California’s Air Resources Board (CARB) recently voted to amend the Low Carbon Fuel Standard (LCFS) on November 8, 2024, a key regulatory update that will impact biofuels markets across the U.S. The revisions aim to boost investment in clean energy projects, particularly those involving dairy digesters, by extending lucrative financial credits for reducing methane emissions. However, the decision has sparked debate, with environmentalists arguing that it reinforces subsidies for methane-producing industries at a time when there’s pressure for more immediate action on climate change.
The LCFS program, initially launched in 2009 and amended several times since, incentivizes the use of alternative fuels with lower carbon intensities. By requiring fossil fuel providers to purchase credits from lower-carbon producers, the program has significantly reduced the carbon footprint of California’s fuel mix. Since its inception, the program has helped displace 70% of petroleum diesel with biofuels and made California a leader in renewable natural gas (RNG), particularly from biogas captured on dairy farms.
The latest amendments raise the carbon intensity reduction target from 20% to 30% by 2030, with a provision to potentially tighten this requirement further if there’s another credit oversupply in the future. This shift aims to address concerns over falling credit prices, which have discouraged further investment in cleaner fuels. However, critics argue that the increased reliance on market demand, rather than limiting the supply of credits from certain industries, could drive up the cost of the program and disproportionately benefit investors in dairy digesters.
Dairy digesters, which capture methane emissions from manure, have been a contentious issue within the program. These facilities receive significant credits for avoided methane emissions, with some environmental groups accusing CARB of giving preferential treatment to the dairy sector. Studies have shown that these credits can provide a return on investment for digester developers after about a decade, raising concerns that they may be incentivizing already profitable projects rather than leading to new emissions reductions.
While the biogas industry defends these credits as necessary for encouraging action from the dairy sector, environmentalists argue that they unfairly reward methane emissions from agriculture, one of the largest sources of greenhouse gases in California. Critics point out that other methane sources, such as landfills, receive much less generous credits, despite using similar technologies to capture and repurpose methane.
Despite these criticisms, the biogas industry maintains that these credits are crucial for continued investment in clean energy projects. Without these incentives, industry leaders argue, many dairy farms would not have the financial motivation to invest in digesters, especially as the most ideal sites for digesters are already being developed. The amendments package also introduces a provision that will require biogas projects to inject their renewable natural gas into the California grid starting in 2037, further aligning the state’s energy system with clean energy goals.
Environmental justice groups have voiced concerns that the increased subsidies for dairy digesters may exacerbate existing pollution burdens on vulnerable communities, particularly those near large industrial dairy farms. These communities, mostly in California’s San Joaquin Valley, already face high levels of air and water pollution, and critics worry that locking in incentives for methane capture could lead to the concentration of these projects in their neighborhoods.
Furthermore, CARB has been authorized to regulate methane emissions from dairy farms since 2016, but the agency has delayed implementing such a regulation. Environmental groups had hoped that the recent amendments would include stronger requirements for methane reduction. Instead, the agency plans to create a regulation by 2030, which advocates see as too slow in addressing a critical source of greenhouse gas emissions.
Despite the opposition, the amendments signal a commitment to continuing biofuel development in California, with further investments in dairy digesters expected. The changes could help ensure that California remains a leader in renewable energy while balancing the demands of industry and environmental protection. However, the debate over methane credits and their distribution is far from over, as environmental groups plan to continue pushing for stronger methane regulations in the coming years.
