Gray, blue, or moo hydrogen? How gas companies are milking California’s LCFS
Research Brief
Evaluating the policy value of dairy biomethane-derived hydrogen in California’s Low Carbon Fuel Standard
Livestock operations and manure management practices together are responsible for around half of the methane emissions in California. California’s Senate Bill 1383 requires the Air Resources Board to adopt regulations to reduce methane emissions by 40% by 2030, focusing on improving dairy manure management operations.
One way to reduce methane emissions is to collect biogas, produced during manure decomposition, instead of releasing it into the atmosphere. California’s Low Carbon Fuel Standard (LCFS) provides a strong incentive, in the form of credits, for projects that can demonstrate they result in avoided methane emissions. Hydrogen produced from biomethane using conventional techniques is also eligible for these credits. Currently, dairy manure pathways have an outsized contribution to the LCFS program due to avoided methane emissions crediting that lead to highly negative carbon intensities (CI). LCFS credit value for dairy hydrogen could even surpass the credit for electrolysis hydrogen from renewable electricity. In addition, LCFS allows hydrogen producers in California to claim credits for biogas captured anywhere in the United States. This system could end up supporting out-of-state digester projects rather than advancing sustainable technologies for low-CI hydrogen production within California.
This brief:
- Estimates the policy value of dairy-biomethane derived hydrogen, including the impact of assumptions about avoided methane, on the CI of this pathway.
- Illustrates the potential of livestock biomethane projects that may be incentivized under this system, particularly outside of California.
The brief concludes with key takeaways and recommendations for policies to limit the contribution of out-of-state, out-of-sector LCFS credits from manure-based pathways:
- The high policy value derived from the dairy biomethane-derived hydrogen pathways does not go towards advanced hydrogen production technologies or in-sector emissions reductions for transportation.
- Phasing out avoided methane emissions for biomethane pathways would better align it with its impact on transport-sector emissions in California.
- Stricter deliverability requirements for manure-based pathways would help ensure that these pathways help achieve emissions reduction goals in California. /li>
