Carbon Capture and Sequestration Project Eligibility FAQ
The California Air Resources Board’s (CARB) Low Carbon Fuel Standard regulation, which appears at sections 95480 to 95503 of title 17, California Code of Regulations, is designed to reduce greenhouse gas emissions associated with the life cycle of transportation fuels used in California. CARB staff prepared this document to address frequently asked questions (FAQ). These answers may be based in part on case-specific factual circumstances and are offered here only as guidance that does not supplant the requirements of the LCFS regulation. Unlike the regulation itself, this document does not have the force of law. It is not intended to and cannot establish new mandatory requirements beyond those that are already in the LCFS regulation, nor can it supplant, replace or amend any of the legal requirements of the regulation. Conversely, any omission or truncation of regulatory requirements does not relieve entities of their legal obligation to fully comply with all requirements of the regulation.
This document addresses common questions related to carbon capture and sequestration (CCS) project eligibilities for receiving LCFS credits. These requirements are primarily addressed in LCFS Regulation section 95490(a) and the CCS Protocol subsection A.1. If you have a question that you would like to be included in this FAQ, please contact LCFS staff (see contact below).
1. Do CCS projects have to be located within California to earn LCFS credits?
No. Projects may be located anywhere, but the innovative crude oil or transportation fuel produced and associated with the CCS project must be sold in California markets (with the exception of direct air capture (DAC) projects). The credits generated will be pro-rated based on the volumes of fuel sent to California. DAC projects that store the captured carbon dioxide (CO2) underground may apply for CCS Permanence Certification regardless of location.
2. Does the CO2 need to be captured and sequestered by the same entity?
No. CO2 may be captured by one entity and transferred to another entity for sequestration. For crediting under the LCFS, both the capture entity and the sequestering entity must apply as joint applicants.
3. Do LCFS credits go to the entity that captures or sequesters the CO2?
Once the CCS project application receives Permanence Certification, and after the reported amounts of sequestered CO2 are verified, LCFS credits may be claimed by the entity that captures the CO2. The entities that operate the sequestration sites are not necessarily the entities eligible to receive LCFS credits (unless that same entity is also the entity that captured the CO2).
4. What types of CCS projects are eligible under the LCFS?
The following table is intended to be a complete list of the types of CCS projects that are eligible to generate LCFS credits under the LCFS regulation. CARB staff acknowledge that there may be other CCS project types that could become eligible in the future.
|Project Type (these entities receive the LCFS credits)||Examples (where the CO2 is captured from)|
|Direct air capture (credits generated by the capturer)|
|Tier 2 pathway (credits generated by the alternative fuel producer)|
|Refinery Investment (credits generated by the refinery)|
|Innovative Crude (credits generated by the crude producer1 )|
5. What types of sequestration sites are eligible for CCS projects?
The sites that are eligible for CO2 sequestration under the LCFS are:
- Saline reservoirs
- Depleted oil and gas reservoirs
- Oil and gas reservoirs used for CO2-enhanced oil recovery (CO2-EOR)
As a reminder, the entities that run the sequestration sites are not the entities receiving the LCFS credits (unless that same entity is also the entity that captured the CO2). In addition, all sequestration site types must be located onshore in order to be eligible for CCS Permanence Certification.
6. Is the oil produced from CO2-EOR, using CO2 captured from eligible project types, eligible to generate credits?
No. CO2-EOR fields are sequestration sites under the CCS Protocol, not project types. The capture facility is the entity that generates the LCFS credits, not the CO2 sequestering facility. The crude oil generated as a result of CO2-EOR using CO2 captured from eligible projects is not eligible for generating LCFS credits under the Innovative Crude Provision.
7. Can CO2 that is already being captured and used productively in industry (e.g., in carbonated beverages or dry ice production) generate LCFS credit if it is instead permanently sequestered?
Under these circumstances, the net reduction in CO2 emissions to the atmosphere depends on the marginal new source of CO2 that replaces the prior industrial use. If the marginal source of CO2 is newly installed capture from anthropogenic sources, then the CCS project would result in net CO2 emission reductions to the atmosphere and would be eligible for LCFS crediting. Conversely, if the marginal source of CO2 is increased production from a natural CO2 dome, then net CO2 reduction from the CCS project would be zero and the project would not be eligible for LCFS crediting.
Section 95490(c)(2)(A) of the LCFS regulation requires that the applicant provide a complete description of the CCS project and how greenhouse gas emissions are reduced. In order to demonstrate that CCS projects for which CO2 is already being captured and used productively do result in net GHG emission reductions, the applicant must provide an independent research analysis showing that the marginal source of CO2 for that region is from newly installed capture from anthropogenic sources.
If you have questions regarding the above information, please visit the LCFS Contacts webpage.
- 1The crude oil producer may elect to transfer the right to opt in for credit generation to the joint applicant through a written agreement.