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News Update
- California is nearing scoping plan path selection. On March 15, California stakeholders studied new modeling details as the California Air Resources Board (CARB) staff nears a decision on a scenario that will guide the state's climate policies and emissions targets in the spring. Commenters at a hearing demanded more information about the potential role of hydrogen or renewable natural gas, and expressed concern about the inclusion of carbon capture and sequestration. Every five years, California must update its goals and assumptions about the state's future emissions. The resulting scoping plan directs goals for a wide range of state policies, including transportation and building construction. Staff have stated that the process must be completed before changes to programs such as the Low Carbon Fuel Standard can be made. The session presented four scenarios, ranging from an aggressive phase out of liquid transportation fuels by 2035 to a slower push with increased use of carbon capture to achieve carbon neutrality by 2045. In May, staff intends to present to the board a recommended scoping scenario.
- Plants apply LCFS renewable diesel, jet pathways. AltAir applied for permission to produce renewable diesel, naphtha, and jet fuel from its facility in Paramount, California. Animal fats converted to diesel or jet fuel had CO2/megajoule pathways ranging from 15g to 38g. While jet fuel does not incur deficits under the LCFS, low-carbon sustainable aviation fuel can generate compliance credits. Diamond Green Diesel was also looking for certification for renewable diesel made from animal fats, distiller's corn oil, soybean oil, and used cooking oil. Carbon intensities for rendered used cooking oil ranged from about 18g CO2 per megajoule to about 60g CO2 per megajoule for soybean oil.
- California LCFS transfers set a new monthly high in February. California recorded a record volume of Low Carbon Fuel Standard (LCFS) transfers in February, despite lower prices and lower activity compared to the previous month. During the month, the market saw 1.55 million metric tons of credits moved across 159 transfers. This was less than half of the volume transferred in an unusually strong January, but it was still 52 percent higher than the volume reported in February 2021. In the first two months of this year, approximately 4.9 million t of credits were transferred, a 55 percent increase over the same period in 2021.
- Crimson applies for LCFS biodiesel pathways. Following the startup of new equipment at its Bakersfield, California plant, Crimson Renewable Energy sought California Low Carbon Fuel Standard (LCFS) pathways for five new biodiesel streams. The application seeks carbon intensities for biodiesel from corn oil, animal fats, and used cooking oil produced by combining an older, previously certified plant with new, more efficient process equipment completed last year. Carbon intensities range between 16g and 33g CO2/megajoule.
- California gasoline demand reduces in November 2021. According to the most recent state fuel tax statistics, implied California gasoline consumption fell in November but got closer to pre-pandemic levels. Taxable gallons of gasoline adjusted for aviation fuel were 1.1 billion US dollars in November, a 5% decrease from the previous month and a 7.1 percent decrease from November 2019. That 7.1pc decline from pre-pandemic levels improved from a 7.8pc difference during the same time for October. California gasoline demand has regularly behind most other US states in recovering to levels reached before measures to stop the spread of Covid-19 affected business and tourism. CARBOB is the single greatest source of deficits under the state's Low Carbon Fuel Standard (LCFS), accounting for 78pc of all deficits created in the third quarter of 2021. Taxable diesel gallons, which comprise conventional diesel, renewable diesel, and biodiesel, decreased by 4.6 percent from October to over 236 million USG. When compared to November 2019, the volume was 8.2 percent greater. Renewable diesel was a prominent producer of LCFS credits in 2021, accounting for nearly 32pc of all credits created in the first nine months of the year.
- Southern California Gas RNG volume rises. The volume of renewable natural gas moved in Southern California Gas's system increased by about 17 percent in 2021, the utility announced on February 24. Connections to nine renewable natural gas (RNG) supply facilities, including five installed last year, increased renewable natural gas across the Los Angeles-area distributor's system to 14 Bcf (397 million m3). The corporation transferred a total of 884 Bcf, or 2.4 Bcf/d, over its system in 2020, the most recent full year available. Renewable natural gas is produced from collected organic emissions, which are often emitted by landfills or animal husbandry enterprises such as dairies. Use of the gas in compressed natural gas (CNG) cars earns credits used for compliance under California's Low Carbon Fuel Standard (LCFS) (LCFS). Such sources created 1.9mn credits over the first nine months of 2021, or around 13pc of all new credits for that time.
