November 29, 2017

LCFS Weekly Transfer Volumes More Than Quadruple, Prices Continue Rise: CARB

Low Carbon Fuel Standard (LCFS) credit prices in the week ended Sunday rose for the fifth time in the last six weeks, according to data released Wednesday by the California Air Resources Board (CARB).

The volume-weighted average price increased 52cts, to $96.27/credit, the highest level since the week ended July 17, when it was at $103.40/credit, the agency reported.

The total value of the transfers in the week was $31.07 million, up from $7.40 million in the previous week as transfer volumes picked up.

CARB said 322,810 credits were transferred in the most recent reporting week, up from 77,300 in the previous week. The 23 reported transfers in the week ended Sunday were up from the 12 reported in the previous week.

The low trade in the week was reported at $92/credit (for 10,000 credits) and the high trade was at $109/credit (for 100 credits). The largest transfer was reported at 80,000 credits at a price of $94.65/credit.

OPIS Tuesday assessed the LCFS credit at $109/credit, unchanged from a week earlier.

For the weekly report, CARB considers the date the transfers were fully completed rather than the date they were posted, which can vary.


November 22, 2017

LCFS Credit Prices Swell to Highest Level Since June 2016

Low Carbon Fuel Standard (LCFS) credit prices soared to their highest levels in nearly 18 months on Tuesday as strong buying continued in the aftermath of quarterly data showing more deficits than credits generated under the program.

On Tuesday, LCFS credits were reported traded first at $107/credit and as high as $111/credit, continuing a long-winded rally seen for much of November. OPIS assessed LCFS credits at $109/credit on Tuesday, the highest level since they were assessed at $110/credit on June 2, 2016.

On Wednesday morning, with many traders out of the office for the Thanksgiving holiday, buying interest was reported at a quieter volume, with discussions heard in the $110-111/credit range.

"The big guys are taking a breather," one broker speculated. "They'll be back next week."

Obligated stakeholders under the LCFS program have had a heavy buyer's appetite since Oct. 31 when the California Air Resources Board (CARB) reported more deficits than credits were generated in the second quarter of 2017, the second straight quarter where deficits outpaced credits. Entering 2017, that had never happened before in the program's history.

On Oct. 31, LCFS credit prices were assessed by OPIS at $103/credit, up from $96.50/credit a week earlier.

A record 2.497 million metric tons of carbon deficits were generated in Q2, 6.02% above the Q1 total as diesel and CARBOB gasoline consumption grew. CARB said 2.329 million credits were generated. While that total was 21.6% higher than in Q1, it still resulted in a Q1 net deficit of 167,651 credits. By comparison, 439,286 net deficits were generated in Q1 and 748,399 net credits were generated in Q2 2016.

After the sizable Q1 net deficit was reported earlier this year, the Q2 data did not come as much of a shock to the market, one trader said. Some sources expected net deficits to match or even exceed the 400,000 seen in Q1.

As the LCFS program moved from a 2% reduction in the carbon intensity (CI) of transportation fuels in 2016 to a 3.5% reduction at the beginning of 2017, credit generation slowed sharply while the number of deficit rose because of the more stringent CI reductions.

Most fuel types saw a rise in credit generation from Q2, led by a sharp gain in credits generated by renewable diesel blending, which delivered 820,340 credits, up 46% from the 558,962 credits in Q1 and 22% above the Q2 2016 total.

Credits generated from ethanol with a CI score below 65 more than tripled from
36,723 credits in Q1 to 118,594 credits in Q2 as the premium on lower-CI product rose and imports of sugarcane ethanol from Brazil picked up.

Meanwhile, credits generated from ethanol with a CI score between 65 and 75 moved slightly lower by 1.3% to 676,898 credits. Ethanol with a CI score above 75 increased marginally to 61,458.

Credits generated from on-road electricity stalled again, totaling 20,410 credits, up 12.7% from Q1, but substantially lower than the Q2 2016 total of 132,740 credits.

On the deficit side, the tighter CI reductions for gasoline and diesel again led to another rise in deficit generation from 2.355 million in Q1 to 2.497 million in Q2. CARBOB contributed a record 2.04 million deficits -- more than 81% of total deficits generated in the quarter -- up from 1.91 million deficits in Q1 and 1.36 million deficits in Q2 0216. Diesel contributed 401,552 deficits -- 16% of the quarter's deficits -- up from 380,134 in Q1.

