The Stillwater LCFS Quarterly Newsletter presents our analysis of the credit and deficit data from the LCFS Reporting Tool and Credit Bank & Transfer System (LRT-CBTS). The LRT-CBTS is the repository of the LCFS transaction and credit/deficit data input by Fuel Reporting Entities. The California Air Resources Board (CARB) uses this data to publish its LRT Quarterly Summary. Analysis of the data provides insight into the trends of credit and deficit generation, the trends in low carbon intensity (CI) fuel use, and potential future trends.
In the first quarter of 2025 net credits fell to 2,870,811 metric tons (2.87 MT) from a record net credit of 4,278,445 MT (4.28 million MT) in the fourth quarter of 2024, and exceeding the 2,457,773 MT (2.46 million MT) net credit for the same quarter the previous year (1Q2024). CARB cautions that “these figures are subject to change as regulated parties may correct their quarterly data.” We note that with each quarterly release there are at least small revisions to the prior quarter(s). In this quarter’s release, only a small project credit was added to the 4Q2024 data.
At the close of 1Q2025, the credit bank stands at a record high 40.22 million MT.
In this quarterly edition, we offer a highlight article detailing and analyzing the first quarter 2025 data and comparing the quarter to the prior and year-earlier quarters to reveal potential trends.
A Note on Mid-Year Amendment Implementation: The Office of Administrative Law (OAL) approved the 2024 LCFS Amendments and filed with the Secretary of State on June 27, 2025 with an effective date of July 1, 2025. As such, the 9% step-change in CI reduction (and resulting benchmarks applied to the generation of credits and deficits) included in the amendment package is not effective for 1Q2025 or 2Q2025 reporting. The prior benchmarks – a 1.25% step-down from the 2024 schedule – apply to both quarters.
LCFS Credit and Deficit Trends – Credit Bank Grows to Another Record High
For the first quarter of 2025, 8.55 million MT of gross credits were generated. This quarterly gross credit generation compares to 10.14 million MT in the fourth quarter of 2024 and 8.15 million MT in the first quarter of 2024. On the other side of the credit-balance equation, there were 5.68 million MT of gross deficits for the first quarter of 2025. This quarterly gross deficit generation compares to 5.86 million MT and 5.70 million MT for the fourth quarter of 2024 and first quarter of 2024, respectively. At the close of the first quarter of 2025, the credit bank stands at 40.22 million MT compared to 37.35 million MT at the close of 2024.
As illustrated in Figure 1, since the third quarter of 2021, the credit bank has shown a rising trend. The 2.87 million MT first quarter 2025 net credit builds on the past 15 quarters’ positive net credit trend, albeit at a lower rate, and brings the cumulative credit bank to the highest level since the LCFS program’s inception. Incremental Crude CI[1] deficits, which were triggered for the first time in 2020, decreased in 2025 to 0.89 gCO2e/MJ (or g/MJ) of CARBOB or ULSD compared to 1.18 g/MJ in 2024. These CARBOB and ULSD Incremental Crude deficits for the first quarter totaled 316,140 MT, significantly down from the 461,920 MT logged for the fourth quarter of 2024 and the 446,771 MT reported for the first quarter of 2024.
At the end of the first quarter, the cumulative credit bank was equal to 7.09 quarters of deficits at the 1Q2025 rate of deficit generation, meaning that if no credits were generated going forward, it would take more than a year and three quarters for the credit bank to run out.
Figure 1: Net LCFS Credits by Quarter and Cumulative
LCFS Credit/Deficit Trends – QTQ Credits Drop Sharply while Deficits Decline Minimally
Figure 2 shows the quarterly credits and deficits by fuel category as reported by CARB. The total net credits (gross credits less adjustments for fuel exports, corrections, etc.) posted for credit-generating fuels fell off significantly (16.2%) to 8.41 million MT for 1Q2025 from 10.03 million MT for 4Q2024 but were up slightly (4.9%) from 8.02 million MT in 1Q2024.[2]
On the deficit side, combined CARBOB and ULSD deficits decreased slightly (4.7%) from 5.83 millon MT in 4Q2024 to 5.61 million MT in the first quarter of 2025. Quarterly deficits were down very slightly (0.4%) from 5.64 million MT in the same quarter the previous year (1Q2024).
