LCFS Program Updates Increase ROI of Fleet Electrification

LCFS updates affect who can monetize credits, how much they’re worth, and the measures they must comply with

The Low-Carbon Fuel Standard (LCFS) is a rule, initially enacted in California in 2009, aimed at reducing greenhouse gas emissions from transportation fuels in the state. The scheme requires fuel producers to reduce the carbon intensity (CI) of their products, incentivizing the adoption of cleaner alternatives such as biofuels, electricity, and hydrogen. One of the most critical components of this program is the trading of LCFS credits.

LCFS credits are tradable certificates that represent a reduction in the carbon intensity of transportation fuels. Under California’s LCFS program, fuel producers and importers are required to meet carbon intensity reduction targets. The credits are awarded based on how much cleaner the fuel is compared to a baseline. For example, if a producer creates a biofuel that has a lower carbon intensity than gasoline or diesel, they can earn LCFS credits.

These credits can then be sold or traded to other companies that need to meet their carbon intensity reduction goals. The trading market for these credits has become a significant part of the overall strategy to encourage the transition to cleaner fuels.

The LCFS program is part of California’s broader effort to meet its climate goals, including a commitment to achieving carbon neutrality by 2045. Several other states now have similar programs, predominantly on the west coast of the US and Canada.

Recent changes to California’s law, approved in the fall of 2024, reflect an evolution of the LCFS program. Notable changes for end users include: 

• A stricter carbon intensity standard, likely meaning fewer available credits and higher prices.
• Electric vehicle charging data is now subject to 3rd-party verification.
• Electric Transport Refrigeration Unit (eTRU) credits will now be issued to shore power infrastructure owners rather than to TRU owners (as of April 1, 2025).
• Forklift charging now must be metered rather than estimated (as of Jan. 1, 2026).

Several additional changes affect biofuel producers and other entities. It’s also worth noting that the U.S. Supreme Court recently declined to hear a challenge to California’s Low Carbon Fuel Standard, meaning the rule is likely to stay in place for some time, even under the upcoming Trump administration.

Let’s look at a few examples of how these changes affect various industries:

LCFS Updates for Food Producers

Companies switching to electric or hybrid electric TRUs (eTRUs) will now experience a simplified process for generating and monetizing LCFS credits. With the recent changes, credits are generated by the owner of eTRU shore power infrastructure, instead of the owner of the eTRU. This allows for a simpler and more straightforward measurement and certification process that aligns better with EV charging-related LCFS credits. 

One additional requirement is that companies adding electric forklifts or other electric yard equipment will be required to install accurate metering at the charging station to generate LCFS credits.

LCFS Updates for Fleet Owners

Fleet owners will likely need to invest in new assets and infrastructure across the light-, medium, and heavy-duty sectors. They will also need a third party to verify charging data for electric vehicles. As a reward, the credit system can provide a new revenue stream for those fleet owners who meet or exceed the carbon intensity benchmarks. 

LCFS Updates for Third-Party Logistics

Third-party logistics providers (3PLs) such as warehouse operators stand to benefit substantially if they host transport electrification or other alternative fueling infrastructure. By offering this infrastructure to their customers, they can not only charge for the service but also benefit from the LCFS credits generated. This could position 3PLs as key players in the transition to zero-emissions vehicles (ZEVs). These companies can install and manage their own infrastructure, or they can partner with service providers who can deploy and manage the infrastructure on their behalf, taking a cut of the proceeds as rent.

Conclusion

As businesses adapt to the new rules, there will be both challenges and opportunities. Those who are proactive in embracing cleaner fuels and technologies will be well-positioned to thrive in the evolving LCFS market, while also contributing to California’s ambitious climate goals.

Ndustrial’s Energy-as-a-Service offering, for example, allows users to plug into eTRU electrification infrastructure at sites they are already visiting, at a lower cost than diesel. Meanwhile, site hosts can benefit from making this infrastructure available, even with zero capital investment or ongoing costs.

Site hosts may also choose to deploy and manage the infrastructure themselves, often with the help of tools from service providers they contract with. Hosts can then monetize LCFS credits directly in addition to charging customers for their services. They may then choose to pass along the value of these credits to their customers.

For fleet owners and logistics providers, these changes present new opportunities for reducing costs, increasing revenue, and simplifying regulatory compliance. For stakeholders in the fuel and energy sectors, staying informed about these changes is essential for navigating the new regulatory landscape and ensuring continued success in the low-carbon economy. 

For further information on business models, infrastructure hosting, or LCFS credit monetization, contact BusDev@ndustrial.io.