Earth Protect Blog

By Robert Tuttle
Bloomberg News

California’s battle against climate change is being fought more fiercely in fast food restaurants than in Tesla’s car factory in Fremont.

Seven years after the Golden State began offering credits to producers of low-carbon fuels, cities and companies across California are using diesel brewed from fats and oils to fuel everything from fire trucks to United Parcel Service delivery vehicles. Now, the value of the credits exceed those from electric vehicles fourfold and are second only to ethanol.

The company that’s benefited most from California’s embrace of renewable diesel is based 6,000 miles away in Helsinki. Neste Oyj started sending tankers of the fuel from its refineries in Singapore and Europe around 2012. It’s now the biggest supplier, according to Ezra Finkin, policy director at the Diesel Technology Forum, a Frederick, Maryland-based advocacy group.

The market “is definitely growing,” Dayne Delahoussaye, Neste’s head of North American public affairs, said in a phone interview from Houston. “Renewable diesel has become very popular with the refining community as a good tool to meet obligations.”

Renewable diesel generated almost 628,000 metric tons of credits in the fourth quarter of last year, up from about 6,000 in 2011, state data shows. The credits, which sold at a six-month high of $91.74 per metric ton in early October, are poised to surge as the state accelerates its carbon cuts to meet its goal of reducing emissions to 30-year-old levels by decade’s end. The price will more than double to $215 by 2019, Irvine, Calif.-based Stillwater Associates said in a June report.

Refiners and other purchasers of the credits have paid almost $650 million for them over the past year, costs that are passed onto consumers at the pump.

The credits will add 15 to 20 cents a gallon to the cost of fuel over the next two years, Leigh Noda, senior associate at Stillwater Associates, said in a phone interview. “Ultimately, these programs are designed to subsidize the price of the biofuel suppliers.”

In recent years, cities such as San Francisco, Oakland, and San Diego, as well as Sacramento County, have transitioned to using renewable diesel to power buses, fire engines and other city vehicles. Alphabet’s shuttle buses in Silicon Valley also burn it, and UPS said two years ago that it would buy 46 million gallons of the fuel to run its fleet of delivery trucks.

California represents more than half of the U.S. market for the biofuel, Diesel Technology Forum’s Finkin said.