The Renewable Fuel Standard (RFS): In Brief
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy
November 27, 2013
Congressional Research Service
7-5700
www.crs.gov
R43325
The Renewable Fuel Standard: In Brief
Summary
The Renewable Fuel Standard (RFS) requires U.S. transportation fuel to contain a minimum
volume of biofuel. The RFS—established by the Energy Policy Act of 2005 (P.L. 109-58;
EPAct05) and expanded in 2007 by the Energy Independence and Security Act (P.L. 110-140;
EISA)—began with 4.0 billion gallons of renewable fuel in 2006 and ascends to 36.0 billion
gallons in 2022. The Environmental Protection Agency administers the RFS. Compliance for the
RFS is met using a credit system with renewable identification numbers (RINs). Some have
concerns about how EPA is administering the RFS (e.g., the accuracy of EPA projections of the
annual amounts of advanced biofuel that will be produced), which biofuels are eligible for which
part of the mandate, how the RIN market operates, and the potential impact of the “blend wall,”
among other things. Congress has expressed interest in the RFS, particularly the challenges
associated with implementing the RFS and with compliance. Some question whether it is time to
amend or repeal the RFS or maintain the status quo.
Congressional Research Service
The Renewable Fuel StandardJanuary 16, 2015
Congressional Research Service
7-5700
www.crs.gov
R43325
The Renewable Fuel Standard (RFS): In Brief
Contents
Introduction...................................................................................................................................... 1
The Statute ....................................................................................................................................... 1
Statutory Compliance ...................................................................................................................... 12
Considerations ................................................................................................................................. 34
Administering Agency ............................................................................................................... 34
Qualifying Biofuels ................................................................................................................... 4
RIN Market5
Cellulosic Biofuel Production ................................................................................................... 6
RIN Market............................. 5
Blend Wall ................................................................................................... 6
Blend Wall .............................. 6
External Factors ................................................................................................... 7
Other Factors ...................... 7
Congressional Issues ....................................................................................................... 8
Congressional Issues ................. 7
CRS Experts........................................................................................................ 8
CRS Experts............................. 8
Contacts
Author Contact Information............................................................................................................. 8
Acknowledgments .............. 9
Contacts
Author Contact Information............................................................................................................. 89
Congressional Research Service
The Renewable Fuel Standard (RFS): In Brief
Introduction
The Renewable Fuel Standard (RFS) is a federal statutory requirement, which mandates that U.S.
transportation fuel must contain a
minimum volume of biofuel, is a federal statutory requirement.1 The mandated minimum volume
increases annually, and can be met using both corn-starch ethanol and advanced biofuels. In order
for a biofuel to be applied toward the mandate, it must meet certain environmental and biomass
feedstock criteria.
The RFS is the only federal energy policy that mandates the use of an alternative energy source
for a specific sector with an environmental stipulation: biofuels for transportation that meet
certain lifecycle greenhouse gas (GHG) emission reduction thresholds. A variety of factors (e.g.,
infrastructure, technology, and weather) have led to challenges in meeting the RFS targets.
Industry’s inability to meet the targets has led to investigations of the RFS by some in Congress,
and to court rulings. Because of concerns about the feasibility of the RFS, some stakeholders may
question whether it is time to amend or repeal the RFS or maintain the status quo.2 A variety of factors (e.g., infrastructure, technology, weather, the “blend wall,”
and federal assistance) have led to challenges, including delays by the Environmental Protection
Agency (EPA) in setting the annual volume standards and a lack of cellulosic biofuel production.
Further, it is not clear how declining oil and gasoline prices will impact the biofuel industry.
Challenges in implementing the RFS have led to investigations of the RFS by some in Congress,
and to court rulings. More specifically, the 113th Congress held seven hearings where the RFS or
renewable fuels was the focus or a recurring topic of discussion, and since 2010 there have been
five legal challenges regarding EPA’s administration of the RFS.2 Because of concerns about the
implementation and feasibility of the RFS, some Members of Congress have questioned whether
it is time to amend or repeal the RFS, or to maintain the status quo.3
This report provides a basic description of the RFS, including some of the widely discussed
issues.4
The Statute
The RFS was established by the Energy Policy Act of 2005 (P.L. 109-58; EPAct05) and expanded
in 2007 by the Energy Independence and Security Act (P.L. 110-140; EISA). The RFS mandate
requires that transportation fuel sold or introduced into commerce in the United States annually
from 2006 to 2022 contain an increasing volume of a predetermined suite of fuels (4.0 billion
gallons of renewable fuel in 2006, ascending to 36.0 billion gallons in 2022). This suite includes
renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. The annual
volumes required are being met mostly with conventional biofuel (e.g., corn-starch ethanol) in the
beginning years. In later years, the conventional biofuel volume amounts are held steady, while
the mandate increases the requirement of advanced biofuels. For instance, the RFS cellulosic
biofuel requirement increases over time from less than 1% of the RFS in 2010 to 44% of the RFS
in 2022.3
Statutory Compliance
The EPA regulates compliance with the RFS using a credit system. Obligated parties (generally
gasoline and diesel fuel producers and importers) submit credits—called renewable identification
numbers (RINs)4—to EPA equal to the number of gallons in their annual obligation.5 A party’s
1
This report is an abbreviation of CRS Report R40155, Renewable Fuel Standard (RFS): Overview and Issues.
