California LCFS, 2024 CARB amendments and Gas Prices
The California Low Carbon Fuel Standard (LCFS) is a comprehensive climate policy that requires transportation fuel providers to reduce the carbon intensity of their fuels over time, with significant implications for gas prices in Lodi and the broader San Joaquin Valley region. The California Air Resources Board (CARB) approved amendments in 2024 that go into effect on July 1st 2025, along with an excise tax increase of 1.6 cents per gallon. This report examines the current CARB amendments in effect and the potential changes to the LCFS Credit Market that could raise gas prices from 8 cents per gallon at the low end to 65 cents per gallon at the high end.
What is the Low Carbon Fuel Standard?
The LCFS is a market-based regulation designed to reduce greenhouse gas emissions and air pollution from transportation fuels[1]. Established in 2009 and implemented starting January 1, 2011, the program caps the carbon intensity (CI) of transportation fuels and creates a credit trading system where high-carbon fuel producers must offset their emissions by purchasing credits from lower-carbon alternatives[2].
The regulation covers fossil fuels, such as gasoline, diesel, compressed natural gas (CNG), and liquefied natural gas (LNG), as well as alternative transportation fuels, including biofuels, electricity, and hydrogen. [1] The program aims to achieve an 80% reduction in carbon intensity from 2010 baseline levels by 2030[1].
Recent Amendments and Implementation
On November 8, 2024, the California Air Resources Board (CARB) approved significant amendments to the LCFS program, which take effect on July 1, 2025[3]. These amendments include:
Accelerated carbon intensity targets: A sharp increase in requirements, jumping from a 9% reduction by 2025 to 30% by 2030[3]
2025 step change: A 9% reduction in carbon intensity is required for fuels supplied beginning July 1, 2025, compared to previous gradual increases[5]
Automatic adjustment mechanism: Starting in 2028, the program will automatically tighten standards when credit supply exceeds certain thresholds[6]
The amendments faced regulatory hurdles when the Office of Administrative Law initially disapproved them in February 2025 due to clarity concerns[7], but final approval was granted on June 27, 2025, allowing implementation to proceed on July 1, 2025[4].
Price Impact Estimates
Current Gas Prices in the Region
As of July 1, 2025, the statewide average gas price in California is $4.58 per gallon, significantly higher than the national average of $3.18[9]. In the Lodi area specifically, regular gasoline averages approximately $4.42 per gallon[10].
Projected LCFS Price Impacts
Conservative Estimates: UC Davis research suggests the LCFS amendments will add approximately 8-9 cents per gallon to gas prices, with total LCFS impact estimated at around 20 cents per gallon (plus or minus 3 cents)[11]. This analysis is based on current LCFS credit prices, which have remained in the $40-$ 75 range since late 2022 [11].
Higher-End Projections: Other analyses project more substantial increases:
University of Pennsylvania study: 65 cents per gallon in 2025, rising to 85 cents by 2030 and $1.50 by 2035[12]
Independent Emissions Market Advisory Committee: Up to 85 cents per gallon by 2030[14]
Some projections suggest prices could reach $8 per gallon by late 2026 due to combined regulatory pressures and refinery closures[15]
Additional July 2025 Price Factors
Beyond the LCFS, California's gas excise tax increased by 1.6 cents per gallon on July 1, 2025, bringing the total state excise tax to 61.2 cents per gallon[16]. This annual adjustment is tied to inflation and infrastructure funding needs.
LCFS Credit Market Dynamics
The LCFS operates through a credit trading system where current credit prices significantly influence consumer costs. Recent market data shows:
Current credit prices: Averaging $48.36 per metric ton as of June 2025, with a range of $40-75[17]
Market surplus: Over 1.6 times the credits needed for 2024 compliance requirements exist as surplus, keeping prices relatively low[11]
Historical context: Credit prices peaked at over $200 per metric ton in early 2021 but have declined due to oversupply[5]
For gas prices to increase by the projected 65 cents per gallon, credit prices would need to reach the program's maximum of nearly $270 per metric ton—a level never achieved historically[11].
Regional Concerns in San Joaquin Valley
Environmental Justice Issues
The San Joaquin Valley, home to approximately 90% of California's 1.7 million dairy cows, faces unique challenges due to the implementation of LCFS [18]. Environmental justice advocates have raised concerns that the program incentivizes factory farm expansion and biogas production, potentially worsening air quality in communities already experiencing some of the nation's worst air pollution[19].
