The big week

We’ll be waiting at least a few days more for the results of the big vote. No, California’s Low Carbon Fuel Standard isn’t on a ballot today like Washington’s cap-and-trade system. California’s Air Resources Board instead will consider tougher targets, new supply hurdles and other changes to the program this Friday. It’s a key milestone in years of discussion on a program that has reshaped fuel strategies around the world. Regulators will weigh transportation incentives that slumped for three years under the weight of swollen credit supplies against fuel cost fears that have been stoked to a boil.

California published data on Halloween showing a record 3.12mn t build in extra credits available for future compliance — a specter of the program’s fate without some kind of change. Fuel suppliers have added nearly 20mn t of these credits in excess of requirements since the first workshops contemplating changes to the LCFS in December 2021.

Much of this surge has come from renewable diesel suppliers answering the west coast call to deliver this easily adopted, lower-carbon fuel. Renewable diesel made up more than 69pc of the state’s liquid diesel pool in the second quarter, shrinking old-fashioned petroleum diesel to less than a quarter of the state’s consumption. It made up 38pc of all new LCFS credits in the second quarter. Gasoline consumption meanwhile shoulders nearly all the new deficit creation that drives demand for these credits. California drivers are asking more pointed questions about that this month, alarmed by projections of sharply higher per-gallon costs associated with tougher regulations.

CARB has proposed a 9pc tougher target for 2025 — targets usually get about 1.5pc harder to meet each year — and a host of other new hurdles for crop-based fuels targeting the state. Higher-carbon fuels already face a shortened future in the program when targets get tougher. But the proposals scheduled for board consideration on Friday also include plans for tougher audits on these crop-based feedstocks and an outright limit on the credits they can generate before the end of the decade. These decisions have elicited howls of protest from agribusiness, including a frustrated letter from the Missouri attorney general’s office about access for its farmers to the California market. The proposals also lock in decades of incentives for dairy methane capture and use, regardless of any other state regulations to mandate reductions of this potent agricultural air pollutant.

Few seem thrilled by what the board will consider this week. Conventional fuel suppliers warn of higher costs. Renewable fuel suppliers say the targets lack the bite needed to chew up banked credits. Agribusiness says California is contorting a science-based program to arbitrarily shut out their feedstocks. Environmental advocates meanwhile say that CARB has fallen short of protections against local air quality hazards and deforestation. But CARB staff say they are out of time. The tougher targets, feedstock limits and other modifications developed this year must either advance before 5 January or face an estimated two years of restarted work, staff said last month.

LCFS credit prices are rising ahead of Friday, shrugging off that record Halloween build to rise by almost 10pc in light trade. This week’s vote will say a lot about the future: about the US fuel supply and the tools used in one of the largest North American fuel markets to reshape it.