LCFS credit bank swells with renewable diesel credits

The credit bank pushed to new highs during the third quarter of 2022, according to data released Wednesday, February 2, by the California Air Resources Board.

Renewable diesel (RD) is rapidly replacing petroleum diesel at a much quicker pace than expected, resulting in credit generation vastly over forecast.

There were 1.7 million credits added to the bank during the third quarter of 2022, bringing the cumulative total to 13.4 million banked credits. Third-quarter credit generation was the largest on record, surpassing the previous high of 1.36 million credits by over 27 percent. The previous high was set in during the second quarter of 2022.

The top credit-generating fuels during the third quarter were renewable diesel, electricity, and renewable natural gas. These three fuel categories provided 4.08 million credits, approximately 76 percent of the 6.9 million credits generated. Ethanol and biodiesel contributed a combined 1.5 million credits, just over 22 percent of the quarterly total.

For the year, credit generation was very similar to the quarter. Renewable diesel, electricity, and renewable natural gas account for 76 percent of the 19.5 million credits generated through the first three quarters of 2022. Ethanol and biodiesel account for 23 percent.

Third quarter deficit generation totaled 5.2 million, 3.5 percent below Q2 but one percent above Q3 2021. CARBOB and diesel, plus the incremental credits associated with these fuels, accounted for over 99 percent of the monthly deficits.

Renewable diesel is the largest credit-generating fuel in California’s LCFS program, generating 36.5 percent of all credits yet accounting for less than eight percent of the liquid fuel volume. In 2011, RD accounted for 0.01% of the liquid fuel volume and generated 1.3 percent of the credits. During the first three quarters of 2022, RD generated more LCFS credits than it did during all of 2021.

Renewable diesel is rapidly replacing petroleum diesel within the California market. Total diesel fuel consumption in 2022 (through Q3) is 2.7 billion gallons. Petroleum diesel accounts for 55 percent of the total, renewable diesel 37.3 percent, and biodiesel 7.7 percent. Renewable diesel and biodiesel have a combined share of 45 percent of the diesel fuel market in California. Petroleum diesel’s market share has fallen from 99.6 percent in 2011 to 55 percent today.