Governing bodies nationwide have tackled global warming by creating eco-friendly regulations. However, which ones affect you and your business the most? If you drive fleets, it may be the low-carbon fuel standard. These policies mean your gasoline and diesel composition could change in the next decade.
Here’s what you need to know for 2025.
What Is the Low-Carbon Fuel Standard?
The low-carbon fuel standard is a set of policies dictating how much carbon is permitted in various fuels. States have used this protocol to decrease emissions and clean up the transportation industry. These climate-friendly policies have existed for over a decade.
California introduced the first of its kind in 2007. By 2011, the state’s Air Resources Board implemented the fuel standard and began regulation.
The last 14 years have seen various changes, though the focus has remained on carbon intensity. Then, a couple of other states followed suit.
After seeing California’s success, Oregon implemented a low-carbon fuel standard in 2016. It emulated most of California’s policies to reduce the greenhouse gases (GHGs) from tailpipes.
The most recent state to implement similar regulations was Washington. Olympia’s policies went into effect in January 2023.
What Fuels Are Included in These Standards?
When states implement these fuel policies, it’s more than just the gas you put in your car. For instance, California’s low-carbon fuel standard includes liquefied natural gas in domestic and industrial settings. Your home or business could also be affected by compressed natural gas.
While there are other focuses, the primary fuels scrutinized are those in your car. Gasoline, diesel, hydrogen and biofuels highlight the fuels in these environmental policies. Fuel producers must reduce the carbon in their supplies for the next decade, following the zero-emission goals nationwide.
Besides fuels, low-carbon standards also include credit generation and reporting requirements. Companies can purchase carbon credits to offset their fuel emissions or sell extra ones. Fuel producers and importers must also report their carbon intensity for state compliance.
Why Do States Implement These Policies?
Environmental regulations are crucial when combating climate change. With stricter fuel regulations, you can encourage alternative energy sources and research. West Coast states are the leaders in carbon reduction, and electric vehicles (EVs) are more prominent there. California is also a pioneer in hydrogen fuels.
Another reason for instituting a low-carbon fuel standard is air quality. Western states have mountains with adverse conditions and wildfires, so it’s wise for them to incentivize cars and trucks to use cleaner energy. EVs produce zero GHG emissions, and larger cities can reduce fuel usage through public transit.
Being stricter on carbon isn’t just about EVs — it includes the entire green energy market. When CO2 emissions cost more, businesses have more incentive to develop alternatives. They may invent low-carbon technologies or move away from fossil fuels entirely. Increased energy security is ultimately beneficial for a state’s future.
What’s New for 2025?
Since 2011, states implementing low-carbon fuel standards have altered them based on progress. California has updated its policies for 2025 to include new benchmarks. It’s now mandated that carbon intensity decrease by 30% by 2030. It also changed the carbon reduction goal to 90% by 2045. Besides the carbon intensity goals, the Golden State amended its fuel standards to support zero-emissions infrastructure.
It has significantly focused on EV chargers as it builds this infrastructure. Last year, Gov. Newsom announced California exceeded 100,000 public and private chargers.
Similar pushes to enforce stricter policies are happening in Washington. House Bill 1409 would require suppliers to purchase additional low-carbon fuel credits. If implemented, Washington residents may have to pay extra for gasoline and diesel. Today’s credits cost about $75, and the funds raised will help electrical infrastructure.
Who Will Be Next to Implement Similar Fuel Policies?
Three states have implemented a low-carbon fuel standard. New Mexico appears to be the next state to introduce these environmentally friendly regulations. In early 2024, its legislature passed carbon fuel regulations that will reduce carbon intensity. By 2030, fuel will have 20% less carbon than it did in 2030. Then, 2040 will include a 30% reduction compared to 2018.
The New Mexico Environmental Department will regulate fossil fuels, hydrogen and biodiesels. Another critical element is clean fuel producers opting into the program to buy and sell credits. Governor Michelle Lujan Grisham signed the legislation in March 2024, and it will start by summer 2026.
The administration determines a fuel producer’s fees each year based on its credits. If a supplier is under the carbon threshold, it can sell credits. However, exceeding means it must pay to ensure compliance. This new law encourages renewable energy production, considering the exceptions. New Mexico says geothermal, solar, wind and hydropower contribute zero emissions toward the standards.
Are Other States Considering Similar Standards?
The West Coast has pioneered these carbon standards, though others are close. States from various regions have considered similar versions to reduce emissions. For instance, Minnesota legislators have proposed such legislation in recent years. The Clean Transportation Standard Act would establish standards for carbon intensity and reporting.
