California Updates Low Carbon Fuel Standard to Accelerate Clean Transportation Transition

The California Air Resources Board announced on June 27 that the amended Low Carbon Fuel Standard (LCFS) will go into effect on July 1, 2025, following approval by the Office of Administrative Law. The updated regulation is designed to boost investment in clean fuels and transportation infrastructure while advancing the state’s legally mandated air quality and climate goals.

The revised program strengthens carbon intensity reduction goals for transportation fuels, requiring a 30 percent cut by 2030 and a 90 percent reduction by 2045. The LCFS operates through a credit trading mechanism, wherein fuel providers below the emissions benchmark generate credits that can be sold to higher-emitting counterparts. This market-based structure has generated around $4 billion annually in private sector investment and is expected to generate $68 billion in total revenue for California businesses through credit generation and sales by 2045.

The LCFS has displaced over 30 billion gallons of petroleum fuel to date. In addition, it has replaced 75 percent of diesel consumed in California with cleaner alternatives, while accelerating the expansion of zero-emission vehicle infrastructure.

Beyond climate benefits, the amendments are expected to deliver public health improvements by reducing air pollution and exposure to harmful emissions, with particular focus on investments in underserved communities. The program is also designed to help moderate fuel price volatility by increasing competition in the transportation fuel market.

To address concerns about potential impacts on consumer fuel costs, state officials plan to closely monitor retail gasoline prices and publish regular assessments. Independent analyses suggest that any additional costs tied to the program will remain relatively modest. The amended regulation follows an extensive public rulemaking process, with California positioning the updated LCFS as a key tool in meeting both state and federal climate mandates while supporting economic development in the clean energy sector.