Aemetis optimistic about LCFS update, tax credit

US biofuels producer Aemetis expects supportive regulatory changes to boost profits, which have struggled recently on lower prices.

Chief executive Eric McAfee said Thursday that expected policy changes in the next year will "significantly increase the value of our products," which include ethanol and renewable natural gas. He cited the California Air Resources Board's (CARB) upcoming meeting in November in which regulators will consider updates to the state's low-carbon fuel standard (LCFS), as well as an Inflation Reduction Act federal tax credit for clean fuels kicking off in January and Environmental Protection Agency action to approve higher E15 ethanol blends in more of the country next year.

In California, regulators are weighing tougher targets for the LCFS program, where sagging credit prices over the last year could deter investments in decarbonizing transportation. They have floated an initial step down in carbon intensity limits in 2025 of 7pc or more. McAfee predicted that CARB would ultimately determine that a 9pc stepdown "basically is the minimum required, not the maximum, but the minimum required to move major oil companies forward on buying more credits now".

He said that in discussions with CARB officials, it was "pretty clear" that the growth in unused credits available for compliance in future years had exceeded expectations. The bank of credits, which do not expire, hit a record high at the end of the first quarter, according to data released this week.

The Inflation Reduction Act's 45Z tax credit, which will tie incentives to a fuel's lifecycle greenhouse gas emissions, could also benefit the company's expanding biogas business. McAfee said there is a "wide range" of potential outcomes, since it is unclear how federal regulators will account for fuels with negative carbon intensity. But he expects a worst-case scenario would still be a subsidy of around $7.20/mmBTU.

That credit will also be more generous to sustainable aviation fuel (SAF), although it is unclear when Aemetis' planned SAF and renewable diesel production facility in Riverbank, California, will come on line. The company received key air permits from local regulators in the first quarter this year and that it was "discussing the use of innovative pricing structures with our airline customers to accelerate the financing, construction, and operation of the SAF plant", McAfee said. Aemetis has signed offtake agreements with companies such as Delta Air Lines and Alaska Airlines.

The company did not immediately respond to a request for comment on its timeline for starting up the plant, which could produce 90mn USG/yr of SAF and renewable diesel.

Aemetis this week reported a net loss of $29.2mn in the second quarter this year, up from a net loss of $25.3mn during the same period last year. The company sold more ethanol and renewable natural gas in the US and less biodiesel in India but received lower prices for many of its products.

By Cole Martin