The U.S. Environmental Protection Agency (EPA) recently published final volume requirements for the Renewable Fuel Standard (RFS) for the years 2014, 2015 and 2016. This rule finalizes higher volumes of renewable fuel than the preliminary volume requirements proposed in May, a move we hope will support the growth of the biofuels industry.
EPA made the announcement at the beginning of the COP21 Paris climate change conference, which is a high-profile opportunity for the Obama Administration to make its case for a global strategy to address climate change. While EPA altered the final standards for some of the fuels covered under the RFS program compared to proposals it set forth last May, the Agency believes that the final mandates will allow biofuel producers and investors to move forward with a greater sense of confidence as the renewable fuels industry continues to grow.
The RFS requires EPA to set annual volume requirements for the four categories of biofuels that include cellulosic biofuel, advanced biofuel, biomass-based diesel and renewable fuel. EPA set volumes for 2014 and 2015 at levels that reflect the actual amount of domestic biofuels used during those years, and it increased the total volume of renewable fuel required by the end of 2016 to 18.11 billion gallons, which is an 11 percent increase from 2014. The final volumes per EPA are as follows:
From a percentage standpoint, the final volumes for all of the individual biofuels are (marginally) higher than the proposals from last May. However, it’s important to remember that the legislative levels for each year were significantly higher than the final volumes. For example, the 2015 legislative volume for renewable fuel would have been set at 20.5 billion gallons rather than 16.93 gallons, including 3 billion gallons of cellulosic biofuel, and 5.5 billion gallons of advanced biofuel. In the end, the final 2015 renewable fuel volume is over 17 percent lower than legislative level specified earlier. As a point of reference, the chart below illustrates both the original legislative levels and the proposed volumes from last May.
Naturally, EPA stands behind its decisions and it final volume requirements. “The biofuel industry is an incredible American success story, and the RFS program has been an important driver of that success—cutting carbon pollution, reducing our dependence on foreign oil, and sparking rural economic development,” noted Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation. “With today’s final rule, and as Congress intended, EPA is establishing volumes that go beyond historic levels and grow the amount of biofuel in the market over time. Our standards provide for ambitious, achievable growth.”
But biofuels industry insiders have generally been less enthusiastic about these latest developments. As the Renewable Fuels Association (RFA) noted in a news release, “EPA’s decision today turns our nation’s most successful energy policy on its head.” It continues, “Data shows that EPA, in its initial RFS proposal, understated the likely market for E85 and non-ethanol conventional biofuels in 2016 by at least 440 million gallons. The data suggests there will be at least 14.7 billion gallons of undifferentiated renewable fuel blended next year. With approximately 2 billion surplus RIN credits already available for refiners to use for compliance in 2016, and with another 900 million RINs potentially becoming available from 2015 over-compliance, the EPA’s decision to lower the 2016 RVO below the statutorily imposed level of 15 billion gallons is simply unnecessary.”
The RFA news release concludes, “Today’s decision by EPA… sadly, significantly undercuts President Obama’s credibility as he prepares to take the world stage to address climate change at the COP21 talks in Paris.” While legislative assistance in the near-term is critical to making biobased energies successful in the future, the process is painfully slow in most cases. If fossil-based energy sources continue to remain artificially cheap due to the substantial tax benefits they receive, renewables will never have a true market opportunity to prove their environmental, economic and societal worth.
While these final RFS volumes fall considerably below the legislative amounts, there is still reason for the industry to remain hopeful. The silver lining for biofuels in this case is that EPA actually raised the requirements from the preliminary levels, an indication that the Agency heeded the industry’s warning about the negative effect the lower standards would have on investment and development.