How States Can Use Low-Carbon Fuel Standards to Incentivize Clean Hydrogen-Derived Fuels

The policy brief examines how Low-Carbon Fuel Standards (LCFS) can complement federal hydrogen investments by directing clean hydrogen toward high-priority sectors. It analyzes existing programs in California, Oregon, and Washington, providing four lessons for other states: regulating intrastate aviation fuel to move beyond biogenic feedstocks, phasing in maritime fuel regulation, managing biogenic feedstock demand to prevent indirect land use change, and implementing rigorous emissions accounting to avoid loopholes for blue and grey hydrogen.

• Low-carbon fuel standards (LCFS) function as credit markets that reward fuels with carbon intensity (CI) below an annually decreasing limit and require those exceeding the limit to purchase credits.
• Current LCFS programs in California, Oregon, and Washington have primarily focused on light-duty transport, but clean hydrogen is essential for decarbonizing heavier modes such as long-haul trucks, aviation, and shipping.
• The 'opt-in' approach for sustainable aviation fuel (SAF) in early LCFS programs has led to slow uptake; in 2021, SAF qualified for only 0.3 percent of LCFS credits sold in California.
• To accelerate the transition to hydrogen-based e-fuels for aviation, California has proposed fully regulating intrastate jet fuel starting in 2028, which would create deficits for fossil-based fuels.
• British Columbia is the only North American jurisdiction with an LCFS policy that mandates SAF use, requiring all jet fuel sold in the province to be at least 1 percent SAF by volume by 2028.
• Over-reliance on biogenic feedstocks, such as those used in the HEFA pathway, can lead to indirect land use change (ILUC), increased food prices, and deforestation, as seen with palm oil subsidies in the European Union.
• California's 'book and claim' accounting method allows blue and grey hydrogen producers to use carbon offsets from dairy biogas, which the document argues creates a competitive disadvantage for clean hydrogen from electrolysis.

APA

RMI (2024). How States Can Use Low-Carbon Fuel Standards to Incentivize Clean Hydrogen-Derived Fuels. https://rmi.org/resources/how-states-can-use-low-carbon-fuel-standards-to-incentivize-clean-hydrogen-derived-fuels/

Chicago

RMI. How States Can Use Low-Carbon Fuel Standards to Incentivize Clean Hydrogen-Derived Fuels. 2024. https://rmi.org/resources/how-states-can-use-low-carbon-fuel-standards-to-incentivize-clean-hydrogen-derived-fuels/.

Wikipedia

{{cite report |author=RMI |title=How States Can Use Low-Carbon Fuel Standards to Incentivize Clean Hydrogen-Derived Fuels |date=9 February 2024 |url=https://rmi.org/resources/how-states-can-use-low-carbon-fuel-standards-to-incentivize-clean-hydrogen-derived-fuels/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024how, author = {{RMI}}, title = {{How States Can Use Low-Carbon Fuel Standards to Incentivize Clean Hydrogen-Derived Fuels}}, institution = {RMI}, year = {2024}, month = feb, url = {https://rmi.org/resources/how-states-can-use-low-carbon-fuel-standards-to-incentivize-clean-hydrogen-derived-fuels/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }