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US exports 530 mln litres of renewable diesel to Canada in H1
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Falling credit score market values will hit money movement for brand new tasks
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British Columbia authorities not planning modifications to LCFS program
By Shariq Khan and Nia Williams
NEW YORK, – Canadian renewable gasoline producers are dealing with decrease returns on new services as a result of a droop in British Columbia’s low carbon gasoline commonplace credit score market, a pattern anticipated to persist amid a flood of exports from the United States. Weakness in British Columbia’s LCFS credit score market displays rising pains within the worldwide biofuels business, the place many regulators are cracking down on imports to guard their nascent home markets from oversupply.
Low-carbon fuels are dearer to provide than petroleum-based gasoline or diesel. LCFS packages assist to bridge the hole by issuing credit to suppliers of fuels with decrease emissions depth, which will be offered to these with higher-carbon fuels that must convey down their emissions. Canada has lagged the U.S. in organising home renewable diesel manufacturing. British Columbia is the one Canadian province with an LCFS credit score market, which helped encourage Calgary-based Tidewater Renewables to open the nation’s first standalone renewable diesel refinery final 12 months. Others are additionally betting on the credit to help building of extra services in British Columbia and different provinces. At the identical time, the LCFS has additionally made Canada a lovely outlet for a glut of U.S. renewable diesel.
U.S. producers shipped not less than 530 million litres of renewable diesel to Canada within the first six months of 2024, a soar from 151 million litres in the identical interval final 12 months, in accordance with knowledge compiled by Will Faulkner, founding father of business evaluation agency Carbon Acumen.
British Columbia’s LCFS credit fell to C$207 in July and C$350 in August, after buying and selling above C$400 for greater than two years beforehand, ringing alarm bells for Tidewater.
The firm mentioned in August that the droop damage its potential to generate revenues, and blamed weakening costs on a surge in renewable diesel imports from the United States. Tidewater subsequently offered some belongings and future credit to its majority stockholder to keep away from monetary misery.
British Columbia LCFS credit score values rose to C$456 in September, however credit score market transactions reported final month might have been accomplished earlier than the value crash in July, Faulkner mentioned. There has not been a big slowdown in U.S. imports, he famous.
Tidewater solely produces renewable gasoline at its 3,000 barrel-per-day, or about 170 million liters-per-year, plant in British Columbia, so is extremely uncovered to low credit score values there. However, falling BC LCFS credit can also weigh on returns for particular person renewable gasoline tasks owned by diversified vitality producers resembling Imperial Oil and Parkland, mentioned Sam Harrison, senior analyst at Navius Research. Imperial is constructing a C$720 million 20,000-bpd renewable diesel facility in Alberta, the biggest in Canada, that shall be partly funded by LCFS credit granted by British Columbia.
“This correction downwards out there will have an effect on Imperial’s money movement from the renewable diesel that they are capable of promote into the British Columbia market,” Harrison mentioned. Construction on Imperial’s undertaking, which is predicted to start out manufacturing in 2025, is progressing and the undertaking is extremely enticing, a spokeswoman instructed Reuters when requested in regards to the decline in credit.
Parkland declined to touch upon how a renewable gasoline producing unit at its 55,000-bpd Burnaby refinery could be impacted by declining LCFS credit score values, however mentioned a steady coverage atmosphere had helped incentivize low carbon gasoline manufacturing in British Columbia.
REGULATORY CHALLENGES Biofuels are set to play a serious function in world efforts to chop climate-warming emissions from transportation. The International Energy Agency forecasts world renewable diesel demand will develop to 26.4 billion litres per 12 months by 2028 primarily based on present insurance policies, from an estimated 18.6 billion litres in 2023. More aggressive insurance policies might see demand surpass 39 billion litres.
British Columbia goals to provide 1.5 billion litres of renewable fuels by 2030.
The provincial authorities instructed Reuters it isn’t at present contemplating modifications to this system, as credit score costs naturally fluctuate primarily based on provide and demand dynamics. In distinction, the European Union this 12 months started levying anti-dumping tariffs on Chinese biofuels after complaints that Chinese producers profit from artificially low output prices. The EU has additionally levied tariffs on U.S. and Canadian biodiesel imports since 2021 following related complaints.
Some analysts count on British Columbia’s LCFS market to stay underneath strain, with oversupply from the U.S. compounded by decrease biofuel feedstock costs that make renewable diesel cheaper to provide.
Low-carbon gasoline producers and importers can now additionally declare Canada’s Clean Fuel Regulation credit for actions that earn them LCFS credit. Introduced final 12 months, the CFR credit are including to British Columbia’s attractiveness as an outlet for extra U.S. renewable diesel.
Higher authorities help for renewable diesel producers within the U.S. has the potential to restrict Canadian business progress, the U.S. Department of Agriculture mentioned in a report final 12 months.
“At problem is the truth that U.S. producers can declare the $1/gallon U.S. federal Blenders Tax Credit which is issued for producing and mixing biomass primarily based diesel within the U.S., together with Canadian CFR credit, that are issued for promoting renewable fuels out there in Canada on high of B.C.’s LCFS credit,” Faulkner mentioned.
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