California Launches New Fuel Policies in 2016

by Graham Noyes (Biodiesel Magazine/ Keyes, Fox & Wiedman LLP) California will be the biodiesel market to watch in 2016 as the state implements a diverse portfolio of policies that will directly impact the industry. The state’s landmark greenhouse gas (GHG) reduction program, AB 32, is celebrating its 10-year anniversary and ramping up quickly. ...

The low carbon fuel standard (LCFS) is California’s flagship GHG reduction program in the fuels sector and is delivering 10 percent of the state’s GHG reductions, despite being hindered by litigation. In 2015, California’s Air Resources Board readopted the LCFS program to satisfy procedural requirements while simultaneously enhancing the program and refusing to delay the GHG reduction timetable.

Based on credit generation, California’s transportation sector reduced its carbon intensity 2 percent between 2010 and 2015, and will reduce it 8 percent more between 2016-’20. The market has responded accordingly with credit prices moving from $28 per ton in June to triple digits by December. Robust credit values have incentivized biodiesel production particularly from corn oil, tallow and used cooking oil, and also attracted 115 million gallons of renewable diesel into California’s market in 2014. In addition, highly effective participation in the readoption process by the National Biodiesel Board, California Biodiesel Association and individual producers convinced ARB to reduce by more than half the indirect land use change (ILUC) attributable to soy. This change will roughly triple the rate of LCFS credit generation from virgin soy biodiesel compared to the prior LCFS regulation.

As a GHG-reducing clean fuel technology, current and future California biodiesel producers are potentially eligible to receive a portion of the GGRF budget.

AB 692 establishes mandatory procurement of low carbon fuels for the overall state fleet with a 3 percent requirement applicable for 2017, ratcheting up 1 percent annually to 10 percent in 2024. Very low carbon diesel fuels must not exceed 40 percent of the carbon intensity of CARB diesel—a standard that can be met by biodiesel produced from low carbon feedstocks.

While these programs appear likely to create opportunities for biodiesel, California’s Alternative Diesel Fuel regulation presents more of a challenge. The ADF regulation has been under development for many years and its implementation was made mandatory by the LCFS lawsuit. The ADF regulation establishes a fuel approval process in California. During the rulemaking, ARB analyzed the emissions performance of biodiesel blends and found a small increase in nitrogen oxide (NOx) emissions. As a result, ARB imposed limitations on biodiesel blends that vary from B5 to B10 depending on the season and cetane number. READ MORE / MORE (National Biodiesel Board/Biodiesel Magazine)