The CA LCFS model is a credit/deficit demand-supply model that calculates credit/deficit generation based on volume of different types of fuel consumed. The model simulates vehicle sales, retirement, and use based on different economic and technical parameters. Vehicles are classified based on their weight classes (LDV, MHDV, and HDV). For each class, the model generates results for fuel demand projections until 2035 broken into several fuel categories: gasoline, gasoline substitute such as ethanol and drop-in renewable gasoline; diesel; diesel substitutes such as biodiesel (BD) and renewable diesel (RD); compressed natural gas (CNG); liquefied natural gas (LNG); electricity; and hydrogen. The model includes scenarios for the uptake of Sustainable Aviation Fuel (SAF), the impact of Carbon, Capture and Sequestration (CCS) in Ethanol pathways, dairy RNG to electricity pathways and modifies the scenarios for ZEV uptake in the MHDV segment.

Model Change Log

The dataset has been calibrated using the latest available data (till 2025 Q3), and this version of the model incorporates California’s approval of E15 fuel sales under AB 30, signed in October 2025. The baseline scenario has also been updated to reflect a delayed timeline for full ZEV adoption, shifting from 2035 to 2038. Click here for the Explainer!

The California Low Carbon Fuel Standard (CA LCFS) is one of the most established and influential clean fuel programs globally, designed to reduce the carbon intensity (CI) of transportation fuels in California. Since its launch in 2011, the program has significantly reshaped the fuel landscape by incentivizing the adoption of low-carbon alternatives such as renewable diesel, biodiesel, electricity, and renewable natural gas (RNG).

The LCFS operates through a market-based credit system. Fuels with CI below the annual benchmark generate credits, while higher-carbon fuels like gasoline and diesel generate deficits. Obligated parties must offset deficits by purchasing credits, creating a financial incentive to adopt cleaner fuels. Over time, increasingly stringent CI reduction targets have driven innovation and investment across the clean fuels value chain.

A major shift in recent years has been the dominance of renewable diesel as the primary source of credit generation, overtaking ethanol. Additionally, electricity credits—driven by rising electric vehicle (EV) adoption—have grown rapidly, particularly from residential charging. Bio-CNG derived from dairy manure has also contributed significantly due to its extremely low or even negative carbon intensity.

However, the market has faced volatility. A large buildup in the credit bank—reaching historically high levels—has created an imbalance between credit supply and demand, leading to a decline in credit prices from earlier peaks near $200 to lower levels in recent years. In response, regulators are considering more aggressive CI reduction targets to tighten the market and restore price signals.

Looking ahead, the CA LCFS is expected to enter a more constrained phase. Factors such as stricter targets, potential supply limitations in renewable diesel feedstocks, and uncertainties around EV adoption will shape market dynamics. As deficits grow later in the decade, credit prices are likely to rise, reinforcing the program’s role as a cornerstone of transportation decarbonization.