The Central Valley Air Quality Coalition and other groups argue that LCFS subsidizes large polluters while failing to address local public health impacts[21]. These concerns led to legal challenges against CARB, with groups arguing that the agency had failed to assess environmental impacts on disadvantaged communities adequately. [22]
Transportation and Economic Impacts
The San Joaquin Valley's agricultural economy and transportation-dependent workforce make residents particularly vulnerable to fuel price increases. Research shows that disadvantaged households in the region spend over 11% of their income on gasoline, making them disproportionately affected by price increases[23].
Regional transportation agencies, including San Joaquin Regional Transit District, have begun factoring LCFS credits into their budgeting, generating approximately $515,000 from credit sales in fiscal year 2023[24].
Market Outlook and Uncertainty
Several factors create uncertainty about actual price impacts:
Credit oversupply: The substantial surplus of credits in the market may continue to suppress prices despite tighter standards[11]
Refinery closures: Phillips 66 and Valero refineries are scheduled to close by 2026, potentially causing supply shortages and price spikes independent of LCFS[13]
Federal policy changes: Changes in federal biofuel policies could affect California's fuel markets
Electric vehicle adoption: Increased EV adoption may reduce gasoline demand, affecting pricing dynamics
Conclusion
While the LCFS amendments taking effect on July 1, 2025, will likely increase gas prices in Lodi and the San Joaquin Valley, the magnitude of the increase remains highly uncertain. Conservative estimates suggest increases of 8-9 cents per gallon specifically attributable to the amendments, while more aggressive projections warn of increases up to 65 cents or more. The actual impact will depend on credit market dynamics, refinery capacity, and broader economic factors affecting California's unique fuel market. An updated report on California Refinery Capacity is available here. Residents in the region should prepare for gradual price increases while monitoring how credit prices and market conditions evolve over the coming months.
Sources
[1] Understanding California's Low Carbon Fuel Standards Regulation https://rmi.org/understanding-californias-low-carbon-fuel-standards-regulation/
[2] Low Carbon Fuel Standard - California Air Resources Board - CA.gov https://ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard/about
[3] California Air Resources Board Approves Low Carbon Fuel ... https://www.sidley.com/en/insights/newsupdates/2024/11/california-air-resources-board-carb-approves-low-carbon-fuel-standard-lcfs-amendments
[4] California Finalizes LCFS Amendments, effective July 1, 2025 https://www.srectrade.com/blog/srec-markets/california-finalizes-lcfs-amendments-effective-july-1-2025
[5] California office approves LCFS changes: Update - Argus Media https://www.argusmedia.com/en/news-and-insights/latest-market-news/2704896-california-office-approves-lcfs-changes-update
[6] CARB approves major updates to strengthen the LCFS Program https://www.srectrade.com/blog/low-carbon-fuel-standard/carb-approves-major-updates-to-strengthen-the-lcfs-program
[7] [PDF] Information Regarding Low Carbon Fuel Standard Regulation ... https://ww2.arb.ca.gov/sites/default/files/2025-02/LCFS_OALMarketNotice.pdf
[8] OAL Releases Details on LCFS Disapproval Decision https://ca-rta.org/oal-releases-details-on-lcfs-disapproval-decision/
[9] California average gas prices - AAA Fuel Prices https://gasprices.aaa.com/?state=CA
[10] Lodi Fuel Prices https://lodi411.com/fuel-prices
[11] No, Your Gas Prices Will Not Rise by 65 Cents per Gallon in July - ITS https://its.ucdavis.edu/blog-post/no-your-gas-prices-will-not-rise-by-65-cents-per-gallon-in-july/
[12] California gas prices expected to jump in July: Here's why and how it will hit your pocketbook https://www.latimes.com/california/story/2025-06-25/ready-for-a-summer-road-trip-heres-why-a-visit-to-the-gas-pump-could-cost-you-more-in-july
[13] California Gas Prices to Go Up July 1: What to Know - Newsweek https://www.newsweek.com/california-gas-prices-hike-lcfs-2091030
[14] Hurtado asks for analysis into potential $0.47 gas price increase https://sjvsun.com/news/politics/hurtado-asks-for-analysis-into-potential-0-47-gas-price-increase/
