada and nearly half of the supply for Arizona.”

http://www.energy.ca.gov/2013_energypolicy/documents/2013-06-26_workshop/presentations/10_SupplyDemand%20Balances_Gordon_2013-06-24.pdf 14 See Section 6 for more on the credit clearance market. 15 The proposal sets up a ‘clearance market’ in years of apparent credit shortfall to ensure any credits on sale get 

traded (at up to the cap of $200/credit), then allows any remaining deficits a rollover term of up to 5 years; debts 

must be repaid in years where sufficient credits are on the market. The proposed noncompliance penalty is 

$1,000/credit. For this and other amendments discussed in this section, see ARB (2014c).