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News Update
- Former CARB Chief Cheryl Laskowski Comments on Auto-Acceleration Mechanism. Cheryl Laskowski, former CARB Chief of Transportation Fuels, issued comments on the auto-acceleration mechanism (AAM) and RNG phaseouts contained in the states’ proposed scoping plan. Laskowski noted that the AAM would address oversupply of credits in the LCFS programs by triggering two checks. The AAM would be triggered if the credit to deficit ratio is greater than one, or if the total credit bank exceeds three quarters of annual deficit. The AAM can not be implemented before 2027, according to comments by Laskowski, and could not be triggered two years in a row. Laskowski commented on the state’s proposal to phase out crediting pathways for RNG for vehicle use by 2040 saying the language was not clear enough. Laskowski said the proposal could be interpreted to allow a project certified in December 2029 to earn avoided methane credits through 2060. The proposal is under a 45-day public comment period ending February 20.
- EIA Trims 2024 US Renewable Diesel Production and Consumption Forecast. The EIA trimmed its 2024 forecasts for US renewable diesel production and demand in its January Short-Term Energy Outlook. Domestic production was projected at 229,000 Bbl/d, down 3% from the December STEO. US renewable diesel demand was estimated at 252,000 Bbl/d, down 3% from the prior months’ outlook. Imports of renewable diesel for 2024 were cut by 4% to 23,000 Bbl/d. Fresh 2025 forecasts came in at 294,000 Bbl/d for production, 309,000 Bbl/d for demand and 14,000 Bbl/d for imports.
- CARB Releases Proposed LCFS Amendments Ahead of March 21 Public Hearing. On December 19, California’s Air Resources Board (CARB) released a preliminary LCFS proposal laying out amendments which nearly mirrored those in the Standardized Regulatory Impact Assessment released in September. CARB proposed a 30% reduction in carbon intensity by 2030, including a 5% step-down in 2025. This marks a 50% increase in carbon targets over the original 20% reduction target for 2030. Reductions increase to 90% by 2045 compared to a 2010 baseline. The proposal contained an automatic acceleration mechanism (AAM) which would advance stringency for a given year when unused credits more than triple average deficit generation by advancing the carbon reduction target by two years. Amendments included eliminating the exemption for intrastate jet fuel beginning in 2028 and new tracking requirements for crop-based and forestry-based feedstocks to their point of origin. The regulator proposed phasing out biogas used in transportation fuel by 2041 and by 2045 for biomethane used to produce renewable hydrogen. CARB expects to kick off the required 45-day public comment period in January, with a public hearing set for March 21, 2024.
- Washington Aims for SAF Eligibility in Rulemaking Update. The Washington Department of Ecology will begin rulemaking early 2024 to advance SAF pathways for credit generation as early as December 31, 2023. Earlier this year, Washington legislators passed a law requiring the department to accept SAF applications by the end of 2023 and accepting biomethane as a feedstock for renewable diesel and SAF. The move builds on the state’s SAF credit eligible for SAF sold on flights departing the state. The $1/gallon base credit value can reach a maximum of $2/gallon based on each percentage point in carbon reduction under 50%. Next year’s round of rulemaking will seek to establish a third-party verification program, incentives to encourage SAF production, update book-and-claim accounting requirements for electricity and methane. Washington is not adjusting current annual targets, land-use change requirements and models that set fuel carbon intensity scores.
- British Columbia Low Carbon Fuel Standard to Require SAF. The government of British Columbia on December 11 released new rules for its Low Carbon Fuels Standard, set to take effect on January 1, 2024. Under the updated regulations, SAF must make up 1% of the fuel mix by 2028, rising to 2% for 2029 and 3% for 2030 and beyond. The regulations include carbon intensity reductions for jet fuel starting at 2% in 2026, 4% in 2029, 6% in 2028, 8% in 2029 and 10% for 2030 and beyond. CI reduction requirements for gasoline and diesel start at 16% in 2024, rising to 18.3% in 2025, 20.6% in 2026, 23% in 2027, 25.3% in 2028, 27.7% in 2029 and 30% in 2030.
- Marathon Martinez Refinery Fires Trigger Federal Investigation. Recent fires at Marathon’s Martinez refinery triggered a federal investigation by the Chemical Safety and Hazard Investigation Board (CSB). Fires on November 11 and November 19 at a hydrodeoxygenation (HDO) unit led to spills of RD. Marathon aims to achieve 48,000 Bbl/d of production at its Martinez, California facility by year-end.
