Looking under the hood of Stillwater’s California LCFS Credit Price Outlook

Understanding the value of future Low Carbon Fuel Standard (LCFS) credit prices is a critical factor in decision-making while you strategize moves in the renewable fuels space. Stillwater leverages a proprietary method enhanced by data analytics to bring you reliable, quarterly LCFS credit price outlooks as part of our broader Carbon Market Outlooks Dashboard. Our method is grounded in over 15 data sets from publicly available sources and integrated into a series of proprietary models, as shown in the diagram below. Importantly, our outlooks are also informed by more than 150 combined years of insightful industry experience.

Here, we walk through a high-level overview of our process, demonstrating how Stillwater’s LCFS credit price outlook has become such a powerful tool for market participants. 

It starts with CARB’s Quarterly Data

The California Air Resources Board’s (CARB) release of quarterly LCFS Reporting Tool (LRT) data initiates the Stillwater process, and updated CARB data is one foundational data set critical to the accuracy of the outlooks. But updates about the current status of the LCFS program are far from sufficient to predict future credit prices. Numerous independent variables from across multiple sectors play a role in the complex evolution of the LCFS program, which are ultimately reflected in the credit prices.

Nuance and Complexity Go Hand-in-Hand

Zero-emission vehicle (ZEV) penetration is a good example. To accurately understand the past ZEV data and make reliable projections requires an understanding of a much larger picture. For example, we incorporate population trends in California, car buying statistics (not just ZEVs), fuel prices, inflation, policy trends at the state and Federal level, prevailing trends with ZEV manufacturers, and insights regarding geopolitical trends that may affect global ZEV availability and prices. Once we have compiled our expected trajectory for ZEV populations, we determine the associated impact on fuel demand and availability.

The value of reading between the lines of market trends cannot be overstated. Fuel projections—fossil and renewable—are a crucial area where this is highly applicable, as they are a robust aspect informing Stillwater’s credit price outlooks. In a complex market such as  California, tracking, understanding and integrating a disparate set of information with confidence requires decades of experience.  For example, as digesters, waste water and the dairy industry transform the natural gas space, integrating market trends with policy uncertainty is an area where Stillwater’s experience shines. Predicting where the incremental crude carbon intensity (ICCI) will go requires another highly nuanced analysis.

Renewable diesel (RD) has emerged as a renewable fuel powerhouse around the world. But the RD market has recently been moving faster than state and federal policy, significantly impacting fuel markets. Stillwater’s extensive experience in the diesel space, coupled with advanced data analytics, enables us to see through this fog to create clarity.

As depicted in the diagram above, several other data sources also inform Stillwater’s integrated set of proprietary models. In addition, Stillwater developed two stand-alone boutique outlooks: one for the price of U.S. Renewable Fuel Standard (RFS) credits known as renewable identification numbers (RINs) and a second for the supply of lipid feedstocks available to U.S. markets. The latest findings from these boutique outlooks also play a role in shaping our LCFS credit price outlook.

Getting Down to Brass Tacks

Based on the current, ever-shifting policy landscape, Stillwater develops three or four cases each quarter – a base case, a high case, a low case, and sometimes an alternative base case. An alternative base case is useful, for example, when CARB is in the middle of a rulemaking and we want to model a second potential policy outcome which differs from the assumptions in the three primary cases (the base, high, and low cases). Each case is carefully selected after review of initial model results and consultation with a team of senior subject matter experts (SMEs).

What is not depicted in the graphic above is the iterative cycle Stillwater’s SME team uses to refine the results and tweak the models each quarter. After the cases are developed and fed into the model, Stillwater uses a review and feedback process that dates to the founding of the company. This is the Stillwater “secret sauce” that makes our product so unique. We gather seasoned SMEs who are deeply knowledgeable in various parts of the petroleum and renewable fuel ecosystems to review and challenge the outputs from our proprietary model, thus creating uncommon opportunities to refine the results and provide a sharper LCFS credit price outlook.

Our LCFS Outlook Is Just the Beginning

For deeply informed and expertly crafted outlooks, subscribe to Stillwater’s Carbon Market Outlooks Dashboard. With a one-year subscription, you will gain access to Stillwater’s regularly updated outlooks for credits under the California Low Carbon Fuel Standard (LCFS), Oregon Clean Fuels Program (CFP), British Columbia LCFS (BC-LCFS), and the U.S. Renewable Fuel Standard (RFS). You’ll also get our outlook for the availability of lipid feedstocks in the U.S. And we have an inaugural Canadian Clean Fuel Regulations (CFR) outlook and Washington Clean Fuel Standard (CFS) outlook in the works for 2025!

Each dashboard subscription also comes with a one-hour, one-on-one Q&A session with Stillwater’s senior subject-matter experts.

If you are looking for analysis and projections more tailored to your company’s specific business, Stillwater can help there too! We work with many clients who leverage our Carbon Market Outlooks Dashboard in addition to bespoke analysis to inform specific decisions.

To start the conversation, contact us.