Post‐2020 carbon constraints: modeling LCFS and cap‐and‐trade

A combination of the Low Carbon Fuel Standard (LCFS) and California’s Cap-and-Trade Program can reduce the state’s greenhouse gas emissions and reduce dependence on oil more economically and effectively, relative to Cap-and-Trade alone. That’s the conclusion from new research performed by the consulting firm ICF and commissioned by a group of business organizations, non-profits and alternative fuel trade associations. The LCFS and the Cap-and-Trade Program strengthen each other. Cap-and-Trade is growing the clean economy and LCFS is key to ensuring California spurs innovation in the clean fuels market giving consumers diverse fuel choices, while also reducing the compliance cost of the Cap-and-Trade Program. ICF’s new research shows that strengthening the LCFS from its current 10 percent carbon reduction goal to a 20 percent reduction goal by 2030 would cut Cap-and-Trade allowance prices in the 2030 timeframe by 50 percent. Because the LCFS directly reduces greenhouse gas emissions from the transportation sector, it lessens pressure on the overall emissions cap, and ensures other sectors participating in the program are not obligated to reduce more than their fair share of emissions. This helps lower Cap-and-Trade Program allowance prices, which in turn lowers the cost burden economy-wide.