Low-Carbon Fuel Standard

Low Carbon Fuel Standard (LCFS) is a regulatory program promulgated by California Air Resources Board (CARB), appearing at Sections 95480 to 95503 of title 17, California Code of Regulations. LCFS promotes the use and production of low-carbon transportation fuels to reduce greenhouse gas emissions and petroleum reliance. There are three ways to generate LCFS credits: fuel pathway-based crediting, project-based crediting, and zero emission vehicle infrastructure (capacity-based) crediting.

Under the fuel pathway-based crediting method, LCFS sets carbon intensity (CI) benchmarks for traditional and alternative transportation fuels, including electricity for electric vehicles (EVs). Every year, the CI for each transportation fuel is compared to the benchmark. Low-carbon fuel providers generate LCFS base credits when their fuels have a CI lower than the benchmark. Low-carbon fuel providers include electric investor-owned utilities (IOUs), as they provide electricity as fuel to their EV customers. CPUC’s LCFS involvement is limited to overseeing the IOUs’ participation in the fuel pathway-based crediting method.

A certain portion of the IOUs’ base credits is allocated toward the statewide California Clean Fuel Reward (CCFR) program. Effective July 1, 2025, CARB’s updated regulations now limit the CCFR program to providing a point-of-purchase rebate to customers purchasing a medium- and heavy-duty (MDHD) EV rebate. CARB’s July 2025 updates also reclassify San Diego Gas and Electric (SDG&E) as a medium IOU, while Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) remain classified as large IOUs. The large IOUs must contribute 50% of their base credits to the CCFR program, while any medium IOU must contribute 25% of its base credits to the CCFR program. SCE serves as the administrator for the CCFR program. The IOUs sell the remaining portion of base credits and allocate the revenue toward IOU-designed “Holdback” programs that CARB regulations require to further transportation electrification efforts in California.

In December 2020, CPUC—after consultation with CARB—issued Decision (D.) 20-12-027 concerning LCFS Holdback Revenue Utilization. D.20-12-027 adopted parameters governing the IOU sale and use of LCFS Holdback credits, including mandatory equity and resiliency spending thresholds. The decision required the IOUs to allocate a certain portion of LCFS Holdback credits toward equity programs that primarily benefit or primarily serve disadvantaged, low-income, or rural communities. Specifically, the decision adopted a ramp-up period requiring allocation of 35% of LCFS Holdback credits toward equity projects in 2021, 45% in 2022, 55% in 2023, and 75% in 2024 and thereafter. D.20-12-027 also requires the IOUs to allocate up to 20% of the remaining (non-equity) LCFS Holdback credits toward programs that address EV resiliency (e.g., EV charging facilities at evacuation/emergency response centers, pilots for technologies that allow EVs to power electric equipment at home or businesses). D.20-12-027 requires PG&E, SCE, and SDG&E to submit LCFS Holdback Implementation Plans that must include a proposal for at least one program and a description of how the IOU plans to spend the rest of the LCFS holdback funds.

LCFS regulations outline several parameters that inform what kinds of projects IOUs may propose. CARB’s 2025 amendments increased the required percentage of holdback credits to focus on disadvantaged, low-income, rural, and tribal communities. The code lists nine pre-approved project types that meet this requirement, which are listed below.

Pre-approved “Equity” Holdback Projects:

1. Electrification of drayage trucks, MDHD, or off-road vehicles, including school and transit buses.
2. Public charging infrastructure and charging infrastructure in multi-family residences.
3. Electric mobility solutions, such as EV sharing and ride hailing programs.
4. Additional incentives for low-income individuals beyond existing incentives at the local, federal, and State levels for: purchasing or leasing EVs, installing charging infrastructure in residences, including panel and service upgrades, and offsetting costs for EV charging.
5. Promoting use of and incentives for public transit and other clean mobility solutions, via charging equipment or infrastructure that supports:
   • EV sharing and ride hailing programs,
   • Electrification of public transit and school buses, including battery swap programs, and
   • Use or ownership of neighborhood EVs, eBikes, eScooters, eMotorcycles, and other micromobility solutions.
6. Re-skilling and workforce development for TE and EV infrastructure applications.
7. Investments in grid-side distribution infrastructure for MDHD charging.
8. TE projects that are identified in, or consistent with, a Community Emission Reduction Plan created in response to AB 617 (stats. 2017, ch. 136).
9. IOUs may work with local environmental justice advocates, community-based organizations, and municipalities to develop and implement projects that promote TE in disadvantaged, low-income, and/or rural communities. These alternative projects must be approved by CARB’s Executive Officer or their delegate.

CARB also updated its list of pre-approved non-equity project types, such as EV charging optimization education and the deployment of bidirectional EV charging equipment.

Pre-approved “Resiliency” (Non-Equity) Holdback Projects:

1. Investments in grid-side distribution infrastructure necessary for EV charging.
2. Support for vehicle-grid integration (VGI), including:
   1. Encouraging the optimization of EV charging through education in peak demand, rate pricing, grid emergencies, potential power shutoffs, infrastructure deferral, renewable integration, and/or other signals and grid needs to provide grid and customer benefits.
   2. Providing program incentives to encourage driver participation in monitored/managed charging, demand response, or vehicle-to-load/vehicle-to-grid applications.
   3. Supporting the deployment and installation of bidirectional charging equipment.
   4. Other innovative approaches to promoting and managing EV charging and discharging.
3. Hardware and software that decrease the cost of or avoid updates to infrastructure, including load management software or outlet splitting.

The table below summarizes the current LCFS Holdback programs within each IOU’s territory as of July 2026. The programs have all been authorized by CPUC but are at various stages of implementation.

For more information on the LCFS regulation, please visit CARB’s website: https://ww2.arb.ca.gov/our-work/programs/low-carbon-fuel-standard