Oregon's Clean Fuel Program: A Comprehensive Overview

Navigating Ambitious Carbon Reductions and Spearheading Zero Emission Vehicle Adoption

Oregon's commitment to environmental sustainability is exemplified through its ambitious carbon reduction targets and the substantial growth of its Clean Fuel Program (OR CFP). Established in 2015, the OR CFP has seen significant revisions aimed at enhancing the state's clean fuel activities, positioning Oregon as a leader in North America's clean fuel markets.

Oregon's Carbon Reduction Goals and Zero Emission Vehicle Adoption

With approximately 3.89 million vehicles registered, Oregon has set rigorous goals to decrease average carbon intensity by 10% from 2015 levels by 2025, escalating to 20% by 2030 and 37% by 2035. These targets reflect a robust commitment to curbing emissions at a rate aligned with global sustainability targets.

Oregon's approach is notably characterized by its embrace of Zero Emission Vehicles (ZEVs). Ranking third in the U.S. for the proportion of ZEVs among total vehicle registrations, Oregon's policies have successfully fostered a conducive environment for electric vehicle (EV) adoption. This is propelled significantly by the sale of battery EVs, which dominate the ZEV growth trajectory.

Incentives Fueling the Transition to Clean Fuels

A suite of incentives, including the Oregon Clean Vehicle and Charge Ahead Rebate programs, federal tax credits, and the Oregon Department of Transportation’s (ODOT) Community Charging Rebate Program, have collectively doubled EV sales in the last two years. Oregon's bold legislative steps, such as the 2019 Senate Bill 1044, aim to have at least 250,000 registered EVs by 2025, reinforcing the state's commitment to transitioning away from fossil fuels.

Residential charging stands as the primary source of credit generation within the CFS program, highlighting the role of consumer behavior in driving clean energy initiatives. The increased adoption of renewable diesel, with a current blend ratio of 25%, has also significantly contributed to the rise in incentives for renewable diesel suppliers.

Renewable Diesel's Ascending Role

In the third quarter of 2023 alone, Oregon’s consumption of renewable diesel reached 39.07 million gallons, representing approximately 17% of the state’s diesel pool. The compatibility of renewable diesel as a drop-in fuel and the ease of retrofitting existing facilities have made it an increasingly popular choice. Meanwhile, biodiesel consumption has seen a decline due to reduced margins and associated blend walls.

Ethanol remains the largest volume contributor in the OR CFP, although renewable diesel is rapidly catching up. With the enactment of House Bill 3051 allowing blends above 10%, the projected ethanol blend rate for 2024 is set at 10.15%, indicating a stable growth in ethanol utilization.

Financial Indicators and Market Confidence

The introduction of renewable diesel has positively impacted Oregon's credit-to-deficit ratio, which indicates the balance between credits generated and credits required by the program. After experiencing a deficit, the ratio has begun to rise, suggesting a healthier financial state and potentially increasing market confidence. This change reflects broader economic or legislative developments that enhance credit generation, fostering greater investment and consumption within the state.

In Q3 2023, incentives from supplying renewable diesel into Oregon peaked at $1.12 per gallon, the highest among North American clean fuel markets. This lucrative incentive structure is likely to attract more suppliers to the Oregon market, further boosting the state's clean fuel ecosystem.