The Benefits of Low Carbon Fuel Standards for EV Adoption

Electric vehicles (EVs) and EV charging infrastructure investments are critical to support both long-term climate and clean air goals and delivering savings for drivers and fleets. As EV adoption continues to scale, California's Low Carbon Fuel Standard (LCFS) has remained an instrumental policy to accelerate the transition to low and zero emission fuels as well as the buildout of convenient and accessible EV charging networks. Following in California's footsteps, over half a dozen states considered LCFS programs this year, with New Mexico becoming the fourth state in the U.S. to pass a Clean Fuels Program. If California adopts key enhancements to the LCFS this November, it will continue to serve as a best practice that other states may continue to emulate.

LCFS is one of the most impactful policy tools to drive forward transportation electrification, but what exactly is it? In sum, the LCFS encourages decarbonization of transportation fuels by evaluating the "carbon intensity" from a broad suite of fuels - including electricity - and incentivizing low- or zero-carbon fuel options. It achieves this goal by allowing producers of low- or zero-carbon fuels (like renewable electricity) to generate credits that can then be sold to producers of high-emissions fuels to meet their LCFS compliance obligations. For the EV charging industry, the LCFS creates opportunities for EV charging providers like EVgo to expand their networks to serve more EVs and deliver an elevated customer experience for drivers through ongoing operations support. For example, California's LCFS program has created a $4 billion annual market for low-carbon fuels in the state, with an estimated $1 billion in LCFS credits generated from EV charging alone since the program's inception in 2011.¹

Another major benefit of the LCFS is that it establishes a reliable, self-sustaining funding stream for EV charger deployment without any material fiscal impact to ratepayers or state budgets. By implementing an LCFS, states can put themselves in a stronger position to achieve zero-emission vehicle and decarbonization goals in a manner that avoids electricity rate increases and bolsters resilience during more challenging economic times.

The realization of these LCFS benefits depends on sound program design. As more policymakers begin to consider LCFS programs, California has taken the lead in modernizing its LCFS to support EV adoption through several proposed changes, including:

• Long-term, ambitious annual carbon intensity (CI) targets: By establishing robust annual decarbonization targets through 2045, California has sent a clear, durable signal that will support long-term investment in EV charging infrastructure. If approved, these nation-leading targets would put the Golden State on track to reduce the carbon intensity of transportation fuels by 30% in 2030 and 90% in 2045 relative to 2010 levels.

• Flexibility to raise program ambition to avoid overcompliance: It is important to ensure that LCFS programs remain adaptable and accommodate technological innovation as clean fuels continue to accelerate at unprecedented rates. California has proposed toadopt a mechanism that would automatically increase the ambition of the LCFS if the state is meeting and exceeding established CI targets for a sustained period. As other states seek to adopt LCFS programs, they should monitor low carbon fuel adoption and retain the flexibility to increase program stringency to support continued private investment in low carbon fueling infrastructure, like EV charging.

• Infrastructure crediting mechanisms to support buildout of needed Direct Current Fast Charging (DCFC) stations: The LCFS can provide an additional avenue to support the deployment of DCFC stations by allowing EV charging providers to generate LCFS credits based on the installed capacity (in kilowatts) of EV charging infrastructure. Critically, California has proposed to preserve and extend the availability of its Fast Charging Infrastructure (FCI) crediting provisions in the LCFS, and Washington's Clean Fuels program has similar provisions. This pathway is particularly useful for supporting the buildout of fast chargers when charger utilization is initially low and enables EV charging providers to invest in needed infrastructure in anticipation of driver demand.

Since its implementation, California's LCFS has displaced over 25 billion gallons of petroleum fuels and inspired the development of similar programs in other regions.² If California adopts a strengthened LCFS in November that matches the ambition of its EV adoption goals, the Golden State would further cement its status as an EV leader and bolster the expansion of convenient, reliable, and accessible charging networks across the state. Further, it would send an important signal to other states contemplating their own Clean Fuels Program before we move into the 2025 legislative session. By establishing strong Clean Fuels Programs, states can bolster their commitments to accelerate EV adoption and make EV charging more accessible for all.

¹California Air Resources Board, California Low Carbon Fuel Standard Workshop [Slides] (April 10, 2024)https://ww2.arb.ca.gov/sites/default/files/2024-04/LCFS%20April%20Workshop%20Slides.pdf

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