Legislation has been proposed in the 113th Congress that would amend or repeal the RFS (e.g., H.R. 1461, H.R.
1462).
3
Calculations include the annual mandate required by statute in 2007 and do not take into account EPA’s revision of
the cellulosic biofuel mandate that occurred in 2010, 2011, 2012, and 2013.
4
A RIN is a unique 38-character number that is issued (in accordance with EPA guidelines) by the biofuel producer or
importer at the point of biofuel production or the port of importation. Each qualifying gallon of renewable fuel has its
(continued...)
2
Congressional Research Service
1
The Renewable Fuel Standard: In Brief
annual obligation, referred to as the renewable volume obligation (RVO), is the fuel supplier’s
total gasoline and diesel sales multiplied by the annual percentage standards announced by EPA.6
RINs are valid for use in the year they are generated and the following year. Further, obligated
parties may carry a limited deficit from one year to the next, but may not carry year-on-year
deficits. RINs may be used by the party that generates them or they may be traded with other
parties. The EPA Moderated Transaction System (EMTS) is used to register RIN transactions.
Differences Between the 2005 RFS and the 2007 RFS
The RFS was first established in 2005 via the Energy Policy Act. Specifically, Section 1501 (Renewable Content of
Gasoline) of EPAct05 amended Section 211 of the Clean Air Act (CAA) by adding a Renewable Fuel Program. CAA
Section 211 requires any gasoline and diesel fuel and fuel additives produced and commercially distributed for use in
highway motor vehicles to be registered with EPA. Section 1501 directed the EPA Administrator to ensure that
gasoline sold or introduced into commerce in the United States contained a volume of renewable fuel at a certain
level annually. This “original” 2005 RFS required 4.0 billion gallons of renewable fuel for 2006, ascending to 7.5 billion
gallons by 2012. Subsequent annual volume amounts were to be determined by the Administrator and the Secretaries
of Agriculture and Energy. Additionally, the 2005 RFS would have required that 250 million gallons of the renewable
fuel be derived from cellulosic biomass starting in 2013.
There are at least five major changes from the 2005 RFS to the 2007 RFS: much larger annual volumes in the 2007
RFS, the establishment of separate requirements for different classes of biofuels (e.g., cellulosic, advanced), the
addition of greenhouse gas accounting requirements, a more selective renewable biomass definition, and an expansion
of EPA’s waiver authority to lower RFS volumes. The renewable biomass definition for the 2007 RFS does not allow
for biomass removed from federal lands, and excludes crops from forested lands. Further, the 2007 RFS waiver
authority directs the EPA Administrator to set the annual standard for cellulosic biofuels under the RFS for the
following year by November 30 of each year, and to lower the cellulosic biofuel standard if projected production is
less than the volume in the statute. The 2007 RFS waiver authority also allows the EPA Administrator to reduce the
renewable fuel and advanced biofuel requirements of the standard, if the cellulosic biofuel requirement is lowered.
Different biofuels are not treated equally within the RFS, meaning that some biofuels can meet
the annual standard for multiple RFS categories. The categories are nested within each other, such
that some fuels qualify for multiple categories (e.g., cellulosic ethanol), while others (mainly corn
ethanol) may only be used to meet the overall RFS but not the advanced category or its nested
subcategories. For example, a gallon of cellulosic biofuel may be used to meet the cellulosic
mandate, the advanced biofuel mandate, and the overall RFS. A key part of the definition of each
fuel category is whether the fuel achieves certain GHG reductions relative to gasoline and diesel
fuel. Each fuel is assigned a lifecycle GHG emission threshold (in proportion to baseline lifecycle
GHG emissions for gasoline and diesel).7 For example, a fuel must achieve at least a 50% GHG
reduction to be considered an “advanced biofuel.” Similarly, biofuel must achieve at least a 20%
GHG reduction to qualify as a generic renewable fuel.
