The California Air Resources Board (CARB) published quarterly program data for the Low Carbon Fuel Standard (LCFS) on April 28, 2023. In this piece, we will provide some analysis of the new data and highlight interesting trends. 

Credit Bank Growth Slows 

The cumulative credit bank, a measure of net credit generation over the lifetime of the program, grew for a seventh consecutive quarter to reach a new program high of about 15M MT. However, quarter-over-quarter credit growth slowed to 2% while deficits rose by 5%, resulting in a net build of 1.65M MT, slightly lower than last quarter’s build of 1.76M MT and halting a three-quarter trend of growing credit builds.

_{Source: CARB}

Q4 2022 Credit Trends

• Renewable diesel (RD) rebounded from a rare quarterly decline in Q3, growing by 7% to a new program high of 2.5M MT. RD remains the largest source of credits under the program at 36%.
• Renewable natural gas (RNG) volumes dropped by about 2% but remains the lowest average carbon intensity (CI) fuel at -119 gCO2e/MJ. Notably, a bill was introduced that would direct CARB to restrict dairy digesters from generating credits under the California program. 
• Credits from ethanol declined by 5%, while credits from biodiesel and hydrogen both dropped by 4%.

_{Source: CARB}

EV Credit Growth Also Slows

Credits from electric vehicles represented one-quarter of all credits under the program but grew by only 66k MT last quarter, the least since Q4 2021. The distribution of credits across the categories of eligible EVs remains unchanged: residential (49%), eForklifts (23%), and non-residential light/medium-duty (15%). Notably, credits from heavy-duty EVs grew by 10% while credits from electric cargo handling equipment and electric refrigeration units both fell by about 5%. 

_{Source: CARB}

The California Air Resources Board (CARB) published quarterly program data for the Low Carbon Fuel Standard (LCFS) on January 31, 2023. In this piece, we will provide some analysis of the new data and highlight interesting trends. 

But First: What is the Credit Bank and Why is it Growing?

Each quarter, CARB issues credits and deficits based on the carbon intensity (CI) and volume of fuel reporting under the program. The cumulative credit bank, a measure of net credit generation over the lifetime of the program, is often used as a proxy for credit supply and demand. This credit bank grew for the first few years of the program, reaching about 10M MT by the end of 2016. From 2017 through the first half of 2021, the credit bank remained largely stable as quarterly net gains were balanced by quarterly net reductions. However, the credit bank has increased significantly since then, reaching about 13.5M MT according to the latest data.

The immediate reasoning behind the growing bank is simple:

1. An increase in the production and use of low carbon fuel, which creates credits
2. A simultaneous decrease in the use of gasoline and diesel, which creates deficits

The forces behind these trends are much more complex, but the LCFS is itself one of those forces. For example, the production of renewable diesel (RD) is incentivized by LCFS and now makes up almost 40% of the diesel fuel reported in the program. RD displaces the use of conventional diesel which would otherwise create deficits. As more RD is produced, more credits and fewer deficits will be generated each quarter. And RD happens to be the single largest source of credits in the program, making up about ⅓ of all credits last quarter.

Of course, RD is not the only fuel generating credits and contributing to the growing credit bank…

Q3 2022 Credit Trends

• The largest quarter-over-quarter increases came from renewable natural gas (10%), ethanol (6%), and electricity (6%).
• RD declined slightly (-3%) for the first time since 2020
• The primary driver of credit growth from renewable natural gas (RNG), the third largest credit source in the program, has been declining average CI. While RNG volume is only 7% up from the same quarter last year, the average CI is now -111 gCO2e/MJ compared to -60 last year. The lower the CI of a fuel, the greater number of credits it will generate.

Spotlight on EV Credits

Credits from electric vehicles continue to be a major source of growth in LCFS, reaching a record share of credits generated Q3 2022 (24%). Consistent with previous quarters, almost 90% of credits from EV charging came from just three categories: residential (49%), eForklifts (23%), and non-residential light/medium-duty (15%).

CARB is expected to release Q4 2022 data by April 28, 2023.  

SRECTrade Pays Fleets under Canada’s Clean Fuel Regulations for Owning and Operating Electric Equipment.

SAN FRANCISCO, CA — SRECTrade, the single partner to manage and transact environmental commodities, announced that it has expanded its management and transaction services to Canada. With these services, SRECTrade and parent company Xpansiv, the premier global market-infrastructure platform for environmental commodities, generate and monetize clean fuel credits to fund budgets to help cover the cost of deploying and operating zero emission vehicles.

