(Bloomberg) -- A rally in the California fuel credit market is faltering as regulators weighs changes to a state program intended to cut carbon emissions.
So-called Low-Carbon Fuel Standard credit prices fell as low as $74 per metric ton of carbon dioxide in a transaction on March 2, the lowest price paid for the credit since late December.
That’s down from a record-high of $153 per metric ton on Feb. 19, the most paid in a single transaction in California Air Resources Board data extending back two years.
The price drop came after the board’s staff proposed implementing carbon reduction goals more gradually over the next 12 years than originally planned. The Low-Carbon Fuel Standard requires refiners to obtain increasing numbers of credits each year for every barrel of fuel produced. Refiners can buy the credits from producers of biofuels such as ethanol and biodiesel.
The proposed changes were followed Monday by an announcement that rules incentivizing refiners to buy increasing numbers of credits for each barrel of diesel produced would be frozen until at least next year following a court decision.
“These kinds of announcements do have a market impact,” David Hackett, president of Irving, California-based Stillwater Associates, said in a phone interview. “Basically, the impact is a decrease in demand for LCFS credits which should directly weaken the LCFS credit market.”
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