Taking total credits and total deficits into account produces the black “net credits” line in Figure 2 below, which reflects the quarterly sum of the net credit and deficit columns in Figure 1.
Figure 2: LCFS Net Credit/Deficit by Fuel and Quarter
Note: Incremental Crude Deficits are included in the CARBOB and Diesel categories.
Fuel Volume Trends – Alternative and Renewable Fuel Volumes Fall Off from All-time High
As shown in Figure 3, alternative and renewable fuels volumes fell to 26.19% of transportation energy in the first quarter of 2025 compared to 27.42% in the prior quarter. Total reported transportation fuel volume fell in the first quarter by 11.1% and 9.4% compared to 4Q2024 and 1Q2024, respectively. Combined CARBOB and ULSD volumes fell by 9.6% and 6.5% compared to 4Q2024 and 1Q2024, respectively.
Figure 3: Alternative and Renewable Fuel as % of Transportation Fuel Energy
Alternative and Renewable Fuels Excluding Ethanol Fall Off from All-time High
Since ethanol is essentially fixed at 10% of the gasoline volume because of CARB gasoline specifications, (except for the volume of E85 which has been small to-date), volumetric use of ethanol is dependent on gasoline use and should vary little independent of CARB gasoline other than changes in inventory. A truer picture of the impact of low-CI fuels on the California transportation energy mix becomes clearer when ethanol is excluded. Figure 4 shows the contribution that non-ethanol alternative and renewable fuels (i.e., those fuels with growth potential) have made to the transportation fuel mix. The total contribution of non-ethanol renewable and alternative fuels fell to 20.42% of transportation fuel energy in the first quarter of 2025, down from 21.77% and up from 18.63% in the fourth quarter of 2024 and first quarter of 2024, respectively. The primary reason for this decline is reduced volumes of RD which may be a result of a decline in production and supply economics due to a number of factors: low LCFS credit values, the expiration of the biomass-based diesel blenders tax credit (BTC) and transition to the Clean Fuels Production Credit (CFPC), changes to the treatment of imported feedstocks and biofuels under crediting schemes, and increased competition between LCF programs.
Figure 4: Alternative and Renewable Fuel excluding Ethanol as % of Transportation Fuel Energy
Ethanol CI Trend – Volumes Decline while Average CI Inches Up
Figure 5 shows the trends for volumes and weighted average CI for ethanol. The weighted average CI remains significantly lower than 2015 and earlier because the indirect land use change (ILUC) value decreased in the 2015 re-adoption of the LCFS. Since mid-2019, the weighted-average ethanol CI has been fairly flat. The 58.77 g/MJ average CI for the first quarter of 2025 is up very slightly from 58.24 g/MJ in the fourth quarter of 2024; this remains within the range observed for the past six quarters.
Figure 5: Ethanol Volume and Weighted-Average Ethanol CI
Biodiesel, Renewable Diesel Shares, and CI Trends – RD & BD Share of Diesel Pool Holds Steady
Figure 6 shows the percentage of BD and RD as a share of the liquid diesel pool (the combined ULSD, BD, and RD pool) and the weighted average CI for each. The BD volume percentage fell very slightly quarter-to-quarter from 6.9% of the liquid diesel pool in the fourth quarter of 2024 to 6.8% in the first quarter of 2025. Meanwhile, the RD volume percentage rose very slightly from 72.0% of the diesel pool in the fourth quarter of 2024 to 72.1% in the first quarter. Combined, RD and BD made up 78.9% of the liquid diesel pool in the first quarter, essentially flat with the previous quarter in spite of a 21.1% drop in the total liquid diesel pool.
