Urging the EPA to Reconsider RFS Targets
The Advanced Biofuels Association recently submitted our formal comments on the U.S. EPA’s proposed 2014 Renewable Volume Obligations. Nothing is more important to the continued future growth of advanced and cellulosic fuels than convincing the EPA to reconsider the arbitrary and insufficient targets it proposed for 2014. The full text of our comments covers more than 25 pages, but I’ll summarize a few key points.
Policy reversal falls disproportionately on advanced biofuels. The proposed rule represents a significant reversal of the EPA's support from previous years for the advanced and cellulosic biofuels industries. The intent of Congress with the renewable fuel standard (RFS) was to encourage the development of advanced and cellulosic biofuels, and this proposed rule undermines the ability of our member companies to deliver upon that vision.
The agency’s proposed RFS cuts fall disproportionately on advanced biofuels and fail to maximize the energy security and greenhouse gas benefits as intended by the statute. The proposal would cut the volume requirements for advanced biofuels by more than 40 percent when compared to the requirements written into the RFS statute. In contrast, the EPA is proposing a less than 10 percent reduction to volume requirements for conventional renewable fuels. We acknowledge that the conventional pool boasts more than 13 billion gallons of production and that a 10 percent cut represents more than 1 billion gallons. However, a cut of 40 percent from an intended pool of only 3.75 billion will send a significant signal that the government is backtracking from its interest and support of the advanced biofuels industry. This setback comes at a time when the advanced industry has had just four short years to develop, as compared with the almost 40 years the first-generation ethanol industry had to establish itself.
Proposal backtracks on commitment to reduce greenhouse gases. ABFA wonders why EPA would deliver such a large blow to the category of renewable fuels that reduces greenhouse gas emissions by at least 50 percent, while at the same time, the administration has doubled down on its effort to reduce climate change emissions.
Questionable legal authority likely results in “suspended animation.” EPA's contention that it has sufficient authority to waive the renewable mandate for conventional ethanol based on the demand of gasoline, rather than the production of the biofuels, appears manifestly contrary to the statute. This contention will most likely wind up in federal court, further leaving the country and the advanced and cellulosic industry in suspended animation concerning the overall direction of the RFS. This lack of clarity and uncertainty will stifle the ability of many smaller companies to acquire the financing necessary to build out the advanced biofuel sector envisioned in the 2007 law.
Let’s get real about RINs. Opponents of the RFS have made a great effort to suggest that the price of renewable identification numbers (RINs) is passed directly onto consumers in the price of gasoline. This assertion has been vastly distorted, and ABFA research shows a lack of correlation between the price of the RINs in the biomass-based diesel pool and the price of diesel.
Due to the economics of scaling up innovative technologies, advanced and cellulosic producers rely heavily upon RIN values to offset the high up-front costs of producing first-of-a-kind fuels relative to incumbent players in the fuels market. The intent of RINs is to provide value to the producer and to encourage industry, not undermine it. By reducing the 2014 advanced biofuel standard to below actual production in 2013, EPA runs the risk of becoming the agent of a self-fulfilling prophesy, where under-projecting production limits the potential for RIN generation, and therefore reduces producers' ability to increase production and grow the advanced and cellulosic biofuels industry.
Our ask of EPA. As a matter of policy, EPA should set RFS standards that encourage production and consumption of all available advanced biofuels. Setting a target below current production is highly destructive to the industry, and an arbitrary and capricious application of its statutory authority.Considering that in 2013, this industry generated more than 3.2 billion RINs qualifying as advanced under the RFS, around 500 million of those RINs will be available to “carry over” into 2014, and further production is anticipated to come on line, ABFA believes the 2014 statutory target for advanced biofuels of 3.75 billion is appropriate. We will continue to work with all policymakers to see that the rule is modified moving forward. Your engagement will be most important and helpful.
Author: Michael McAdams
President, Advanced Biofuel Association