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MARKET WATCH

Renewable Fuel Standards Debate

Posted by LeAndra Spicer on October 14, 2013
Ask a fellow American what concerns him or her most about the current situation in Washington, and “government shutdown” or “looming debt ceiling” are likely responses. While congressional leaders deal with these new issues, the debate over the Renewable Fuel Standards (RFS) is a longstanding issue that remains front and center. Since the standards were enacted over five years ago, ongoing rhetoric has obscured the intent of the RFS to address the nation’s energy security, environmental and economic concerns.

The latest attempt to thwart the RFS came on October 8 when the American Petroleum Institute (API) announced it had filed a lawsuit to challenge the 2013 standards set forth by the Environmental Protection Agency (EPA). The lawsuit should come as no surprise given the API previously challenged both the 2011 and 2012 standards. Citing EPA-mandated volumes of cellulosic ethanol are not yet available in the marketplace – four million gallons required versus 142,000 gallons produced – the API has called on Congress to repeal the RFS.

Repeal seems a bit rash considering the billions of dollars’ companies have invested in the emerging renewable fuels industry. However, the API is correct that a great divide has existed between statutory volumes set by the EPA and what commercial producers have released to the market.

For 2012, the EPA mandated refiners blend 8.65 million gallons of cellulosic biofuels into gasoline and diesel fuels although no cellulosic biofuel was produced on a commercial scale. This led to a federal court of appeals decision to vacate the 2012 mandate for cellulosic biofuels followed by a motion filed by the EPA to also reconsider its 2011 standards.

Food vs. Fuel

Cellulosic biofuels were included in the revised RFS under the Energy and Independence Security Act of 2007 in response to concerns over the diversion of food crops for biofuel production. Despite the lack of commercially-available cellulosic biofuels at the time the mandate was initiated, aggressive production targets were set so that quantities of cellulosic fuels would eventually rise above those set for corn ethanol. Although production to date has not come close to the 250 million gallons of capacity the EIA projected by 2015, it has ramped up over the past few months with commercial-scale production underway at KiOR and INEOS Bio.

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As for the ongoing notion that harvesting corn to produce fuel negatively impacts food prices, these effects remain uncertain. The Congressional Budget Office has found energy costs have a greater impact on food prices than ethanol production.

Environmental Impacts

Aside from the food vs. fuel debate, one of the most provocative arguments against the RFS is that the use of renewable fuels harms the environment. Realizing land-use changes could in fact cause unintended environmental harm, the RFS requires qualifying biofuels be produced from “biomass that excludes the use of planted crops from land newly converted to agriculture and wood from old growth and late successional forests.”

Compared to both gasoline and corn ethanol, cellulosic biofuels give off fewer greenhouse gas emissions. The EPA estimates full implementation of the RFS (by 2022) would reduce greenhouse gas emissions by 138 million tons per year.

Blend Wall

To address the coming blend wall, which is the amount of ethanol that can be reasonably blended into the fuel supply, the EPA has announced it will lower 2014’s quota based on an estimated 13.2 billion gallons of ethanol that could fit within the E10 blend wall.

RFS supporters want the EPA to increase the blending requirements from 10 percent (E10) to 15 percent ethanol (E15). Opponents argue the widespread availability of E15 will lead to consumer confusion and misfueling, resulting in engine damage in vehicles and small equipment not approved for the fuel blend.

Changes Unlikely This Year

In mid-September, Representative John Shimkus (R-IL) and Chair of the House Energy and Commerce Committee’s subcommittee on Environment and the Economy remarked any intent to reform the standards would be communicated within the next few months. “By the end of this year, you’ll know whether we’re going to do something or not.” The self-inflicted turmoil federal legislators are currently dealing with has likely set RFS reforms even further on the back burner.

The RFS have been under attack since they were introduced, and now that cellulosic biofuel production is ramping up, the arguments are certain to continue. The development of a clean, cost-effective and renewable fuel has not proved easy, but 2013 is poised to be a turning point.

A series of five whitepapers released by the House Energy and Commerce Committee provided the information referenced in this article. Each of the white papers, as well as stakeholder comments, are available for review on the Energy and Commerce Committee website.

Topics: renewable fuel standard

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