Renewable Fuel Standard (United States)

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The Renewable Fuel Standard (RFS) is an American federal program that requires transportation fuel sold in the U.S. to contain a minimum volume of renewable fuels. The RFS originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007 (EISA).

History[edit]

The RFS program requires renewable fuel to be blended into transportation fuel in increasing amounts each year, escalating to 36 billion gallons by 2022. Each renewable fuel category in the RFS program must emit lower levels of greenhouse gases relative to the petroleum fuel it replaces.[1]

The first RFS, usually referred to as RFS1, required that 4 billion gallons of biofuel be used in 2006. This requirement was scheduled to rise to 7.5 billion gallons in 2012. These requirements were passed as part of the Energy Policy Act of 2005. The Energy Independence and Security Act of 2007 changed and broadened these rules. EISA was signed into law by President George W. Bush and the bill was overwhelmingly supported by members of congress from both parties.[2] Many people were skeptical of the possibility of producing so much biofuel but the production was roughly double the targeted amount in 2010.

The changes required by the 2007 legislation are usually referred to as RFS2. RFS2 required the use of 9 billion gallons in 2008 and scheduled a requirement for 36 billion gallons in 2022. The quota for 2022 was to allow no more than a maximum of 15 billion gallons from corn-starch ethanol and a minimum of 16 billion gallons from cellulosic biofuels.[2]

In reaction to the implementation of the RFS, passage of EISA, and other measures to support ethanol, the Organization of Petroleum Exporting Countries (OPEC) expressed alarm. In 2007, OPEC's secretary general, Abdalla El-Badri, said that increased use of biofuels by the United States could cause OPEC to decrease production. Other OPEC leaders openly worried about "security of demand."[3]

Enforcement and administration[edit]

The United States Environmental Protection Agency (EPA) administers the RFS program with volume requirements for several categories of renewable fuels.[4] The EPA issued detailed regulations for implementing RFS1 in April 2007. These regulations established rules for fuel suppliers, created the Renewable Identification Numbers (RIN) scheme for compliance and trading credits, and rules for waivers. The EPA calculates a blending standard for each year based on estimates of gasoline usage created by the Department of Energy's Energy Information Agency. Separate quotas and blending requirements are determined for cellulosic biofuels, biomass-based diesel, advanced biofuels, and total renewable fuel. Exemptions for small producers are considering when calculating blending ratios.[2][5] Advanced biofuels are required to meet stricter air pollution requirements than regular corn-based ethanol.[6]

The individual obligations for producers are called Renewable Volume Obligations (RVO). An RVO is determined by multiplying the output of the producer by the EPA's announced blending ratios for each of the four standards described above. The producer has to show compliance through the RIN system. It can purchase RINs to makeup for any shortfall in production. Surplus RINs can be sold. This is done through the EPA's Moderated Transaction System.[2] According to the EPA the EPA established an RVO of 18.11 million gallons total for 2016.[5]

On May 29, 2015, the EPA set an RVO lower than the benchmarks established by Congress. This generated criticism from all sides of the issue. The EPA was also blamed for missing legal deadlines to revise the RVO targets. Some say this introduced market uncertainty, harming both consumers and producers. The EPA made this announcement in May to meet a June 1, 2015 deadline established by a settlement to suit brought by fossil fuel and chemical trade associations. The EPA defended the targets calling them "ambitious but responsible" and arguing that "Biofuels remain an important part of the overall strategy to enhance energy security and address climate change." The EPA announcement called for a 27-percent increase in the use of advanced biofuels from 2014 to 2016. Most gasoline used in the United States is blended to E10, giving it a relatively low ethanol content. The May 2015 rule changes thus created incentives to make greater use of E85 and E15, which contain much more ethanol.[7]

Many in the biofuel industry argue that the EPA abused its waiver authority by setting RVOs lower than the statutory minimums. They say Congress clearly intended for the law to apply according to supply that could be available rather than demand. They contend that the EPA has conflated the two. Under EISA, the statutory standard for 2017 is 24 billion gallons. The EPA only set an RVO of 18.8 billion gallons of biofuel for 2017. This was up from 18.4 billion gallons in 2016. Ethanol supporters and oil companies alike criticized this target.[8]

