The extent to which California’s Low Carbon Fuel Standard (LCFS) can absorb rapid growth in domestic renewable diesel (RD) production is a preeminent question among stakeholders. The nation’s longest-standing, state-based climate initiative faces an acute oversupply of LCFS credits. At the same time, uncertainty from a shifting regulatory environment looms over the RD and sustainable aviation fuel (SAF) industry, while similar state-based programs vie for product.
The answer holds outsized implications for the future supply and pricing of LCFS credits as the fuel is the top credit generator under the program, and rapid renewable diesel production growth has led to the development of a record credit surplus of over 15 million credits. This bank is expected to grow significantly over the coming quarters until California’s Air Resources Board (CARB) adopts measures to increase the stringency of the program.