[15] California's gas prices are set to increase on July 1. Here's what to know. https://www.cbsnews.com/sacramento/news/california-gas-prices-increases-july-1-2025/
[16] Controversial climate rule, which could raise gas prices, about to go ... https://smdp.com/news/environment/controversial-climate-rule-which-could-raise-gas-prices-about-to-go-into-effect/
[17] Weekly LCFS Credit Transfer Activity Reports https://ww2.arb.ca.gov/resources/documents/weekly-lcfs-credit-transfer-activity-reports
[18] [PDF] The Low Carbon Fuel Standard and Dairy Practices in the San ... https://www.law.berkeley.edu/wp-content/uploads/2023/06/LCFS-Dairy-Practices-Nicholls-6.13.23.pdf
[19] Central Valley community group refuses to participate in Low ... https://leadershipcounsel.org/central-valley-community-group-refuses-to-participate-in-low-carbon-fuel-standard-workshop-ignoring-their-concerns/
[20] Groups sue CARB over environmental impacts of flagship climate ... https://leadershipcounsel.org/groups-sue-carb-over-environmental-impacts-of-flagship-climate-program/
[21] Fuel prices on the rise soon again? New California rule voted in ... https://kmph.com/news/local/fuel-prices-on-the-rise-soon-again-new-california-rule-voted-in-could-be-the-reason
[22] Environmental Justice Group Sues California Agency Over Flawed ... https://earthjustice.org/press/2024/environmental-justice-group-sues-california-agency-over-flawed-low-carbon-fuel-standard-changes
[23] California's New Fuel Standards Hurt the Poor, with Little ... https://www.independent.org/article/2025/02/12/californias-new-fuel-standards-hurt-the-poor-with-little-environment-benefit/
[24] [PDF] Adopted Budget Fiscal Year 2022-2023 https://sanjoaquinrtd.com/wp-content/uploads/2023/02/RTD_FY22-23_Annaul_Budget_Report.pdf
[25] Low Carbon Fuel Standard - Alternative Fuels Data Center https://afdc.energy.gov/laws/6308
[26] Regulatory Setback: California LCFS Amendments Disapproved https://www.clearbluemarkets.com/knowledge-base/regulatory-setback-california-lcfs-amendments-disapproved
[27] Lodi area fuel prices are going up! https://lodi411.com/lodi-eye/recent-increase-in-fuel-prices
[28] Gas Prices Near Me - Lodi, California - Way https://www.way.com/gas/prices/california/lodi
[29] California's Office of Administrative Law disapproves CARB's ... https://www.biobased-diesel.com/post/california-s-office-of-administrative-law-disapproves-carb-s-changes-to-lcfs
[30] Low Carbon Fuel Standard - California Air Resources Board - CA.gov https://ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard
[31] Monthly LCFS Credit Transfer Activity Reports https://ww2.arb.ca.gov/resources/documents/monthly-lcfs-credit-transfer-activity-reports
[32] California Regulators Ignore Environmental Community and ... https://earthjustice.org/press/2024/california-regulators-ignore-environmental-community-and-scientists-by-locking-in-low-carbon-fuel-standard
[33] California's Low Carbon Fuel Standard https://kleinmanenergy.upenn.edu/research/publications/californias-low-carbon-fuel-standard/
[34] California opts to preserve credits for anaerobic digesters in major ... https://www.wastedive.com/news/california-low-carbon-fuel-standard-carb-dairy-digester-methane-credit/733168/
[35] [PDF] Low Carbon Fuel Standard 2023 Amendments https://ww2.arb.ca.gov/sites/default/files/2023-09/lcfs_sria_2023_0.pdf
[36] Brace for Impact: California Gas Prices to Increase in 2025 https://californiaglobe.com/fl/brace-for-impact-california-gas-prices-to-increase-in-2025/
[37] Confusion grows for California drivers over how much gas prices will ... https://www.cbsnews.com/sacramento/video/confusion-grows-for-california-drivers-over-how-much-gas-prices-will-go-up-come-july-1/
[38] [PDF] California LCFS December price trends - Navius Research https://www.naviusresearch.com/wp-content/uploads/2025/01/Blog-December-2024-California-price-trends.pdf
[39] Market Impacts and Evidence for Retail Fuel Price Effects: Bates White https://www.bateswhite.com/newsroom-insight-Low-carbon-fuels-standards-Cain-2022.html
[40] Fact check: Claims swirling on California gas prices https://www.gov.ca.gov/2025/06/25/fact-check-claims-swirling-on-california-gas-prices/
[41] California office approves LCFS changes | Latest Market News https://www.argusmedia.com/en/news-and-insights/latest-market-news/2704815-california-office-approves-lcfs-changes