From the start of the program through the end of Q2, CARB said participants have generated 30.1 million credits and 20.8 million deficits for a net total of 9.3 million credits.


November 16, 2017

LCFS Credit Transfers Off in October, But CARB Says Prices Continue Climb

While transfer activity and transfer volume for California's Low Carbon Fuel Standard credits dropped off sharply in October, the price of those transfers maintained the steady upward tilt that monthly accounting from the California Air Resources Board (CARB) has revealed for four months in a row now.

The total number of LCFS credit transfers dropped 36.4% in October, from 151 in September to 96 last month, according to CARB's recently released Monthly LCFS Credit Transfer Activity Report. Total credit volume transferred in October also made a substantial retreat over the month, down 43.8% to 745,000 metric tons.
However, compared to the same month last year, credit transfers are up 18.5% and total transfer volume more than doubled.

Some market watchers note that it is not unexpected that October LCFS activity would retreat from September numbers, since September represented the end of a quarter and that often encourages a surge in credit transfers.

Meantime, the average LCFS credit price in October came to $91/credit, up $3, or 3.4%, from the September. Firmer October credit pricing means average values reported by CARB are now up each month since slumping in June, in which time credit prices stepped 19.7% higher. October credit prices also edged up 2.25% compared to where CARB reported values a year ago.

Through the first half of November, OPIS indications are that LCFS credit trading continues to boost prices. The latest word had LCFS trading values moving back over the $1.00 mark and talks pushing $1.02 by $1.03/credit, regaining the level trade sources marked around the end of October.

The monthly activity report from CARB represents "transfers that were proposed and completed as well as those that were proposed and still pending buyer's confirmation in the LCFS Reporting Tool and Credit Bank & Transfer System," the agency explains.

"CARB prices reflect contract and spot transactions reported to CARB by regulated parties which are then compiled using a weighted average technique and posted each month."

Through October 2017, CARB calculates that since the start of the credit program participants transferred a total of 17.146 million metric tons of LCFS credits, up almost 89.3% since the same month last year.


November 8, 2017

All Cal Cap-and-Trade Oblig. Parties Comply W/ 16 Deadline:CARB

All facilities covered by California's cap-and-trade greenhouse gas reduction program are 100% compliant, surrendering 30% of total obligations due for 2016, the California Air Resources Board (CARB) said in a recent statement.

The remainder of the CO2 obligations should be turned in next year, marking the end of a three-year compliance period between 2015 and 2017, CARB said. The 30% was due on Nov. 1, according to a calendar posted on CARB's website.

"100-percent compliance helps keep California on track to meet the state's 2020 and 2030 GHG reduction goals," said CARB Executive Officer Richard Corey in the press release. "This is also further proof that cap-and-trade is now part of the fabric of the California economy."

The compliance news came a few days after CARB released data revealing that state greenhouse emissions declined faster in 2016 than the carbon allowances cap reduction for the same time period.

In 2016, the state's emissions declined about 4.8% year on year, greatly outpacing the year-on-year cap reduction of 3.1% for the same year. The cap is set to decline by 3.1% in both 2017 and 2018.

"As a result of an immediate drop in emissions, fewer compliance instruments will be needed to meet the obligations for 2016," analysts California Carbon said in a report late Monday following CARB's GHG data release. "We estimate that 60.7 million unused allowances will be carried over to the next compliance year i.e. 2017."

The news in part gave extra momentum to a recent downward path for California carbon allowance prices. Prices were stable after regaining some strength in late trading Wednesday after a more than 10cts/mt decline on Tuesday. On Tuesday, a deal was done for the V17 Dec 2017 futures contract as low as $15.09/mt, roughly 36 cents/mt lower than the OPIS Prompt+1 assessment on Oct. 31.

The recent CCA price drop was also attributed by market sources to a price correction after an upward trend in October.


November 7, 2017

Oregon Adopts 2017 Clean Fuels Program Rulemaking Package

The Oregon Environmental Quality Commission has adopted the proposed 2017 Clean Fuels Program (CFP) rulemaking package, the state's Department of Environmental Quality (DEQ) said late Monday.

At a public meeting Friday in Eugene, CFP Manager Cory-Ann Wind and CFP Analyst Bill Peters presented the changes to the commission, which approved the rulemaking in a 4-0 vote.

The changes -- which will now go into effect Jan. 1, 2018 -- update how the agency will address modifications state lawmakers included in a transportation funding package approved this summer. 

