Dairy farmers have narrowly escaped a move to limit the crediting period for anaerobic digesters within California’s Low Carbon Fuel Standard. Yet the California Air Resources Board has agreed on a resolution to initiate the rulemaking process for livestock methane emissions if dairy farmers are unable to meet the state’s 40% reduction target for 2030.
Representatives from the dairy and renewable natural gas industries have long warned the state’s escalating scrutiny over digesters — amid a series of academic and fiscal assessments backing the program — is creating a chilling effect on private investments. The return on those investments was further put in doubt last week with the reelection of Donald Trump as president, fueling concerns LCFS will make an easy political punching bag for the Republican administration and that Trump may cancel federal credits.
Throughout a grinding 12-hour hearing that ran into Friday night, CARB board members and a range of advocates expressed pessimism over the future of the state’s many ambitious climate policies under a president often hostile to California’s clean air goals.
Following the election, Newsom called for a special legislative session to shore up the state’s existing Trump resistance policies and bolster its legal resources. Trump responded by arguing the “cost of everything” in California is out of control and reiterated a commitment to send more water to farms and cities.
CARB has also encountered political pressure from state leaders to mitigate the financial burdens its regulations impose on Californians. For the past year, Gov. Gavin Newsom has advanced laws to place more scrutiny on oil industry profits and bolster their backup supplies in an attempt to prevent further spikes in gasoline prices. In that time, Newsom and state and congressional representatives have experienced a surge in outcry from constituents over the rising cost of living in the state, particularly with gas prices, housing and the doubling of electricity rates for many residents over the past decade.
Since 2022 the economy — particularly with the cost of living and jobs — has been the biggest issue on the minds of Californians, according to polling from the Public Policy Institute of California.
Newsom is looking for any opportunities for agencies to ease the costs. After the state Senate blocked a measure to speed up CARB’s process for approving the E15 blend of ethanol in gasoline, Newsom, seeking to lower prices at the pump, stepped in and directed CARB to accelerate the regulatory process anyway. He then tasked CARB and its sister agencies with finding ways to reduce electric bills by creating more efficiency in their programs.
CARB had already scaled back the scope of the LCFS amendments since their release last December. Initially staff considered adding jet fuel to the program, enacting a carbon tax on instate flights. Instead, on the same day as Newsom’s memo to agencies on lowering costs, CARB struck a deal with national airlines on a voluntary goal of incorporating sustainable aviation fuel in 40% of the flights by 2035. CARB also walked back an effort to reduce the crediting periods for digesters from 20-30 years to just 10.
The changes delayed a vote on the amendments by several months. In that time, concerns over the potential hit to gas prices steadily rose, initially among Republicans and later to moderate Democrats.
Michael Boccadoro, Dairy CaresThe current LCFS goal is to reduce the carbon intensity of gasoline and diesel fuels by 20% below 2010 levels. A boom in biomass-based diesel has led CARB to bump the CI target to 30% by 2030 and to 90% by 2045, when the state plans to achieve statewide carbon neutrality. Critics argue that could raise the gas price by as much as 65 cents per gallon.
The agency believes the update is unlikely to lead to a significant increase in gas prices, but offered little certainty in their assessments, owing to the complex nature of the carbon trading market and the individual decisions of the many companies involved.
“The LCFS credit prices are not a major driver of retail fuel prices in California,” said CARB air pollution specialist Dillon Miner, in a lengthy presentation to the board. “Any claims LCFS is somehow responsible for high gas prices is misleading at best and not supported by the historical data.”
The political backlash, combined with the presidential election and Newsom’s directive, set a somber tone for Friday’s hearing, in stark contrast to earlier hearings when staff and board members celebrated new regulations on clean cars, forklifts, trucks and trains.
“Let's be realistic, the tools in our toolbox may become much more limited going forward,” said board Chair Liane Randolph. “While we will do everything we can to protect our authority in California and our existing programs that we have to clean the air, we know we must do all we can to use our existing state authority to bring clean fuels to California.”
Cut through the clutter! We deliver the news you need to stay informed about farm, food and rural issues. Sign up for a FREE month of Agri-Pulse here.
Outgoing board member Dean Florez further piled on to the skepticism over LCFS during the hearing as well as in an opinion piece ahead of the vote. The former state senator had spearheaded a two-decade effort to ban open agricultural burning in the San Joaquin Valley but sided with Republican concerns over the potential impact to gas prices and with environmentalists over incentivizing digesters.
