California’s crop-based cap starts to matter in 2028

California’s limit on crop-based feedstocks has been in force since 2025, and it has changed very little in the biomass-based diesel market so far because most existing pathways are grandfathered. That protection expires on 1 January 2028, which is when the rule starts to affect feedstock sourcing and the economics of renewable diesel supplied into California.

Under Section 95482(i) of the LCFS regulation, soybean, canola and sunflower oil can account for no more than 20% of a producer’s combined biomass-based diesel volume. Crop-based volume above that threshold is assigned the benchmark carbon intensity and generates no LCFS credits. The fuel can still be supplied into California, but past the cap it carries no LCFS value.

17 CCR §95482(i); CARB current-pathways file and LCFS Reporting Tool Quarterly Data Summary (Q1 2026).

Timing explains why the cap has had so little effect to date. Pathways certified after 1 July 2025 are already subject to it. Pathways certified before that date keep their existing treatment until 1 January 2028.

CARB’s current pathway file shows how much volume that covers. Of 814 biomass-based diesel pathways, 693 operate under CA-GREET 3.0 and 121 under earlier versions. None operates under CA-GREET 4.0, the version that carries the cap. Virtually all credited biomass-based diesel volume in California today is generated through pathways that stay exempt until the end of 2027.

Two features of the rule matter when sizing its effect.

California’s biomass-based diesel market ran at crop-oil levels well inside the new threshold for several years. Crop oils were 12.8% of combined renewable diesel and biodiesel feedstock in 2021, 16.6% in 2022 and 19.4% in 2023, easing to 17.7% in 2024. Waste-based feedstocks held roughly 80% to 87% of volume across that period.

CARB LCFS Reporting Tool Quarterly Data Summary, FeedStock tab, renewable diesel and biodiesel combined. Crop = soy + canola, the basis §95482(i) caps; CARB reports no sunflower row. Q1 2026 is one published quarter.

Crop-oil share then rose to 30.4% for 2025 as a whole and 48.3% in the first quarter of 2026. The quarterly path is steady rather than a single jump.

Grandfathering creates an incentive that runs in the same direction. A pathway certified before July 2025 can keep generating LCFS credits from crop-based feedstocks through the end of 2027, while a newly certified pathway is already held to the 20% limit. Producers therefore have reason to maximise volume through grandfathered pathways while the treatment lasts, which makes the recent increase difficult to read as a durable shift in California’s preferred feedstock mix.

Canadian renewable diesel production runs on the feedstocks California is preparing to restrict. Statistics Canada’s renewable fuel plant input data puts vegetable oil at 95.3% of feedstock processed by Canadian plants in 2025, against 80.6% in 2021, with canola the dominant share. A significant portion of that production has historically moved south into the United States.

Once the cap becomes fully effective in 2028, incremental canola-based volume stops generating LCFS value beyond a producer’s 20% threshold.

The Clean Fuel Regulations treat the same feedstocks differently. The CFR applies no equivalent cap on crop oils, and the lifecycle treatment of land-use emissions diverges materially between the two systems.

Canola volume that clears the cap loses its California credit value in 2028. We model the netback across LCFS, CFR and RFS on your pathway mix.

Under the ECCC Fuel LCA Model, the land-transformation component for crop pathways carries a negative contribution to lifecycle carbon intensity. For canola renewable diesel that value is approximately −6.63 gCO₂e/MJ, a meaningful share of the pathway’s overall result. California adds a positive indirect land-use change penalty to every crop gallon by default. The CFR carries no indirect term, excludes land converted after July 2020 outright, and credits measured soil carbon on established cropland.

Placing approved pathway values from the two programmes side by side shows the size of the gap.

Certified pathway values, gCO₂e/MJ, built the same way on both sides: best approved pathway per feedstock, averaged across facilities holding all four feedstocks — four Gulf Coast plants under the CFR (ECCC list, 30 September 2025) and ten California facilities on CA-GREET 3.0 (CARB pathway file, 14 July 2026). ILUC is the fixed value California adds under §95488.3(d) Table 6.

Used cooking oil carries no land-use term in either system and scores within 0.4 gCO₂e/MJ of the same value in both, which isolates land accounting as the source of the divergence on crop oils. These are specific approved pathways, so facility-level results vary.

Under Canadian accounting, soybean and canola score better than tallow. Those are the same feedstocks California will increasingly constrain once grandfathering ends.

Feedstock economics point the same way. Waste oils already face stronger competition across North American low-carbon fuel markets, and changes to U.S. tax policy and trade flows have affected their availability and pricing. California’s crop cap adds further demand for uncapped feedstocks such as used cooking oil and tallow, which would put more upward pressure on their value.

Canola faces the opposite pull. Weaker California demand for incremental crop-based renewable diesel after 2027 gives Canadian producers more reason to place that volume domestically, particularly as Canadian compliance demand keeps growing. The two markets would then diverge, with California valuing waste-based feedstocks more highly and Canada remaining relatively more supportive of crop-based renewable diesel.

ECCC’s September 2025 discussion paper on targeted amendments to the CFR set out two measures aimed at strengthening domestic low-carbon fuel production. One was a domestic credit multiplier giving additional credits for Canadian-produced fuel. The other was a minimum domestic-content requirement obliging part of the compliance pool to come from domestic production. Consultation closed on 15 January 2026. Neither measure has been enacted, and there is no certainty that either proceeds.

A domestic production incentive would reinforce the shift the California cap creates. A canola-based renewable diesel barrel worth less at the margin in California after 2027 becomes more attractive in Canada if domestic production earns additional CFR credit value. The same feedstock would then face two policy signals pulling in opposite directions.

Pathway recertification. Producers holding grandfathered CA-GREET 3.0 pathways have until the end of 2027. Movement of biomass-based diesel pathways onto CA-GREET 4.0 in the CARB file is the clearest early signal of how the market is repositioning.

Crop share through 2026 and 2027. Crop share has risen for five consecutive quarters to 48.3%. Whether that continues, plateaus or reverses before 2028 indicates how much volume producers intend to run through grandfathered pathways while they can.

The ECCC amendment package. Consultation on the domestic credit multiplier and minimum domestic-content requirement closed in January 2026 with no decision published. Either measure would change the Canadian netback on the same canola barrel California is constraining.

California’s timing is fixed at 1 January 2028. What remains open is whether Canada adds domestic production incentives on a similar timeline, and how quickly producers adjust feedstock and market strategy in response.

Climate Decode · Advisory

Where does your canola barrel earn most after 2027?

Pathway-level carbon intensity, cap exposure and cross-border netbacks across the LCFS, the CFR, Oregon, Washington and the RFS.

Method and Sources

Cap provisions and timing from 17 CCR §95482(i); indirect land-use change values from §95488.3(d) Table 6. Pathway counts and certified carbon intensities from the CARB current-pathways file (14 July 2026). Feedstock shares and biomass-based diesel volumes from the CARB LCFS Reporting Tool Quarterly Data Summary, FeedStock tab, Q1 2026 release, renewable diesel and biodiesel combined; crop = soy + canola, the basis §95482(i) caps, as CARB reports no sunflower row. Canadian plant input shares from Statistics Canada table 25-10-0082. Canadian pathway carbon intensities and the land-transformation component from the ECCC Fuel LCA Model and approved-pathway list (30 September 2025). Proposed domestic measures from the ECCC targeted-amendment discussion paper, September 2025.

Certified pathway values vary by facility and production pathway. Not investment advice.