Businesses and consumers could face higher fuel costs from proposed changes to the longstanding state Low Carbon Fuel Standard (LCFS) program, the California Chamber of Commerce is warning air board regulators.

The CalChamber is urging the California Air Resources Board (CARB) to revise the proposed LCFS amendments to ensure they are cost-effective and feasible, as required by law.

The LCFS was originally designed to encourage the production and use of low-carbon transportation fuels via market mechanisms that avoid picking technology winners and losers, the CalChamber reminded CARB members in a recent letter.

The CalChamber has long supported regulatory market mechanisms - such as a well-designed cap-and-trade program - that reduce greenhouse gas emissions at the lowest cost to businesses and consumers throughout California.

Proposed LCFS Changes

The CARB staff has proposed accelerating the LCFS by increasing the regulation's existing stringency through 2030 and setting a new target to reduce carbon intensity 90% by 2045.

The staff asserts the proposal is intended to align the LCFS with the 2022 Scoping Plan and California's carbon neutrality goals.

In its letter, the CalChamber told CARB members it is concerned the costs of the proposal may outweigh the benefits and impose higher fuel costs on businesses and consumers, continuing the increases over several decades.

Potential Impact

The CARB regulatory impact assessment estimates the proposed regulatory change would translate to a $0.47/gallon increase in gasoline prices in 2025, rising to a $1.80 increase starting in 2040.

The assessment also estimates the potential for modest-but-lower gross state output, employment and personal income compared to a staff-set baseline.

Other Factors

Recently enacted ABX2-1 authorizes the California Energy Commission to impose minimum transportation fuel inventories on oil refiners in the state. The CalChamber opposed ABX2-1 because of the risk it could create fuel shortages and increase fuel prices for businesses and consumers.

Following adoption of ABX2-1, one company announced plans to close a Los Angeles oil refinery at the end of 2025. The closure would reduce the state's diminishing refinery capacity by 8%, increasing the risk of fuel price volatility and fuel unavailability.

Balance Needed

In closing its letter, the CalChamber urged CARB members to seriously consider the broader concerns about businesses and consumers when taking up the proposed LCFS amendments.

"We can still achieve our climate goals, while striking a more reasonable balance that will help mitigate cost impacts on businesses and consumers who are disproportionately bearing the increased costs of our ambitious climate reduction goals," the CalChamber said.

Staff Contact: Ben Golombek

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