- RNG developer applies for California LCFS pathways. DTE Energy Trading is requesting permission to generate California Low Carbon Fuel Standard (LCFS) credits from renewable natural gas produced at three dairies. Treated gas from three Wisconsin dairies totaling more than 28,000 cows would be fed into pipeline networks connecting to liquified natural gas and compressed natural gas automobile terminals in California. Carbon intensities for output range from -390g to -285g CO2 e/MJ, with higher-carbon production coming from liquefied and compressed hydrogen produced from wastewater sludge.
- Darling Ingredients is optimistic about California LCFS prices. US biofuels feedstocks processor Darling Ingredients anticipates California Low Carbon Fuel Standard (LCFS) prices to grow as the market decreases its expectations for renewable diesel supply. Credit prices may continue to decrease in the short term, but they should recover as the outlook for renewable diesel production improves and additional countries increase demand for low-carbon fuels, according to Darling chief strategy officer John Bullock. Darling is a joint venture partner with US independent refiner Valero in Diamond Green Diesel, the largest renewable diesel production in North America.
- ExxonMobil increases Global Clean Energy connections. ExxonMobil purchased $145 million in preferred shares and appointed two executives to Global Clean Energy's board of directors, strengthening connections surrounding the renewable fuel producer's proposed California renewable diesel facility. Global Clean Energy will utilize the funds to reorganize its debt and complete a planned conversion of an old refinery in Bakersfield, California, to produce 15,000 b/d of renewable diesel. ExxonMobil had already promised to buy virtually all of the plant's production once it commenced operations. The launch was initially scheduled for "early 2022." Camellina, a non-food crop, has been proposed as a feedstock by Global Clean Energy. The company's feedstock affiliate, Sustainable Oils, has proposed a grain storage and rail loading facility in Montana to supply the plant.
- Tereos enlists Brazil ethanol facility in LCFS scheme. French sugar and ethanol business Tereos registered its first Brazilian ethanol factory under California's Low Carbon Fuel Standard (LCFS), according to the California Air Resources Board (CARB) . Tereo's Tanabi facility achieved the lowest carbon intensity score for Brazilian sugar cane-based ethanol using the program's most recent route calculator, with 47.51g CO2/megajoule. Brazil's largest ethanol producer Copersucar also renewed its two Quata units under the new LCFS route calculation in February. Tereos' LCFS certification matches recent interest among Brazilian ethanol and biodiesel producers in certifying their mills in order to sell to US and European markets as the shift to a low-carbon energy market accelerates.
- LCFS prices will compel regulators to take action: REG. California regulators will adjust Low Carbon Fuel Standard (LCFS) targets "in the medium term" as prices fall to four-year lows, according to Renewable Energy Group (REG) CEO Cynthia Warner. Credits have exceeded deficits through the first nine months of 2021, owing to sluggish gasoline demand and rising supplies of renewable diesel and renewable natural gas. Higher prices may also allow alternative fuels to compete, according to Warner. The renewables industry had already shifted from total reliance on state or federal incentives to customers willing to pay a premium for carbon reduction. Regulators, on the other hand, have resisted calls to set tougher targets for increasing credit demand, citing an ongoing statewide review that would prevent changes to the LCFS from being implemented before 2024. Chevron plans to acquire REG for $3.2 billion in order to expand its renewables business.
- California crude oil project is applying for LCFS credits. The California Air Resources Board (CARB) has released for public comment the "innovative crude" application for a solar photovoltaic generation project proposed by Vaquero Energy in a Kern County oil field. The project would generate LCFS credits by generating the electricity needed on-site to operate equipment in the producing field using solar power rather than fossil fuels. Oil companies can earn LCFS credits for crude produced using "innovative" methods that reduce greenhouse gas (GHG) emissions, but participation has been limited thus far. CARB hopes to generate more interest in linking renewables and oil production as LCFS carbon intensity targets tighten up to 2030. However, since 2016 only ten applications have been submitted by companies. A project must result in a total emission reduction of 5,000t/yr or a carbon intensity reduction of 0.1 CO2e/megajoule to be eligible for the program. In Vaquero's project, the carbon intensity is reduced from the baseline by 0.11 gCO2e/MJ and is expected to increase to 0.46 gCO2e/MJ.
