The Low Carbon Fuel Standard (LCFS) Program: How It Works & Its Benefits

In recent years, talks of greener sources of energy have become a hot topic. From solar panels to wind turbines, it’s becoming increasingly common to look for ways to diminish companies’ carbon footprint. And to play their part, state and federal government entities have created programs to incentivize companies to transition to more environmentally friendly ways to create energy. 

One of the most popular ones is California’s Low Carbon Fuel Standard program (LCFS). But what does it entail? What are the benefits? And how does the credit system work? 

What is the Low Carbon Fuel Standard (LCFS) Program? 

In 2009, the California Air Resources Board (CARB) implemented the Low Carbon Fuel Standard (LCFS) program, designed to reduce greenhouse gas emissions (GHG) within the transportation sector, which is responsible for 50% of GHG emissions in the state. 

Accordingly, California requires certain entities to report their greenhouse gas emissions to the California Air Resources Board (CARB). The covered entities include: 

• Fuel suppliers
• Petroleum fuel importers
• Petroleum refiners
• Petroleum wholesalers
• Biofuel refiners

Other types of entities can opt into the program to benefit from selling credits (as explained below). 

• Industrial facilities
• Electricity generators
• Electricity importers

All of their GHC data must comply with CARB’s guidance documents (which vary depending on the entity). 

Companies have to report their fuel data quarterly by using California’s Electronic Greenhouse Gas Reporting Tool. This information is then used to calculate the entities’ carbon intensity (CI) score, which measures the GHG emissions released during production, transportation, and consumption. 

Each credit represents one metric ton of CO2 (which is the highest credit value in the nation). The more efficient operations run and the lower the carbon intensity of a company’s fuels, the more credits they receive. 

The program is fuel neutral — meaning there are no specific requirements regarding the fuel type used (such as RNG, hydrogen, or ethanol), as long as you’re working to reduce CO2 emissions. 

The Benefits of the LCFS Program

Reduces Environmental Pollution

The LCFS program incentivizes the use of alternative sources of energy, with the goal of reducing greenhouse gas emissions by 20% by 2030 — and thus decreasing the state’s impact on global warming. The target percentage may be increased if the program continues being as successful as it has been since it was implemented. 

Decreases Dependence on Petroleum

Drilling and fracking contribute to land degradation and water pollution. By promoting the use of greener energy, the LCFS program also aims to reduce the widespread dependence on petroleum as a source of energy. 

Provides an Additional Source of Income

Any time an enterprise has a CI score that’s lower than the CARB targets, they generate LCFS credits. Entities that generate lower emissions than the targets established by CARB can sell their remaining balance to companies that generate more.

Increases Competition

Economists report that the LCFS will result in more fuel suppliers entering the market. This means having a wider variety of clean energy options. 

Saves Consumers Money

The same study that foresees additional market competition within the fuel industry estimates that once California reaches their goal of 20% fuel reduction, the price of transportation fuel would decrease due to less market demand. 

How to Generate LCFS Credits

There are several ways to generate credits in the Low Carbon Fuel Standard program. Each of them requires applying to participate in the program. These include: 

Fuel Pathways 

Fuel pathways crediting requires all transportation fuels to receive a carbon intensity score. The process used to determine the process to receive the score depends on the type of fuel. 

Projects

Project crediting includes any type designed to reduce GHG emissions. It takes into account life cycle emission reductions, and information must be verified before credits are issued. 

ZEV Infrastructure

Zero Emission Vehicle (ZEV) crediting is designed for entities that deploy zero emissions. It takes into account the capacity of a hydrogen station minus the fuel dispensed. 

Benefits of CHP Systems to Reduce CI Scores

An enterprise’s carbon intensity score is calculated by the overall inputs and outputs of fuel production. It takes into account the feedstock you’re using in transportation. How are you getting it to a digester facility? How much electricity and natural gas is being used? Every step along the process to create, transport, and combust fuel goes into the CI score.

Using alternative sources of energy — especially if done so using combined heat and power (CHP or cogeneration) technology — will help you reduce your CI score so that your operations can benefit from the LCFS credits. Some of the ways CHP helps you improve your CI score include: 

1. Energy Efficiency

In addition to creating electricity, combined heat and power is a technology that also captures the heat generated by it to use as thermal energy. This can be used to create steam, heat water, or cool spaces. Because it generates additional energy on its own, it significantly reduces the need for fossil fuels-generated power. 

2. Versatility

CHP systems can be used with several different types of renewable energy, including renewable natural gas (RNG), biogas, and hydrogen. They’re also compatible with traditional fossil fuels and would still lower your carbon footprint by reusing heat that would otherwise be wasted. 

3. Reduced Grid Dependency

The generator in cogeneration systems can work with an existing grid through a master PLC or be self-controlled and operated as a microgrid. Because of this, it makes your operations less dependent on traditional power grids. The benefits of this are many: energy independence, lower CI scores, and energy resilience in the case of a power outage. 

4. Lower Greenhouse Gas Emissions

Since less fuel is burned to produce energy, your operations emit fewer pollutants into the air. To calculate how much emissions you’d save from CHP, you can read the Environmental Protection Agency (EPA)’s PDF on Fuel and Carbon Dioxide Emissions Savings Calculation Methodology for Combined Heat and Power Systems.  

2G Energy CHP Systems Offer Natural Gas and Biogas Solutions

2G Energy offers a wide array of CHP solutions for renewable natural gas and biogas. We also have an extensive portfolio of successful CHP projects in the U.S., Canada, and Europe, and have installed over 6,500 systems worldwide, including those used in the Rialto Bioenergy Facility. In addition, we are the only CHP provider that offers technology that can run 100% on hydrogen. 

Contact us to learn more about how CHP technology can transform your operations and significantly reduce your long-term energy costs.