How the Californian LCFS works and why biomethane from manure can have a negative carbon intensity

The Low Carbon Fuel Standard (LCFS) is a Californian market system that lowers the average carbon intensity of transport fuels by rewarding fuels cleaner than a set benchmark and burdening dirtier ones. According to CARB, the board approved the LCFS regulation in 2009, and implementation began on 1 January 2011. For biogas this has particular significance: biomethane from manure or food waste can achieve a very low, even negative, carbon intensity, which translates into high revenue from the sale of credits.

Basic mechanics

Each fuel is assigned a carbon intensity (CI), expressed in grams of CO₂ equivalent per megajoule of energy. It takes into account emissions from the whole lifecycle: from obtaining the feedstock, through production and transport, to use. The regulator sets a CI benchmark that falls from year to year. An entity that places on the market a fuel with a CI lower than the benchmark generates credits; a fuel with a CI higher than the benchmark generates deficits. Obligated parties (e.g. importers and producers of petrol and diesel) must cover their deficits with credits — their own or bought from other market participants.

In this way the system does not mandate a specific technology: the combined result must achieve the required fall in CI, and the cost of the reduction is covered by the credit market.

Why the CI of biomethane can be negative

Conventional natural gas has a positive CI. Biomethane from agricultural or municipal waste is different, because its production can prevent emissions that would have occurred in the baseline scenario. Slurry stored in open lagoons emits methane; if a biogas plant captures this methane and burns or upgrades it, the emission is "avoided". The LCFS methodology counts this saving as a credit in the fuel's balance, which is why the overall CI of biomethane from slurry can be below zero.

Where project revenue comes from

Two streams are sold: the gas itself and LCFS credits. In the US, biomethane used as a transport fuel can additionally generate RIN units under the federal Renewable Fuel Standard. The parallel use of the national RIN and state credits is one of the reasons why California became the main arena for manure RNG projects, and credit prices a factor shaping investment plans.

Controversy

Crediting of avoided methane is criticised by environmental organisations, which argue that it rewards large-scale, intensive farms and reduces the motivation to cut emissions at source. Supporters stress that methane capture really does lower emissions and that without the credit many projects would not be viable. In November 2024 the CARB board approved an amendment to the programme which, according to Biomass Magazine, phases out crediting of avoided methane for biomethane burned as a fuel (we describe the details in a separate news item).

Other jurisdictions

Similar systems operate elsewhere. Washington's Clean Fuel Standard has operated since 1 January 2023. Ecology publishes quarterly summaries of the number of credits and deficits generated and the number of programme participants (the latest data are in the update). Oregon has its own Clean Fuels Program. In Canada the Clean Fuel Regulations have applied at federal level since 2022, and British Columbia has its own low-carbon fuel system. Each of these systems has separate methodologies, so a credit from one is not exchangeable for another.

What this means for Poland and Europe

In the EU the equivalent is the obligation to reduce the emission intensity of fuels (RED, FuelEU for shipping, ReFuelEU for aviation), but the credit market here is less integrated than in California. For European biomethane producers the lesson from the LCFS is the importance of a clear, stable methodology: when the rules for calculating CI are disputed or changeable, investment risk rises. It is also worth noting that in the EU the method of crediting avoided methane (the slurry bonus) is set out within RED and is not the subject of annual administrative decisions, which gives greater predictability but less flexibility.

It is worth remembering that an LCFS credit is revenue additional to the price of the gas itself and any RINs, and its value changes with the supply of credits and the tightening of the benchmark.

Key concepts

• CI (carbon intensity) — the lifecycle emissions of a fuel per unit of energy.
• Benchmark — the annual reference level against which credits and deficits are calculated.
• Credit — a unit equal to 1 t CO₂e, generated by a fuel with a CI below the benchmark.
• Avoided methane — a credit for methane whose emission is prevented by the facility.