CaliforniaCASE STUDY 2 Background and objectives California is the US’s second largest transport fuel market. A large vehicle fleet, major refining base and heavy freight make transportation the state’s largest source of emissions. The state prioritizes clean fuel to reduce emissions, diversify fuel supply, strengthen energy security, create quality jobs and promote next-generation fuel development. Key policy pillars –Market-based incentives: California’s Low-Carbon Fuel Standard (LCFS) enforces increasingly tight carbon-intensity targets for fuel suppliers. Compliance requires supplying lower-CI fuels or retiring tradeable credits, rewarding verified lifecycle reductions. –Policy coordination (“stacking”): LCFS is designed to stack with other federal tools (e.g. Renewable Fuel Standard; Inflation Reduction Act 45Z/45V tax credits), strengthening project economics across investments and operations. Impact –>95% of total US renewable diesel consumption occurs in California. –>$20 billion equivalent in LCFS credits issued to date. –~25% reduction in California’s surface transport emissions since 2007. Exportable lessons –Diversify incentives: Pair upfront fiscal tools (e.g. tax credits) with performance-based credits (e.g. LCFS) to create multi-stage revenue and bankability. –Coordinate across levels: Align state and federal frameworks to ensure that support endures through political or financial shifts. –Reward performance: Tie credits to lifecycle CI metrics to incentivize continuous innovation and improvement. Sources: Bureau of Transportation Statistics, US Energy Information Administration (EIA), California Air Resources Board (CARB).59 Fuelling the Future: How Business, Finance and Policy can Accelerate the Clean Fuels Market 26

Fuelling the Future 2026