US government agency upholds proposal for new biofuel standards

25 June 2015

The US Senate held a hearing last Thursday to re-examine the Environmental Protection Agency (EPA)’s management of the federal renewable fuel standard (RFS). Under the country’s Clean Air Act (CAA), the EPA is mandated to set volume requirements for four biofuel categories including cellulosic biofuel, advanced biofuels, bio-based diesel, and total renewable fuels, with the ultimate goal of reaching approximately 136 billion litres of renewable fuel blended into domestic transportation fuels by 2022.

The RFS, born in 2005, requires a minimum of corn-based ethanol and other biofuels to be blended into transportation fuel produced or imported into the US, in a bid to reduce greenhouse gas (GHG) emissions that contribute to climate change. Legislators also contend the policy improves national energy security by reducing demand for foreign oil.

The US government agency formally released a proposal in early June with new volume requirements and associated percentage standards that would apply under the RFS programme for 2014, 2015, and 2016. The EPA also set a volume target for biomass-based diesel that would be required in 2017.

“This proposal marks an important step forward in making sure the Renewable Fuel Standard programme delivers on the congressional intent to increase biofuel use, lower greenhouse gas emissions and improve energy security,” said Janet McCabe, the Acting Assistant Administrator for EPA’s Office of Air and Radiation, during the Senate hearing last week.

Towards renewable transport?

According to the agency, the total amount of domestic renewable fuel blending in 2014 was 60 billion litres. This new proposal would increase this figure to 61.7 billion litres in 2015 and 65.8 billion litres in 2016, with most of the projected growth in non-ethanol advanced biofuels.

However, these targets fall short of what the RFS standard called for in the 2007 legislation. In addition, the target for the 2014 standard reflects the actual amount of domestic biofuel used in that year, since the report was released more than a year behind schedule.

This decrease in the volume requirement, coupled with the failure of the agency to release the 2014 and 2015 targets by the statutory deadline, has incited criticisms from ethanol producers who claim they are forced to scale back due to policy uncertainty.  

The topic of biofuels more generally has, however, also proved a lightning rod for debate in recent years in a number of other countries. While alternative biofuels are seen as one option to cut dependence on GHG-intensive transport fuels, other camps argue that biofuel production can put pressure on food prices and cause other negative climate impacts.  

While total biofuels make up just 0.8 percent of global energy markets, some experts suggest the significant potential for increase in the years ahead, and existing increases in biofuels trade in the last decade. Policy efforts to set renewable transport energy targets in countries such as the US and the EU can also alter the global market dynamics for biofuels. (See BioRes, 5 March 2015)

Bioethanol and biodiesel continue to be the primary forces behind international biofuel markets. Brazil is the world’s largest producer and exporter of biofuels of various varieties, while the US and the EU are the second and third largest producers.

Overcoming the “blend wall”

In the US, the EPA has said it intends to use its waiver authority to set the volumes of renewable fuels below those mandated by national law, citing the availability of refuelling infrastructure as a condition to waive the standard.

Current infrastructure and automobiles in the US still support mainly just the use of E10 fuel, which is 90 percent unleaded gasoline with up to 10 percent blended ethanol.

According to experts, the requirements made in 2007 expected a higher demand in gasoline that would have spurred innovation within the transportation industry to move past the so-called E10 “blend wall”, which represents the volume of ethanol that can be consumed domestically if all gasoline in the US contained 10 percent blended ethanol.

While the new EPA proposal does not change the actual proportion of biofuel that must be blended into gasoline or diesel, the volume requirements support the expansion of E15 or E85 fuels to meet RFS standards.

In a corresponding move last week, the US Department of Agriculture (USDA) announced a plan to spend US$100 million on new blender pumps that can deliver more ethanol to consumers who use higher-blend fuels.

Market uncertainty

During the US Senate hearing last week, lawmakers emphasised that the RFS must be implemented in a way that provides certainty in the marketplace. One congressman reported that 54 plants in 20 states have closed or idled due to the agency’s late announcement for 2014 and 2015 standards.

“Uncertainty has real consequences…the advanced and cellulosic sectors have already lost US$13.7 billion due in investment to EPA’s delay,” said on congressman utilising recent figures released by the Biotechnology Organisation.  

In response, the agency reiterated its commitment to finalise these volume requirements for 2015 and 2016 by 30 November this year.

The proposal is open for public comment until 27 July.

ICTSD reporting; “EPA renewable fuel standard management scrutinized at hearing,” BIOMASS Magazine, 19 June 2015, “EPA unveils three-year ethanol mandate,” THE HILL, 29 May 2015.

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