Low carbon fuels below the benchmark generate credits, while fuels above the CI benchmark generate deficits. Credits and deficits are denominated in metric tons of GHG emissions. Providers of transportation fuels must demonstrate that the mix of fuels they supply for use in California meets the LCFS carbon intensity standards, or benchmarks, for each annual compliance period. A deficit generator meets its compliance obligation by ensuring that the amount of credits it earns or otherwise acquires from another party is equal to, or greater than, the deficits it has incurred.

There are three ways to generate credits in the LCFS: fuel pathways, projects, and capacity-based crediting.