(...continued)
own unique RIN.
5
For more information, see CRS Report R42824, Analysis of Renewable Identification Numbers (RINs) in the
Renewable Fuel Standard (RFS).
6
For 2013, the overall biofuel standard was 9.74%, the advanced biofuel standard was 1.62%, the biomass-based diesel
standard was 1.13%, and the cellulosic biofuel standard was 0.004%. U.S. Environmental Protection Agency,
“Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Final Rule,” 78 Federal Register 158,
August 15, 2013.
7
For more information, see CRS Report R40460, Calculation of Lifecycle Greenhouse Gas Emissions for the
Renewable Fuel Standard (RFS).
Congressional Research Service
2
The Renewable Fuel Standard: In Brief
In addition to the different categories of RINs, some biofuels generate more RINs per volume
than others. This is possible because of the equivalence value (EV) of the biofuel. Biofuels vary
in energy content and renewable content, and the EV takes this into account.8 For example,
because biodiesel has an EV of 1.5 when being used as an advanced biofuel,9 1,000 gallons of
biodiesel would equal 1,500 RIN gallons of advanced biofuels. The EV of a renewable fuel
represents the number of gallons that can be claimed for compliance purposes for every physical
gallon of renewable fuel used.
Considerations
Implementation of the RFS has been complex, and compliance with some of its parts has been
challenging. These challenges have raised concerns with many stakeholders. This section briefly
explains some of the general issues and associated challenges.
Administering Agency
EPA administers the RFS.10 This includes evaluating proposed pathways of various biofuel
production processes for eligibility in meeting the GHG requirements. In addition, EPA must
evaluate the ability of all RFS-eligible renewable fuel facilities to meet the annual standard,
release an annual volume supply standard based on these research findings,11 and ensure that
annual compliance is met. All of the above must be completed in a one-year time frame, taking
into consideration comments from other government agencies, the public, and, recently, court
decisions. These responsibilities could be viewed as a significant addition to EPA’s regulatory
authority, and required EPA to develop new capabilities in order to carry them out. It is not clear
that, more than three years after the 2010 issuance of the amended RFS final rule,12 EPA has
mastered those capabilities, in large part because it must rely on critical information from the very
biofuel plants that it is evaluating.
One of the concerns some have is the accuracy of EPA’s calculations of the annual amounts of
advanced biofuel that will be produced in a given year. Using its waiver authority,13 the EPA may
lower the volume requirements for biofuels if the projected volume is lower than what is in the
statute. For instance, EPA used this waiver authority to consistently lower the cellulosic biofuel
mandate from 2010 to 2013. EPA’s 2012 cellulosic biofuel projection, among other things, was
objected to by the American Petroleum Institute and challenged in court. The federal court
8
40 CFR 80.1415.
All EVs are in relation to the energy content of ethanol. The EV for ethanol is 1.0. One gallon of biodiesel has
contains roughly 1.5 times the energy of one gallon of ethanol, and thus has an EV of 1.5.
10
Although EPA administers the RFS, there are programs under the direction of other federal departments that may
indirectly assist biofuel production that may be used to meet the mandate. For example, the U.S. Department of
Agriculture provides resources and support for biofuel feedstock development and supply (e.g., Biomass Crop
Assistance Program) as well as biofuel infrastructure development (e.g., Rural Energy for American Program,
Biorefinery Assistance Program, etc.).
11
On occasion, EPA has approved annual standards for some biofuels different from what was originally scheduled in
statute.
12
Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard
Program; Final Rule,” 75 Federal Register, March 26, 2010.
13
For more information, see CRS Report RS22870, Waiver Authority Under the Renewable Fuel Standard (RFS).
9
Congressional Research Service
3
The Renewable Fuel Standard: In Brief
vacated the 2012 cellulosic biofuel standard and provided principles that EPA will have to apply
to future annual projections.14
Another pressing issue for EPA is the timing of the announcement of the annual volume
production requirements. For the last three years, EPA has only once announced on time the final
rule for the annual RFS standards for the following year.15 EPA’s late announcement of the annual
RFS standards may be due to the depth of the analysis (e.g., difficulty in obtaining reliable and
timely information from the industry) or to other factors. Even if EPA is exercising the highest
level of due diligence and using the most dedicated suite of federal resources, the agency’s
missing annual standard announcement deadlines and making inaccurate volume projections
could have serious consequences for private investors.