The overarching theme of the modifications involves measures designed to contain the program's costs, but there are several other key changes that DEQ will implement.

DEQ is adding provisions to create a credit clearance market (CCM) as an additional cost-containment mechanism, replacing a Monthly Fuel Price Deferral.

The CCM will create a path for regulated parties to come into compliance with the standards in the event that they are short of necessary credits, DEQ said. It also will establish a maximum price for credits to be sold at the end of a compliance period, capping the cost of complying with the program, DEQ said.

DEQ also will update and refine several provisions relating to electricity's use as a transportation fuel and add electricity used for certain public transit applications to the program. The rulemaking will reclassify renewable hydrocarbon diesel as a regulated fuel because some types of renewable hydrocarbon diesel may have carbon intensities that exceed the clean fuel standard.

Further, DEQ will restrict the transfer of the compliance obligation for large importers of finished fuels for in-state transactions below the rack, add market monitoring and enforcement provisions, amend and rename the Emergency Fuel Supply Deferral to include the ability to respond to credit market disruptions, update definitions, streamline and clarify several administrative processes and update several tables to reflect the latest and most accurate information.


October 31, 2017

Manitoba Stares Down Federal Govt. With Flat C$25/mt Carbon Price: Reactions

Manitoba will impose a flat carbon price of C$25/t beginning next year and running through 2022, according to the province's climate plan released late last week.

The "Made-in-Manitoba Climate and Green Plan" introduces a number of new initiatives to preserve and protect wetlands and watersheds, while also providing jobs through the development of its own low-carbon infrastructure.

"Our vision is to make Manitoba the cleanest, greenest and most climate- resilient province in Canada," said Manitoba Premier Brian Pallister. "We are charting that course with a comprehensive plan based on Manitoba needs and focused on Manitoba priorities."

But the headline initiative is without question the flat C$25/t carbon price and its defiance of a federally mandated price of C$50/t by 2022. Manitoba argues that the lower price is stronger than required in its initial years, spurring more carbon emission reductions earlier than the federal plan. The provincial government also contends the lower price reflects prior investment made in its low-carbon hydroelectric power system. Hydropower provides Manitoba with nearly all of its electricity, making it one of the cleanest sub-national power systems in the world.

"Our Made-in-Manitoba Climate and Green Plan will cost less and reduce more than the made-in-Ottawa carbon tax," said Pallister. "Our lower carbon price respects the massive hydro investments Manitobans have made over decades to build one of the cleanest electricity systems in the world."

The Manitoba climate plan notes that agricultural emissions, which make up as much as 32% of provincial emissions, will be exempt from the carbon levy. think Agricultural emission reductions will instead come from a variety of potential policies, including an offset system and an increased biodiesel mandate.

Ottawa has taken notice and signaled to Manitoba that its efforts are appreciated, but also in violation of federal mandates.

"I'm looking forward to seeing the details of Manitoba's plan. But I also want to be very clear: We've laid out the price schedule we need to see, which reaches $50/tonne by 2022 -- well beyond the $25/tonne carbon price Manitoba is proposing," Canada's minister of Environment and Climate Change, Catherine McKenna, posted on Facebook on Oct. 27.

"We'll be assessing each province and territory each year on whether their approach to pricing pollution meets the standard we've set. So when Manitoba moves forward with this proposal, they'll be in good shape for the first year and the second year. After that, they'll need to up their game," added McKenna. "The details matter. But today's plan is a step forward towards a cleaner economy in Canada."

Prime Minister Justin Trudeau also addressed Manitoba's homemade carbon price, noting the federal government's responsibility to citizens to grow the economy while protecting the environment.

"We have put forward very clear benchmarks that we expect the carbon prices in various provinces to meet and we will evaluate and ensure that every province meets both the stringency and efficacy of the shared approach on pricing carbon," he said.

"As we've said, there will be a federal backstop and if any province doesn't move forward in an appropriate way, the federal government will ensure that the equivalent price on carbon is applied to the specific jurisdiction -- remembering, of course, that monies collected in one jurisdiction will always stay and be returned to that jurisdiction. That's something that's very important within our federation and will continue to be," Trudeau said.

General consensus has been that although Manitoba's plan lacks details, its emphasis on cumulative emissions and higher carbon prices earlier should exceed the federal 2022 emissions reduction target, making for potentially entertaining political discussion around the time of the future program reviews.

