The California Air Resources Board’s Low Carbon Fuel Standard (LCFS) is a market-based regulation that requires producers, importers, and blenders of transportation fuel sold in California to progressively cut the carbon intensity of that fuel or buy credits from suppliers of cleaner alternatives. The CARB LCFS regulation sets an annual carbon intensity benchmark, measures every fuel against it, and issues credits to fuels that come in below the line and deficits to fuels that come in above. Regulated parties must retire enough credits to zero out their deficits each compliance year. Miss that, and each uncleared deficit is a separate violation carrying a penalty of up to $1,000 per day.1Legal Information Institute. California Code of Regulations Title 17 Section 95494 – Violations
Amendments that took effect July 1, 2025 steepened the schedule considerably, targeting a 30% carbon intensity reduction by 2030 and 90% by 2045 against a 2010 baseline.2California Air Resources Board. Proposed Low Carbon Fuel Standard Amendments
2026 Benchmarks and How Credits Work
For 2026, the gasoline-substitute benchmark is 75.16 gCO₂e/MJ. The diesel-substitute and jet-fuel-substitute benchmarks are each 80.17 gCO₂e/MJ.3New York Codes, Rules and Regulations. California Code of Regulations Title 17 Section 95484 – Annual Carbon Intensity Benchmarks The gasoline figure is roughly a 24% cut from the 2010 baseline of 99.15 gCO₂e/MJ, and the schedule then tightens by about 2.25 percentage points annually through 2030.
Credits and deficits are counted in metric tons of CO₂ equivalent. A fuel sold below the benchmark generates credits; a fuel above generates deficits. The size of each is the gap between the fuel’s certified carbon intensity score and the benchmark, multiplied by the energy delivered that quarter. Standard petroleum gasoline and diesel sit well above the benchmarks, so refiners and importers accumulate deficits every quarter they operate.
Beginning in 2028, an auto-acceleration mechanism can advance the entire benchmark schedule by one year. It activates when the accumulated credit bank exceeds three quarters of total annual deficits and annual credit generation outpaces deficit generation in the same year. It cannot fire in consecutive years, but when it does, every future benchmark shifts one year earlier.
Who Must Comply
Section 95483 designates a “first fuel reporting entity” for each fuel type, and that party carries the compliance obligation.4Legal Information Institute. California Code of Regulations Title 17 Section 95483 – Fuel Reporting Entities For gasoline, diesel, and other liquid petroleum fuels, it’s the producer or importer. Blenders that mix renewable components into petroleum stocks carry the obligation for their portion of the blend. For alternative jet fuel, the producer or importer of the alternative component reports.
Gaseous fuels split by product. Biomethane producers and importers are the reporting entity for bio-CNG and bio-LNG. Owners of fueling equipment report for fossil CNG and propane. Hydrogen station owners report for hydrogen.
Opt-In Credit Generators
Suppliers of low-carbon energy are not required to participate, but there’s a strong financial reason to. Electric utilities, EV charging station owners, hydrogen producers, and biogas upgraders can voluntarily register with CARB to generate and sell credits. For residential EV charging, the electric distribution utility (or its designee) generates the base credits. For non-residential charging at workplaces, public stations, and fleet depots, the owner of the charging equipment is the eligible credit generator.4Legal Information Institute. California Code of Regulations Title 17 Section 95483 – Fuel Reporting Entities Starting with 2026 operating data, EV credit generators must have their annual reports independently verified, with verification statements due by August 31, 2027.
Getting a Carbon Intensity Score
Every fuel claimed under the program needs a certified carbon intensity score in grams of CO₂ equivalent per megajoule. The score is lifecycle: feedstock extraction, transport, refining, distribution, and combustion. CARB sorts pathways into three tiers based on how much site-specific analysis they require.5Legal Information Institute. California Code of Regulations Title 17 Section 95488.1 – Fuel Pathway Classifications
- Lookup Table pathways use pre-calculated CI values that CARB staff developed with the CA-GREET3.0 model. Producers whose operations match the description adopt the published score with no custom modeling.
- Tier 1 pathways cover fuel categories CARB has extensive experience with but where site-specific variables matter. Producers use Board-approved Simplified CI Calculators with their own operational data.
- Tier 2 pathways cover fuels CARB has limited experience evaluating, including technologies not yet in widespread commercial production. Review is the most rigorous.
Applications go through the Alternative Fuels Portal and must include feedstock purchase records, transportation logistics, energy source documentation such as utility statements, and facility-specific operational data. Certified (non-provisional) pathways require 24 months of operational data in the CI calculator submission.6California Air Resources Board. LCFS Guidance 22-02 – Carbon Intensity, Credit Adjustments, Credit True Up, and Deficit Obligation Provisional pathways may be certified with less data; CARB removes provisional status once 24 months of verified data are on file.
