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Calif. Low-Carbon Fuel Standard credit prices rise $3 in September to $88/tonne

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Calif. Low-Carbon Fuel Standard credit prices rise $3 in September to $88/tonne

California Low-Carbon Fuel Standard credit prices continued to rise in September, increasing by $3 to an average of $88.00/tonne, as trading volumes surged on the month. Monthly data released Oct. 10 by the California Air Resources Board show the LCFS prices ranged from $62.00/tonne to $98.00/tonne in September.

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During the month, 151 transfers took place, for a total volume of 1,326,000 credits. This was up from 99 transfers and total volume of 595,000 credits in August.

The CARB data show 86 entities were sellers of LCFS credits in September, while 25 parties were buyers of credits. A total of 62 entities were both sellers and buyers of LCFS credits during the month.

On a three-month basis this year, the average price for LCFS credits was $85/tonne in the third quarter, $81/tonne during the second quarter and $92/tonne in the first quarter.

The monthly statistical data from the CARB includes transfers that have been proposed and completed as well as those that are still pending confirmation from buyers.

The LCFS requires California fuel providers to calculate the carbon intensity of fuel sold for transportation, including imported fuel. The program requires the reduction of average carbon intensity of fuels by 10% by 2020, imposing a gradual cap on carbon intensity levels in the years preceding.

In early 2014, CARB staff proposed making several revisions to the LCFS after an appeals court ruling in the POET I lawsuit upheld the challenged program but said some adjustments were needed.

In the lawsuit, ethanol producer POET LLC and others claimed that the CARB, during the initial adoption process of the rules, violated the California Administrative Procedure Act and the California Environmental Quality Act. Plaintiffs contended that the agency violated the act by excluding from the rulemaking file made available to the public certain emails from consultants.

Although the CARB made revisions to the LCFS in 2015, POET said that the changes failed to properly meet the agency's responsibilities to fix the violations that originally took place.

In an opinion published in April of this year, the California Court of Appeal for the Fifth Appellate District reversed the lower court's decision, concurring with POET, stating that the agency failed to comply with CEQA's requirement that it analyze the degree to which nitrogen oxide emissions from biodiesel fuels had been and would be impacted by the implementation of the LCFS. The court instructed the CARB to conduct a year-by-year analysis of whether the implementation of the LCFS rules may have caused an increase in NOx emissions.

Although the CARB subsequently asked for a rehearing, the California Court of Appeal reissued its opinion at the end of May without substantively changing its April ruling.

In a parallel legal challenge to the readopted LCFS by POET, known as POET II, a hearing on the merits of the case will be heard Dec. 21 following a delay from July.

The postponement in POET II was requested by the CARB since it said that the NOx analysis required under POET I would not be completed by the end of July. Since the two cases are closely related, the agency said it would be premature to hold a hearing on POET II before the issues regarding POET I are resolved.

At the same time the CARB requested the postponement of the POET II proceedings, it said it would also seek California Supreme Court review of the May opinion in POET I, looking for clarification regarding the standards by which compliance with a CEQA-related writ should be measured and would seek to have the decision depublished.

On Aug. 23, the Supreme Court of California denied the CARB's petition for review of the POET I ruling, as well as its request for depublication of the associated opinion and remitted the case to the Fresno County Superior Court.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas and coal index prices, as well as forwards and futures, visit our Commodities pages.