The CARB-reported weighted average CI for RD mostly hovered in the mid-to-low 30s since the middle of 2016, increased several points in 2021 as RD from soybean oil increased in the RD mix, and has fluctuated again in recent months.[3] The CI of RD fell slightly to 42.18 g/MJ in the first quarter from 42.56 g/MJ in the fourth quarter of 2024. In the first quarter of 2024, the average RD CI was slightly lower at 41.27 g/MJ.
For its part, the CARB-reported weighted average CI of BD increased significantly to 37.51 g/MJ, up from 35.52 g/MJ in the fourth quarter of 2024 and 32.26 g/MJ in the first quarter of 2024.
Figure 6: Biodiesel and Renewable Diesel Trends
CNG/LNG and Renewable Natural Gas Trends – Volumes Drop Off and CI Rises Sharply
Figure 7 highlights the trends in RNG and fossil natural gas use in CNG and LNG vehicles. The chart shows the volumes in million diesel gallon equivalents (DGE) per quarter of RNG and fossil gas in the CNG and LNG pool, and the weighted average CI of the RNG pool. RNG represented 94.2% of total transportation CNG/LNG volume for the first quarter of 2025, the first time this percentage has been below 95% since 3Q2020. This decline may be linked to the partial waiver of the cellulosic (D3) renewable volume obligation under the U.S. Renewable Fuel Standard (RFS). Figure 7 reports the weighted average RNG CI.
On the volume side, first quarter renewable CNG/LNG usage was 51.41 million DGE, down 8.0% compared to the 4Q2024 volume of 55.90 million DGE and down marginally (0.5%) from the 1Q2024 volume of 51.67 million DGE. The CARB-reported weighted average CI of bio CNG increased by 6.9% quarter-to-quarter to -158.50 from -218.17 g/MJ in 4Q2024.
Figure 7: CNG & LNG and RNG Trends
Electricity Trends – Transport Electricity Usage Ticks Upward, Average CI Slides Downward
The following figures illustrate trends around electricity. Figure 8 displays the electricity volume trends broken into three primary categories:
- on-road light-duty vehicle / medium-duty vehicle (LDV/MDV)
- on-road heavy-duty vehicle (HDV)
- total off-road electricity
We break down the LDV/MDV category further into residential and non-residential sub-categories.
In addition, the trend line for total on-road electricity as a percentage of total transportation electricity is shown. Figure 9 shows the electricity source categories as volumes by quarter:
- Grid Average CI
- Zero-CI Sources
- Other Low-CI Sources
Figure 8: LCFS Electricity Volume Trends by Use and Percent On-Road
Figure 9: LCFS Electricity Breakdown by Source Trends
CI Reduction Trends – Actual CI Reduction Declines for First Time Since 4Q2022
Figure 10 below tracks the actual program CI reductions compared to the regulatory benchmark. This figure also separately tracks the percent reduction for the gasoline-alternative fuels (which include fuels with CIs measured against the gasoline benchmark) and the diesel-alternative fuels (which include fuels with CIs measured against the diesel benchmark). These data help demonstrate where CI reductions are concentrated and where the opportunities and challenges exist for the LCFS. For the first half of 2025, the regulatory benchmark for the LCFS program is a 13.75% CI reduction. The reduction increases to 22.75% in the second half of the year given the July 1, 2025, effective date for the 2024 LCFS Amendments. In the first quarter of 2025, the achieved reduction was 20.70%, a decrease of 0.93 points from the fourth quarter. The gasoline pool measured an increase in percent reduction while the diesel pool measured a decrease in percent reduction.
