The LCFS is not setup to address fuel efficiency, and acts on a completely different area for technological promotion than the CAFE standards. CAFE is a vehicle sandard, while the LCFS is a fuel standard, which targets refiners as opposed to automotive manufacturers. It's better to think of the LCFS as a market-based modificaiton to the RFS2 than to think of it as a fuel economy standard. The LCFS creates a technology incentive mechanism that directs pricing signals toward low-carbon fuel production, and rewards incremental improvements in carbon intensity from a baseline level. These standards may then be met through any modifications to existing fuel production pathways, and through bringing new fuels to market (mostly biofuels).
While cellulosic ethanol may be produced with negative net energy, the RFS barrier prevents that from happening, as it rightly should. The issue with the RFS and promoting cellulosic ethanol is that the RIN waiver credits have not been substantially high, and the mandated levels have remained uncertain, which has discouraged investment in the technology. If the 50% reduction criteria were removed, this would amount to bringing cheaper, less relevant cellulosic technologies to market, with only the assumption that GHG emissions would be reduced as costs came down. If cellulosic technologies are not coming online with the given RIN waivers, additional funding should be directed toward RD&D as necessary. We're starting to see some plants finally entering the market, so we'll see where the technology ends up.
A lot of fuel technology policies have, unfortunately, fallen victim to the "fuel du jour" phenomenon, in which the subsidies and incentives have been patchy and short-lived. We truly need a comprehensive energy innovation policy system in this country that is setup to take technologies from their infancy through to market deployable solutions. The LCFS tries to work toward this in some capacity.