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News Update
- Gasoline sales in California increased in December. Gasoline sales in California increased in December, though not enough to improve fourth-quarter demand. December gasoline sales averaged around 892,000 b/d, up 1.8 percent from November and 13 percent higher than a coronavirus-free December in 2020. Nonetheless, December demand was the second lowest in more than 20 years of state records. State gasoline sales were down 7% in the fourth quarter of 2019 compared to the same period the previous year, prolonging the pandemic-induced demand slump for Low Carbon Fuel Standard (LCFS) credits earned to offset the carbon intensity of CARBOB gasoline. Rising supply of low-carbon fuels and dwindling demand for gasoline, which accounts for roughly 80% of LCFS deficits, have contributed to credit prices falling to their lowest levels in four years. Full-year gasoline sales were likewise the second-lowest on record, averaging around 900,000 b/d, an 11 percent rise from 2020 but a 10 percent decrease from 2019. However, December sales were 6.1 percent lower than in December 2019, marking the closest year-over-year comparison to pre-pandemic gasoline consumption since attempts to restrict the spread of Covid-19 began in early 2020. Fuel sales, including biodiesel and renewable diesel, hit their best levels in December and the fourth quarter since 2017. The state recorded around 231,000 b/d of diesel demand for the month, a 28 percent rise over November and a 9 percent increase over December 2019. Renewable diesel accounted for 31% of all new LCFS credits generated in the third quarter, the most recent period for which data is available. The fourth-quarter LCFS credit statistics will be available towards the end of April.
- California will consider LCFS amendments during July workshop sessions. This summer, California regulators will host workshops to consider tighter Low Carbon Fuel Standard (LCFS) objectives, as credit prices trade at their lowest in four years. The California Air Resources Board (CARB) intends to release a draft scoping plan for climate policies and regulations, including the LCFS, in May. This scoping plan would allow for a larger decrease in fuel carbon intensity under the LCFS than the 25% reduction specified in draft scenarios. The present program aims to reduce the carbon intensity of fuels by 20% by 2030 compared to 2011 levels, with a 10% reduction target for this year. This summer's workshops will focus on accelerating the reduction of carbon intensity of transportation fuels through the LCFS before 2030 and beyond. CARB personnel did not have any dates yet for the summer workshops or specific adjustments to the carbon intensity criteria. CARB's interest in tighter LCFS standards comes at a time when spot credit prices for the program are at their lowest in over four years.
- California's climate strategy is being hampered: CARB. According to Rajinder Sahota, deputy executive officer of the California Air Resources Board (CARB), the state's efforts to swiftly decarbonize are delayed by long permitting periods, skepticism from some community organizations about the state's market-based initiatives, and local project resistance. California needs to create utility-scale solar and offshore wind, as well as transmission, to get power to where it is needed. Some neighborhood organizations allege that the cap-and-trade scheme is increasing air quality inequities, although this is a myth that has cast a "shade over the program." Nonetheless, California's "long, unshakable commitment" to addressing climate change has been a powerful signal attracting investment and allowing the state to be a sector leader. California is in the process of revising its climate change scoping plan, which outlines the strategies the state will employ to fulfill its emissions targets, such as LCFS and cap-and-trade. CARB staff intends to provide a draft plan in May, which will be submitted to the board in June. Legislative guidance will be "fed back into the scoping plan" during the summer, and by September or October, agency staff will have a final plan ready for a vote by the CARB board. Participants in the LCFS and cap-and-trade markets are keeping a close eye on the scoping plan because it will influence future adjustments to both programs, including increasingly strict emissions limits.