Figure 10: CI Reduction Trends
Notably, the diesel fuel reduction curve (which references the right axis and covers the liquid diesel fuels plus LNG/CNG and heavy-duty electricity) has shown a much greater reduction in CI than the gasoline fuels (covering CARBOB, ethanol, hydrogen, and light-duty electricity). There are two factors that have accelerated the diesel fuel reduction curve relative to the gasoline fuels’ reduction curve up until this quarter. The first is the use of BD and RD which has displaced nearly 80% of the ULSD volume in the liquid diesel pool. The second factor is the increased use of highly negative CI animal waste digester RNG that has displaced fossil and landfill natural gas used in natural gas vehicles. By contrast, the gasoline pool has not had a comparable high-volume, low-CI liquid fuel substitute to displace high-CI CARBOB. For the gasoline pool CI to decline and approach the annual CI-reduction benchmark, the percentage of light- and medium-duty electricity, renewable gasoline blendstocks and hydrogen will need to greatly increase from its current energy economy ratio (EER) adjusted 6.9% of the gasoline pool energy.
Highlight: Quarter-to-Quarter and Year-to-Year Comparisons
As discussed above, the net credits logged in the first quarter of 2025 were 2,870,811 MT, down 1,407,634 (32.9%) from the fourth quarter 2024 net credit of 4,278,445 MT. The 4Q2024 net credit was the historic quarterly high. The fall-off in net credits was due to less credit generation from the major credit-generating fuels (except on-road electricity) and was somewhat offset by the reduction in deficits from CARBOB and ULSD.
Compared to the same quarter in the year prior (1Q2024), the first quarter of 2025 showed a 413,038 MT increase in net credits (16.8%). First quarter 2025 total credits were up 394,274 MT (4.8%) from the prior year with total deficits decreasing 18,764 MT (0.3%) from that of 1Q2024.
Table 1 below lists credit generation by fuel category and subcategory for the first and fourth quarters of 2024 alongside the first quarter of 2025. The table highlights the differences between the first quarter of 2025 and the prior quarter (i.e., quarter-to-quarter, QTQ) and the same quarter one year prior (i.e., year-to-year, YTY). Further below, Table 2 displays the fuel volumes and CARB-reported average CIs from the LRT for the first and fourth quarters of 2024 alongside the first quarter of 2025, highlighting the QTQ and YTY differences.
Table 1: Quarterly Comparison – Credits & Deficits
Table 2: Quarterly Comparison – Volumes and Average Carbon Intensities
A review of these data reveals that all low-CI fuels (with the exception of on-road electricity and renewable gasoline blendstock) contributed to the decrease in QTQ net credits. On the deficit side, decreases in CARBOB and ULSD deficits offset part of the credit decline from low-CI fuels.
The major factors in contribution to the YTY changes were: increases in net credits for on-road and off-road electricity, Alternative Jet Fuel (AJF, also known as Sustainable Aviation Fuel or SAF) and RNG, offset by reductions in net credits for ethanol, BD and RD. Interesting for the deficit generating fuels, the increase in CARBOB deficits was more than offset by the reductions in ULSD deficits and incremental crude CI deficits.
The fuels of significance in these QTQ and YTY comparisons are:
- Renewable Natural Gas – RNG credit generation decreased 586,961 MT (27.3%) QTQ on an 8.0% decrease in RNG volume. The disproportional decrease in credits compared to volume can be attributed to the higher average CI due to a decrease in RNG from dairy and swine manure and an increase in RNG from landfill gas. Dairy and swine RNG volumes tend to fall off in the first quarter of each year, although the 1Q2025 decline was more severe than in past years. This sharper than normal fall-off may also be related to the U.S. Environmental Protection Agency’s action to partially waive the cellulosic biofuel renewable volume obligations for 2024 and 2025. YTY, there was a 26,831 MT (4.8%) increase in RNG credits on a 0.5% decrease in volume. In 1Q2025, RNG represented 18.6% of total LCFS credit generation.
- On-road Electricity – On-road electricity credits increased 136,085 MT (7.8%) QTQ and 471,922 MT (33.4%) YTY on 7.1% and 31.6% increases in volume, respectively. In 1Q2025, on-road electricity represented 22.4% of LCFS credit generation.