"This is pure politics," Christopher Bataille, adjunct professor at Simon Fraser University and associate researcher with the Institute for Sustainable Development and International Relations, told OPIS on Tuesday. "They want a climate policy in place, but they're on the more conservative end of the spectrum and they wanted to differentiate themselves from Ottawa."

Bataille notes that while the cumulative approach to emission reductions and stronger initial carbon price will exceed reductions achieved by the higher federal prices, the Manitoba carbon price will eventually need to rise above the C$25/t to meet Paris Agreement compliance and federal climate targets

"In terms of environmental outcomes, we shouldn't shrug off the idea of cumulative emissions reductions: After all, it's the total GHG emissions in the atmosphere, not annual emissions that drive costly impacts of climate change," said Dale Beugin, executive director and research director with Canada Ecofiscal Commission, in a blog post released Tuesday. "Of course, that argument only works once. Ultimately, we are concerned with ambitious, long- term emissions reductions. Moving beyond 2022, Manitoba itself commits to deeper emissions reductions in the Plan; its 'implementation' section promises to link policy action to ambition. Eventually, that will require more stringent policy."

"In terms of political outcomes, it gets interesting. Clearly the made-in- Manitoba price is lower than the price required under the [Pan-Canadian Framework], or at least it will be in 2020. That introduces a clear point of contention between Manitoba and the federal government, and raises some questions. How do we measure 'compliance' with the PCF? Year-by-year? Over a broader compliance period? Let's just say that the PCF's promised 2020 and 2022 review processes will be ... exciting."


October 30, 2017

CARB Awards Only 209k Offsets in Second October Issuance

The California Air Resources Board (CARB) awarded only 209,100 California carbon offsets (CCO) in its second-half October issuance, the majority of which went to a ozone depleting substance (ODS) destruction project in Ohio, according to the most recent CCO inventory data released by the agency.

The latest offset issuance is the air regulator's smallest since first half July when it awarded just under 206,000 offsets. The regulator has awarded an average 1.52 million offsets on a bi-monthly basis since the beginning of the year, a number that was given a substantial boost following the massive 14.5 million offset issuance for second-half September. The latest award pushes the 2017 total number of offsets issued to more than 30.36 million.

The bulk of the latest issuance when to Chicago-based Tradewater for its ODS 7 project. The project collected nearly 32,000 lbs. of mostly CFC-12 refrigerant from 14 states for destruction at the Heritage Thermal Services facility in East Liverpool, Ohio. Tradewater received 138,972 vintage 2017 offsets for ODS 7 project. The company has received more than 791,000 offsets since November 2016. The latest offsets carry an eight-year invalidation timeline that will expire in August 2025.

Reclamation Technologies received 55,404 offsets for its own A-Gas Americas 2017-6 ODS destruction project. The project collected nearly 31,000 lbs. of mostly CFC-11 refrigerant from 10 states for destruction at the Reclamation Technologies facility in Bowling Green, Ohio. The company has received more than 600,000 offsets since the beginning of the year. The latest offsets carry an eight-year invalidation timeline that will expire in July 2025.

The remaining offsets were awarded to the Miller Forest Improved Forest Management Project in Humboldt County, Calif. The project received 7,574 V16 offsets and 7,774 V17 offsets in the latest issuance, bringing its total number of offsets received since 2014 to 300,993. The V16 offsets will shed their invalidation time frame in June 2024, while the V17 offsets will satisfy their invalidation time frame in June 2025.

Only one small project is expected to have its offsets receive "golden status" over the remainder of October. Looking ahead, more than 737,000 offsets will see their invalidation time frame expire by the end of the year.

Compliance entities appear well prepared for the upcoming Nov. 1 obligation surrender, which is resulting in a fairly quiet market for offsets to be delivered by the end of 2017. That said, buying interest has mostly shifted to December 2018 delivery. Bid levels have also firmed in line with the broader trends in the allowance market. Bid for Golden CCOs have mostly coalesced around $13.70/mt against offers as low as $13.88/mt. Golden CCO assessments have averaged $13.777/mt over the past 30 days.

The CCO-3 discount to Golden CCOs has narrowed to around $1/mt, while the CCO- 8s discount range to CCO-3s has narrowed to 35-45cts/mt.


October 17, 2017

Californians to See Gasoline, Diesel Tax Hike on Nov. 1

California is set to increase tax rates on gasoline and diesel fuel on Nov. 1 not only on drivers but also on fuel retailers, wholesalers and suppliers.