“I've been watching most of the industry tweets, and they all seem very giddy about the current program,” said Florez, referring to widespread support from biofuel manufacturers. “That kind of worries me.”
In two more op-eds following the hearing, Florez called the vote “a misstep that will provide Trump an opportunity to argue that California’s climate policies are out of touch and economically unsustainable.” He embraced calls from environmental groups to drop biofuel incentives in favor of an electric-only agenda, which CARB staff have asserted would be considerably more expensive and technologically challenging, especially with replacing diesel engines in trucks, trains and planes.
Out of 16 board members, the other dissenting vote came from Diane Takvorian, who leads a San Diego-based environmental justice organization. Takvorian appreciated the resolution still required staff to develop a livestock methane rule, though she acknowledged it was purposefully neutral on the outcome of the regulatory review. She had endorsed the initial draft of the resolution that would have reduced digester crediting and was appalled staff dropped the language from the final proposal.
“This amendment really significantly challenges CARB’s ability to actually do fair and equitable and science-based rulemaking,” she said. “The jury is still out as to whether digesters promote and encourage dairy expansion.”
At the start of the hearing, staff had given a detailed rebuttal to the arguments against dairy methane crediting. Dillon Miner explained the current incentive structure has successfully deployed projects and needs to continue for the state to reach its target.
“Staff are also mindful of the importance of avoiding stranded assets that risk backsliding on greenhouse gas reductions,” he said. “We know that biomethane is unlikely to be cost competitive with fossil gas on its own, without programs that provide financial support that values the climate benefits from reducing methane emissions.”
If those projects went offline, methane emission would likely increase, and digesters currently capture 5% of the state’s greenhouse gas emissions. CARB Deputy Executive Officer Rajinder Sahota stressed to Takvorian that smaller dairies need the longer crediting period to get the return on the costly investment.
“I understand there are water quality concerns, there are ammonia concerns, there are odor concerns,” said Sahota. “But if we are going to have these dairies persist and we're going to capture that methane, this is one way to do it and give them a finance stream to do it, without having them relocate outside the state of California.”
She warned that walking away from such investments after just 10 years would send a signal to investors and create a chilling effect on other public-private partnerships.
Nevertheless, Takvorian hosted a separate vote outside of the LCFS rulemaking in an attempt to adopt the original resolution. She gathered two more votes, alongside Florez’s, in favor of limiting the credits to 10 years, but the motion fell short of passing.
Despite the lengthy discussion over cost impacts and explanations from staff, state lawmakers have remained wary of the program. On Monday, Assembly Speaker Robert Rivas and State Senate President Pro Tempore Mike McGuire issued statements pressing for more legislative oversight of CARB to increase transparency and bring down costs.
Industry groups, on the other hand, applauded CARB’s decision to maintain the avoided methane credits. Dairy Cares Executive Director Michael Boccadoro said at the hearing the presidential election makes LCFS even more critical.
Rajinder Sahota, CARB“The other change we need to recognize is going to occur is there’s now duct tape on the federal cookie jar that has funded many of California's programs,” said Boccadoro. “So we're going to need private investment.”
He added that the industry is “welcome and entirely open” to a fact-based rulemaking process that considers the merits of digesters.
Sam Wade, who directs public policy at the Coalition for Renewable Natural Gas, also stressed that federal support, through the Renewable Fuel Standard, is uncertain going forward.
“The clean tech investment community is struggling to make a business case for continued climate action, leaving green jobs, air quality and climate benefits all in jeopardy,” said Wade. “Now, more than ever, we need regulatory certainty from CARB for any of these long-lived green assets to be financeable.”
Jonathan Harding, state policy manager at the American Biogas Council, agreed with staff concerns over creating a chilling effect.
“Changes to this system place these projects at a significant disadvantage,” said Harding. “It could potentially lead to shutdowns and will certainly stifle investments in these new projects going forward.”
He called it a mistake to enact a new regulation that would mandate dairies reduce their emissions, regardless of incentives. He argued that would “increase the abatement costs for California farmers, thus increasing the price of food for Californians.”
Several environmental groups maintained their opposition to the LCFS update and any policies supporting digesters. Food & Water Watch staff attorney Tyler Lobdell said the program has “devolved into a polluter’s paradise” by rewarding factory farm biogas.
For more news, go to Agri-Pulse.com.