- Off-Road Electricity – Off-road electricity credits decreased 34,338MT (5.2%) QTQ and increased 29,321 MT (4.9%) YTY. Volumes were down slightly by 2.7% QTQ but up 2.1% YTY.
- Ethanol – Ethanol net credits decreased by 130,898 MT (14.9%) QTQ and 33,478 MT (4.3%) YTY on volume decreases of 9.3% QTQ and 1.3% YTY. The percent credit decrease exceeded the percentage decline in volume due to the scheduled increase in benchmark reduction on January 1, 2025. Additionally, the average CI of ethanol in California increased 0.9% QTQ but decreased 0.7% YTY.
- Biodiesel – BD credits decreased 118,738 MT (14.9%) QTQ and 142,598 MT (4.3%) YTY on a volume decrease of 23.0% QTQ and a volume decrease of 22.5% YTY. QTQ, the average BD CI increased 5.6%, and YTY CI increased 16.3%.
- Renewable Diesel – RD has been the most significant credit-generating fuel under the LCFS program, generating 39.0% of LCFS credits in the fourth quarter of 2024. In the first quarter of 2025, however, RD fell back to generating 36.5% of the credits. For 1Q2025, RD credits dropped off by 889,439 MT (22.5%) QTQ and declined by 65,659 MT (2.1%) YTY on a volume decrease of 21.0% QTQ and a volume increase of 2.7% YTY.
- Alternative Jet Fuel – AJF, more widely known as sustainable aviation fuel (SAF), is a growing fuel under the LCFS as its credits provide 2.0% of the total net credits. SAF credits had a major jump in 2024, but the growth slowed in 1Q2025. SAF credits decreased by 12,387 MT (6.8%) QTQ but increased 111,217 MT (187.5%) YTY on 2.8% and 218.5% increases in volume, respectively. The mismatch in percent change in credits vs. volume was due to an increase in SAF’s average CI of 6.4% QTQ and 6.9% YTY and the annual increase in benchmark stringency.
- CARBOB – CARBOB deficits decreased by 163,370 MT (3.0%) QTQ on an 8.8% decrease in volume. CARBOB deficits grew 69,497MT (1.3%) YTY on a 4.7% decrease in volume. The QTQ and YTY disproportionate change in deficits versus volume is due to the 1.25% step-down in benchmark CI (effective January 1, 2025) and partially offset by the 2025 decrease in the incremental crude CI which declined from 1.18 to 0.86.
- ULSD – ULSD, the other major deficit-generating fuel, saw decreased deficit generation QTQ and YTY. ULSD deficits decreased 55,191 MT (15.2%) QTQ on a 20.7% decrease in volume and decreased 93,273 MT (23.3%) on a volume decrease of 28.3%. As with CARBOB, the QTQ and YTY disproportionate change in deficits versus volume is due to the 1.25% step-down in benchmark CI (effective January 1, 2025) and partially offset by the 2025 decrease in the incremental crude CI which declined from 1.18 to 0.86.
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[1] Incremental Crude Carbon Intensity adds additional deficits to petroleum-based fuels as specified in the LCFS regulation. The incremental CI is determined by the amount that the three-year average CI of the crude oils processed in California’s refineries exceeds the 2010 baseline. The incremental crude CI does not apply if the three-year average is lower than the baseline.
[2] Per CARB: “For alternative fuels that displace diesel and CARBOB, credits are generated by low-CI fuels due to production, imports, and purchase, etc. while any deficits generated are either due to a higher carbon intensity (CI) than the CI standard or due to sale of inventories, exports outside of CA, etc.”
[3] This increasing RD CI trend is attributable to increasing soybean oil-based RD supplied to California. We note here that there is not projected to be enough waste oil feedstocks to fully supply the RD facilities being constructed in North America, so Stillwater expects average CI of RD to generally increase over the next couple of years as these plants come online and the share of soybean oil in the feedstock mix increases.
