US energy companies push states for carbon markets to spur renewable fuel growth

FILE PHOTO: Calgren's renewable fuel facility that cleans milk methane into natural gas is shown in Pixley, California
FILE PHOTO: Calgren’s renewable fuel facility that cleans milk methane into natural gas is shown in Pixley, California, U.S., October 2, 2019. REUTERS/Mike Blake/File Photo

December 13, 2021

By Laura Sanicola

(Reuters) – U.S. energy companies are urging states to speed up the development of low-carbon fuel markets, warning that more projects are proposed to produce renewable natural gas and biofuels. Another school may fail.

State programs, led by the California Low Carbon Fuel Standard (LCFS), reward fuel producers who have decarbonized by producing renewable fuels, who have responded by increase production of such “greener” supplies.

As a result, the credit prices that refineries and other pollutants can generate have plummeted – so it’s less likely that companies will invest in more production facilities in the coming years. next.

Nearly every independent U.S. refiner has announced plans to make waste fuels and vegetable oils because these incentives can be profitable for their industries. The US Department of Energy forecasts that renewable diesel will account for about 7% of total diesel by 2030; it is currently only 5%.

However, the price of LCFS credits in California, created and traded by companies that produce low-carbon-intensity fuels relative to benchmarks set by other states, fell nearly 30 percent in the past year. two months down below 145 USD/ton. carbon, according to the California Air Resources Board (CARB).

According to industry experts, that is the result of increased sales of renewable diesel engines as refiners plan to increase production of the fuel. The industry warned that if oversupply continues to depress the prices of these credits, investors’ interest to build more advanced biofuel projects will wane.

Eric McAfee, president and chief executive officer of Aemetis, a renewable fuel company, told California regulators: “For every $5 credit drop, another group of investors won’t invest in it. This short-term trial only lasted 10 years. in a virtual public conference held on Wednesday.

McAffee and other biofuels producers argued during comment time that quicker action from regulators is needed to keep investors looking for LCFS prices in the $200 range. .


Only a handful of US states have LCFS markets. California has created one of the largest regional carbon markets for the transportation sector, which state regulators see as one of the most effective ways to reduce carbon emissions from road fuels. .

In 2020, CARB said the creation of LCFS credits met nearly all of the state’s carbon reduction targets. The LCFS sets annual carbon intensity (CI) standards, or benchmarks, that become more stringent over time.

But other states have struggled to work together to introduce their own low-carbon programs, which would open additional markets for the growing supply of renewable energy and boost credit prices a bit. Again.

Last month, a low-carbon program on the East Coast that had been in place for five years, including Massachusetts and Connecticut, died after various governors expressed concern that the program would raise gasoline prices. California currently has the highest gas prices in the nation at $4.70 a gallon.

The program will require major gasoline and diesel suppliers to purchase auctionable “allowances” for fuel-burning pollution sold in participating areas.

Petroleum-related trade groups oppose the idea, saying it would harm, rather than promote, the use of fuels that produce fewer pollutants by discouraging fuel efficiency investments. to replace.

Stakeholders are now eyeing New York, where a policy backed by the New York Climate Action Council could be adopted that would call for a substantial increase in investment in renewable diesel engines through 2030.

“Replacing diesel with renewable diesel and green hydrogen will reduce harmful fine particulate emissions in disadvantaged communities,” the council said in a draft plan released on Thursday. October.

(Reporting by Laura Sanicola) US energy companies push states for carbon markets to spur renewable fuel growth

Bobby Allyn

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