On June 22, 2016, the EPA announced that it was considering changes to the enforcement of blending standards. The agency has received petitions calling for compliance to be shifted away from refiners to blenders or “the entity that holds title to the gasoline or diesel fuel, immediately prior to the sale from the bulk transfer/terminal system … to a wholesaler, retailer or ultimate consumer.”[9]

After 2022, the EPA has wide discretion to set RVOs as it sees fit.[10] According to the EISA, "the applicable volumes of each fuel specified in the tables in clause (i) for calendar years after the calendar years specified in the tables shall be determined by the Administrator, in coordination with the Secretary of Energy and the Secretary of Agriculture, based on a review of the implementation of the program during calendar years specified in the tables..."[11]

Feedstock[edit]

Under EISA, "renewable fuel" was defined as being made from biomass but also restricted the type of land on which permissible feedstock could be grown. Land put into cultivation after December 13, 2007 was excluded. Tree crops, tree residues, and biomass grown on federal land were all excluded as permissible feedstock.[2]

Pollution standards[edit]

IESA has air pollution standards that require vary according to the type of biofuel used and the fuel being displaced. Cellusoic biofuels must have emissions that are at least a 60 reduction relative to gasoline or diesel fuel that would be used in its place. Biomass and sugarcane ethanol must have 50 percent reductions. Other forms of ethanol, including corn-based ethanol, must achieve at least 20 percent reductions. In 2014, the EPA estimated that the 20 percent reduction requirement for corn-based ethanol would be achieved in 2022.[6]

"Blend wall"[edit]

The amount of ethanol used in the United States is effectively capped by a limit of 10% ethanol content for most gasoline and diesel sales. This limit is often referred to as the "blend wall". Raising the blend wall to 15% could help meet the statutory minimums set out in EISA but at significant cost.[3]

Food prices[edit]

According to research sponsored by the United States government, the World Bank, and other organizations, there is no clear link between the RFS and higher food prices. Ethanol critics contend that RFS requirements crowd out production that would go to feed livestock.[3][12]

References[edit]

  1. ^ "Renewable Fuel Standard". US Department of Energy Alternative Fuels Data Center. Retrieved 15 January 2013. 
  2. ^ a b c d e Schnepf, Randy; Yacobucci, Brent (14 October 2010). Renewable Fuel Standard: Overview and Issues. United States: Congressional Research Service. 
  3. ^ a b c Brown, Robert C.; Brown, Tristan R. (2012). Why Are We Producing Biofuels. Ames, Iowa: Brownia. ISBN 978-0984090631. 
  4. ^ "Renewable Fuel Standard". US Environmental Protection Agency. Retrieved 15 January 2013. 
  5. ^ a b Swift, Wes (19 April 2016). "RIN generation is up, but more biofuels mandates are on the way". The Barrel: The essential perspective on global commodities. PLATTS McGraw-Hill Financial. Retrieved 20 April 2016. 
  6. ^ a b "The Renewable Fuel Standard: Issues for 2014 and Beyond" (PDF). www.cbo.gov. Congressional Budget Office. June 2014. Retrieved 16 June 2016. 
  7. ^ Neuhauser, Alan (29 May 2015). "EPA Raises Fuel Requirements, Lowers Standards, Upsets Everybody". U.S. News (United States). Retrieved 20 April 2016. 
  8. ^ Dinneen, Bob (22 May 2016). "It's Time for the RFS to get ‘Back on Track’". Ethanol Producer Magazine (United States). Retrieved 16 June 2016. 
  9. ^ [1]
  10. ^ [2]
  11. ^ [3]
  12. ^ Prentice, Chris (14 June 2016). "Ethanol, bioenergy no threat to food security - report". Reuters (United States). Retrieved 16 June 2016.