CARB Powers Through: Amended LCFS Regulations Set to Kick-Off in July 2025 | cCarbon Analysis

Key Takeaways

• Following a tumultuous few months of uncertainty, the California Air Resources Board (CARB) announced on Friday, June 27, that it had received approval from the Office of Administrative Law (OAL) for its amended Low Carbon Fuel Standard (LCFS) Regulation. The amended regulation with a new, stricter CI benchmark, is scheduled to take effect in July 2025, covering transactions and volumes of fuel supplied on and after July 1, 2025.
• The past few months have seen LCFS credit prices drop to historic lows with the spot price reaching $40.25 on June 10. The average spot credit price dropped from $72 in February to $44.95 in June. A more stringent CI schedule for fuel volumes starting July 1st (Q3 2025 and beyond) will lead to a surge in credit demand, pushing prices higher. As an initial response, spot prices on June 27 jumped up, reaching $50 for the first time since May 23.
• The RSI on benchmark prices, which was in the oversold territory (<30) between May 20th and June 12th, crossed into the overbought zone (>70) on June 27th. The RSI, or Relative Strength Index, is a momentum indicator that measures the speed and change of price movements.
• cCarbon’s nowcast estimates credit bank to surpass 43 million MT as of June 30, 2025 (compared to 37.5 million MT as of December 31, 2024). We expect the bank to decrease to 39 million MT by the end of Q4 2025. To know what lies ahead for the California LCFS market in the coming months and years, join us on July 15th for a webinar where cCarbon analysts will discuss the top credit generators, EV outlook, and price forecasts to help you navigate these uncertain times of change in the clean fuels world.

OAL Offers Relief to the LCFS Market with Approval of Amendments

After a period of uncertainty, the California Air Resources Board (CARB) announced on Friday, June 27, that it had received approval from the Office of Administrative Law (OAL) for its amended Low Carbon Fuel Standard (LCFS) Regulation.

Figure 1: LCFS CI Reduction Trajectory, Source: CARB

The CARB Board initially approved the amendments on November 8, 2024, but they were disapproved by the OAL in February 2025 due to clarity standards inconsistencies. Following this, CARB revised the regulation, opened a 15-day comment period, and resubmitted the amended regulation to the OAL on May 15, 2025. The OAL granted approval on June 27, 2025.  The amended regulation includes a new, stricter carbon intensity (CI) benchmark and is set to take effect in July 2025, covering transactions and volumes of fuel supplied on and after July 1, 2025.

In its latest slew of changes that CARB opened to public comment, the regulation included some key changes. There is a notable focus on increasing support for hydrogen refueling infrastructure (HRI), particularly in the heavy-duty segment (HD), with an increase in the derating factor used to calculate HD-HRI credits. Furthermore, the cap on credits from both LMD (Light and Medium-Duty) and HD-HRI, which limited them to 1.5 times capital expenditure (excluding grants and external funding prior to becoming operational), has been removed. The amended regulation provides a more inclusive interpretation of hydrogen that can generate credits, allowing hydrogen produced with accompanying carbon capture and sequestration (CCS) technology to contribute toward the 80% renewable hydrogen requirement by 2030. Original Equipment Manufacturers (OEMs) have been excluded from receiving a portion of base credits for electricity charging.

Market Reacts Favorably to Effective Date Certainty

The past few months have seen LCFS credit prices drop to historic lows with the Spot price reaching $40.25 on June 10. The average spot credit price dropped from $72 in February to $44.95 in June. A more stringent CI schedule for fuel volumes starting July 1st (Q3 2025 and beyond) will lead to a surge in credit demand, pushing prices higher. As an initial response, spot prices on June 27 jumped, reaching $50 for the first time since May 23.

Figure 2: CA LCFS Spot and Benchmark Prices ($), Source: CC.info

Figure 3: CA LCFS Benchmark Price RSI, Source: CC.info

The RSI on benchmark prices, which was in the oversold territory (<30) between May 20th and June 12th, crossed into the overbought zone (>70) on June 27th. The RSI, or Relative Strength Index, is a momentum indicator that measures the speed and change of price movements. It ranges from 0 to 100 and helps identify whether an asset is overbought or oversold. Explore technical indicators on the CA LCFS market on cCarbon’s Trader’s Perspective Dashboard.

What Lies Ahead: cCarbon’s LCFS Outlook

cCarbon’s initial nowcasts estimate Q1 and Q2 2025 credit generation exceeding demand, resulting in the credit bank surpassing 43 million MT (compared to 37.5 million MT as of December 31, 2024). We expect the bank to decrease to 39 million MT by the end of Q4 2025. To know what lies ahead for the California LCFS market in the coming months and years, join us on July 15th for a webinar where cCarbon analysts will discuss the top credit generators, EV outlook, and price forecasts to help you navigate these uncertain times of change in the clean fuels world.

Figure 4: CA LCFS Credit, Deficit and Bank cCarbon Estimates, Source: CarbonOutlook Model

Emerging Developments to Track

Over the past week, an Assembly committee has considered SB-237, which among other things, proposes a cap on LCFS credit prices tied to January 2025 values, adjusted annually for inflation. The existing cap on LCFS credit prices was set at $200 in 2016, also adjusted for inflation. The bill requires CARB to adopt these changes as emergency regulations exempt from traditional review processes, valid until January 1, 2031. The legislation also mandates standardized regulatory impact analyses for all CARB or Energy Commission rules that affect retail fuel prices. The outcome of this bill could have a significant impact on the LCFS market.

Join Us for a Webinar to Know What’s Next for the California LCFS Market

CC.info Reader’s Digest

Stakeholders React Favorably to CARB’s Latest LCFS Proposals, but Some Continue to Resist November 2024 Amendments

CARB Third LCFS 15-Day Package Aims to Expedite Amendments- Keeps Original CI Reduction Trajectory

CARB Outlines Swift Action Plan, Drawing on Past Experience to Address OAL’s Decision of Disapproval​