Some question whether EPA is the best agency to administer the RFS. The RFS requires intimate
knowledge of all levels of the biofuel production chain, something that EPA did not seem to
possess prior to the RFS. However, EPA has for the past few years been closely involved with the
beginning of the advanced biofuel industry’s evolution, allowing EPA an unprecedented view of a
technology that could lead to promising results in the future. There may not be an “ideal” agency
to administer the RFS. Any agency would likely find it difficult to accurately project when a new
technology (i.e., advanced biofuel) selected by Congress, and not yet proven at commercial scale,
would come online and at what pace. Other government agencies (e.g., USDA) may be perceived
as too close to the industry and thus as lacking objectivity.
Qualifying Biofuels
Various biomass feedstocks (e.g., crop residue, tree residue, algae) can be used to produce
multiple types of biofuels. One potentially confusing aspect of the RFS is understanding which
biofuel is eligible for which part of the mandate.16 There are a number of nested categories within
the RFS, and a fuel may qualify as an advanced biofuel for one portion or more than one portion
of the mandate.17 Difficulty in understanding all of the advanced biofuels that qualify for the RFS
can lead to more difficulty in determining how compliance is being met.
Some misconceptions have arisen regarding eligible biofuels for the RFS. One is that all fuels
from a renewable source are eligible. That is not the case. The RFS operates as a biofuel standard,
with priority assigned to liquid transportation fuels from biomass feedstocks rather than other
renewable sources (e.g., wind). Another misconception is that, by creating the RFS, Congress
mandated the production of biofuels. The statutory language does not explicitly mandate the
production of biofuels; rather, it mandates the use of biofuel. It could be argued that it is difficult
to use a fuel that is not being produced, and that the RFS therefore indirectly does mandate the
production of certain biofuels.
14
American Petroleum Institute v. EPA, 706 F.3d 474 (D.C. Cir. 2013).
Under the CAA, each year’s standards are required to be announced by November 30 of the previous year. EPA
announced the 2011 final rule in November 2010, the 2012 final rule in December 2011, and the 2013 final rule in
August 2013.
16
For example, there were questions by some about the eligibility of algae-based biofuels for the RFS. For more
information, see CRS Report R42122, Algae’s Potential as a Transportation Biofuel.
17
Approved RFS fuels and feedstocks are provided by EPA at http://www.epa.gov/otaq/fuels/renewablefuels/newpathways/rfs2-pathways-determinations.htm.
15
Congressional Research Service
4
The Renewable Fuel Standard: In Brief
Some of the annual advanced biofuel volumes established by Congress are taking longer than
expected to be realized. For example, cellulosic biofuel production volumes are below
expectations. This is due to several factors, including lack of financial support, technology
setbacks, a down economy, and uneven support from the federal government (among other
factors).18 These factors, coupled with the fact that annual volumes in the statute were established
during different economic conditions, may indicate unrealistic volumes for some advanced
biofuels for the near future.
RIN Market19
The RFS created a market for RINs, which may be traded and sold like other commodities. If a
party has RINs beyond those they need for compliance in a given year, that party may bank the
RINs for the following year, or sell the RINs to other parties.20 Two key questions have been
raised about the RIN market and how the system operates: (1) What safeguards are in place to
prevent fraud in the system; and (2) what safeguards exist to prevent volatility and excessively
high RIN prices?
All RIN transactions are registered with the EPA Moderated Transaction System (EMTS).
However, this system is merely a clearinghouse for the transactions; trading parties are
responsible for all due diligence. Under this “buyer beware” system, trading parties, of their own
accord, must verify the legitimacy of the RINs they are selling or purchasing. The parties are
responsible for any fraudulent RINs they pass on to other buyers or submit to EPA for
compliance.21 In the past, questions have been raised about the validity of the RINs due to
fraudulent activity that occurred in the biodiesel RIN market in 2010 and 2011. EPA has since
taken steps to establish a voluntary quality assurance program (QAP) for verifying the validity of
RINs.22
While the proposed QAP could help prevent RIN fraud going forward, concerns over high prices
and volatility remain. Starting in January 2013, spot prices for conventional ethanol RINs rose
dramatically through the first half of the year, spiking to particularly high prices in mid-March
and mid-July. Since mid-July, when the possibility was raised by some stakeholders that the 2014
obligations might be lowered, prices have dropped steadily. Some stakeholders have questioned
the level of transparency surrounding RIN transactions and the role of non-fuel market players.
The March 2013 spike in RIN prices led some lawmakers, as well as stakeholders in the
petroleum, livestock, and other industries, to request EPA’s intervention in the RIN market to help
lower RIN prices.23 However, others, including biofuel proponents and many economists, have
18
For more information, see CRS Report R41106, Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic
Biofuels: Questions and Answers.
