EPA Reduces Ethanol Mandate in Renewable Fuel Standard
Posted on December 12, 2013
In his 2006 State of the Union address, President George W. Bush famously stated that “America is addicted to oil.” To address this national addiction, the president included among other advanced energy initiatives, a new commitment to biofuels, including ethanol:
“We’ll also fund additional research in cutting- edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switchgrass. Our goal is to make this new kind of ethanol practical and competitive within six years.”
Unfortunately, almost 8 years later, this goal has yet to be realized. Acting upon Bush’s call, Congress passed the Energy Independence and Security Act of 2007 (EISA), much of which is codified in Section 211(o) of the Clean Air Act. Under EISA, the Environmental Protection Agency (EPA) is responsible for ensuring that transportation fuel sold in the United States contains a minimum volume of renewable (i.e., non fossil-fuel-based) fuel. Section 211(o) of the Clean Air Act establishes annual volume standards for four types of biofuel: cellulosic biofuel, biomass-based diesel, advanced biofuel, and “total renewable fuel” (the vast majority of which is conventional corn ethanol). Section 211(o) also requires EPA to annually review and, under certain circumstances, adjust the annual volumes. Under the agency’s Renewable Fuel Standard (RFS) program, producers and importers of transportation fuel use the annual volumes and associated percentage standards to calculate their compliance obligations.
On November 15, 2013, the EPA released a Notice of Proposed Rulemaking setting forth the 2014 Renewable Fuels Standard (RFS). As it has done regularly in previous years, EPA is proposing to set the 2014 annual volume for cellulosic biofuel (the ethanol made from Bush’s “wood chips and stalks, or switchgrass”) far below the statutory goal–17 million gallons instead of 1.75 billion gallons–evidence that this most promising type of biofuel has yet to become commercially viable. However, what makes this year’s proposed RFS especially noteworthy, is that EPA is proposing, for the first time ever, to also set the annual volume for total renewable fuel (i.e., mainly corn ethanol) below the statutory goals: 15.1 billion gallons instead of 18.15 billion gallons. The proposed 2014 RFS standards are listed in This Chart.
The proposed total renewable fuel volume for 2014, if finalized, would strike a blow to the beleaguered corn ethanol industry. However, in EPA’s view, the reduced volume is necessary because beginning in 2014, ethanol will have hit the so-called “blend wall”: a practical limitation on the volume of ethanol that can be consumed in gasoline across the country in light of logistical constraints on the supply of higher ethanol blends to the vehicles that can use them. In addition, as EPA explains in the preamble to its proposed RFS standard, the total demand for gasoline into which ethanol could be blended has been decreasing over the last few years due to the recent greenhouse-gas and fuel efficiency (CAFÉ) standards for vehicles, fuel prices, and broader factors affecting the economy.