New report projects credit generation under California LCFS in 2023

EcoEngineers has published a new report that analyzes 10 years of data from California’s Low Carbon Fuel Standard to project credit generation under the program in 2023. In the report, titled, California LCFS: Low Carbon Fuel Supply Scenario Analysis, EcoEngineers looks at the potential supply of low-carbon alternatives to diesel and gasoline fuels, projecting three credit-supply scenarios.

“The key question we try to answer is whether the low-carbon fuel supply currently in the pipeline is sufficient to make credit markets whole in California and increase the cumulative credit bank,” stated EcoEngineers. “We also project when this may happen.”

Image: EcoEngineers

The company noted that LCFS credit prices have remained at approximately $200 per metric ton of CO2-equivelant since 2018, providing strong incentive.

“For example, in 2020 there were over a dozen renewable diesel projects with an aggregate 2.6 billion gallons of supply in the pipeline,” the company stated. “These projects will have a global impact, since the supply can be directed to other markets. Other U.S. states, nations, or regions planning low-carbon fuels policies now have an assured supply scenario. …Fuel policies will influence the type of fuels consumed, and a clean fuel standard that is technology-neutral and market-based will incentivize supply and use of low-carbon fuels. It will also achieve several ancillary benefits, such as jobs creation and sectoral boosts to a wide cross section of industry including construction, agriculture, logistics, power generation, etc.”

Petroleum-based diesel’s contribution to energy demand in the diesel pool will be eroded to 65 percent or less by 2023, the report indicates.

EcoEngineers previewed several key takeaways from the report relative to biobased diesel. One, blends of 80 percent renewable diesel and 20 percent biodiesel (R80B20) will become popular thanks in part to a 2020 court ruling allowing biodiesel blends up to 20 percent to be stored and retailed in California. Two, about 2.6 billion gallons of renewable diesel capacity could be available in 2023 but the emergence of such volumes could be complicated by multiple factors, including feedstock price movements relative to LCFS credits. And three, the potential growth of sustainable aviation fuel (SAF) is “a key uncertainty in credit supply for the California LCFS.”

For more information about obtaining the report, click here.