California Proposes Credits Cap for Soy-Based Renewable Diesel

By Ryan Hanrahan

Agri-Pulse’s Philip Brasher reported Tuesday that “the California Air Resources Board is proposing to cap the amount of renewable diesel made from soybean or canola oil that would qualify for the state’s low carbon fuel standard.”

“Proposed revisions for amendments to CARB rules for the California LCFS also would require feedstocks such as soybeans to be certified as meeting sustainability criteria,” Brasher reported. “CARB also is proposing to continue an exemption from LCFS requirements for jet fuel; removing the exemption as the board had originally proposed could encourage the use of sustainable aviation fuel.”

“Under CARB’s proposals, released Monday, companies would be eligible for LCFS credits for no more than 20% of their biomass-based diesel that comes from soybean or canola oil,” Brasher reported. “Scott Gerlt, an economist for the American Soybean Association, said the 20% cap on credit eligibility ‘could be quite restrictive.’ During the first quarter of this year, biofuel sourced from soybean and canola oil accounted for about 30% of the renewable diesel that qualified for credits, he said.”

“The proposal also would likely increase credit prices and boost fuel costs in the state, he said. The cap ‘will lower the amount of credits that can be generated, which will pull back the supply somewhat and increase the credit price,’ he said,” Brasher reported. “CARB will take comments on the proposed amendments through Aug. 27.”

Biofuels Experts Weigh In

Arlan Suderman, Chief Commodities Economist for StoneX Group, said on the social media platform X that “the CARB proposal in California would give U.S. soybean oil a better carbon score than that sourced from Argentina or Brazil, but still cap use at 20% as a feedstock – a significant restriction. It would require more paperwork to certify the farms from where the beans originated.”

“The CARB proposal in California would push advanced biofuel producers toward being able to certify the farms from where the soybeans originated that produced the soyoil used in producing the biofuel to show that it was from ground cropped prior to 2008,” Suderman said. “The intent of CARB seems to be to push the industry closer to EV cars, while simultaneously still supporting the sustainable aviation fuels.”

Brasher reported that “Paul Winters, director of public affairs for the Clean Fuels Alliance America, which represents biomass-based diesel producers, said large-scale renewable diesel refineries in California would have to rely on waste feedstocks, such as used cooking oil, under the CARB plan. Small, out-of-state producers that depend on vegetable oils will be put at a disadvantage, he said.”

The University of Illinois’ Scott Irwin said on the social media platform X that “I think this is also a potentially important development for biofuels in two other ways. First, will the other (low carbon fuel standard) programs in Oregon, Washington, New Mexico, and Canada follow suit? Second, the feedstock wars between ag and enviros is really gonna start heating up in my opinion. I believe it is going to center on (used cooking oil) imports.”

“California just gave a long-run greenlight to UCO imports over domestic soybean oil production, whether they really understand that or not,” Irwin said. “There is on obvious political countermove for ag: lobby for punitive tariffs on imported UCO. This would sharply increase the cost of renewable diesel in California (and elsewhere in the US) and/or cause a runup in the price of other low CI feedstocks.”