If you live in California, you have probably heard the term Low Carbon Fuel Standard (LCFS) credit for electric vehicles, as they are beneficial for businesses involved in providing fuel for transportation.
In this article, we’ll explain what LCFS credits are, how they work, and how companies can benefit from them.
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What are LCFS credits?
The Low Carbon Fuel Standard is a standard that was enacted into California state law in 2009 and is governed by the California Air Resources Board (CARB).
Since the LCFS was introduced, it has been rolled out across several US states and has the potential to be adopted further.
LCFS credits rely on fuel pathways which means calculating the carbon intensity (CI) of the transportation fuel pool and incentivizing reduction. LCFS credits aim to reduce CI by generating a credit for every metric ton of emissions avoided.
The LCFS credits fuel pathways include the provision of energy efficient EV charging equipment. Other pathways include the provision of hydrogen and compressed natural gas as transportation fuels.
How do LCFS credits work in practice?
Fuel providers must report the volume and type of fuel that they supply to states that are registered in the program.
If the company imports high-carbon fuel, they lose credits. If they import low-carbon or generate renewable energy fuel, then they gain credits.
There is also a financial penalty for importing low-carbon fuels as any company that is in a credit deficit must buy back LCFS credits to offset it.
Businesses that export energy, such as renewable power plants and EV and charging providers, can sell the credits they generate. For example, in 2021 Tesla generated $1.4B revenue through credit sales alone.
The LCFS credit markets are designed to decrease the carbon intensity of transportation fuel pools while incentivizing the adoption of vehicles and equipment powered by cleaner fuel sources within a given state.
Each individual state can control the rules and regulations of its own market and they must be approved by the state’s legislative branch.
Which states are signed up to LCFS credits?
At the moment there are only two fully active LCFS credit markets in the US – California and Oregon.
Some other US states are in the process of adopting LCFS credits. Washington state has approved the legislation, but the rules and regulations are still in the finalization stages. Legislation has been proposed but not yet approved in New Mexico, New York, Minnesota, and Illinois.
Canada also has an established market within the British Colombia province and legislation has been approved for a country-wide program.
How to monetize credits as an EV fleet owner?
LCFS credits are good news for EV fleet owners, as they are involved in charging EVs which reduces fossil fuel emissions for the state. Credits are generated for each kWh of charged energy. The larger the fleet, the more EVs are charged which generates more credits.
Electric fleet owners and operators are able to monetize their LCFS credits by either:
- Handling the registration themselves and reporting their results internally, then selling the credits directly to a broker.
- Outsourcing to a third party, such as a charge management system (CMS) providers who will manage the process for a small fee which will be taken directly from the credits.
How can CMS providers help?
If you are a charge point operator or own EV supply equipment and you want to set up a credit strategy, then CMS providers such as Ampcontrol can help.
At Ampcontrol, we have reporting tools that allow you to easily manage LCFS credits. In addition, we have partnerships with brokers, who will handle the trading. We also make it easy to pull up all the information you need to monetize the credits.
If you plan to install electric fleet chargers you should consider generating revenue through LCFS. Talk to one of our EV experts, and learn how to increase your revenue stream.