- Air Products will construct a green hydrogen plant. Air Products, a US industrial gases company, intends to build a 10-metric ton/d facility in Arizona to produce green liquid hydrogen, with a focus on the California market. Air Products, which bills itself as the world's largest hydrogen producer, anticipates opening the new plant in Casa Grande, Arizona, in 2023. Two thyssenkrupp nucera electrolyzers powered by renewable energy will produce gaseous hydrogen at the facility. The hydrogen will be liquified and transported from an integrated terminal to be dispensed throughout California and other locations. The new hydrogen source will help California meet its goal of selling only zero-emission passenger vehicles and heavy-duty trucks by 2035 and 2045, respectively.
- California is considering gasoline tax rebates. As CARBOB prices soared to multi-year highs, California Governor Gavin Newsom floated the idea of tax rebates for state car owners. State retail gasoline prices have risen despite the fact that demand in California has remained well below pre-pandemic levels. Sluggish CARBOB demand aided Low Carbon Fuel Standard (LCFS) credit generation to exceed deficits in the first nine months of 2021, lowering prompt credit prices to their lowest level in four years. In his State of the State address on March 8, Newsom provided few details about the proposal. He promised to submit to legislative leaders "a proposal to put money back in the pockets of Californians to address rising [gasoline] prices."
- Oregon CFP transfers decreased in February. Even though the number of transfers in Oregon fell, it still had a record volume of Clean Fuels Program (CFP) credit transfers in February. The state recorded approximately 49,000 metric tons of credits over 12 transfers at an average price of $124.92/t. This was a decrease from 29 transfers totaling approximately 186,000t of credits in January, and it was the lowest transfer volume since September. However, trading activity exceeded the approximately 42,000t of credits traded in February 2021.
- Oregon reviews biomethane options. The Department of Environmental Quality (DEQ) looked into how to incorporate renewable gas captured from dairies and other sources into the state's low-carbon fuel incentives. Oregon regulators wanted comments on ways to verify and integrate biomethane and comparable sources transformed into transportation power and hydrogen into the Clean Fuels Program (CFP) (C. Biomethane comprised a relatively insignificant 2.4pc of all Oregon CFP credits generated in the third quarter of 2021, the most recent period for which data are available. Oregon intends to propose a regulation this year to extend the CFP beyond 2025 and to seek further reductions in the carbon intensity of transportation fuels supplied to the state. LCFS schemes limit the carbon intensity of transportation fuels by establishing an average maximum that decreases year after year. Higher-carbon fuels that exceed the yearly maximum cause shortfalls, which providers must balance by delivering certified lower-carbon alternatives.
- Lawmakers in New York keep LCFS hopes alive. New York lawmakers are considering enacting a low-carbon fuel standard (LCFS) as part of the state budget. On March 14, the state Senate passed a budget resolution for 2022-23, which includes an LCFS proposal that had languished in the legislature for several years. Senator Kevin Parker's bill would require a 20% reduction in the carbon intensity of the state's transportation fuels by 2030, creating one of the largest markets in the US for alternative fuels such as renewable diesel. Lawmakers from the Senate and Assembly must now reach a final budget agreement before the state constitution's April 1 deadline.
- New Mexico Clean Fuel Standard stalls. The New Mexico House of Representatives rejected to pass a proposed low-carbon fuel standard (LCFS) and voted 33-33 against the legislation. The legislative session was centered on fears over increased fuel costs and uncertainties of the proposal's ultimate carbon-cutting benefits. The New Mexico proposal allocated deficits to transportation gasoline and diesel and allowed dairies or livestock operations to generate credits to offset those deficits from processed biomethane used in vehicles. It was the second time within less than a year for a New Mexico LCFS proposal to fail to pass in the House.