- Treasury Department Issues SAF Guidance. The US Treasury Department issued guidance on December 15, 2023, clarifying how SAF will be eligible for tax credits worth as much as $1.75/gallon under the Inflation Reduction Act. The SAF tax credit is only issued to fuels which reduce lifecycle GHG emissions 50% below petroleum-derived jet fuel. The Treasury Department plans to calculate emissions intensity using a modified version of the GREEET model planned for March 1, 2024. The adjusted GREET model could open the door for corn-based ethanol to contribute to SAF supply.
- The Washington Clean Fuel Standard Posts Net Credit Surplus for the First Quarter. A total of 275,442 credits were generated, with ethanol accounting for 64% of the total and renewable diesel making up 12%, according to the state’s inaugural quarterly report. Deficits came in at 227,768, for a quarterly surplus of 47,674 credits. The market reacted bearishly with prompt credits tumbling to $79/t from $101/t, or 22%, over the span of just a week.
- Canadian Fuel Regulation Credits Trade. Canadian regulator Environment and Climate Change Canada (ECCC) announced the first trades for the program in early July without releasing volumes or pricing. Credits generated in 2022 and 2023 became eligible for trade on June 30th, 2023. The Clean Fuel Regulations (CFR) target a 30% reduction in transport fuel carbon intensity by 2030. AEGIS saw CFR credits bid at C$205/t for 2023 transfer on July 12, 2023.
Market Update
- CARB reported an average California LCFS transfer price of $73.00/t in December 2023, up $3/t, or 4.3%, from November 2023. The November transfer price marked the lowest monthly transfer price since October 2015.
- Nearly 6.2MM t of credits moved across 422 transfers in the final month of the year, doubling December 2022 levels and setting a fresh record monthly volume. April and December are the two busiest months of the year for LCFS transfer activity. Total 2023 transfers came in at just under 40.2MM t of credits, up 31% from 2022 totals.
- California LCFS credits traded as high as $73.50/t in early December ahead of the CARB release, the highest level in over two months. Prompt credits retreated to $65.00/t following the release as the market had pinned hopes to a January or February board vote for the amendments. The start of January saw prompt credit prices slump to $63.00/t from $68.00/t as traders turned bearish following an industry conference where the state’s proposal was criticized for not doing enough to address oversupply.
- Oregon DEQ reported a record transfer volume of 353,436 metric tons in December 2023, more than double the previous month. December saw 44 transfers with an average transfer price of $137.96/credit, up 6.2% from November’s $129.97. The October 2023 transfer price of $143.93/credit reflected the highest transfer price in more than three and half years.
- Oregon LCFS credit prices tumbled $32.5/t, or 28%, over the course of November to end the month at $85.00/t, the lowest level in over five years. The losses built on a $42/t rout over the course of October as the state attracted record volumes of renewable fuels. Oregon LCFS credits recovered to $90.00/t in December and briefly reached as high as $92.00/t in early January.
- Based on the most recent CARB calculations, the California LCFS maximum credit price is now $253.53/t. as of June 1, 2023, up from the 2022 maximum of $239.18/t. LCFS maximum credit prices are determined by a $200/t cap in 2016 dollars adjusted by a consumer price index.
- The California LCFS market remains acutely oversupplied with the bank of available credits setting a fresh record high for the second quarter of 2023 and credits outpacing deficits by an increasing gap since July 2020. Oversupply saw prompt prices bottom at $59.00/t in 2023, while the slow pace of regulatory reform and mounting criticism that the proposed set rule will not do enough to address the surplus are poised to pressure markets in early 2024.