Gov. Jerry Brown (D) signed into law earlier this year Senate Bill 1 (The Road Repair and Accountability Act of 2017) which increases the excise taxes for gasoline and diesel fuel, and imposes a storage tax on fuel suppliers. 

The excise tax rate for gasoline will increase 12cts/gal, from 29.7cts/gal to 41.7cts/gal. Diesel fuel excise taxes will increase 20cts/gal, jumping from 16cts/gal to 36cts/gal.

Retail sales and use tax rates of diesel fuel will also climb from 1.75% to 5.75%. Sales tax for gasoline will remain steady at 2.25%.

Jet fuel and aviation gasoline taxes are unaffected by the new law.

In addition, a storage tax will be imposed on all gasoline and diesel retailers, wholesalers, and suppliers holding 1,000 gallons or more of tax-paid gasoline or diesel fuel in inventory for sale on 12:01 a.m. Nov. 1. The tax includes all gasoline and diesel fuel in transit or storage below the terminal rack for sale as of Nov. 1.

Storage tax returns must be filed and paid by Jan. 1, 2018.

The increased taxes will contribute to a large portion of a $52 billion plan to help cover California's various transportation needs for the next 10 years, including upkeep of state and local highways and roads, public transit and traffic reduction measures.

By the end of 2027, SB1 aims to have 98% of state highway pavement in good or fair condition, 90% of culverts in good or fair condition, and at least 500 bridges must be fixed.

Californians are already paying for some of the priciest gasoline in the country; in addition to taxes, gasoline prices are also elevated by the state's LCFS and cap-and-trade program, which currently contribute around 5cts/gal and 12cts/gal to retail gasoline prices, respectively. The average price for regular unleaded gasoline at the pump is currently $3.039/gal in the Golden State, bested only by Hawaii.

According to Stillwater Associates, as of July 1, total fuel taxes for gasoline were around 78cts/gal, and will rise to around 90cts/gal after the Nov. 1 tax increase. The firm estimates that climbing LCFS and cap-and-trade costs will boost the total for fuel taxes and fees to around $1.15/gal in 2020.


September 26, 2017

CARB Shows Cap-and-Trade Allocations in Draft Clean Transportation Plan

The California Air Resources Board (CARB) expects to spend $560 million in allocated cap-and-trade auction proceeds on low carbon transportation investments to reduce greenhouse gas emissions, according to a draft of its fiscal year 2017-2018 clean transportation incentives funding plan released by staff members Tuesday. The plan was posted on CARB's website in preparation for an Oct. 4 public workshop to discuss funding allocation recommendations and investments for projects.

The Low Carbon Transportation Program -- part of California Climate Investments -- is expected to "accelerate the transition to low carbon freight and passenger transportation with a priority on providing health and economic benefits to California's most disadvantaged communities," the draft document said.

The program supports a state climate change goal of a 50% reduction in petroleum use in vehicles by 2030 and the deployment of 1.5 million zero-emissions vehicles on California roadways by 2025. The investments will also reduce ozone precursor and toxic diesel emissions, it said.

California lawmakers appropriated about $700 million to CARB for Low Carbon Transportation projects during the previous four budget cycles, and 60% "has been allocated to benefit disadvantaged communities, including low-income residents of the communities," according to the document.

Allocations for FY 2017-2018 Low Carbon Transportation Program initiatives will be invested as follows: up to $140 million in the clean vehicle rebate program, up to $100 million for transportation equity projects, up to $140 million for advanced freight equipment demonstration and pilot commercial deployment and up to $180 million for clean truck and bus vouchers through the Hybrid and Zero- Emission Truck and Bus Voucher Incentive Project.

CARB also will consider technological innovations in heavy-duty vehicle engines. In addition, $35 million may be used to purchase zero-emission buses, according to the document.

The plan also details strategies to spend $28.64 million allocated to the Air Quality Improvement Program, including the Truck Loan Assistance Program. The truck program "helps small business truckers to secure financing for newer trucks and diesel exhaust retrofits to meet compliance deadlines for CARB's In- use Truck and Bus Regulation," the document said.

In addition, the draft includes plans to spend $25 million in Volkswagen settlement funding "for the [zero emission vehicle] aspects of vehicle replacement programs and $50 million on the Zero/Near Zero Emission Warehouse Program."