Schedule
- April 1, 2022: California LCFS 4Q 2021 reporting deadline
- April 29, 2022: California LCFS 4Q 2021 data release
- June 30, 2022: California LCFS 1Q 2022 reporting deadline
- July 29, 2022: California LCFS 1Q 2022 data release
- September 20, 2022: California LCFS 2Q 2022 reporting deadline
- October 31, 2022: California LCFS 2Q 2022 data release
LCFS Credit Pricing
Credits Price as of March 26th, 2022:
-
- California - Spot Delivery $122.00
- Oregon - Spot Delivery $ 119.00
LCFS Credit Transfer Activity for California
Time
|
Transfers
|
Total Volume
|
Avg $/credit
|
Feb -22
|
159
|
1,550,000
|
$ 163
|
Jan -22
|
358
|
3,389,000
|
$ 167
|
Dec -21
|
269
|
3,217,000
|
$ 172
|
Nov -21
|
128
|
1,125,000
|
$ 174
|
Oct -21
|
434
|
3,782,000
|
$ 182
|
Sept -21
|
136
|
1,518,000
|
$ 183
|
Aug -21
|
100
|
709,000
|
$ 185
|
July -21
|
252
|
2,125,000
|
$ 188
|
June -21
|
190
|
1,873,000
|
$ 190
|
May -21
|
81
|
791,000
|
$ 190
|
Apr -21
|
345
|
3,455,000
|
$ 192
|
Mar-21
|
307
|
3,490,000
|
$ 198
|
Feb-21
|
87
|
1,019,000
|
$ 197
|
Jan-21
|
335
|
2,176,000
|
$ 199
|
Dec-20
|
260
|
2,997,000
|
$ 199
|
Nov-20
|
133
|
1,207,000
|
$ 196
|
Oct-20
|
336
|
2,237,000
|
$ 198
|
Sept -20
|
167
|
1,553,000
|
$ 196
|
Aug-20
|
111
|
857,000
|
$ 196
|
Jul-20
|
334
|
2,509,000
|
$ 199
|
June-20
|
129
|
1,059,000
|
$ 202
|
May-20
|
90
|
470,000
|
$ 195
|
Apr-20
|
344
|
4,098,000
|
$ 198
|
Mar-20
|
233
|
2,312,000
|
$ 199
|
Feb-20
|
84
|
581,000
|
$ 206
|
Jan-20
|
240
|
1,895,000
|
$ 200
|
Dec-19
|
217
|
2,216,000
|
$ 197
|
Nov-19
|
88
|
705,000
|
$ 195
|
Oct-19
|
243
|
1,990,000
|
$ 195
|
Sep-19
|
137
|
1,179,000
|
$ 195
|
Aug-19
|
89
|
929,000
|
$ 194
|
Jul-19
|
188
|
1,574,000
|
$ 193
|
Jun-19
|
114
|
875,000
|
$ 190
|
May-19
|
76
|
408,000
|
$ 185
|
Apr-19
|
131
|
1,299,000
|
$ 180
|
Q1 2019
|
373
|
2,972,000
|
$ 188
|
CY 2018
|
1725
|
13,334,000
|
$ 160
|
CY 2017
|
1226
|
8,875,000
|
$ 89
|
CY 2016
|
929
|
5,343,000
|
$ 101
|
CY 2015
|
578
|
2,852,000
|
$ 62
|
CY 2014
|
304
|
1,667,000
|
$ 31
|
CY 2013
|
202
|
887,000
|
$ 55
|
CY 2012
|
24
|
164,000
|
$ 17
|
LCFS Cost for Gasoline and Diesel
Cost as of March 23rd, 2022 for Vintage 2022
-
-
-
- California
- Carbob (No Cl ethanol)- Vintage 2022 13.88 cents per USG
- Carbob (79.9 Cl ethanol)- Vintage 2022 12.99 cents per USG
- Oregon
- E10 gasoline- Vintage 2022 6.86 cents per USG
- B5 diesel – Vintage 2022 7.80 cents per USG
Figure 1. California LCFS USD/t Jan. 2020 - Present
|
2021 Average Daily Price: $176.53 2022 Average Daily Price: $141.60 2021 Highest Daily Price: $201.00 2022 Highest Daily Price: $153.50 (1/6/2022) |
Figure 2. California Monthly LCFS Credit Price and Transaction Volume as Reported by ARB
Figure 3. Oregon LCFS USD/t Jan. 2019 – Present
2021 Average Daily Price: $125.32
|
2022 Average Daily Price: $125.01 |
2021 Highest Daily Price: $127.50 |
2022 Highest Daily Price: $126.50 |
Questions? Contact our team for more information: environmental@aegis-hedging.com
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