Unlocking ROI from low-carbon fuel investments
Involving compliance expertise early in the development of a renewable diesel or sustainable aviation fuel investment of a project can make or break long-term success
Kristine Klavers EcoEngineers
T he success of low-carbon fuel projects depends on market factors like feedstock availability and prices, as well as regulatory mandates, incentives, and in-house net-zero goals. For renewable diesel (RD) and sustainable aviation fuel (SAF) projects specifically, detailed compliance requirements span over every phase of the value chain: from feedstock production and delivery to the process technol- ogy chosen to produce the fuel; and through the mode of transportation of delivering products to market and end use by consumers. Most importantly, successfully investing in low-carbon fuel projects like RD and/or SAF, whether sup- ported by mandatory government programmes or volun- tary initiatives, requires detailed regulatory experience and knowledge, a comprehensive strategy, and strong financial and technical expertise to ensure efficient project execution and avoidance of costly pitfalls. Bottom line: the success of an RD/SAF project hinges on a thorough understanding of regulations and the inclusion of compliance requirements throughout all the project development stages and with full understanding by every team member. Real-time examples Pathways to RD/SAF project success are further explored with real-time (RT) examples of projects. These RT exam- ples highlight the importance of taking proactive steps for the implementation of robust feedstock, technology, and fuel compliance practices in RD/SAF projects early in the engineering, procurement, and front-end planning phase. These implementation steps are instrumental in setting investors and stakeholders on a path to realising long-term value creation for their RD and/or SAF investment. Additionally, the importance of tracking the chain of custody of the feedstock supply is outlined. Tracking begins at origi- nation and moves to procurement and use, ensuring compli- ance and pathway registrations with regulatory bodies while avoiding costly delays. The outlined RT examples explain the importance of understanding carbon intensity (CI) scores. By involving the compliance and regulatory engagement teams early in every phase of the RD/SAF project development, companies, investors, and their stakeholders can realise ROI. Compliance is key in regulated fuel markets Transportation fuel producers are increasingly under pressure
to reduce the CI of their products to comply with state and fed- eral low-carbon policies, industry and company-driven carbon reduction goals, and Scope 3 emission targets. Scope 3 emis- sions are indirect greenhouse gas (GHG) emissions that occur in a company’s value chain, including suppliers and custom- ers. Understanding the regulatory frameworks, compliance requirements, and market mechanisms that underpin low-car- bon fuel projects is crucial to unlocking credits and incentives, maximising profitability, and avoiding ‘greenwashing’. Currently, three major regulatory programmes in North America govern these markets: Canada’s Clean Fuel Regulation (CFR), the US Renewable Fuel Standard (RFS), and California’s Low Carbon Fuel Standard (LCFS). LCFS- type programmes exist in Oregon, Washington, New Mexico, and British Columbia, with several US states consid- ering implementing their specific renewable fuel regulations. All low-carbon fuel regulations have different compliance regulations and guidelines that must be met to unlock the sought-after financial investment support. Some examples of specific compliance requirements for the US Environmental Protection Agency’s (USEPA) RFS and California’s LCFS pro - gramme will be provided further into the discussion. For RD and SAF projects, compliance ensures that renew- able fuel producers can accurately generate and monetise credits under the RFS and LCFS programmes. These cred- its are crucial for offsetting the higher production costs of renewable fuels compared to traditional fossil fuels, making the projects financially viable. In the absence of full compli - ance, producers risk disqualification from the programmes, reputational damage, project delays, and loss of market access, making it imperative for producers to stay up to date with regulatory changes and maintain the required rigorous practices like documentation and reporting. Compliance is not just about meeting regulatory obliga- tions but is a strategic necessity for maximising the eco- nomic potential of RD and SAF projects. It ensures that producers can participate in the RFS and LCFS markets, secure the financial incentives needed for project sustaina - bility, and contribute to broader carbon reduction goals. Follow the RINs ‘recipe’ for success The US RFS programme is a national policy that requires a certain volume of renewable fuel to be used to replace or
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