Low Carbon Fuel Standard Credit Prices and Pass-Through at the Pump—A Preliminary Investigation

State governments have increasingly looked to a Low Carbon Fuel Standard (LCFS) to reduce greenhouse gas emissions from the transportation sector. LCFS policies create an implicit subsidy for biofuels that are blended onto finished fuels. The implicit subsidy is issued via tradable credits to low-carbon fuel producers or fuel blenders. The effectiveness of the policy then relies crucially on full pass-through of these subsidies downstream in the supply chain. While studies have estimated pass-through from similar policies and contexts, this white paper will estimate the pass-through of state LCFS credit prices from fuel suppliers downstream to retailers at major rack locations on the west coast. The researchers will use daily spot credit prices for the California LCFS and Oregon Clean Fuels Program (CFP) and rack biodiesel and renewable diesel prices to estimate the extent to which suppliers pass through costs downstream. The estimates will be supplemented with a simple theoretical framework that highlights the mechanisms through which full pass-through can be hindered in a diesel industry subject to a LCFS-type policy.

• Record URL:
  https://ncst.ucdavis.edu/project/low-carbon-fuel-standard-credit-prices-pass-through-pump-preliminary-investigation

Language

• English

Project

• Status: Completed
• Funding: $36325
• Contract Numbers:

  DOT 69A3551747114

• Sponsor Organizations:

  National Center for Sustainable Transportation

  University of California, Davis
  Davis, CA  United States 

  Office of the Assistant Secretary for Research and Technology

  University Transportation Centers Program
  Department of Transportation
  Washington, DC  United States  20590
• Managing Organizations:

  National Center for Sustainable Transportation

  University of California, Davis
  Davis, CA  United States 

  University of California, Davis

  Institute of Transportation Studies
  Davis, CA  United States  95616
• Project Managers:

  Iacobucci, Lauren

• Performing Organizations:

  University of California, Davis

  Institute of Transportation Studies
  Davis, CA  United States  95616
• Principal Investigators:

  Smith, Aaron

• Start Date: 20201001
• Expected Completion Date: 20220331
• Actual Completion Date: 20221229
• USDOT Program: University Transportation Centers

Subject/Index Terms

• TRT Terms: Biodiesel fuels; Costs; Credit; Policy; Prices; Subsidies
• Identifier Terms: Low Carbon Fuel Standard
• Geographic Terms: California; Oregon
• Subject Areas: Economics; Energy; Highways; Policy;

Filing Info

• Accession Number: 01742552
• Record Type: Research project
• Source Agency: National Center for Sustainable Transportation
• Contract Numbers: DOT 69A3551747114
• Files: UTC, RIP
• Created Date: Jun 16 2020 8:48PM