- LCFS transfers in California increased in March. Credit transfers under California's Low Carbon Fuel Standard (LCFS) increased in March, but fell short of the month's record set in 2021. In March 2022, program members transferred 3.3 million metric tons of LCFS credits over 280 transfers, more than double the credits moved in the normally lower-volume trade month of February. The transfer volume was 5% lower than in March 2021, when members moved the third-largest monthly credit volume in program history and the most in a single March. March is the final full month of commercial activity for businesses as they prepare for the yearly compliance deadline at the end of April. Credit prices fell to a low of $111/t in March until a one-day $10 bounce pulled the market higher on March 25. Credit transfers hit a first-quarter record of 8.2 million tons, a 23 percent increase over 2021.
- California strengthens its EV objectives. Under proposed regulations this summer, California would require hybrid and zero-emissions vehicles (ZEV) to account for 35% of new car sales beginning in 2026. Effective in 2026, the new rules would also demand a minimum 150-mile (241km) electric range and features that make it easy to charge rapidly at home, addressing issues that have impeded speedier ZEV adoption, according to California Air Resources Board (CARB) officials. Starting in 2035, the new sales requirement would increase by 8% every year to a previously determined 100% of new car sales. They would also almost triple the current 12.4 percent of California new car sales made up of hybrid and zero-emission cars, as automakers invest in such vehicles while simultaneously dealing with supply chain and cost difficulties. Electric vehicle charging for light- and medium-duty vehicles has contributed a modest but rising proportion of overall Low Carbon Fuel Standard (LCFS) credits. Residential charge credits climbed by 12 percent in the third quarter of 2021, the most recent period for which data is available, accounting for 8.5 percent of total credits created during the time. The public comment process will last 45 days, beginning on April 15, with the first of two public hearings on the ideas slated for June 9. CARB intends to finalize the regulation at a meeting in August.
- Oregon targets 37pc reduction in road fuel carbon. In a regulation change that regulators want to complete this year, Oregon will aim for a 37% reduction in the carbon intensity of its transportation fuels by 2035. The more extreme reductions would practically eliminate unused Clean Fuels Program (CFP) credits by 2030, assuming obligated parties meet a 20% reduction by that year. Stakeholders will debate the recommendations at a meeting of the state Department of Environmental Quality (DEQ) on 31 March. The revised approach is predicted to reduce the amount of unused CFP credits to around 60,000 by 2030, before increasing usage of energy for transportation begins to contribute to the excess in 2033. Staff anticipates formally proposing a new regulation by June for consideration by the DEQ commission this autumn.
- Fuel providers warn that Oregon's CFP objectives should be approached with care. Fuel providers warned Oregon regulators on March 31 that ambitious new low-carbon gasoline standard (LCFS) objectives might have unanticipated effects on state fuel costs and supplies. In an advisory meeting with state Department of Environmental Quality (DEQ) personnel, environmental, utility, and biofuel producing groups advocated for further Oregon Clean Fuel Program (CFP) reduction to road fuel carbon intensity. However, gasoline providers warned that by establishing aggressive ambitions while competing with California, Canada, and Washington for the fuels and infrastructure needed to reach the planned goals, Oregon risked burdening customers with increased prices. DEQ staff have approved rule modifications aimed at reducing the carbon intensity of transportation fuels by 37% by 2035 compared to 2015 levels. The reductions include a 20% target by 2030, as well as state goals of increasing electric vehicle ownership to more than 900,000 electric cars throughout the new program timeframe. The adjustments would also rely on a renewable diesel blend rate of up to 25%, up from the existing 5% blend rate. The DEQ staff will not make a final judgment on recommended objectives until a meeting in late May. Traditional gasoline providers were concerned about the availability of these alternatives in more remote areas. Oregon would also struggle to compete for fuels with neighboring California and other bigger markets, perhaps hiking credit prices and fuel costs for customers in order to attract adequate volumes of low-carbon alternatives.
