We recently interviewed Mr. Stefan Unnasch, Managing Director at Life Cycle Associates, a firm specializing in managing life cycle greenhouse gas (GHG) studies for fuel developers and advancing sustainability assessment tools. With extensive expertise in supporting biofuel developers, Stefan helps assess GHG footprints in compliance with government regulations such as the EPA RFS2, California LCFS, and the European Renewable Energy Directive. His work involves documenting the carbon intensity of alternative and renewable fuel pathways using tools like GREET, and quantifying life cycle impacts for a variety of fuel types, from algae-based biofuels to aviation fuels.
cCarbon: You’ve been a vocal proponent of the recent LCFS amendments. How do you think they will impact California’s long-term climate goals?
Stefan Unnasch: The amendments addressed a couple of key factors in the LCFS regulation. First, they tackled the issue of credit supply, demand, and price with an auto-correct mechanism. Many market participants were disappointed when the price dropped below $200 per ton, which was clearly due to the growth in low-carbon intensity (CI) fuels like low-CI renewable diesel and negative CI Renewable Natural Gas.
This growth was maybe predictable, but it still surprised many. As a result, credits exceeded deficits, causing prices to decline. The new auto-correct mechanism is an interesting concept, though its success remains to be seen. It’s untested in financial crises or other market shocks, but it seems promising.
Another area the amendments addressed was verification and enforcement penalties. There was significant administrative clean-up in the regulation, which is meaningful for market participants. However, for those not directly impacted by compliance issues—like CI ratings being too high or low—these updates are mostly procedural.
Additionally, the amendments introduced a limitation on vegetable oil-based renewable diesel and biodiesel, as well as on dairy RNG. These suggestions came with relatively little public review. While there were workshops, the rationale seemed to stem largely from environmental NGOs’ objections. The argument was that food crops are being used to make fuel and that indirect land use emission factors do not protect against a food vs fuel trade off. After some back and forth, these limitations became part of the approved amendments.
Interestingly, two board members voted against the new amendments, citing concerns about the use of vegetable oil-based biofuels as well as the cost of the program.
To answer your question about their importance for California’s climate goals, I’d say that reducing dairy methane emissions, displacing gasoline, and introducing new fuels have all proven successful under the LCFS. If California had simply set goals without this regulatory framework, it’s unlikely this progress would have occurred. The LCFS made it happen.
cCarbon: The amendments also include limits on feedstocks like soybean, canola, and sunflower oil, but the inclusion of forest waste biomass is also notable. Can you elaborate on that?
Stefan Unnasch: That’s correct. The inclusion of forest waste biomass is another significant addition to the regulation. If you look at my comments, discussions about forest waste pathways date back to 2011. There were numerous meetings with project developers, but progress has been slow.
Earlier this year, in February, an external group hosted a workshop on this topic, which I participated in. Despite this, there’s still no concrete pathway forward. For other fuels, there’s typically a default value for feedstocks. However, for forest biomass, this remains undefined.
CARB has a guidance document for new crop-based fuels. If you’re developing a fuel, like camelina or one derived from wood chips, you need to follow this guidance. It requires you to count direct emissions, such as fertilizer use, and analyse indirect land use changes. This creates a vague framework for moving forward.
Unfortunately, this lack of clarity is challenging for project developers. The current approach seems to be to build the project first and then work out the specifics with CARB later.
cCarbon: With the introduction of this new feedstock source, do you think it signals a shift? Could cellulosic biofuels as a group gain more popularity in the coming years compared to the ones being limited now?
Stefan Unnasch: The popularity of cellulosic biofuels depends on project developers being able to finance their projects. This is influenced by a combination of factors, including the IRA, RINs, LCFS credits, and other incentives. Ultimately, it’s the credit price that drives interest.
Having more explicit language in the regulation helps, but that’s the inherent challenge with incentives. From a developer’s perspective, an incentive is useful only if it’s clearly defined. Developers need to understand it well enough to incorporate it into their business plans and present it to banks. For banks to approve loans, the incentives need to feel reliable—essentially “bankable.”
However, none of these incentives are truly guaranteed. They depend on factors like the expiration of IRA provisions, interpretations of acceptable biomass under the RFS, and the ability to secure pathway approvals under the LCFS.
Incentives are essentially hurdles that only the toughest developers can overcome. For smaller developers or those experimenting with unproven technologies and feedstocks, it’s incredibly challenging to create a viable project that relies on these incentives.
cCarbon: Are you suggesting that smaller producers may be unlikely to adopt these measures unless the market responds favorably to the incentives provided?
Stefan Unnasch: It’s going to require the first successful project to demonstrate that it works. Take Fulcrum, for example. While it wasn’t strictly a woody biomass project, it could have captured cellulosic RINs. If they had successfully worked out their LCFS pathway, that would have served as a template for future biomass-based projects.
