Weekly LCFS Credit Price Trend

For the week of August 17-23, credit prices started at $88/MT– down $1/MT (~1%) from the previous week’s closing price. Credit prices increased to $89/MT before decreasing and closing at $88.25/MT – down $0.75/MT (~1%) from the previous week’s closing price. The same week last year averaged $181/MT. Based on the 2022 benchmark, a credit price of $88.25/MT correlates to 11.94 cents per gallon (CPG) for CARBOB and 11.91 CPG for ULSD.

In addition to the direct cost of LCFS credit prices, the LCFS program’s incremental crude CI provision adds deficits to all CARBOB and ULSD in California. At a credit price of $88.25/MT, the incremental added cost of the 2022 incremental crude provision is 0.97 CPG for CARBOB and 1.09 CPG for ULSD. Given the cost of this additional deficit, the total added cost of the LCFS program is 12.91 CPG for CARBOB and 13.01 CPG for ULSD.

Long-Term LCFS Credit Price Trends

For 2022 year-to-date, LCFS credit prices have averaged $114/MT, reaching an annual high of $154/MT on January 6^th and a low of $79.50/MT on June 9^th. The year-average price for 2021 was $178/MT. The maximum allowable credit price for June 1, 2022 through May 31, 2023 is $239.18. Credit price trends for the past two years are displayed in the figure below.

LCFS Annual Credit Price Trends – Daily vs. Moving Averages

The figure below shows daily OPIS prices along with 30- and 180-calendar-day moving averages.(1) As can be seen, credit prices closely tracked the 30-day moving average this week.

LCFS Trade Price Trends

The figure below shows the minimum, maximum, and volume-weighted average weekly price for the past twelve months. The range of prices illustrates that the transactions for some credits have been contracted in prior periods when credit prices were different, or the credits are discounted for commercial purposes.

LCFS Trading Trends

The figure below shows a history of weekly volumes traded and number of deals for the past twelve months. The week beginning August 15^th saw 24 trades totaling 195,270 MT compared to 28 trades totaling 548,677 MT last week (revised upward from 31 trades totaling 262,696 MT). The same week last year saw 29 trades totaling 391,996 MT.

LCFS in the News – August 17-23

• On August 17th, PowerTap Hydrogen Capital Corp indicated that the Inflation Reduction Act (IRA) would allow the company to “expand outside California given that the legislation provides incentives at the federal level.” PowerTap said it intends to focus its efforts on maximizing the available tax credits on top of California’s LCFS hydrogen refueling infrastructure and dispensing carbon credits.
• On August 18^th, World Energy announced it is launching “advanced engineering plans to convert its existing assets in Houston to launch a new sustainable aviation fuel (SAF) hub that will enable the company to produce another 250 million gallons of SAF annually by 2025.” World Energy currently operates the only SAF plant in the U.S. (located in Los Angeles) where the company is in the midst of a $2 billion expansion project to boost capacity to 375 million gallons of renewable fuels. Relatedly, Simple Flying published an article addressing the question “Could Aviation Fuel Become Net Negative?”
• On August 22^nd, Aemetis, Inc. announced that it has agreed to a multi-year agreement with International Airlines Group (IAG) to supply SAF to help power British Airways and Aer Lingus flights from San Francisco Airport beginning in 2025. Eric McAfee, Chairman and CEO of Aemetis, said: “Our production of SAF in California is supported by the California Low Carbon Fuel Standard, creating new investment and jobs in disadvantaged minority communities in the state.”
• On August 23^rd, The Western Producer reported that “Renewable diesel production is expected to overtake biodiesel production in the United States in October, according to the U.S. Energy Information Administration.” Mindi Farber-DeAnda, team lead of petroleum and natural gas modeling at the EIA, said the EIA’s long-term outlooks for RD have been “very vanilla” because they fail to properly account for government policies, which are the real drivers of growth for the sector. In 2023, that is changing; EIA will incorporate Oregon’s Clean Fuels Program into its outlooks and more fully represent SAF rather than rolling it in with other biomass-based diesel.
• On August 23^rd, Weekly Credit Transfer Report for August 15-21 was posted on CARB’s website.

LCFS News Beyond California

• On August 17^th, The Seattle Times reported on the effects of the IRA – signed into law just one day before, on Washington state’s efforts to decarbonize. “Washington is preparing to roll out a spate of programs that will put a price on greenhouse gas emissions, require electric utilities to phase out coal and reduce the carbon intensity of transportation fuels. An influx of money could streamline and expedite state efforts to decarbonize.”
• On August 18^th, the Province of British Columbia posted the July 2022 Monthly Credit Market Report for the BC-LCFS.
• On August 21^st, The Everett Herald summarized the proposed Washington Clean Fuel Standard, highlighting the August 31^st deadline for public comments (accepted here). The CFS will be finalized this fall and go into effect on January 1, 2023.

(1) Moving averages are widely used technical indicators that smooth out price trends by filtering out “noise” from random short-term price fluctuations, providing a clearer view of the direction prices are trending. They are used by traders and investors for the “technical analysis” of financial data such as stocks or commodities prices or trading volumes to inform decisions of when to buy or sell stocks or commodities. In addition to helping identify trends, moving averages are also used to determine support and resistance levels. In an uptrend, the average may act like a floor (support), so the price recovers with an upward movement. In a downtrend, a moving average may provide resistance with the price pausing before dropping again.