- Oregon Clean Fuel credit trading increased in March. The number of credit transfers through the Oregon Clean Fuels Program increased dramatically in March, despite the fact that the average credit price remained stable. The state said that around 157,000 metric tons of credits were transferred at an average price of approximately $124/t. This volume is more than twice the amount of credits transferred in the same month last year and was more than three times the amount reported in February. The volume was a March record, as well as the sixth highest monthly transfer volume since trading began in 2016. Transfers in the first quarter of this year is more than twice the volume of credit transfers in the first quarter of 2021. March transfers contain credits required to meet 2021 compliance obligations.
- New York removes the mandate for clean fuels from the budget. Efforts to develop a low-carbon fuel standard (LCFS) in New York were deleted from the state budget. This is the latest setback for a transportation fuel carbon market in one of the country's most populous states. State Senate legislation establishing a Clean Fuel Standard was dropped from an approximately $220 billion budget after negotiations that extended past a 1 April deadline and pushed toward final votes on 8 April. The focus now shifts back to identical proposals in the Senate and Assembly committees, as well as a separate state climate scoping process that has sparked fierce discussion among advocates and adversaries. In March, a single sentence in a voluminous Senate budget resolution mandated the adoption of the Clean Fuel Standard. State LCFS legislation that had been dormant for more than a year resurfaced with revisions aiming to link the bills with a state climate advisory process. The budget reference, however, vanished during a week of discussions that resulted in a gasoline tax exemption, rebates for biofuel heating oil, and financing for electric vehicle charging stations. This session, state lawmakers have repeatedly declined to discuss the program. The legislative session is expected to last until early June.
- Stakeholders want detail as Washington LCFS approaches. At a stakeholder meeting on April 13, the Department of Ecology showcased draft rule language, carbon intensity scores, and other components of the upcoming Washington's Clean Fuels Program. Participants at the conference also requested more information on possible costs associated with the low-carbon fuel standard (LCFS), which is set to go into effect on January 1, 2023. Regulators are finalizing the details ahead of an expected formal rule proposal in July. Producers urged Washington regulators to follow Tier 2 methods already established in California and Oregon, which will serve as a model for many features of the new Washington program. Otherwise, lower-carbon fuels would not gain full credit for their generation before 2025. Washington officials also asked additional feedback on suggested fees for participating in the program. In 2023, the state will impose a flat participation fee, followed by a deficit generation fee in 2024. This would be maintained in 2025, with an annual fee schedule being announced in April coming ahead. At today's session, regulators provided little information on the deficit generating fee, instead collecting feedback from stakeholders on the idea. Deficit fees, which are independent from the deficit and credit activity that reflect program compliance, would support up to 80% of the estimated program cost. The state will accept comments on the proposed rulemaking through April 25.
Schedule
- April 29, 2022: California LCFS 4Q 2021 data release
- May 10, 2022: California LCFS monthly credit transfer report release
- June 14, 2022: California LCFS monthly credit transfer report 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 April 25th, 2022:
-
- California - Spot Delivery $ 116.00
- Oregon - Spot Delivery $ 121.00
LCFS Credit Transfer Activity for California
Time
|
Transfers
|
Total Volume
|
Avg $/credit
|
Mar- 22
|
280
|
3,301,000
|
$ 158
|
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
|
Source: https://ww2.arb.ca.gov/resources/documents/monthly-lcfs-credit-transfer-activity-reports
LCFS Cost for Gasoline and Diesel
Cost as of April 26th, 2022 for Vintage 2022:
-
- California
- Carbob (No Cl ethanol)- Vintage 2022 14.13 cents per USG
- Carbob (79.9 Cl ethanol)- Vintage 2022 13.22 cents per USG
- Oregon
- E10 gasoline- Vintage 2022 7.03 cents per USG
- B5 diesel – Vintage 2022 8.00 cents per USG
Figure 1. California LCFS USD/mt Jan. 2020 - Present
|
|
2021 Average Daily Price: $176.53 2022 Average Daily Price: $134.578 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/mt Jan. 2019 – Present
|
|
2021 Average Daily Price: $125.32
|
2022 Average Daily Price: $123.72
|
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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