California LCFS credits prices surged 70% MoM in July from $30/mt to $51/mt, up 82% YoY. Bids were lying around $48/mt, while offers remained around $53/mt. Most of the sellers were cautious not to drop offers until the coming September when CARB is expected to make reauthorization of the program. Moreover, the drop in RIN prices in July made it difficult to put deals for biofuels together since sellers were expecting to require higher LCFS prices to compensate the loss on RINs, which make up a huge portion (70%) of LCFS credits generated. The market in general has strong expectations that the LCFS program will continue, with the volume of mandates also expected to increase from September.
CARB marked transferred volume up 113% MoM at 322,000 Mt’s with the total 66 deals, only including transfers that were proposed and completed but not pending buyer’s confirmation. The average settlement price also rose sharply by 50% from $30 to $45.
California’s LCFS aims to cut the state’s carbon emissions by more than 10% by 2020. Under the scheme, renewable fuel producers generate tradeable and bankable credits based on headline greenhouse gas savings relative to fossil fuels, against baseline yearly emission reduction targets. California harbours much greater carbon cutting ambitions for the next 15 years. The state’s air and transportation bodies met on Wednesday to plot a route towards Governor Jerry’s Brown’s plan to cut the state’s petroleum use in half by 2030. California aims to cut its greenhouse gas emissions by a massive 80% relative to 1990 levels by 2050.