A proposed 2017-2018 funding plan is expected for release Oct. 13 followed by a public comment period ahead of Board approval at a mid-November meeting. The workshop to discuss the draft plan will be from 9:30 a.m. to 4:30 p.m. PT at the California Environmental Protection Agency headquarters in Sacramento and also webcast at


September 26, 2017

CARB Exploring LCFS Contracts Being Traded on an Exchange Service

The California Air Resources Board (CARB) is exploring the possibility of Low Carbon Fuel Standard (LCFS) credit contracts being traded on an exchange service, Sam Wade, the agency's transportation fuels chief, said Friday.

At a public workshop in Sacramento to discuss proposed regulatory modifications, a stakeholder raised the possibility of allowing LCFS credits to be traded on an exchange, arguing that such a move could spur investment and help the program expand as its carbon intensity (CI) reduction targets.

"As the level of transactions picks up, the move to exchange-based transactions can assist the standardization of specifications and terms," Wade said at the workshop.

As part of CARB's presentation on Friday, staff mentioned the possibility of moving to exchange clearing services on one slide that said the agency is "discussing the potential participation of entities providing exchange clearing services in the LCFS program."

In its presentation, CARB staff added that exchange-based trading of LCFS credits could help further standardize credit contracts, provide hedging options for project financing, allow future compliance hedging and allow for better price discovery in the LCFS market.

In public stakeholder comments posted to CARB's website last week, Idemitsu Apollo Corp. (IAC) Compliance and Renewable Manager David Dunn urged CARB to move toward allowing LCFS credits to be listed as an exchange traded product, which would allow hedging and other benefits.

"What we see as the most critical reason for a listed contract is that it would allow projects in the development phase that would be profitable at a given LCFS price level to be realized," Dunn said in the comments. "As the current bilateral trading market operates, it is extremely difficult to forward sell credits out more than one year. Even when you can find someone for such an offtake, interest is tepid at best for a fixed price deal that properly reflects current values."

Taking the market as a whole, the current surplus of roughly 9 million credits at a $95/credit price is tying up approximately $855 million of cash that could otherwise be invested in projects that would reduce greenhouse gas (GHG) emissions, Dunn said.

To make an exchange traded LCFS contract useful, however, Dunn said two things would need to change. First, he said CARB would need to allow the participation by financial institutions such as banks that are involved with many companies generating credits. Second, the invalidation of credits would need to be reduced to effectively zero on credits that may eventually be delivered through the clearing house upon settlement at an exchange, Dunn said.

"The Cap and Trade contracts listed on ICE have been a huge success for everyone involved and provide clear pricing indication to companies, including IAC, looking to make future investment decisions," Dunn said. "We hope [CARB utilizes] the experience gained in this market and apply it successfully to the LCFS market."

CARB also posted comments from ICE Futures U.S., and ICE Clear Europe. ICE said it supports the proposed verification program put forward by CARB and believes two additional changes will make futures and options on LCFS credits a reality.

Similar to Dunn's comments, ICE contended that LCFS credits need to be irrevocable after third-party verification is performed, and traditional commodity market participants need to be able to hold LCFS credits to facilitate expanded risk management and hedging for biofuel developers.

"We believe that listing of futures and options on LCFS credits would be a significant boon to the development of both the program and the market for credits," ICE said. "Fundamentally, futures and options exchanges provide scalable risk management opportunities for market participants."

ICE also said that to support the proper functioning of a market it is critical that banks and other trading entities be allowed to hold LCFS credits in the registry. These firms traditionally are buyers to biofuel developer output and absorb price risk that developers cannot and, conversely, they act as the sellers to compliance entities and absorb the risk of future price appreciation, ICE said.

"The impact of a properly functioning futures market for LCFS credits would significantly improve access to capital markets for biofuels developers and their investors," ICE said. "This in turn would bring more producers to the market and likely reduce inefficiency in biofuel and LCFS credits markets."

With CI reduction targets increasing from 3.5% this year to 5% in 2018 and 10% in 2020, many believe new production of low-carbon fuel alternatives will have to come online in order to meet the program's goals. Beyond 2020, CARB is proposing reduction targets up to 18% by 2030. Considering the program saw more deficits than credits in the first quarter of 2017 -- a first for the program and much earlier than most anticipated -- CARB is showing flexibility in opening up new avenues to encourage growth.

"We also understand that ARB has a mandate to maintain the environmental integrity of the program," ICE said. "We believe there are a variety of proven mechanisms in similar markets, which effectively address the concern of environmental integrity that the ARB could utilize."

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