California’s Alternative Diesel Fuel Regulation: What does it mean for you?

In May 2021, the California Air Resources Board (CARB) approved new amendments to the state's Alternative Diesel Fuel (ADF) regulations. Adopted in 2015, the ADF governs the introduction and use of alternative diesel fuels, with a focus on mitigating potential environmental or public health impacts. The regulations and amendments are designed to limit No_x emissions from biodiesel.

Under the new ADF amendments which went into effect on August 1, 2021

• R55B20 and R75B20 blends can be used to comply with biodiesel in-use requirements
  - R60, R65 and R70 blends can also be used to comply
  - DTBP remains available as a potential compliance option
• Additives and formulation executive orders certified prior to the amendments are no longer available.
  - Only biodiesel additives or ADF formulations adopted under the new amendments can be used to comply with biodiesel in-use requirements
  - Manufacturers of previously certified additives and formulations must reapply for certification
• Biodiesel producers, importers and blenders must report and submit monthly compliance records quarterly
• The ADF reporting form has been revised to include R55B20 and R75B20 and all fleet and retail fueling Exemption EO options
  - The form will be updated to include any new ADF formulations that are approved in the future

The amendments primarily affect the B20 biodiesel product and biodiesel blenders, producers, importers, refiners and retailers and additive manufacturers. The new certification process has been strengthened as part of California's plan to mitigate potential environmental or public health impacts as new alternative diesel fuels continue to enter the market.

Transitional blending practice for producers

Biodiesel additives or ADF formulations certified under the original regulations must be recertified and approved under the new amendments. The amendment includes a transitional blending practice allowing fuel mitigated under previous requirements to be sold until the mitigated batch is depleted.

What about producers who mitigated fuel with additives or formulations certified under previous rules prior to August 1? They are allowed to supply and sell that fuel until the batch is depleted, even if that occurs after August 1. However, after August 1, no new additives can be added to these fuel batches.

Exceptions and exemptions to the ADF amendments

There are three main exceptions and exemptions to the ADF amendments. Retailers and fleet owners are exempted from the in-use requirements if they meet certain conditions.

The exception applies to biodiesel use that is below the pollutant control level.

Fleets are eligible for exemptions from the in-use requirements if they are made of at least 90% light-and-medium-duty diesel vehicles or there are heavy-duty diesel vehicles equipped with NDTE. Ninety percent of the fleet must be made of some combination of light-duty diesel vehicles, medium-duty diesel vehicles and heavy-duty diesel vehicles equipped with NDTE. A list of fleet vehicles must be submitted, along with proof that the unmitigated fuel is supplied only to the fleet vehicles.

Retail station exemptions are similar. Retail stations are eligible for exemptions from the in-use requirements if 90% of their sales are to a combination of light-duty diesel vehicles, medium-duty diesel vehicles and heavy-duty diesel vehicles equipped with NDTE. CARB has decided that retail stations with a DEF to diesel sales volume ratio of 2.7 or above qualify for the exemption. Retail stations must submit quarterly documentation to verify this and remain eligible for the exemptions.

The amendments also allow biodiesel to be used without No_x mitigation if the use is below the pollutant control level. The No_x pollutant control level is typically B5 (B10 in the colder months).

ADF regulations and California's climate change initiatives

The ADF regulations and amendments are part of California's larger climate change strategies. Transportation and fuel regulations, including the state's low carbon fuel standard, aim to reduce greenhouse gas (GHG) and particulate matter (PM) emissions from vehicles. While both GHG and PM affect climate change, pollution from elevated levels of PM can have negative impacts on air quality and human health.

The ADF regulations are designed to make sure new forms of alternative fuels and additives do not introduce harmful pollutants. Renewable fuels and biodiesel play an important role in how California's transportation sector will follow the state's climate change initiatives. The CARB rules are in place to make sure this is done as safely and effectively as possible through additive testing, certification and monitoring.

Renewable diesel is becoming more popular across the U.S., particularly in California, as it has one of the least carbon-intensive fuels. Biodiesel is already well-established in California and IHS experts believe that increased blending of biodiesel with renewable diesel may become a viable compliance strategy.

Staff from the California Air Resources Board, the National Biodiesel Board (NBB) and the California Advanced Biofuels Alliance (CABA) joined our Biofuels Solutions team for a discussion about the implementation and impacts of California's new biodiesel policies.

Request a sample report of any of IHS Markit's biofuels market serviceshere , to learn more about our expert coverage, industry data, prices and forecasts available.

Posted 05 November 2021 by Jordan Godwin, Associate Director, IHS Markit

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.