California narrows LCFS goals to tougher targets
California will pursue transportation fuel carbon reduction targets in 2025 nearly twice as tough as originally proposed under final Low Carbon Fuel Standard (LCFS) rulemaking language released late Monday.
The California Air Resources Board (CARB) will consider a one-time tightening of annual targets for gasoline and diesel by 9pc in 2025, compared with the usual 1.25pc annual reduction and a 5pc stepdown first proposed in December 2023.
Final rulemaking language introduced a new 20pc/yr cap on a company's credit generation from soybean- and canola-oil-based biodiesel or renewable diesel to begin in 2028. The updated rule also dropped proposals to require carbon reductions from jet fuel in addition to gasoline and diesel, a controversial proposal aligned with governor Gavin Newsom's (D) ambitions for lower-carbon air travel but which participants warned would not achieve its targets.
The new proposal immediately jolted a lethargic credit market that earlier this year slumped to the lowest spot price in nearly a decade under the weight of growing credit supplies. Current quarter trade raced higher by $12.50 — 26pc — in rare after-hours activity less than two hours after CARB staff published the latest documents.
Public comment on the proposals will continue to 27 August ahead of a planned 8 November public hearing and potential board vote. The program changes could be in place by the end of the first quarter of 2025, according to staff.
LCFS programs require yearly reductions to transportation fuel carbon intensity. Higher-carbon fuels that exceed these annual limits incur deficits that suppliers must offset with credits generated from the distribution to the market of approved, lower-carbon alternatives.
Surging use of renewable diesel and outsized credit generation from renewable natural gas have overwhelmed deficit generation to create a glut of credits available for future compliance. LCFS credits do not expire, and 26.1mn metric tonnes of credits — higher by 16pc than all the new deficits generated in 2023 — were available for future compliance by the end of March.
Credits fell in May to trade at $40/t, the lowest level for current quarter credits since June 2015.
California late last year formally proposed tougher annual targets, off-ramps for certain fuels and other changes to North America's largest and oldest LCFS program. Staff had initially targeted March to put ideas including a one-time, 5pc reduction to targets in 2025 and automatic mechanisms to match targets to credit and deficit generation before the board for formal approval, but they delayed that meeting after receiving hundreds of distinct comments on the original proposal.
Staff shifted the 2025 target to at least 7pc after an April workshop discussion and another record-breaking quarter of increases in credits available for future compliance. The 9pc recommendation followed the continued growth of credit supplies in recent quarters. Previous modeling estimated that such a target could draw down the credit bank by 8.2mn t in its first year. Uncertainty over how fuel suppliers and consumers would respond to that target led staff to leave in place the proposed 30pc target by 2030.
An outright cap on credits generated from soybean- or canola-oil derived biomass-based diesels replaced initially proposed lighter "guard rails" on crop-based credit generation. The change would send a stronger market signal preferring waste-based feedstocks for diesel fuels that California expects to replace with zero-emission alternatives.
And staff dropped a proposed obligation on jet fuel used in intrastate flights, estimated to make up 10pc of California's jet fuel consumption. Participants had warned the measure would stoke more credit purchases than renewable jet fuel buying, due to the structure of the aviation fuel market.
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Port of NOLA to close prior to TS Francine
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Houston, 10 September (Argus) — The port of New Orleans (Nola) in Louisiana and terminal operators there are limiting operations today in preparation for a full closure Wednesday as tropical storm Francine passes. Terminal operators are expected to reopen on 12 September after damages are assessed. United Bulk Terminals (UBT) issued a force majeure this morning from the Davant terminal on concerns for employee safety. The company did not disclose a timeline for reopening. UBT specializes in coal and petcoke along with other commodities. Associated Terminals will suspend operations 11-12 September and will assess damages on 13 September. The National Weather Service forecasts Francine to make landfall tomorrow on the Louisiana coast as a hurricane. Commodities including petcoke, coal, agriculture and fertilizer are likely to be affected by the port closure. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
2024 RD production outlook up, 2025 down: EIA
2024 RD production outlook up, 2025 down: EIA
New York, 10 September (Argus) — The US Energy Information Administration (EIA) today upped its forecast for 2024 domestic renewable diesel (RD) production but continued to trim its projections for 2025 as challenging economics for refiners persist. The US is expected to produce on average 208,000 b/d of renewable diesel this year, EIA said Tuesday in its latest Short-Term Energy Outlook (STEO), up by around 1pc from August's forecast. Renewable diesel consumption is expected to hit 237,000 b/d this year, an increase of 1.3pc from the prior month's STEO. But next year, EIA now expects 236,000 b/d of renewable diesel production, down by 3.2pc from the prior forecast and down by 19.7pc from the agency's initial projection in January this year of 294,000 b/d. The agency is also forecasting renewable diesel consumption to reach 255,000 b/d in 2025, a 2.3pc decrease from its estimate last month. Renewable diesel producers have struggled over the last year, as ample supply of fuels used for compliance with government clean fuel programs has helped depress the prices of environmental credits and hurt production margins. More capacity has come online this year — with EIA recently pegging production of renewable diesel and related biofuels like sustainable aviation fuel at an all-time high of 4.9bn USG/yr in June — but uncertainty persists about whether future capacity additions will come on line as planned. EIA also upped its projection for US net imports of renewable diesel, raising its 2024 forecast by 7.1pc to 30,000 b/d and its 2025 forecast by 5.6pc to 19,000 b/d. While a federal tax credit starting next year is expected to discourage biofuel imports, since the incentive can only be claimed for fuel produced in the US, EIA's projections have inched upwards over the course of this year. Biodiesel output target up US biodiesel production this year is expected to average 105,000 b/d, up by around 1pc from August's STEO. US Biodiesel consumption should reach 121,000 b/d this year according to the EIA, down by 0.8pc from the prior forecast. For 2025, EIA raised its outlook for biodiesel production by 5.3pc to 100,000 b/d and for biodiesel consumption by 4.4pc to 94,000 b/d. Today's outlook also includes for the first time more granular data about biodiesel and renewable diesel "that better capture how biofuels are being consumed and the share of total distillate fuel they account for," EIA said. While the agency expects total distillate fuel oil consumption to fall slightly this year, biofuels will account for 9pc of that consumption, up from 8pc last year and 5pc in 2022. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Firms’ short-term climate plans not Paris-aligned: TPI
Firms’ short-term climate plans not Paris-aligned: TPI
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Italy's Falconara refinery widens crude slate
Italy's Falconara refinery widens crude slate
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