For the Future of Advanced and Cellulosic Biofuels, EPA Urged to Reconsider RFS Targets
Tuesday, January 28, 2014
The Advanced Biofuels Association (ABFA) submitted our formal comments today on the Environmental Protection Agency’s proposed 2014 Renewable Volume Obligations. Nothing is more important to the continued growth of the advanced and cellulosic fuels industry than convincing EPA to reconsider the arbitrary and insufficient targets they proposed for 2014. The full text of our comments covers more than 25 pages (which you can read here), but I’ll summarize a few key points.
Jobs and Future Innovation at Stake
Businesses that rely in part on the commitment of the federal government under the RFS have spent $14.72 billion dollars in the last six years in pursuit of the policy goals of the law. According to Bloomberg, $33 billion has been invested world-wide in this sector over the last four years. These numbers represent people and jobs all over America: jobs in rural America planting and cultivating the best new energy crops, jobs building and operating biorefineries, technology and engineering jobs, laboratory jobs researching new feedstocks and enzymes, and many more.
Whether intended or not, this proposed rule has sent a chilling signal to financial markets everywhere about the continued desire of the Obama Administration to support and grow an advanced and cellulosic biofuels industry in the United States. This Administration has spent over half a billion dollars through the Department of Energy alone to develop the advanced biofuels industry. EPA’s proposal would undercut the very companies the Administration has funded, and continues to fund, to develop and commercialize these fuels.
Policy Reversal Falls Disproportionately on Advanced Biofuels…
The proposed rule represents a significant reversal of EPA’s support from previous years for the advanced and cellulosic biofuels industry. The intent of Congress with the Renewable Fuel Standard (RFS) was to encourage the development advanced and cellulosic biofuels, and this proposed rule undermines the ability of our member companies to deliver upon that vision.
EPA’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. EPA is proposing to cut the volume requirements for advanced biofuels by more than 40% when compared to the requirements written into the RFS statute. In contrast, EPA is proposing a less than 10% 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% cut represents more than a billion gallons. But, a cut of 40% 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.
…and 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% at the same time the Administration has doubled down on its effort to reduce climate change emissions. By cutting the advanced pool, EPA is replacing fuels that deliver greenhouse gas emissions reductions of more than 50% with fuels that produce more heat-trapping pollution. Cutting these gallons from the advanced pool will result in 8.5 million more tons of carbon dioxide emissions in 2014.
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 most likely will 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. Another recent study by Informa Analysis reaches a similar conclusion as it relates to the price of gasoline.
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 the RIN is to provide value to the producer and to encourage industry, not undermine it. By reducing the advanced biofuel standard for 2014 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, of which approximately 500 million of those RINs “carry over” into 2014, and that further production is anticipated to come online, ABFA believes the 2014 statutory target for advanced biofuels of 3.75 billion is appropriate. If forced to choose one of the options EPA provided in the proposed rule, ABFA prefers Option 1 regarding “Advanced Biofuel Availability” as it comes closest to the statutory number, and at a minimum it does not backslide from last year’s target as proposed.