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News Update
- CARB Delays LCFS Ruling Till 2024. California’s Air Resources Board (CARB) provided updated guidance on the timeline for its rulemaking process to usher in more stringent carbon intensity targets. The regulator aims to release a proposal after a late-September board meeting during which a non-voting LCFS item will be outlined. The proposal will face a 45-day public comment period allowing the item to be voted on at a board meeting in early 2024. The new targets could come into effect by mid-to-late 2024, or CARB could wait till January 1, 2025. CARB clarified that it would not retroactively apply the ruling to any part of the 2024 compliance year. The August 16 public workshop covered extensive modeling updates to its California Transportation Supply Model (CATS). The updated scenarios included material upward revisions in electrification of HDVs and MDVs, added in total out-of-state biomethane supply and built in a credit bank drawdown pathway. CARB did not factor alcohol-to-jet into the model as sufficient data was not available. Stakeholders raised concerns that the electricity CI used in the model was too high and took issue with using total out-of-state biomethane in the model while not adjusting for out of state competition and restrictions.
- EIA Boosts its 2023 Renewable Diesel Production Forecast. The US Energy Information Administration (EIA) raised its 2023 RD production forecast by 2.5% to 165,000 Bbl/d from 161,000 Bbl/d in July. RD production for 2024 was forecast at 218,000 Bbl/d, down from July’s estimate of 219,000 Bbl/d. The Administration cited lower plant utilization rates and more plant cancellations in response to the June 21st release of the Environmental Protection Agency’s (EPA) final Renewable Fuel Standard rule as a reason for trimming forecasts this summer.
- California LCFS Transfers set July Record. CARB data showed a total volume of 4,347,000 t of LCFS credits across 417 transfers, a record for July, up 18% July 2022. Total year-to-date credit transfers are up 22% on year-ago levels at 149,347,000 t. The averaged transfer price fell to $75/t from $79/t the month prior, marking the lowest since April 2023.
- EVs Made up 24% of New California Car Sales. Electric Vehicles made up 24% of new car sales in California during the second quarter of 2023, according to data from the California Energy Commission. Second quarter car sales came in at 496,000 vehicles. The state aims for zero-emission vehicles to account for all new car sales by 2035.
- 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.
- CARB Breaks Down LCFS Auto-acceleration Design concepts. On May 23rd, 2023, California Air Resources Board (CARB) released two considerations for the auto-acceleration mechanism designed to increase stringency in the LCFS program. The first design would be triggered by a “credit to price bank (CPB)” ratio dropping below a threshold calculated by dividing the average credit price by the total number of banked credits. The second design would be triggered by a “credit to deficit (CtD)” ratio calculated by dividing the total number of credits generated by the total number of deficits generated. Both designs, if triggered, would advance the CI reduction schedule by one year, starting the following year after the trigger ratio is met. Regarding implementation, CARB noted that quarterly LCFS data is finalized at the end of the following quarter that a fuel was used and published one month later, meaning that Q2 is the earliest that a trigger announcement could be made using complete, prior-year data. CARB also noted that if an auto-acceleration trigger occurred in the immediate prior year, then the current year cannot also activate the mechanism as the annual data used to determine the impacts of the newly ratcheted standard would not be ready for analysis. For example, if data for 2024 were to meet trigger criteria, the targets would be advanced starting in 2026, with triggers “locked” until 2028.
- CARB Mulls Over More Stringent Changes to LCFS. California’s LCFS program currently requires a 20% CI reduction by 2030 with a target of 13.75% CI reduction for 2025, but CARB is considering increasing the 2030 LCFS CI reduction target to 25%, 30%, or 35% below 2010 levels. In the May 23rd workshop, CARB discussed potential auto-acceleration mechanisms and whether to take a linear path to a new 2030 target or use a step-down with more aggressive reductions in the short-term. If CARB were to set a new 2030 target of 30% CI reduction, it could set a new 2025 mandate of 15.4% through a linear path, or between 15.75% - 18.75% using a step-down approach. According to CARB models, a 2% step down (15.75% by 2025 mandate) would generate 1 million deficits through 2030, and a 5% step down (18.75% by 2025 mandate) would generate nearly 12 million. While these changes were widely expected to start in January 2024, regulators have suggested that they may not take effect until later in the year. The complexity of the potential acceleration and step-down mechanisms has led staff to take feedback on the timing of new targets and other potential changes in the event that these new regulations are postponed.
- PG&E offers record high LCFS credit volume. Pacific Gas & Electric (PG&E) offered a record volume of 289,000 LCFS credits in their most recent auction at the end of May, ~20% more than the previous auction in March. PG&E generates credits by supplying low-carbon electricity for vehicle charging, and its quarterly offerings have climbed steadily from 72,000 credits in December 2020.
