About LCFS Consulting Services, Inc.

The LCFS

With the world’s fifth largest economy, the State of California is a world leader in the fight to reduce harmful tailpipe emissions and greenhouse gases (GHG)/climate change from manmade sources. Transportation is the biggest source of GHG in California, accounting for about 40% of the total.

In response, California leaders created a market-based, fuel and technology-neutral regulation, the Low Carbon Fuel Standard (LCFS), in 2010. The purpose of the regulation is to give transportation fuel producers and sellers a financial incentive to reduce the GHG derived from on-road transportation fuels they supply to or sell in the State. The agency responsible for implementing the regulation is the California Air Resources Board, commonly referred to as CARB.

Under the LCFS each transportation fuel used on California roads has a carbon intensity, or CI, determined by the amount of carbon dioxide (CO2) generated at each step of the pathway the fuel takes from “well-to-wheel”, i.e., from the creation of its feedstock, to the production of the fuel, to its transportation to the point of dispensing into vehicles and then to the tank of the car where it’s consumed. The amount of CO2 is calculated via a California-centric life cycle analysis (LCA) model, CA-GREET.

The regulation’s incentive comes from valuable LCFS credits that are generated based on the difference in CI between an alternative fuel and the annually declining CI of the fossil fuel it substitutes. (Ethanol and electricity are the substitutes for gasoline, and biodiesel, renewable diesel and renewable natural gas [RNG] are currently the widely available substitutes for diesel.) The lower the CI of the pathway of an alternative fuel, the more LCFS credits that are generated.

However, in order to generate the LCFS credits an alternative fuel producer must register its fuel pathway with CARB through the fuel pathway application (FPA) process. Once certified through the FPA process, the holder of the certified pathway is called the fuel pathway holder (FPH).

Because the CI of the fossil fuel substituted by the alternative fuel declines every year, the FPH has to continue to reduce the CI of its fuel pathway each year if it wants to continue to generate at least the same number of LCFS credits generated in the preceding year.
A regulated party generating credits under the LCFS will also generate RINs under the US’s Renewable Fuel Standard, the RFS.

The LCFS, which went into effect in 2011, has been amended from time to time to incorporate refinements as CARB gains experience in regulating alternative fuels and new fossil fuel substitutes emerge. In January 2019, the last amendment to the LCFS went into effect, but CARB has recently started a new amendment process. During this process CARB will hold workshops during which stakeholders can make comments on concepts proposed by CARB staff and after which stakeholders can provide feedback on such proposals or make suggestions as to other changes they would like to see. Before the amendment can be adopted by the CARB Board, stakeholders will also have an opportunity to review amendment language staff proposes and to comment on such language. The new amendment is currently expected to go into effect some time in 2024.

With the 2019 amendment, CARB added a requirement that each FPH submitting a FPA in 2020 and after must have it validated by an independent third party “verification body” (VB) having a certain number of individually certified “LCFS verifiers”. Furthermore, commencing in the quarter after certification, the FPH must submit quarterly fuel transactions reports, and commencing in the year after the pathway is certified, must submit an annual fuel pathway report to maintain its ability to generate LCFS credits. These reports must be “verified” by a VB.

In in order to become a certified LCFS verifier, a consultant must have a scientific educational background, undergo intense training in the LCFS and the new validation and verification procedures and pass a rigorous exam. In February 2020, CARB certified its first ever group of accredited verifiers. Three members of our team are in that group.

The LCFS currently contains required transportation fuel CO2 reductions only through 2030, but that doesn’t mean the regulation will end then – it expressly provides that it will continue after 2030. Therefore, the LCFS is here to stay and will continue to incentivize ongoing innovation in the low carbon transportation fuel industry going forward.

Fuel Pathway Applications

There are two types of full pathway certification an alternative fuels producer can obtain, i.e., through a Tier 1 or Tier 2 FPA. The Tier 1 is used for certain kinds of biofuels with which CARB has a great deal of experience (like ethanol or most diesel substitutes), while a Tier 2 is used for certain innovative biofuels and those for which a Tier 1 pathway could be filed, but whose FPH believes it is entitled to a significantly lower CI than that calculated under the Tier 1 LCA model.

