The California LCFS market is moving toward a structurally tighter supply–demand balance, with credit prices projected to rise further under the fundamental model. The tightening dynamic is primarily driven by a contraction in Renewable Diesel (RD) volumes to 538 million gallons in Q3 2025 (a 58% pool share), and a downward revision in electricity credit generation amid slower EV adoption and the phaseout of federal tax incentives. Recent quarterly deficits have exceeded credit generation, leading to a continued drawdown of the credit bank. Looking ahead, scenario analysis suggests widening divergence by 2030: a delayed transition pathway would materially erode the bank, the baseline case reflects moderate tightening, while an aggressive transition helps stabilize credit balances. Overall, the outlook points to increasingly constrained market conditions under slower electrification and softer QoQ RD growth.

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