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MARKET WATCH

EPA Releases Proposed RFS Volumes for 2017

Posted by John Greene on May 24, 2016

The U.S. Environmental Protection Agency (EPA) recently published proposed volume requirements under the Renewable Fuel Standard (RFS) for 2017. The proposed volume requirements and associated percentage standards are for cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel.

EPA proposed a total renewable fuel volume of 18.8 billion gallons: 4 billion gallons for advanced biofuels; 312 million gallons for cellulosic biofuels; and 14.8 billion gallons for conventional renewable fuels like corn ethanol. That amounts to nearly 700 million gallons more than the total requirement for the current year, but it is far less than the 24 billion gallons envisioned by the 2007 law that introduced the RFS.

RFS_2016.jpg

Per EPA, the proposed volumes would represent growth over historic levels:

  • Total renewable fuel volumes would grow by nearly 700 million gallons between 2016 and 2017
  • Advanced renewable fuel—which requires fifty percent lifecycle carbon emissions reductions—would grow by nearly 400 million gallons between 2016 and 2017
  • The non-advanced or “conventional” fuels portion of total renewable fuels—which requires a minimum of 20 percent lifecycle carbon emissions reductions—would increase by 300 million gallons between 2016 and 2017 and achieve 99 percent of the Congressional target of 15 billion gallons
  • Biomass-based biodiesel—which must achieve at least 50 percent lifecycle emissions reductions—would grow by 100 million gallons between 2017 and 2018
  • Cellulosic biofuel—which requires 60 percent lifecycle carbon emissions reductions—would grow by 82 million gallons, or 35 percent between 2016 and 2017

While the proposal represents a 36 percent increase over the 2016 volume for the cellulosic biofuel category, some lawmakers and energy industry groups remain unsatisfied with the overall direction of the RFS.

  

Lawmaker Reactions

House Republicans say that EPA’s volume proposals fell short of their expectations. “While I appreciate the fact that EPA is on track to finish its rule by the deadline, I remain concerned about other aspects of this proposal,” noted Ed Whitfield (R-Ky), Energy and Power Subcommittee Chairman. “We owe it to everyone affected—from corn and soybean growers to ethanol and biodiesel producers to refiners and gas station owners, and most importantly to consumers—to strike the right balance, and we will take a close look at the proposal to see if this was achieved.”

A statement subsequently issued by Representatives Bill Flores (R-Texas), Peter Welch (D-Vt.), Bob Goodlatte (R-Va.), Jim Costa (D-Calif.) and Steve Womack (R-Ark.) said the increases will hurt the American economy and environment.

“The EPA’s proposal forces more ethanol into the market than our current infrastructure can handle. This is unsustainable and increases food and fuel costs on hardworking American families. House members have put forth bipartisan solutions to cap fuel ethanol volumes to match current market realities and lessen the impact of the ethanol mandate on hardworking families and businesses.”

 

Energy Industry Reactions

Biofuels industry groups that support the mandate, including the Renewable Fuels Association (RFA), are equally disappointed by the newly-proposed volumes. RFA President and CEO Bob Dinneen said that, “For months, EPA has been saying it plans to put the program ‘back on track.’ Today’s proposal fails to do that. The agency continues to cater to the oil industry by relying upon an illegal interpretation of its waiver authority and concern over a blend wall that the oil industry itself is creating. As a consequence, consumers are being denied higher octane, lower cost renewable fuels. Investments in new technology and advanced biofuels will continue to languish and greenhouse gas emissions from automobiles will be unnecessarily higher.”

Dinneen continued, “The real frustration is that EPA seems to be artificially constraining this market. The RFA has demonstrated just how easy it would be for obligated parties to reach the 15 billion gallon statutory volume for conventional biofuels next year. The fact is with rising gasoline demand, increased E15 and E85 use made possible by USDA’s infrastructure grant program, continued use of renewable diesel and conventional biodiesel that also generate D6 RINs (renewable identification numbers), well more than 15 billion gallons will be used next year.”

Despite RFA’s claims that the EPA’s proposed regulations are aimed at appeasing the fossil oil industry, American Energy Alliance (AEA) President Thomas Pyle also criticized the rule, noting that it was “detached from reality.” AEA is the advocacy arm of the Institute for Energy Research (IER), a not-for-profit organization that advocates for less regulation in global energy markets.

Pyle continued, “The RFS is a broken program. It was based off false assumptions and as a result, Americans are stuck with a program that doesn’t line up with the world we live in today. The RFS is not a ‘success story,’ as EPA official Janet McCabe puts it. Rather, it is a lesson on why the federal government should get out of the energy business and let the markets work the way they’re supposed to.”

 

Same as it ever was…

The fact that the RFA and AEA actually agree on the ineffectiveness of the RFS’s implementation for differing reasons should be a telltale sign of its mismanagement. As we have maintained in the past, advanced and cellulosic biofuels need the opportunity to compete on a level playing field with fossil energy if we are serious about implementing renewable energy solutions for the future. A level market would also provide the certainty needed by the investment community to maintain interest in the pioneering products that will contribute to a cleaner, greener economy.

The real hurdle for renewable energy—especially energies as cutting-edge as cellulosic and advanced biofuels—is not that it is too expensive; rather, it’s that fossil energy remains artificially too cheap. Fossil energy is the largest subsidized sector in the global economy. According to a recent International Monetary Fund (IMF) estimate, fossil fuel companies are benefitting from global subsidies equaling $5.3 trillion a year, which is equivalent to $10 million a minute, every day of the year. To put that number in perspective, the estimate is also greater than the total health spending of all the world’s governments.

Dinneen wrapped up his remarks by noting that, “As this [volume proposal] process continues, we intend to work to encourage a final rule that truly puts the RFS ‘back on track.’ As it is, today’s proposal is a lost opportunity for this administration to cement its legacy in clean fuels, advanced biofuel and climate change.”

 The Forest2Fuel Bioenergy Project Support eBook

 

Topics: renewable fuel standard

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