California’s expansion of its Low Carbon Fuel Standard (LCFS), projected to increase fuel costs by $162 billion through 2046, is on hold after the Office of Administrative Law (OAL) disapproved the regulation. The policy, expected to add $1.15 per gallon to gasoline prices in 2024 alone, was halted due to concerns over clarity and transparency regarding its impact on consumers.
In November, the California Air Resources Board (CARB) approved stricter emissions regulations under the LCFS. These standards operate through a system of credits and deficits, rewarding fuel producers who meet stringent “clean” benchmarks while penalizing those who do not. The plan would have generated approximately $105 billion in electric vehicle (EV) charging credits and $8 billion in hydrogen credits, primarily funded through fees on gasoline and diesel fuel.
Most of the EV credits would have benefited automakers and EV-charging network owners, rather than consumers. Even home charging systems generally allow only the manufacturer, not the individual user, to collect the credits. Additionally, the new LCFS rules would have imposed over $1 billion annually in new costs on refineries. Many refineries have already threatened to leave California due to high regulatory costs, which could lead to fuel shortages not only in California but also in Nevada and Arizona, which rely on California refineries for supply. This could force California to import more fuel, exacerbating congestion at the state’s overburdened ports.
CARB acknowledged the OAL’s decision, stating, “Today, OAL sent CARB a Notice of Disapproval of a Regulatory Action of those amendments pursuant to Government Code section 11349.3.” The board expects further details from OAL soon regarding the reasons for disapproval. Section 11349(c) defines clarity as regulations being “easily understood by those persons directly affected by them,” indicating that CARB may not have adequately explained the true costs of the LCFS expansion.
CARB has 120 days to revise and resubmit the amendments. If the required changes are merely grammatical or procedural, the policy could still move forward. However, substantive changes would necessitate another round of public comment and review.
