Answers to your LCFS FAQs
Get your questions about LCFS answered here. Check back frequently for updates. Have a question that you need answered? Contact us.
Frequently Asked Questions:
- What is the Low Carbon Fuel Standard (LCFS)?
- What is an LCFS credit?
- What kinds of vehicles can generate credits?
- How much value can I get from the program?
- How do you make money through the LCFS?
- Do projects need to be located in California to be eligible?
- Are there requirements on how the revenue from selling LCFS credits is spent?
- What kind of fuels can generate credits?
- How do you get the most out of the LCFS?
Q: What is the Low Carbon Fuel Standard (LCFS)?
A: The California LCFS is a statewide market-based policy with the goal of decarbonizing California’s transportation fuel mix. The policy requires “deficit generators” — providers of petroleum-based fuels — to purchase credits from “credit generators” — companies utilizing low carbon fuels like electricity, renewable natural gas (RNG) or renewable diesel. Many transportation-related programs are interested in how efficient a vehicle is, but the LCFS focuses on how “clean” the fuels are that are powering those vehicles and focuses on reducing the carbon intensity, or the emissions per unit of energy, of those fuels.
Q: What is an LCFS credit?
A: An LCFS credit represents a metric tonne reduction in GHG emissions. Electric charging and the use of other low carbon fuels are eligible to generate these credits. Fuel producers and importers are required to purchase these credits to offset the carbon intensive fuels they supply.
Q: What kinds of vehicles can generate credits?
A: There are a wide variety of vehicle and fuel applications that can generate credits. Any vehicle that could be using fossil fuels but is instead using a fuel with lower emissions can generate credits. Examples of electrified vehicle credit generation opportunities include:
- Battery electric and hydrogen fuel cell electric forklifts
- Passenger Cars via EV campus charging and public DC Fast Charging
- Electric buses and shuttles
- Electric Yard trucks/tractors and other off road cargo handling equipment
- Electric cargo handling equipment
- Electric cargo and delivery vans and box trucks
- Battery and hydrogen fuel cell electric medium and heavy duty trucks and tractors
- Shore powered refrigerated trailers run on electricity
3Degrees offers a free assessment to help organizations identify all eligible crediting opportunities based on their unique operations. Reach out to our team here to see if your equipment qualifies.
Q: How much value can I get from the program?
A: LCFS credit generation varies based on vehicle type, fuel source, and credit value. During our free assessment phase, 3Degrees can help you evaluate the expected value that your organization is entitled to based on your equipment inventory and historical (or projected) charging data.
Q: How do you make money through the LCFS?
A: LCFS credits are earned per metric ton of avoided emissions, and the monetary value of the credits varies based on supply and demand of the credit market. 3Degrees’ clients benefit from our unparalleled trading expertise and network developed over 15 years as an environmental commodities leader to ensure credits are monetized quickly and revenues are maximized. We assume all credit aggregation and monetization activities (e.g., marketing, sale, contracting, settlement, etc.) and remit proceeds directly to our partners.
Q: Do projects need to be located in California to be eligible?
A: The LCFS program applies to any transportation fuel that is sold, supplied, or offered for sale in California. However, other states have similar market-based incentive programs that allow credits to be generated via use of low carbon fuels. Oregon has an active program (Clean Fuels Program) as does British Columbia. Washington and the entire country of Canada are expected to launch programs beginning in 2023. 3Degrees participates in all active markets on behalf of its clients and closely tracks other programs launching soon to ensure our clients benefit as soon as they come online.
Q: Are there requirements on how the revenue from selling LCFS credits is spent?
A: LCFS revenue generated from EV charging must be spent to further benefit vehicle electrification, but the regulation is purposely broad to allow flexibility in how the money is spent. For example, revenues can be used to offset costs from EV purchases and maintenance, charging infrastructure purchases and maintenance, electricity costs, and marketing or education on the benefits of electric transportation. T LCFS credits are also bankable, meaning they don’t have to be sold or used immediately.
*Electric forklifts are not currently required to meet these LCFS credit spend requirements.
Q: What kind of fuels can generate credits?
A: The LCFS is greatly reducing the total cost of ownership of electric vehicles. Electric vehicle charging using renewable electricity generates credits at the highest rate, but even electric charging using standard grid electricity creates a strong financial return. Other low-CI fuels generating credits include low-CI hydrogen, ethanol, biodiesel, renewable diesel, compressed natural gas and biogas (CNG), and liquefied natural gas and biogas (LNG).
3Degrees specializes in helping our partners maximize value available through the program for the use of electricity and low-CI hydrogen, as well as helping owners of public charging and hydrogen fueling infrastructure generate and sell credits.
Q: How do you get the most out of the LCFS?
A: For EV charging, using high value renewable energy certificates can significantly increase LCFS revenues. 3Degrees supplies eligible green power and works with each partner to come up with the optimal long-term sourcing strategy. Lower carbon intensive power can also come from onsite renewable sources, like solar panels, and 3Degrees helps our partners leverage those resources when applicable.
Another key component of maximizing LCFS value is aggregating credits. Entities generating a small number of credits may need to take a price discount in the market because the standard transaction size is thousands of credits. Working with a partner like 3Degrees can improve selling power and ensure maximum credit revenue is realized quickly.