Summary:California's Low Carbon Fuel Standard is designed to stabilize fuel prices and improve the state's air quality. The net effect the LCFS will have on California—and potentially other states—is yet unknown.
The Supreme Court on June 30, 2014, declined to review California’s Low Carbon Fuel Standard (LCFS). The LCFS had previously been found unconstitutional by the U.S. District Court in Fresno but later upheld by the U.S Court of Appeals for the Ninth Circuit. Big oil companies and corn-ethanol producers—seeking a reversal of the Ninth Circuit’s decision upholding the standard—filed petitions to the Supreme Court.
The Low Carbon Fuel Standard was established by Gov. Arnold Schwarzenegger’s executive order on Jan. 18, 2007, as part of California’s landmark climate change law, AB32. The main purpose of a low-carbon fuel standard is to decrease carbon dioxide emissions associated with fuel-powered vehicles while considering the entire life cycle—“well to wheels”—in order to reduce the carbon footprint of transportation. These standards were designed to reduce unhealthy air pollution, protect the environment, and strengthen the state’s clean energy economy. The LCFS utilizes a market-based cap and trade approach in order to lower greenhouse gas (GHG) emissions from petroleum-based transportation fuels such as diesel and reformulated gasoline. Producers of these petroleum-based fuels are required to reduce the carbon intensity of their products, beginning with a quarter of a percent in 2011 and culminating in a 10 percent total reduction in 2020.
California’s Low Carbon Fuel Standard allows providers (petroleum importers, refiners and wholesalers) to either develop their own low-carbon fuel products or buy LCFS credits from other companies that develop and sell low-carbon alternative fuels, such as biofuels, electricity, natural gas or hydrogen. As a significant aspect of California’s groundbreaking climate change laws, the LCFS is designed to help the economy by stabilizing fuel prices and improving California’s air quality, reducing serious health impacts like heart and lung diseases caused by air pollution.
In upholding the constitutionality of the LCFS, the Ninth Circuit Court of Appeals said, “California should be encouraged to continue and to expand its efforts to find a workable solution to lower carbon emissions, or to slow their rise. If no such solution is found, California residents and people worldwide will suffer great harm. We will not at the outset block California from developing this innovative, nondiscriminatory regulation to impede global warming.”
The LCFS has been in effect for almost three years. The net effect the policy will have on California or other states in the future is yet unknown. But California, following the Supreme Court’s decision, will continue to have the opportunity to test the effectiveness of this state policy tool in its fight to mitigate climate change.