Slower-than-expected electric vehicle adoption is increasing the importance of renewable diesel for compliance as more states adopt low-carbon fuel standards, Stillwater Associates Senior Associate Adam Schubert said.

"Renewable diesel is the one lever that the refining industry can vary incrementally to adjust their compliance using the vehicles that are on the road today in the short term," Schubert said.

Refiners can adjust renewable diesel blending more quickly than electric vehicle adoption to meet increasingly stringent carbon-intensity targets, Schubert said, adding that many state programs were designed around faster EV adoption.

The expansion of state mandates is increasing competition for the limited pool of global feedstocks needed to produce renewable diesel -- primarily fats, oils, and greases such as soybean oil, tallow and used cooking oil.

"Every time we add a new program, that's increasing demand on those feedstocks," Schubert said. Feedstocks also face competition from federal, Canadian and European markets, he added.

In California, LCFS compliance costs added 21cts/gal to retail gasoline and 25cts/gal to diesel in June, according to OPIS data, while LCFS credit prices rebounded 23.5% year to date as the credit bank declined. UC Davis researchers estimate updated 2025 targets will add an incremental 8 to 9 cts/gal to retail gasoline in the state.

Hawaii has become the fifth state to adopt an LCFS, adding to a growing patchwork of state programs. The state will face different compliance dynamics from established West Coast markets, with relatively little diesel demand and jet fuel excluded from the program. Its electricity grid also has a higher carbon intensity than those in California, Oregon and Washington, making it more difficult for EV charging to generate large volumes of credits -- factors Schubert said state officials will have to address during rulemaking.