The National Association of Convenience Stores (NACS), the Alexandria, Virginia-based trade association and nonprofit, released a report last Tuesday warning motorists of potential premium increases to gasoline and diesel prices throughout the next decade, as LCFS credit costs continue to rise.
The report, titled Market Reactions of Low Carbon Fuel Standard Programs, examines the history of the LCFS program, and projects the LCFS cost in consumer gasoline prices to hit 18 cents/gal in 2019, before climbing to a projected 69 cents/gal in 2030. Diesel costs, which are projected to hit 14 cents/gal this year, are expected to reach 39 cents/gal in 2030.
The report says that while California’s LCFS program has operated successfully over its 12-year history, the need to meet tougher environmental standards in the coming years could change the programs viability to state drivers, as fuel market reactions to achieving a 5% fuel carbon intensity reduction from 2011 to 2017 “may not be representative of attempting to achieve another 15% by 2030,” the report said.
Moving forward, the report warns that the state’s future LCFS compliance plans relies on the increased use and acceptance of electric vehicles and renewable fuels, including “substantial increases” in renewable diesel, biodiesel and renewable natural gas adoption. These compliance efforts, which the report finds to be key in future LCFS viability, could fall short as soon as 2020, as the uptake of electric vehicles and alternatively fueled vehicles, as well as the availability of low-carbon-intensive fuels, are falling short of California’s projections.
While the report highlights the successes and challenges associated with the LCFS program, the authors admit that they do expect LCFS regulators to implement changes before a credit shortfall would occur, with the aim to ensure the continued integrity and stability of the program.
As of March 2019, California and Oregon are the only two states to have implemented and administered successful clean-fuels programs, with Washington State and a contingent of Midwestern allies appearing interested in the launch of their own clean-fuels systems.
LCFS credits, which had traded for about $51/credit five years ago, averaged over $196/credit in February according to PRIMA data, an over 285% rise during that time.