Washington’s 2027 fuel forecast: enough credits, first bank draw

Commerce expects enough Clean Fuel Standard credits through 2027, ruling out a forecast deferral. The bank peaks at 4.61 million credits at the end of 2026 and falls to 4.29 million in 2027, the program’s first annual draw.

Our model reaches the same turning point with a deeper deficit. Renewable diesel remains the main uncertainty, and it is the variable with the widest historical forecast error.

Washington Department of Commerce, 2027 Washington Clean Fuel Forecast, October 2026; Washington Department of Ecology quarterly data through Q1 2026; Climate Decode Washington CFS model, 3 October 2026.

Commerce’s annual fuel-supply forecast tests whether Washington will have enough fuel and credits for the next compliance year. RCW 70A.535.100 requires estimates of fuel availability, banked credits and deficits, and the credits available from the projected fuel mix. Berkeley Research Group (BRG) prepared the 2027 edition, as in prior years.

Under WAC 173-424-730, Ecology must defer the next step in the standard if the forecast shows insufficient credits. Commerce finds sufficient supply for 2027, so the 11% standard remains in place.

Chapter 319, Laws of 2025 set the standard at 2% below 2017 carbon intensity in 2025, 7% in 2026 and 11% in 2027, followed by steps of three to four points a year to 45% by 2038. The 2026 step doubled first-quarter deficits to 0.63 million credits from 0.32 million a year earlier. The forecast looks only one year ahead and therefore does not test the standards after 2027.

Commerce’s 2027 balance depends heavily on renewable diesel and electricity. Renewable diesel nearly triples from 2025, electricity supplies half of all credits, and lower gasoline and diesel demand reduces deficits. Ethanol volume rises while its credit yield falls as the standard approaches ethanol’s carbon intensity.

Credits are net of the deficits ethanol and biodiesel generate, as Commerce reports them. Electricity and ethanol are as published; the remaining 1.20 million credits are the residual of the 3.32 million total, covering renewable diesel, biodiesel, renewable natural gas, renewable naphtha, infrastructure credits, LPG, hydrogen and natural gas.

Clear gasoline creates 2.89 million deficits, absorbing all but 0.44 million of total credits. Clear diesel adds another 0.76 million deficits and moves the year into a net short position.

Source: Washington Department of Commerce, 2027 Washington Clean Fuel Forecast, Table 3. Gasoline and diesel demand come from the Office of Financial Management’s June 2026 transportation revenue forecast.

•Renewable diesel. Commerce caps growth at the fastest one-year increase in blend Washington has recorded, taking renewable diesel from 10.6% of the diesel pool in 2025 to 30.8% in 2027. Biodiesel is capped at its historical maximum of 5%.

•Seed oils. Commerce expects 45Z feedstock rules to shift production toward North American seed oils and more biomass-based diesel to move north from California. Renewable diesel carbon intensity rises from 54.31 to 59.71 gCO₂e/MJ by 2027, reducing credits per gallon.

•Electricity. Transport electricity rises from 1,182 GWh to about 1,750 GWh and generates 1.68 million credits, half of the 2027 total. Commerce identifies EV adoption and litigation over Washington’s Section 177 vehicle standards as the main risk.

•Ethanol. The blend rises to 12.7% of the gasoline pool, while credits fall from 552,291 in 2025 to 441,344 in 2027 as the gasoline standard declines from 96.95 to 88.04 gCO₂e/MJ, closer to ethanol’s 68.63.

•Renewable naphtha. Commerce holds this new credit stream at its first-quarter 2026 pace of 16 million gallons a year.

•Competition. Oregon, California and New Mexico are also tightening their programs. Commerce expects higher federal renewable volume obligations to offset part of the resulting pull on low-carbon fuels.

Our 2027 balance is 0.77 million credits shorter than Commerce’s, reflecting 0.54 million more deficits and 0.23 million fewer credits. The difference is driven mainly by fuel-volume assumptions.

Sources: Commerce, 2027 Washington Clean Fuel Forecast; Climate Decode Washington CFS model, published 3 October 2026.

•Deficits: gasoline and diesel volume. We carry 190 million more gallons of clear gasoline, adding 0.29 million deficits, and 153 million more gallons of clear diesel, adding 0.25 million. Commerce uses OFM’s revenue forecast for gasoline; our model holds light-duty driving broadly flat and subtracts EV demand.

•Credits: renewable diesel. Our lower renewable diesel volume removes 0.37 million credits, while the remaining fuels together add 0.14 million relative to Commerce.