Facilities operating fewer than three consecutive months, or processing a new feedstock without an existing certified pathway, can petition for a temporary CI value drawn from Table 8 of the regulation. Temporary pathways last up to two consecutive quarters.7California Air Resources Board. Apply for an LCFS Fuel Pathway
Crop-based biofuels carry an additional penalty for indirect land use change. When farmland shifts to fuel production, food production may move to newly cleared land elsewhere, releasing stored carbon. CARB calculates ILUC values using the GTAP and AEZ-EF models and bakes the resulting adder into scores for feedstocks like corn ethanol, sugarcane ethanol, and soy-based biodiesel.8California Air Resources Board. LCFS Land Use Change Assessment
The Credit Market and the Price Ceiling
Credits trade through the LRT-CBTS platform, and prices move with supply and demand. In March 2026, credits traded in the range of roughly $55 to $72.50 per metric ton.9California Air Resources Board. Weekly LCFS Credit Transfer Activity Reports Credits have no expiration and can be banked indefinitely, so low-carbon fuel producers can hold them through periods of oversupply and sell when prices rise.
If a regulated party cannot acquire enough credits through ordinary trading to cover its annual deficits, the Credit Clearance Market runs once a year as a fallback. Deficit-holding entities get one more chance to purchase credits at a regulated maximum price. For 2026, that ceiling is $275.39 per credit, adjusted from a $200 base in 2016 using the Consumer Price Index.10California Air Resources Board. LCFS Credit Clearance Market Entities that pledge credits to the CCM must do so by the April 30 annual report deadline. Anyone still holding uncleared deficits after the CCM closes faces escalating enforcement.
Reporting and Verification Deadlines
Compliance runs through three CARB systems: the Alternative Fuels Portal (for pathway applications), the LRT-CBTS (for reporting and credit trading), and the LCFS Verification Portal.11Legal Information Institute. California Code of Regulations Title 17 Section 95483.2 – LCFS Data Management System To open an LRT-CBTS account, a corporate officer with binding authority submits an online registration form covering the organization’s name, address, Federal Employer Identification Number, and date and place of incorporation, plus a signed letter on company letterhead explaining why the entity qualifies. The account must name both a primary and an alternate account representative.
Fuel transaction data goes into the LRT-CBTS within 45 days after the end of each quarter. A second 45-day window follows for reconciling discrepancies with business partners and correcting errors.12Legal Information Institute. California Code of Regulations Title 17 Section 95491 – Fuel Transactions and Compliance Reporting The annual compliance report, which summarizes the prior calendar year’s credits and deficits and demonstrates compliance, is due April 30.13California Air Resources Board. Reporting, Verification and Annual Compliance Calendar
Third-party verification is a core requirement, not an option. Verification statements for annual fuel pathway reports and quarterly transaction data are due to CARB by August 31 of the year the reports are submitted.14Legal Information Institute. California Code of Regulations Title 17 Section 95500 – Requirements for Validation and Verification Verifiers must complete a formal Conflict of Interest Assessment, and CARB imposes rotation requirements. A verifier who has provided consulting or other professional services to the regulated entity is disqualified.15California Air Resources Board. LCFS Verification
Penalties for Noncompliance
CARB may seek penalties and injunctive relief under Health and Safety Code Section 38580. Each uncleared deficit at the end of a compliance period counts as a separate day of violation, carrying a penalty of up to $1,000 per deficit.1Legal Information Institute. California Code of Regulations Title 17 Section 95494 – Violations For an entity holding thousands of unretired deficits, that exposure scales quickly.
Late, incomplete, or inaccurate reports carry their own penalties, and each day a report remains deficient is a separate violation. A quarterly deadline missed by two weeks is 14 violations. CARB has discretion to weigh severity, duration, and compliance history when setting penalty amounts. Beyond financial penalties, CARB can suspend, revoke, or modify an entity’s ability to transfer credits, freezing it out of the market until the issue is resolved.
Ten-Year Recordkeeping
Every record required under the LCFS must be kept for ten years. That covers all data reported in the LRT-CBTS, individual fuel transaction records, credit and deficit calculations, CI input source data, and supplemental documentation supporting pathway applications and annual reports.16Legal Information Institute. California Code of Regulations Title 17 Section 95491.1 – Recordkeeping and Auditing Records must be detailed enough to allow independent verification of every CI calculation. Audits can reach back the full decade, so organized archives from the day an entity registers are far easier than reconstructions later.