In June 2022, Canada launched the Clean Fuel Regulations (CFR), requiring a reduction in the carbon intensity (CI) of transportation fuels by 15% by 2030. This fuel agnostic program provides valuable incentives for transitioning to and operating clean fleets, including EV charging stations, electric and hydrogen buses, trucks and other equipment. The CFR shares many similarities with clean fuel programs across the United States including the California Low Carbon Fuel Standard (LCFS) and Oregon Clean Fuel Program (CFP). To learn more about participating in the Canada CFR, register for SRECTrade’s webinar on January 31 at 10 am PST.

SRECTrade is already serving Canadian companies and multinationals broadening their participation in clean fuel programs. As the largest agent manager of electric vehicle charging and renewable energy assets across North America, the firm’s expansion into Canada solidifies SRECTrade’s continued leadership in the space, providing clients equitable access to clean fuel and renewable energy programs wherever they exist.

“Organizations that act quickly to meet registration deadlines will be among the first to start generating credits this year,” says Steven Eisenberg, Xpansiv’s President of Managed Solutions. Under Canada CFR, there is no retroactive credit generation so the best time to get started is now. To learn more, contact cleanfuels@srectrade.com.

About SRECTrade

SRECTrade is the single partner to source, manage, and transact environmental commodities globally. Founded in 2008, SRECTrade is the largest agent manager of electric (EV) and renewable energy assets across the U.S. With a 99% annual client retention rate, the firm has generated almost a billion dollars in value across more than 64,000 clients while managing over 185,000 clean energy assets on its technology platform. SRECTrade partners with commercial and public entities across a variety of market segments including manufacturing, freight and logistics, warehouse and distribution, maritime, EV charging networks, transit fleets, municipalities, universities, property management companies and others. SRECTrade is a wholly owned subsidiary of Xpansiv, the premier market-based infrastructure platform for environmental commodities.

For information concerning this release, please contact:

SRECTrade
cleanfuels@srectrade.com

Check out our November 2022 Clean Fuels Market Update for the latest news on clean fuel programs across North America. Highlights from this edition include: 

• SRECTrade begins registrations for Canada’s new Clean Fuel Regulations (CFR)
• CARB holds workshops to discuss significant changes to the LCFS program 
• Oregon adopts stricter CFP targets

Contact SRECTrade at cleanfuels@srectrade.com to start getting paid for the clean equipment you already own and operate.

Check out our August 2022 Clean Fuels Market Update for recent updates on clean fuel programs, pricing trends, regulatory news, grant programs, and more. Highlights from this edition include: 

• Canada launched a new clean fuel program! The early registration deadline is August 20.
• The CA LCFS market continues to be very active, with over 3.5 million credits transferred in July alone, the third-busiest month of the program.
• CARB’s workshop on July 7 provided several key insights into the future of LCFS.

Contact SRECTrade at cleanfuels@srectrade.com to start getting paid for the clean equipment you already own and operate.

Download the May 2022 Clean Fuels Market Update to learn about the latest information on clean fuel programs, pricing trends, policy updates, grant programs, and related news. Highlights from this edition include: 

• On March 21, the Securities and Exchange Commision (SEC) proposed a rule change that would require public companies to disclose information about how they are measuring and managing climate risks.

• The California LCFS market saw an increase in the credit bank of nearly 971k credits, the largest ever quarter over quarter increase.

• Get the newest version of the SRECTrade LCFS Calculator app to estimate credit values through Oregon’s Clean Fuels Program (CFP) and California’s Low Carbon Fuel Standard (LCFS) program.

Contact SRECTrade at cleanfuels@srectrade.com or (415) 763-7732 to start getting paid for your clean fuel assets.

The February 2022 Clean Fuels Market Update covers the latest information on clean fuel programs, pricing trends, policy updates, grant programs, and related news. Highlights from this edition include: 

• The California LCFS market saw an increase in the credit bank of nearly 433k credits, its largest credit increase since 2016
• The Oregon Clean Fuels Program (CFP) pricing for Q4 2021 remained steady at approximately $125 per credit
• New Mexico continues efforts to enact a Clean Fuel Standard

Contact SRECTrade at cleanfuels@srectrade.com or (415) 763-7732 to start generating revenue from your clean fuel assets.

The November 2021 Clean Fuels Market Update covers everything you need to know about clean fuel programs across North America. Highlights from our newsletter include: 

• Q2 2021 saw a significant increase in California LCFS credits and deficits generated, with credits oupacing deficits
• The Oregon Clean Fuels Program (CFP) pricing for Q3 2021 remained steady at approximately $125 per credit
• The House passed the $1.2 trillion infrastructure bill with $7.5 billion for EV infrastructure
• SRECTrade, Inc. has joined Xpansiv Ltd. to lead the transition to a low-carbon future

Contact SRECTrade at cleanfuels@srectrade.com or (415) 763-7732 to start generating revenue from your clean fuel assets.