The industry naturally desires such templates. They provide a clear precedent, which helps developers understand what’s possible. However, as it stands, the LCFS regulation still leaves some details unresolved. For instance, the sustainability requirements for woody biomass aren’t sharply defined, though they appear to be progressing in the right direction.
cCarbon: Since you work with many market participants to calculate their CI, what do you think the new regulations mean for compliance costs, burdens, and strategies participants should adopt?
Stefan Unnasch: The new regulations offer some convenience and reduce frustration for market participants.
One longstanding issue in the LCFS has been the time lag between getting pathways approved and being able to generate credits. There were specific rules about when a pathway was deemed complete and the quarter in which credits could be recorded. If a fuel producer’s pathway wasn’t approved within the required timeframe and the reporting period expired, they’d miss out on credits.
To put this into perspective, consider a biorefinery with a 20-year lifecycle. If it loses credits for two quarters due to delays, that’s effectively 1/40th of its potential LCFS credits—a significant impact in terms of net present value. This creates a real challenge for projects trying to get off the ground. Asking developers to endure two quarters without LCFS revenue is a tough pill to swallow.
The new rules aim to address this issue and streamline processes. While it’s an improvement, the full impact remains to be seen.
cCarbon: What do you think the impact of the new federal regime will be on market participants balancing operations under the RFS and in California?
Stefan Unnasch: I expect increased uncertainty, especially regarding RIN prices, which are tied to the renewable volume obligations (RVOs) set by the federal government. If the RFS program becomes unpopular—due to its impact on the oil industry—the RVOs could become less stringent. Historically, when RIN prices drop, it reduces the supply of renewable fuels, which has a ripple effect. For instance, if you have an obligation in California or other LCFS states, a drop in supply can push up credit prices. We saw this happen a decade ago when the RVO for D5 RINs was reduced; the D5 RIN price dropped, but LCFS credit prices rose. It’s a balancing act: the combined value of attributes like RINs and LCFS credits competes. If the federal value declines, California’s value may increase, and vice versa.
cCarbon: Oregon has proposed updates to align with California, including higher third-party verification requirements. What are the implications of adding these?
Stefan Unnasch: While aligning requirements between states like Oregon and California brings some efficiencies, full reciprocity isn’t seamless. For example, even if a pathway’s CI score is verified in California, Oregon or Washington may still require all the underlying documentation, not simply accept California’s verification. It’s like how California requires its own documentation for state taxes, even if they are based on federal returns. While similar requirements across states help streamline processes, regulators still demand comprehensive verification, which adds cost and effort. This is particularly challenging for verifiers, who may hesitate to accept existing certifications without thorough reviews.
The cost burden, though significant, is modest compared to the value of credits. For instance, a biorefinery producing 10 million gallons a year, with credits worth $0.20 per gallon, would generate $2 million annually in credit value. Verification costs could run into tens of thousands of dollars, which is a small percentage but still an added expense. The frustration comes from paying $10,000–$20,000 to verify something that’s already assured elsewhere. As systems evolve and risks are better understood, hopefully, these costs can be streamlined. But for now, the verification burden, though not overwhelming, remains an irritation for market participants.
cCarbon: What do you think the future of biofuels is in the long term, given the push for electrification of road transport?
Stefan Unnasch: I have mixed feelings about the market potential for electric vehicles. While cordless tools and even chainsaws are becoming more common, batteries are still expensive and have limited lifespans. Elon Musk’s idea that consumers don’t need to own cars seems plausible, as cars have become more practical than exciting. Shared or driverless cars could be the future, though I’m skeptical about driverless technology, given issues like Waymo traffic jams. Shared electric cars might work, especially in California, where many people don’t have garages and the EV infrastructure isn’t growing fast enough. Battery swaps could be a solution, and it’s something we’ve considered here first.
cCarbon: How should clean fuels be promoted in the marine sector? What does the future of clean fuels look like in the marine industry?
Stefan Unnasch: While 100% electrification is possible, charging times and battery power remain challenges. Trucks need heavier batteries, and electric airplanes will likely be limited to small aircraft. Marine vessels, however, still need liquid fuels like methanol, LNG, ammonia, and hydrogen for long voyages. Methanol is particularly promising because it’s “plug-and-play” with minimal engine modifications and doesn’t face storage issues like LNG and ammonia. It also has low-carbon sources and is useful in methanol-to-jet applications, making it ideal for both marine and aviation sectors, which are harder to decarbonize. Even with progress in other sectors, we’ll still need these fuels.
The concept of using methanol dates back 40 years, and while it had challenges, such as making it work in diesel engines, technological advancements like CAD and diesel particulate filters have proven that significant innovation is possible. It’s unclear whether electric vehicles will be widely adopted, especially given charging infrastructure and affordability issues. For those without garages, EV ownership is a unique challenge, similar to those who drive hydrogen cars despite limited fueling stations.
CARB Approves Aggressive Updates to Low Carbon Fuel Standard | cCarbon
Oregon’s Proposed CFP Rulemaking to Streamline and Revamp Carbon Intensity Measurement | cCarbon
CFS Draft Rule Updates: Key Changes Shaping Washington’s Clean Fuel Future | cCarbon
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