Renewable Fuel Credit Market Trends and Regulatory Insights

(EcoEngineers) In the dynamic landscape of renewable energy, understanding the intricacies of market pricing and regulatory impacts is crucial for stakeholders. EcoEngineers' “California Low Carbon Fuel Standard (CA-LCFS) and Renewable Fuel Standard (RFS) Credit Pricing Analysis” report provides valuable insights into market trends and factors influencing energy credit prices.

This article provides a brief overview of recent developments in Renewable Identification Number (RIN) and California Low Carbon Fuel Standard (CA-LCFS) credit pricing, examining the implications of regulatory changes and market conditions. Subscribing to the monthly report provides actionable insights, analysis, and outlooks.

Subscribers receive curated news, in-depth analysis, and actionable insights to drive your clean energy projects. The authors of the report, Roxby Hartley, Ph.D., Climate Risk Director, Holland Heins, Carbon Consultant, Asset Development, and Kylie Bednarick, Senior Carbon Consultant, are fully immersed in these markets and have deep experience tracking and analyzing data, monitoring trends, and developing informed forecasts.

D3 RIN prices have been low due to prevailing market uncertainty. At the end of 2024, D3 RIN prices dropped following the U.S. Environmental Protection Agency's (USEPA) announcement of proposing to partially waive the 2024 cellulosic biofuel volume requirement. While the proposed waiver means the final volume obligation for 2024 is unknown, USEPA officially extended 2024’s compliance deadline, indicating a likely reduction in the 2024 volumes. This, combined with unknown renewable volume obligations (RVOs) beyond 2025 and lingering small refinery exemptions (SREs), has contributed to keeping D3 RIN prices low. The overall lack of policy clarity is causing a wide range in our price projections through 2027. As we await further information, the market remains in a state of flux, with prices staying relatively low due to the prevailing uncertainty.

While D3 RIN generation continues its annual growth trend at around 25%, the total compressed natural gas (CNG) dispensing capacity remains a limiting factor. The USEPA's consideration of these factors in developing the 2026 RVO will be pivotal in shaping the future of the D3 RIN space. The USEPA must balance renewable natural gas (RNG) growth with CNG dispensing limitations when setting the RVO, as a strong RVO could drive prices up and incentivize the development of additional CNG stations to expand capacity, while a weak RVO could lower prices and drive RNG to alternative markets.

The transition to the new Inflation Reduction Act (IRA) Section 45Z Clean Fuel Production Tax Credit (PTC) has impacted D4 RIN prices by offering an upstream production-based carbon intensity (CI)-driven incentive structure compared to the $1-per-gallon biodiesel blender's tax credit (BTC) point-of-sale incentive structure typically favored by downstream fuel blenders and distributors. This shift has led to a surge in D4 RIN prices, especially in April 2025, due to low D4 RIN generation in the first quarter and rumors of a higher biomass-based diesel RVO anticipated to be proposed by the USEPA for 2026 and beyond.

D4 RIN production in 2025 has been lower compared to previous years, primarily because the new Section 45Z PTC is available only for domestic producers. This has led to a drop in foreign RIN generation. Domestic production of D4 RINs has also dropped due to the Section 45Z PTC offering lower credit amounts than the previous BTC for biodiesel, renewable diesel, and sustainable aviation fuel (SAF) producers. Many producers are operating at lower rates or planning shutdowns due to low margins and uncertainty surrounding the Section 45Z PTC guidance. The forecast for D4 RIN prices over the next three years suggests they will remain in the current range, influenced by future commodity prices. However, D4 RIN prices are expected to fluctuate with the release of full Section 45Z PTC guidance and announcement of the biomass-based diesel RVO for 2026 and beyond.

The CA-LCFS program remains the flagship of the state's transportation decarbonization strategy, and its success is driving imitation across many western states. The regulatory framework has established market mechanisms that incentivize innovation while providing compliance pathways for regulated entities. Credit banking mechanisms create market stability, allowing stakeholders to plan investments with confidence, in stark contrast to regulatory signals across the nation that are confusing at best.

Renewable diesel has emerged as an alternative to petroleum-based diesel, transforming California's diesel fuel market. The technology has achieved commercial-scale deployment across multiple production facilities, utilizing feedstock portfolios that range from waste oils to energy crops. The biodiesel sector maintains its volumes, though it faces competition from renewable diesel for feedstock resources. RNG is the third pathway for decarbonizing the heavy-duty vehicle sector in the state, particularly in vehicle segments where electrification faces challenges. Dairy and agricultural sectors have become the dominant feedstock source, lowering the average carbon intensity (CI) score dramatically. SAF development is accelerating as the aviation industry pursues decarbonization objectives within a sector facing few alternative technology options.

California's gasoline market continues to thrive despite transportation electrification trends. Ethanol integration continues providing content within the gasoline pool, and EV use continues to grow across vehicle categories.

Looking ahead, California's low-carbon fuel market demonstrates the viability of policy frameworks that balance environmental objectives with economic realities. The program's success in driving technology deployment, market transformation, and CI reductions provides a blueprint for other jurisdictions pursuing transportation decarbonization.

As production capacity continues expanding across renewable diesel, SAF, and RNG, while electric vehicle adoption accelerates, California's LCFS program positions the state to meet its climate goals while maintaining energy security and economic competitiveness. The convergence of these technologies creates a diversified, resilient transportation fuel portfolio that reduces dependence on petroleum while supporting innovation and job creation across the clean energy sector.

To gain more detailed information now and in the future, subscribe to EcoEngineers' “CA-LCFS and RFS Credit Pricing Analysis” by contacting EcoEngineers' client services at clientservices@ecoengineers.us.

EcoEngineers, an LRQA company, is a consulting, auditing, and advisory firm exclusively focused on the energy transition and decarbonization. From innovation to impact, EcoEngineers helps its clients navigate the disruption caused by carbon emissions and climate change. Its team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. For more information, visit www.ecoengineers.us. READ MORE