Board members approved most of the amendments staff had put forward to broaden the LCFS program, which became effective in April 2010. The regulation aims to reduce the carbon intensity of transportation fuels in California 10pc by 2020.
Board members heard four hours of testimony at the 16 December hearing from parties that opposed and supported the standard. Representatives from the oil industry opposed the rule, claiming the program will increase fuel costs in California.
Board chair Mary Nichols said she was disappointed to hear that parties were still questioning whether the board should go ahead with the regulation.
“There is no question of turning back on the LCFS. We are committed to the basic concept of the LCFS, which is meant to be transformational,” Nichols said.
The credit trading rules the board unanimously approved specify how regulated parties should acquire, bank, transfer and retire credits.
Among the approved rules is the requirement that fuel transactions within each quarter are recorded. This would provide detail on credits generated for fuels that have a lower carbon intensity than the applicable standard. Once credits are generated and recorded, the regulated parties are free to trade these credits, use them for compliance, or bank them for later use.
Staff members will also publish monthly and quarterly reports on transaction prices and volumes of credits bought or sold to improve market transparency.
“I support the credit trading provisions. They are hugely important,” board member Daniel Sperling said.
Regulated parties have started to generate a surplus of credits in 2011, the first year of compliance. Based on the LCFS reporting tool, 450,000 credits were generated in the first three quarters of 2011.
Electric distribution utilities will be the main regulated parties for electric vehicle charging in the residential sector, which stands to generate a large number of credits. Utilities will also receive credits for fleet and public access electric vehicle charging if third-party service providers do not claim credits.
Staff said electric distribution utilities were chosen as the beneficiary of residential electric vehicle charging credits because they are in the best position to return the value of credits to consumers who use electric vehicles in the form of lower rates.
The action cheered utilities that want to capitalize on the allocation of free credits for vehicle charging.
“Our participation will make sure there are no unclaimed credits,” testified Norman Pederson, a representative of the Southern California Public Power Authority, during the hearing. “Electric utilities are in a position to return LCFS value to consumers efficiently.”
The board approved an amendment by board member Hector De La Torre, who requested a change in the way fuel suppliers of high-carbon intensity crude oil account for their emissions.
The board staff had proposed mitigating higher emissions from increases in crude-production carbon intensity by establishing a California average crude production and transport carbon intensity calculation based on the crude slate refined in California in 2009. Beginning in 2013, fuel suppliers would have incurred credit deficits if there had been an increase in the 2009 base year average crude carbon intensity and the current annual average crude carbon intensity.
Board members argued this approach is unfair to fuel suppliers whose carbon intensity has not increased as much as other refiners. De La Torre's amendment would give regulated parties the option to account for their own individual carbon intensity rather than being lumped into the California average.
“I think it is only fair that there should be an option for folks to measure their own performance,” De La Torre said.
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