- Xpansiv to Launch California LCFS Spot Contract in July. Carbon market exchange Xpansiv launched the first exchange-traded California LCFS spot contract on July 10th. The LCFS contract is fully integrated with Xpansiv spot market CBL’s central limit order book enabling instant execution on an open electronic platform with same-day (T+0) settlement of cash and credits through the exchange’s post-trade infrastructure. The contract saw seven trades totaling 44,000 metric tons in its first week of trade.
Market Update
- CARB reported the California LCFS average transfer price was $75.00/t in July 2023, down $4/t from a June 2023 average of $79.00/t.
- CARB reported 417 transfers in July 2023, an 88% increase from the 222 transfers reported in May but down from 547 transfers in April—a record for the program. The total credit transfer volume was 4,347,000 t compared to 2,470,000 t in June.
- California LCFS credits were largely rangebound over the course of July, starting the month at $74.00/t before trading as low as $72.00/t to and ending the month at $73.50/t. Prompt prices surged to $82.00/t in early August, marking the highest level in nearly two months. Credit prices remained elevated ahead of CARB’s August 16 public workshop.
- Oregon DEQ reported a transfer volume of an estimated 166,552 metric tons in July 2023, up 34% from a downward-revied June 2023 level of 123,401 metric tons. July transfer volumes were up 85% on July 2022 levels of 89,873 credits. July saw 32 transfers with an average transfer price of $137.93/credit, up $7.72/t, or 5.9%, from the month prior.
- Oregon LCFS credits traded higher over the month of July, starting at $143.00 and reaching a three-and-a-half-year high of $154.00 by the close of the month. Prices in the first half of July reached as high as $163.00/t, the highest level since August 29, 2019.
- 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 at its highest levels in program history and credits outpacing deficits by an increasing gap since July 2020. Oversupply saw prompt prices bottom at $59.00/t earlier this year before recovering to $86.00/t in May given the regulatory push to increase the pace of reductions in the program. Prompt spot prices were rangebound in July, trading between $72.00/t and $74.00/t, while credits firmed to $82.00/t in early August ahead of CARB’s public workshop.
LCFS & CFP Schedule
Joint EJAC/CARB Session |
September 14th, 2023 |
Oregon CFP Verification Statements Due
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August 31st, 2023
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California LCFS Q2 2023 Reporting Deadline |
September 30th, 2023 |
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California LCFS Q2 2023 Data Release |
October 31st, 2023 |
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LCFS Credit & Futures Pricing
Credit Prices as of August 16th, 2023: |
California Futures Prices as of August 16th, 2023: |
- California - Spot Delivery: $ 80.00
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- Oregon - Spot Delivery: $ 161.50
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LCFS Cost for Gasoline and Diesel
California, as of August 16th, 2023:
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Oregon, as of August 16th, 2023:
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- Carbob (No Cl ethanol) - Vintage 2023: 10.82 cents per gallon
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- E10 gasoline - Vintage 2023: 12.20 cents per gallon
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- Carbob (79.9 Cl ethanol) - Vintage 2023: 10.27 cents per gallon
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- B5 diesel – Vintage 2023: 13.90 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-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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22-Nov
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181
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2,379,000
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$81
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22-Oct
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555
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5,005,000
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$106
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22-Sep
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179
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1,759,000
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$102
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22-Aug
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153
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1,624,000
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$97
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22-Jul
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439
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3,680,000
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$117
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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- 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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22-Nov
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24
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132,299
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$117.80
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22-Oct
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40
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176,986
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$115.55
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22-Sep
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35
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215,128
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$114.74
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22-Aug
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13
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43,724
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$110.83
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22-Jul
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23
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89,873
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$117.44
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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
*Revised as of 8/1/2023
Figure 1. California LCFS Prompt USD/mt August 2022 - Present
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2022 Average Daily Price: $ 98.35
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2023 Average Daily Price: $ 73.72
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2022 Highest Daily Price: $ 153.50
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2023 Highest Daily Price: $ 86.00
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(January 6th, 2022)
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(May 9th, 2023)
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Figure 2. Oregon LCFS Prompt USD/mt August 2022 – Present
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2022 Average Daily Price: $ 117.85
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2023 Average Daily Price: $ 133.98
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2022 Highest Daily Price: $ 126.50
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2023 Highest Daily Price: $ 163.00
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(February 17th, 2022)
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(August 9th, 2023)
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Figure 3. California LCFS Net Credits & Cumulative Bank Volume - Quarterly
Figure 4. California LCFS Net Credits & Cumulative Bank Volume - Yearly
Figure 5. Oregon CFP Net Credits and Cumulative Bank Volume - Quarterly
Figure 6. Oregon CFP Net Credits and Cumulative Bank Volume - Yearly
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