The following chart lays out the steps in a Tier 1 Fuel Pathway Application:

 

Note: The above diagram was created by CARB. However, it’s misleading in that “Verification” does not take place during the fuel pathway application process, but only for fuel pathway reports starting in the year after the pathway is certified, and every year thereafter.
The following chart lays out the steps in a Tier 2 Fuel Pathway Application (to be filed if the FPH cannot file a Tier 1 FPA or opts to go with a Tier 2 in an effort to lower its pathway’s CI):

 

Note: The above diagram was created by CARB. However, it’s misleading in that “Verification” does not take place during the fuel pathway application process, but only for fuel pathway reports starting in the year after the pathway is certified, and every year thereafter.
As you can see from the above charts, there are more steps involved in certifying your pathway under a Tier 2 FPA, so the process will take more time and it will be more expensive. However, if you are successful in substantially reducing your pathway’s CI through a Tier 2 FPA, it can be well worth the extra time and money.

If you are entitled for file a Tier1 FPA, but are considering filing a Tier 2, we can analyze your opportunities for reducing your CI through the Tier 2 process, so you can decide whether to incur the additional expense.

Note that there are other possible, but not full, certifications under the LCFS – provisional, design-based and temporary.

What is LCFS Consulting Services, Inc.?

LCFS Consulting Services, Inc. is a California corporation based in Los Angeles, CA. We advise regulated parties under the LCFS regulation, or companies considering becoming regulated parties.

We are longtime LCFS regulatory and fuel pathway application experts. Our expertise includes years as CA-GREET modelers. In our ranks, we have three certified LCFS verifiers (2 lead).

While other companies with certified LCFS verifiers provide validation and verification services, i.e., auditing services, our sole business is providing LCFS-related consulting services to producers of alternative fuels, including corn and sugarcane ethanol, renewable diesel, biodiesel, biomethane, also known as renewable natural gas (RNG), electricity and hydrogen. We also advise regulated parties in the electric forklift industry.

Upon request and prior to the preparation of a fuel pathway application, we will analyze if there are ways the applicant can reduce the pathway’s CI and prepare an estimated carbon intensity reports for the applicant’s investors or bankers.

We assist in the preparation of the fuel pathway application and interface with CARB on the applicant’s behalf during the application process. We accompany the process through to certification, including interfacing with the VB during the required validation process and preparing the monitoring plan required before validation can begin.

After certification we can prepare the required quarterly fuels transactions reports and annual fuel pathway reports. Those reports must also be verified by a VB so we can interface with the VB during that process as well.

We can also represent a stakeholder’s interests during an LCFS amendment process, interface with CARB outside the FPA process, provide customized LCFS training for a company’s employees and assist with CARB account registration and maintenance services.

Finally, in addition to services related to the LCFS we also help companies, including those outside of the transportation fuels industry, with their ESG (Environmental, Social and Governance) objectives. Providers of goods and services today must work on reducing their carbon emissions – their stakeholders demand it. The imperative goes beyond reducing a company’s own direct emissions, so-called “Scope 1” emissions – but also its indirect electricity emissions, the “Scope 2” emissions, and the emissions of other companies in its value chain, the “Scope 3” emissions, as shown in the following graphic:


We can assist a company with its ESG goals by analyzing each type of emission in its operations, preparing a carbon footprint report and making recommendations as to where reductions might occur.

Reducing Methane Emissions

We at LCFS Consulting Services have a special focus on RNG (i.e., biomethane) pathways under the LCFS. Therefore, we were happy to see the world turn its attention to reducing methane emissions in 2021 as a way to head off devastating and irreversible climate change.
Methane is a short-lived climate pollutant (SLCP), so called because it has an atmospheric lifetime of roughly a decade in comparison with that of CO2, which remains in the atmosphere approximately 100 years in comparison. Methane is so dangerous because it also contributes to the formation of ozone, which, like methane, is a short-lived but powerful GHG. In addition, surface ozone is an air pollutant with detrimental effects on people, ecosystems and crops.

The UN Environmental Programme (UNEP) has found that methane has a Global Warming Potential more than 80 times greater than that of carbon dioxide (CO2) during its lifespan. Therefore, in May 2021 the Climate and Clean Air Coalition (CCAC) and UNEP released their “A Global Methane Assessment” (the “UN Report”) which concluded that holding global warming to the target 1.5˚ C increase “can only be achieved with deep and simultaneous reductions of carbon dioxide and all non-carbon dioxide climate forcing emissions, including short-lived climate pollutants such as methane.” I.e., it can’t be achieved by reducing CO2 emissions alone.

The UN Report found that more than half of global methane emissions stem from human activities in three areas: fossil fuels (35 per cent of human-caused emissions), waste (20 per cent) and agriculture (40 per cent).

The following 2021 EPA graphic shows the sources of methane emissions in the US:


U.S. Environmental Protection Agency (2021). Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2019

Because these emissions come from human activity, we can reduce them by changing our behavior in those three areas. The good news is that a substantial majority of targeted measures to reduce human-caused emissions have either low or negative mitigation costs. The UN Report concluded that currently available measures could reduce emissions from the three sectors by as much as 45 per cent, by 2030, and that reducing “human-caused methane emissions is one of the most cost-effective strategies to rapidly reduce the rate of warming and contribute significantly to global efforts to limit temperature rise to 1.5°C.”