Michigan is another Midwestern state considering adopting these policies. The Mitten State’s adoption would be significant because of its automotive industry. Its legislature has discussed related legislation since 2023. If passed, the bill would create a clean fuel standard for the state. Proponents have advocated for a carbon reduction by 2035.
On the East Coast, New York has led the charge in tackling carbon emissions. Like other proposals, the Empire State’s plan would mitigate GHGs from transportation fuels. The most recent legislation passed the New York State Senate but stalled in the Assembly.
What Scrutiny Has the Low-Carbon Fuel Standard Faced?
Carbon standards are becoming more prominent nationwide, whether on the West Coast or Mid-Atlantic. However, these policies aren’t without scrutiny. Opponents of these standards have voiced displeasure by saying they go too far or are insufficient. This litigation has started in California — the home of carbon fuel standards.
In late 2024, Communities for a Better Environment (CBE) filed a lawsuit in California Superior Court. The suit alleges the California Air Resources Board didn’t disclose the impact of its latest amendments. CBE says the state overlooked the environmental harms of biofuels and other energy sources.
In California and other states, biofuels have become the center of attention. While their environmental impact is lower, there are significant trade-offs. For example, biofuels require land-use changes in the Golden State and surrounding regions. Clearing land involves displacing animals and competing with crops for land and water.
Do Other Countries Have Similar Fuel Standards?
Carbon fuel standards are slowly growing in the U.S. and worldwide. Start with the country north of the American border. Canada has recently adopted federal regulations that will regulate carbon intensity through 2030. The nation’s Clean Fuel Regulations will reduce the CO2 equivalent per megajoule of energy for fuel suppliers.
The European Union has been a bastion of environmental policies, especially regarding automobiles. However, the governing body hasn’t directly tackled CO2 through a low-carbon fuel standard. Instead, it’s relied on member nations to enact climate policies voluntarily. This European organization has similar policies dating back to its 2009 emissions limit for new vehicles.
Some countries outside the EU have carbon intensity regulations. For example, the United Kingdom started the Renewable Transport Fuel Obligation in the 2000s. This law means fuel suppliers must file reports on carbon emissions and biofuels. The U.K. has used these policies to promote biofuels and increase the nation’s electricity security.
How Carbon Fuel Standards Affect the Economy
These fuel policies require producers and importers to reduce their gas and diesel carbon intensity. While fuel prices may increase, these standards benefit communities economically. The primary opportunity for growth is through new jobs.
When environmental consciousness has incentives, enterprises may build biofuel production or battery manufacturing facilities. Therefore, new career opportunities arrive in places needing economic development. These policies could also aid industry professionals in the transition from fossil fuels to clean energy.
The ramifications extend further by inviting brands with similar sustainability views. Communities benefit when those from multiple sectors build eco-conscious factories and shops in cities.
Besides dollars and cents, low-carbon fuel policies increase power resilience in communities worldwide. With less incentive to use fossil fuels, cities and states can focus on renewable energy infrastructure.
Fossil fuels have a finite shelf life, so communities must prioritize resilience. Incorporating solar, wind and geothermal sources is integral to helping keep the power on. Ultimately, it’s financially viable when combating the long-term effects of climate change.
Following the Low-Carbon Fuel Standard in 2025 and Beyond
While there aren’t federal guidelines, a few states have pushed legislation on carbon intensity. So far, four have or will implement policies to reduce CO2 emissions and promote cleaner fuel.
New York, Michigan and Minnesota have had legislative activity, though more could join. What state will be next to discuss legislation?
Most have centered their policies around carbon credits. Fuel suppliers and importers can purchase or sell credits based on annual carbon levels.
California has updated its policies to make fuel standards tighter for 2025. Will Washington follow suit with its low-carbon fuel standard?
These policies will likely gain traction worldwide due to environmental and economic benefits. From green jobs to cleaner air, communities have benefited.
Frequently Asked Questions
How is carbon intensity measured?
Companies measure carbon intensity through the fuel’s entire life cycle. From production to the end user, its emissions matter. These calculations include the CO2 from extraction, distribution, combustion and other critical aspects.
What happens if a supplier doesn’t comply?
If a state has a low-carbon fuel standard, it’s the law. Therefore, failure to comply could result in significant penalties. California has fined businesses like Kern Oil and Tesoro for misreporting their carbon fuels.
What are considered low-carbon fuels?
Low-carbon fuels have fewer greenhouse gases than traditional fossil fuel sources. Biofuels are an excellent example, as they contain biodiesel and renewable diesel. Natural gas and propane are low-carbon electricity sources you may find at home.