LCFS & CFP Schedule
California LCFS Q3 2023 Data Release |
January 31st, 2024 |
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CARB Public Hearing LCFS |
March 21st, 2024 |
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California LCFS Q4 2023 Reporting Deadline |
April 1st, 2024 |
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LCFS Credit & Futures Pricing
Credit Prices as of January 12th, 2024: |
California Futures Prices as of January 12th, 2024: |
- California - Spot Delivery: $ 65.00
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- Oregon - Spot Delivery: $ 90.00
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- Washington - Spot Delivery: $ 61.00
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LCFS Cost for Gasoline and Diesel
California, as of January 12th, 2024:
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Oregon, as of January 12th, 2024:
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- CARBOB (No Cl ethanol) - Vintage 2023: 9.66 cents per gallon
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- E10 gasoline - Vintage 2023: 8.36 cents per gallon
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- CARBOB (79.9 Cl ethanol) - Vintage 2023: 9.28 cents per gallon
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- B5 diesel – Vintage 2023: 9.53 cents per gallon
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Monthly Credit Transfer Activity for California
Time
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Transfers
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Total Volume
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Avg $/credit
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23-Dec
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422
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6,161,000
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$73
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23-Nov
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203
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2,672,000
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$70
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23-Oct
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451
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4,661,000
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$76
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23-Sep
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233
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1,033,000
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$73
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23-Aug
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168
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2,044,000
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$77
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23-Jul
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417
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4,347,000
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$75
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23-Jun |
222 |
2,470,000 |
$79 |
23-May |
158 |
1,684,000 |
$81 |
23-Apr |
547 |
5,596,000 |
$74 |
23-Mar
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252
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2,702,000
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$73
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23-Feb
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161
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1,293,000
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$71
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23-Jan
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470
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4,564,000
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$81
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22-Dec
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292
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3,001,000
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$86
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CY 2023
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3,704
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40,186,000
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$75
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CY 2022
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3,137
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30,641,000
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$125
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CY 2021
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2,664
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25,279,000
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$187
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CY 2020
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2,461
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21,728,000
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$199
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CY 2019
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1,656
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14,146,000
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$192
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CY 2018
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1725
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13,334,000
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$160
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CY 2017
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1226
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8,875,000
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$89
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CY 2016
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929
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5,343,000
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$101
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CY 2015
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578
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2,852,000
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$62
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CY 2014
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304
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1,667,000
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$31
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CY 2013
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202
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887,000
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$55
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Source: https://ww2.arb.ca.gov/resources/documents/monthly-lcfs-credit-transfer-activity-reports
Monthly Credit Transfer Activity for Oregon
Time
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Transfers
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Total Volume
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Avg $/credit
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23-Dec |
44 |
353,436 |
$137.96 |
23-Nov |
35 |
164,936 |
$129.97 |
23-Oct |
34 |
188,537 |
$143.93 |
23- Sep |
23 |
102,570 |
$141.94 |
23- Aug |
29 |
188,709 |
$137.33 |
23- Jul |
32 |
166,522 |
$137.93 |
23-Jun |
28 |
123,401 |
$130.21 |
23-May |
30 |
121,556 |
$131.04 |
23-Apr
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69
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322,461
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$121.73
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23-Mar
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50
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345,944
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$118.85
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23-Feb
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24
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130,929
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$119.73
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23-Jan
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41
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212,109
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$116.98
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22-Dec
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47
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329,116
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$118.02
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CY 2023
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441
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2,421,140
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$129.76
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CY 2022
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319
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1,607,127
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$119.01
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CY 2021
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245
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1,035,306
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$125.30
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CY 2020
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151
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806,028
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$128.08
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Source: https://www.oregon.gov/deq/ghgp/cfp/Pages/Monthly-Data.aspx
Monthly Credit Transfer Activity for Washington
Time
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Transfers
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Total Volume
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Avg $/credit
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23-Dec |
8 |
58,288 |
$74.06 |
23-Nov |
- |
- |
- |
23-Oct |
10 |
49,930 |
$98.12 |
23- Sep |
20 |
51,322 |
$96.26 |
23- Aug |
4 |
27,055 |
$106.66 |
23-Jul |
0 |
0 |
- |
CY 2023
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42
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186,595
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$91.23
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CY 2022
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-
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-
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-
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CY 2021
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-
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-
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-
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CY 2020
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-
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-
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-
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Source: https://ecology.wa.gov/air-climate/reducing-greenhouse-gas-emissions/clean-fuel-standard/data-reports
Figure 1. California LCFS Prompt USD/mt January 2023 - Present
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2023 Average Daily Price: $ 72.54
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2024 Average Daily Price: $ 66.94
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2023 Highest Daily Price: $ 87.00
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2024 Highest Daily Price: $ 68.50
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(May 9th, 2023)
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(January 4th, 2024)
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Figure 2. Oregon LCFS Prompt USD/mt Janaury 2023 – Present
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2023 Average Daily Price: $ 132.23
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2024 Average Daily Price: $ 90.89
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2023 Highest Daily Price: $ 167.00
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2024 Highest Daily Price: $ 94.00
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(September 21st, 2023)
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(January 8th, 2024)
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Figure 3. Washington CFS Prompt USD/mt May 2023 – Present
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2023 Average Daily Price: $ 89.94
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2024 Average Daily Price: $ 61.11
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2023 Highest Daily Price: $ 111.00
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2024 Highest Daily Price: $ 63.00
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(June 15th, 2023)
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(January 3rd, 2024)
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Figure 4. California LCFS Net Credits & Cumulative Bank Volume - Quarterly
Figure 5. California LCFS Net Credits & Cumulative Bank Volume - Yearly
Figure 6. Oregon CFP Net Credits and Cumulative Bank Volume - Quarterly
Figure 7. Oregon CFP Net Credits and Cumulative Bank Volume - Yearly
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