The UN Report was followed by action by the Biden administration in advance of the COP 26 meeting held from Oct 31, 2021 – Nov 12, 2021 in Glasgow. The result was the Global Methane Pledge launched in November 2021, which over 100 countries, including the US, have already signed. The signatories have committed to a collective goal of reducing global methane emissions by at least 30 percent from 2020 levels by 2030.

Anaerobic Digestion and RNG

One of the best tools we have in the US to meet the Global Methane Pledge is to reduce methane emissions from livestock manure via anaerobic digestion. AD converts the methane first to biogas, which can be sold to the grid as renewable electricity. Alternatively, the biogas can be upgraded to pipeline quality biomethane, i.e., RNG. If dispensed into a vehicle’s tank or injected into a utility pipeline anywhere in North America that RNG can qualify to generate LCFS credits. Note that the CI of RNG generated from the AD of dairy and swine manure is typically ultra-negative and therefore generates maximum LCFS credits.

After dairy and swine manure the lowest possible CI to date has come from food scraps (FS)-to-RNG pathways. Although there have only been two of them certified by CARB under the current version of CA-GREET, CA-GREET 3.0, we expect the number to significantly increase starting in 2022. The reason: the implementation of regulations adopted under a California law known as Senate Bill (SB) 1383, which require 75% of FS to be diverted from landfills by 2025.

If you are interested in learning more about FS pathways, please see the articles written by our CEO, Nathalie Hoffman, on the two that are currently certified, found at https://www.biocycle.net/food-scraps-to-rng-pathway-in-californias-lcfs/ and <href=”https://www.biocycle.net/second-food-scraps-to-rng-project-certified-under-california-lcfs-greet-3-0/”>https://www.biocycle.net/second-food-scraps-to-rng-project-certified-under-california-lcfs-greet-3-0/.

Other RNG pathways available under the LCFS are those derived from landfill gas, wastewater sludge and other organic waste such as urban landscaping waste or industrial food waste.

The following EPA graphic shows the types of organic waste that can be anaerobically digested and the by-products of the process, including RNG.

There is an existing use for RNG as a transportation fuel. It is in long-distance heavy-duty trucking. Because of the LCFS RNG has almost completely replaced fossil natural gas as the fuel for trucks on California roads that have natural gas engines, as shown in the following graph:


Reprinted by permission of Stillwater Associates, California LCFS Monthly Newsletter, November 2021

Not only has the volume of RNG gone up, the average CI has gone substantially declined as more dairy/swine manure projects have come online.

Our Differentiator and Our Goal

For an alternative fuels producer, it’s always been important to have a LCFS consultant who knows the regulation inside and out, and who has longtime relationships with and access to CARB decision makers and LCFS staff. However, with the last major amendment to the LCFS that went into effect in 2020 and the heightened focus on innovative alternative fuels along with traditional ones, it’s crucial now.

For Brazilian ethanol producer fuel pathway holders, we provide unique value-added. While we are native English speakers and writers, we include fluent Portuguese speakers. We also have great on-the-ground experience in sugarcane agriculture/ethanol production. One member of our team spent months learning Brazilian ethanol production in the heart of the industry in the interior of the state of Sao Paulo, and another is a process engineer based in Piracicaba, SP.

At LCFS Consulting Services our goal is to help you to (re)certify your fuel pathway in a seamless, stress-free and timely fashion.

RenovaBio

American corn ethanol producers now have a way to potentially diversify their sources of revenue via a Brazilian law that’s an analogue to the LCFS.

The law, RenovaBio, went into effect in December 2019. Like the LCFS, it’s market-driven and technology and fuel neutral. Its purpose is to incentivize the reduction of GHG from on-road transportation fuels in Brazil.

RenovaBio’s financial incentive comes from Cbios (Decarbonization Credits) generated by a producer of a biofuel based on the amount of the difference in its CI and the CI of the fossil fuel it replaces. Cbios are publicly traded securities.
US corn ethanol is expressly permitted to generate Cbios.

To date American producers have not availed themselves of RenovaBio due to current Brazilian import duties assessed on American ethanol in conjunction with the still-low CBio value. However, if and when the situation changes, we will be assisting American producers to certify their pathways to generate Cbios. As Portuguese speaking US consultants who have a deep understanding of corn ethanol and RenovaBio, we are uniquely qualified to do so.

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