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News Update
- 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 spoty conract this summer. Carbon market exchange Xpansiv announced plans to launch the first exchange-traded California LCFS spot contract this summer on July 10th. The LCFS contract will be 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.
Market Update
- CARB reported the California LCFS average traded price was $81.00 in May 2023, which is 9.46% higher than the April 2023 average of $74.00.
- CARB also reported 158 transactions in May 2023, a sharp 71.1% decrease from the 547 transfers reported in April 2023. The traded volume in May was equal to 1,684,000 credits, compared to April’s traded volume of 5,596,000 credits.
- Overall, California LCFS credits traded higher in May 2023, starting at $85.50 before dropping to $83.00 and reaching a 9-month high of $86.00 on May 9th. Prices then continued to fluctuate between $83.00 and $86.00 before closing the month at $85.00. Prices dropped into first part of June with trading ending at $80.00 on June 15th.
- Oregon DEQ reported a transfer volume of an estimated 126,556 metric tons of credits in May 2023, nearly twice the volume moved in May 2022 but 62.5% lower than the previous volume of 338,000 credits transferred in April 2023.
- Overall, Oregon LCFS credits traded higher over the month of May 2023, starting at $134.00 and increasing to a 3 year high of $140.00 in the first half of the month. Prices in the last half of May levelled off at $137.50 before closing the month at $138.50.
- Based on the most recent CARB calculations, the California LCFS maximum credit price is now $253.53/t. as of 1 June 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.
- While the market remains oversupplied fundamental with the bank of LCFS at its highest levels in program history, prices did rebound off lows of $59 earlier this year to $84 in May given the regulatory push to increase the pace of reductions in the program. Though likely not to be finalized until calendar year 2024, the market is factoring this and prices expected to rise by next year.
LCFS & CFP Schedule
California LCFS Q1 2023 Reporting Deadline
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June 30th, 2023
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Oregon CFP Verification Statements Due
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August 31st, 2023
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California LCFS Q1 2023 Data Release
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July 31st, 2023
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California LCFS Q2 2023 Reporting Deadline
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September 30th, 2023
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California LCFS Q2 2023 Data Release
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October 31st, 2023
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LCFS Credit & Futures Pricing
Credit Prices as of June 16th, 2023: |
California Futures Prices as of June 16th, 2023: |
- California - Spot Delivery: $ 81.75
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- Oregon - Spot Delivery: $ 140.00
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LCFS Cost for Gasoline and Diesel
California, as of June 16th, 2023:
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Oregon, as of June 16th, 2023:
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- Carbob (No Cl ethanol) - Vintage 2022: 10.89 cents per USG
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- E10 gasoline - Vintage 2022: 10.57 cents per USG
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- Carbob (79.9 Cl ethanol) - Vintage 2022: 10.34 cents per USG
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- B5 diesel – Vintage 2022: 12.05 cents per USG
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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-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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22-Jun
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133
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1,268,000
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$113
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22-May
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119
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861,000
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$125
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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-May |
29 |
126,556 |
$131.28 |
23-Apr
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67
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337,461
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$122.24
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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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22-Jun
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5
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37,135
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$115.95
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22-May
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24
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66,458
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$122.23
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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
Figure 1. California LCFS Prompt USD/mt May 2022 - Present
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2022 Average Daily Price: $ 98.35
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2023 Average Daily Price: $ 72.76
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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 May 2022 – Present
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2022 Average Daily Price: $ 117.85
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2023 Average Daily Price: $ 127.61
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2022 Highest Daily Price: $ 126.50
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2023 Highest Daily Price: $ 140.00
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(February 17th, 2022)
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(May 15th, 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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