Ecology’s first-quarter 2026 data support Commerce’s gasoline path and our renewable diesel path. Clear gasoline fell 13.3% year on year, ahead of Commerce’s 9.0% decline for 2026 and well beyond our 1.0%. Biomass-based diesel reached 27 million gallons, or 16.5% of the diesel pool, close to our 2026 assumption and well below Commerce’s 25.7%. Reaching Commerce’s 2026 volume would require about 53 million gallons per quarter for the rest of the year, twice the first-quarter pace.

Using the first-quarter gasoline pace with our renewable diesel assumption produces a 2027 draw of about 0.8 million credits and a year-end bank of 3.7 million. Applying both Commerce volume paths produces a small surplus. Current data suggest our gasoline assumption is too high, leaving renewable diesel as the main open question.

Renewable diesel is the swing variable, and the forecast record on it is wide. We model the Washington credit balance and price quarter by quarter.

Commerce has correctly resolved the deferral question in every forecast, while its fuel-volume projections have varied widely. Early forecasts underestimated renewable diesel and electricity growth; the 2025 forecasts then overestimated biomass-based diesel as volumes fell sharply.

Forecasts by BRG for the Department of Commerce: September 2022, the 2024 forecast workbook, September 2025 and October 2026. Recorded volumes from Ecology. No recorded figure is yet available for 2026 or 2027; Ecology’s first-quarter 2026 data report biomass-based diesel rather than renewable diesel alone.

•2022 forecast, for 2023–24. BRG projected 44 million gallons of renewable diesel in 2024; Ecology recorded 135 million. It projected 76,060 electricity credits against about 1.08 million recorded, and a 0.54 million-credit year-end bank against an actual 2.98 million.

•2024 analysis, for 2025. Clear gasoline was 17% above actual volume (2,491 million gallons versus 2,136) and renewable diesel 40% above actual (112 versus 80). The year-end bank was understated by 0.37 million credits (3.85 versus 4.22).

•2025 report, for 2025–26. Its 2025 estimate assumed 165 million gallons of renewable diesel against 80 million delivered, and a bank of 5.14 million credits against 4.22 million. This year’s report cuts the 2026 renewable diesel forecast from 199 to 150 million gallons and the year-end bank from 5.86 to 4.61 million.

The 2025 miss coincided with the expiry of the $1-per-gallon blenders’ tax credit on 31 December 2024. Its replacement, 45Z, pays producers, varies with carbon intensity and, from 2026, requires North American feedstock. Washington’s biomass-based diesel volume fell from 162 million gallons in 2024 to 89 million in 2025.

Commerce’s forecast has been reliable on the deferral decision and is best treated as one scenario for fuel volumes. Its largest 2027 assumption, renewable diesel nearly tripling in two years, is also the variable with the widest historical forecast error.

Both forecasts put Washington into a bank draw in 2027, with further tightening still to come. Commerce’s 4.3 million-credit bank covers more than a year of 2027 deficits; our 3.2 million covers about nine months. In either case, the shift reaches prices well before it threatens compliance.

Ecology’s monthly average credit price rose from US$28.95 in January to US$75.93 in August as the 2026 standard step increased deficits. We expect further tightening through 2027. Commerce’s renewable diesel build would moderate that pressure; a continuation of first-quarter volumes would accelerate it.

Climate Decode · Advisory

Where does your Washington position sit once the bank turns?

Credit balance, bank trajectory and price scenarios across the Washington Clean Fuel Standard, Oregon CFP, California LCFS, BC LCFS and the federal Clean Fuel Regulations.

Sources and Notes

•Washington Department of Commerce, 2027 Washington Clean Fuel Forecast, prepared by BRG, October 2026: Tables 3, 5, 8, 9 and 10.

•BRG for Commerce, Washington CFS 2026 Fuel Forecast Report, September 2025: Tables 3, 8 and 9.

•BRG for Commerce, Clean Fuel Supply Forecast workbook (2025 fuel forecast analysis), 2024: demand forecast and credit summary.

•BRG for Commerce, Washington Clean Fuel Forecast, 23 September 2022: Tables 22 to 24.

•Washington Department of Ecology, Clean Fuel Standard quarterly data summary through Q1 2026, and credit transfer activity report through August 2026.

•Climate Decode, Washington CFS model, published 3 October 2026. This article quotes its volumes and credit balance only.

Commerce nets the deficits generated by ethanol and biodiesel against their credits, while Ecology reports them gross; both conventions produce the same net balance. Actual bank figures are Ecology’s, as restated in Commerce’s 2027 report. Each Washington credit represents one tonne of CO₂e; all figures are by compliance year.

For information only. Not investment, legal or trading advice.