California’s goals for cleaner motor fuels are sparking changes at big US oil refiners, as they retool to make a form of diesel from cooking oil cast off by restaurants and animal fats rendered at slaughterhouses. Marathon Petroleum, Phillips 66 and HollyFrontier are among the refining companies exploring or pursuing projects to produce “renewable diesel”, which can substitute petroleum-based diesel in trucks and buses and can be made with some of the same equipment.
The moves come as the pandemic knocks US oil demand to the lowest levels since the late 20th century, forcing refiners to curtail volumes. Yet in renewable diesel, they have an opportunity to expand. The incentive is in progressively tougher emissions policies in California. The state’s low-carbon fuel standard was designed to hasten a shift to transport with lower greenhouse gas emissions, the main force driving climate change. Scientists warned climate change would intensify wildfires, a threat was borne out as millions of California acres burn this month.
The low-carbon program awards credits to suppliers of fuels whose emissions are lower than a state-set benchmark. Suppliers of carbon-heavy fuels such as petroleum-based diesel must purchase these credits to comply with state law. As the benchmark tightens, the price of credits has soared to almost $200 a tonne of carbon dioxide, prompting more oil refiners to expand into fuels that receive carbon credits. Renewable diesel and a related fuel, biodiesel, typically earn more credits per gallon than other biofuels. Last year California used a combined 830m gallons of both types of diesel, accounting for 22 percent of the total state diesel market, according to the National Biodiesel Board.