University of California Institute of Transportation Studies

The Low Carbon Fuel Standard (LCFS) plays a critical role in California’s efforts to reduce greenhouse gas (GHG) and air pollutant emissions from transportation. The LCFS incentivizes the use of fuels with lower life cycle GHG emissions by using a credit market mechanism to provide incentives for low-carbon fuels, using revenue generated by charges applied to high-carbon ones. Maintaining an approximate balance between LCFS credit and deficit supplies helps support a stable LCFS credit price and the broader transition to low-carbon transportation. The Fuel Portfolio Scenario Model, presented here, evaluates bottom-up fuel supply and LCFS compliance to inform LCFS policy decisions. We considered two key fuel demand scenarios: (1) the Low Carbon Transportation scenario, reflecting the expected transition to low-carbon transportation in California over the next 15 years, and (2) the Driving to Zero scenario, featuring a significantly higher consumption of petroleum gasoline. In both scenarios, 2030 LCFS targets around 30% resulted in a near-balance between credits and deficits, with some banked credits remaining. Several additional scenarios were modeled to explore the impact of target trajectory timing, alternate post-2030 targets, greater biofuel use, and other parameters. This fuel portfolio scenario modeling work can meaningfully inform policy development.