Renewable Diesel’s Advantages Put It in the Driver’s Seat

Why RD is on the rise, and how refiners are adapting their plans

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As part of the Paris Agreement and other sustainability goals, countries across the globe are formulating strategies to reduce greenhouse gas emissions (GHG) The resultant policies target numerous different areas such as stationary emissions, electricity production, and transportation fuel sourcing. Within the transportation sector, one aspect that has spurred quite a bit of investment relates to reducing the carbon intensity (CI) of transportation fuels. The “low-carbon fuel” policies that are in place today, coupled with those that are being evaluated for the future, have the potential to displace a sizeable portion of the petroleum-based fuels in the jurisdictions where they are adopted.

Emission-reduction policies can cover a broad list of targets — everything from fossil-fired power plants, industrial facilities, and landfills to commercial buildings, home heating, and fuel usage in cars, trucks, buses, and railroads.

In this Drill Down Report, which is based in large part on work by our friends at Baker & O’Brien, we will examine low-carbon fuel policies, with a particular focus on renewable diesel, including how it is made, the advantages it holds over biodiesel, and its potential impacts on refiners and the overall transportation fuels market.

Key takeaways from the report include:

  • Low Carbon Fuel Standards, which aim to reduce greenhouse gas emissions in the transportation sector, are relatively new but their use is spreading.
  • LCFS programs may differ by jurisdiction, but they generally are based on the carbon intensity, or CI, of various fuels, and call for increasing the use of lower-CI fuels over time.
  • Renewable diesel provides a lower-carbon, renewables-based alternative to petroleum-based diesel, and is also a drop-in replacement for ultra-low sulfur diesel. Unlike another biofuel, ethanol, it has no “blend wall.”
  • California’s LFCS is one of the longest-running programs for carbon intensity reduction and provides an ideal case study for understanding how one type of GHG-reduction policy can work.
  • Refiners have been investing heavily in renewable fuels production, such as renewable diesel and ethanol, and in sourcing more of their electricity needs from wind and solar.

Driver’s Seat is included in RBN Energy’s 2021 Drill Down report series, a suite of reports covering many of the key issues expected to impact the markets for crude oil, natural gas and natural gas liquids. Drill Down reports are part of RBN Backstage Pass™ premium resources that also include Blog Archive Access, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. By subscribing to RBN’s Backstage Pass™ Premium Services, you plug into our network and get direct access to our premium resources.

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