Published on Monday, July 18 2022
Authors : Cinda Lohmann

The May 2022 Draft Scoping Plan, presented to the California Air Resources Board (CARB) in June, continues to support the current 2030 greenhouse gas (GHG) reduction goals and lays the foundation for achieving carbon neutrality by 2045 with carbon capture and storage (CCS) through “natural and working lands and mechanical technologies” (CARB, 2022 Scoping Plan Documents, 2022)[1].  Program alignment with this policy direction includes strengthening of the Low Carbon Fuel Standard (LCFS) program with additional reduction targets prior to 2030, accelerated growth in zero-emission vehicles (ZEV), and investment in CCS and technology advancements in direct-air capture.  We are finalizing a comprehensive assessment of the renewable fuels and feedstocks markets and the role the California LCFS Program plays in balances and prices, but the scoping plan may signal carbon credit price support which may be forthcoming.

Background

In 2006, the California Global Warming Solutions Act of 2006 [Assembly Bill 32 (AB 32)] was passed, creating a multi-year program to reduce GHG emissions in the state of California.  CARB is required to outline a plan to achieve the GHG reduction targets.  This is referred to as the AB 32 Climate Change Scoping Plan (scoping plan).  The initial scoping plan was approved by the Board in 2008.  Since this time, there have been two additional updates, 2013 and 2017.  In 2017, the scoping plan update outlined a path to achieve the statutory 2030 climate target, reduce GHG emissions by 40% from 1990 levels (CARB, 2017 Scoping Plan Documents, 2017)[2].  CARB released another draft scoping plan in May 2022. 

Each version of scoping plan leverages a suite of existing policies and programs to aid in achieving the objectives.  The suite includes programs such as the LCFS, the Renewables Portfolio Standard (RPS), the Advanced Clean Cars Program, the Sustainable Freight Action Plan, and the Cap-and-Trade Program.  As the 2022 scoping plan is finalized, these existing programs will begin to undergo review and as necessary proposed amendments will be made.  In addition, new regulations and incentives will need to be considered and implemented, specifically in areas of CCS and direct air capture.

2022 Draft Scoping Plan

The 2022 draft scoping plan focuses on five key elements:  1) aggressively reducing the dependency on fossil fuels through all sectors (transportation, industrial, residential /commercial, etc.), 2) strictly enforcing reduction in harmful chemicals and refrigerants, 3) continuing to evolve renewable energy sources such as solar, wind, and other renewable sources, 4) incorporate natural and working lands to store carbon, and 5) capture and store carbon as well as direct-air capture technology, all which will be used to balance the carbon output by 2045. 

CA Targets 90% Reduction in Fossil Fuel Consumption

With over 40% of the state’s GHG emissions coming from the transportation sector, the reduction in the dependency on fossil fuel will require additional strengthening of programs and incentives.  This is underway with the current LCFS and the Advanced Clean Cars Program but is also gaining momentum with the additional incentives being provided by the state.  Over $15B has been invested in climate action in 2021-2022 through Governor Newsom’s “California Comeback Plan” with another $22B in the 2022-2023 “California Blueprint.”   This includes $10B to various ZEV programs, propelling the transportation sector toward the Governor’s Executive Order [(EO) N-79-20], and banning the sale of new gas-powered cars and trucks by 2035.  The EO was followed by proposed amendment and development of the Advanced Clean Cars II regulation, strengthening the deployment of the ZEV.  This regulation is anticipated to be finalized in the Fall of 2022.  These programs pave the way for the 2022 scoping plan to aggressively reduce California’s petroleum fuel demand by upwards of 90%. 

In October 2020, Governor Newsom issued EO N-82-20 with a goal of protecting 30% of California’s lands and waters by 2030, requiring new regulations and incentives to evolve the natural and working lands (NAWL); however, according to the scoping plan, this is not enough to achieve the goal.  The role of CCS and direct-air capture will also be essential.  In 2018, CARB incorporated a CCS Protocol in the LCFS amendments, allowing fuel pathway holders to obtain credit for carbon dioxide reduction through CCS.  This provides an incentive for a renewable fuel pathway holder to obtain credit for reducing the carbon intensity of the renewable fuel produced.  There are other ways in which CCS could play a vital role in the fight against climate reduction, but unfortunately market barriers are holding back the investment in these projects.  CARB recognizes the need to engage with stakeholders to better understand and address concerns related to CCS.  This process is expected to begin in Q3 of 2022. 

Potential Direction of the LCFS Program

CARB Staff has been monitoring the development of the scoping plan and is exploring ways in which to amend the LCFS in alignment with the plan.   In the recent July 7 public workshop, CARB LCFS Staff shed some light into the areas in which the LCFS program may be headed.  Our next blog will focus on the upcoming direction of the LCFS program.

For more of TM&C’s insight into the California Market, contact Cinda Lohmann (cindalohmann@turnermason.com) or Sam Davis (sdavis@turnermason.com). 

[1] CARB. (2022, June). 2022 Scoping Plan Documents. Retrieved from https://ww2.arb.ca.gov/our-work/programs/ab-32-climate-change-scoping-plan/2022-scoping-plan-documents

[2] CARB. (2017, November). 2017 Scoping Plan Documents. Retrieved fm https://ww2.arb.ca.gov/our-work/programs/ab-32-climate-change-scoping-plan/2017-scoping-plan-documents