19
For more information on the RIN market, see CRS Report R42824, Analysis of Renewable Identification Numbers
(RINs) in the Renewable Fuel Standard (RFS). This section prepared by Brent Yacobucci, CRS Section Research
Manager.
20
It should be noted that the RIN market is not limited to obligated parties. Individuals and companies that are not
involved with fuel production and/or supply may also own, buy, and sell RINs.
21
Obligated parties who purchase fraudulent RINs must pay fines for each RIN submitted, and must submit valid RINs
to offset the fraudulent RINs.
22
Environmental Protection Agency, “RFS Renewable Identification Number (RIN) Quality Assurance Program;
Proposed Rule,” 78 Federal Register 35, February 2013.
23
See, e.g., Letter from The Honorable David Vitter, Ranking Member, Senate Committee on Environment and Public
(continued...)
Congressional Research Service
5
The Renewable Fuel Standard: In Brief
argued that high RIN prices are a necessary market signal to promote the development of new
fuels and infrastructure that would otherwise be uneconomical.24 RINs are currently a largely
unregulated market, although various stakeholders are considering ways to increase regulation
and oversight of the market.
Blend Wall
The “blend wall”—the upper limit to the total amount of ethanol that can be blended into U.S.
gasoline and still maintain automobile performance and comply with the Clean Air Act—is
viewed by many to be in direct conflict with the biofuel volumes mandated in the RFS.25 Thus far,
the largest volume being met under the RFS is for the non-advanced biofuel segment of the
mandate, and this has been met mainly with corn-starch ethanol blended into gasoline. Due to a
variety of factors, ethanol content in gasoline is generally limited to 10% (E10). With a relatively
fixed supply of gasoline, the amount of ethanol that can be supplied this way is also limited. If the
ethanol content of gasoline remains at 10%, and depending on fuel consumption rates, in the near
future the RFS may actually require more ethanol than can technically be blended into gasoline.
Some recent developments could alleviate blend wall concerns in the near term. One option
would be to blend higher levels of ethanol into conventional gasoline. In 2010 EPA granted a
Clean Air Act waiver that allows gasoline to contain up to 15% ethanol for use in model year
2001 and in newer light-duty motor vehicles. However, infrastructure and automobile warranty
concerns have precluded widespread offering and purchase of E15, gasoline blended with 10.5%
to 15% ethanol. Widespread use of E15 could postpone hitting the blend wall for a few years.
Another option to address the blend wall would be an aggressive push for flexible-fuel vehicles to
use E85, a high-level gasoline-ethanol blend containing 51% to 83% ethanol.26 There are
infrastructure concerns with the use of E85. There are a limited number of E85 fueling stations,
largely clustered in the Midwest, where many flex-fuel vehicles are concentrated. Most of the rest
of the flex-fuel vehicles in the United States are on the East Coast and in Texas, which contain far
fewer E85 stations.27
If ethanol remains the primary biofuel produced to meet the RFS, at some point the blend wall
will have to be addressed or the scheduled levels of biofuels in the RFS cannot be met. In the
(...continued)
Works, and The Honorable Lisa Murkowski, Ranking Member, Senate Committee on Energy and Natural Resources,
to The Honorable Gina McCarthy, Assistant Administrator, Office of Air and Radiation, Environmental Protection
Agency, March 20, 2013, http://www.vitter.senate.gov/newsroom/press/vitter-murkowski-ask-epa-to-protectamericans-from-rising-gas-prices.
24
For example, see Bruce A. Babcock and Sebastien Pouliot, The Economic Role of RIN Prices, Iowa State University
Center for Agricultural and Rural Development, CARD Policy Brief 13-PB 14, Ames, IA, November 2013,
http://www.card.iastate.edu/publications/dbs/pdffiles/13pb14.pdf.
25
For more information, see CRS Report R40445, Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol
“Blend Wall.”
26
The U.S. Energy Information Administration reports that as of 2011, there are close to 10 million flexible-fuel
vehicles (FFVs) on the road that are designed to use any mix of gasoline and/or E85. However, most of these FFVs are
not using E85.
27
Bruce A. Babcock and Sebastien Pouliot, How Much E85 Can Be Consumed in the United States, Iowa State
University Center for Agricultural and Rural Development, CARD Policy Brief 13-PB 15, Ames, IA, November 2013,
http://www.card.iastate.edu/publications/dbs/pdffiles/13pb15.pdf.
Congressional Research Service
6
The Renewable Fuel Standard: In Brief
longer term, the development of non-ethanol biofuels may obviate these concerns, but currently
these fuels are not available in sufficient supply to help meet the RFS mandates.
External Factors
The RFS is not a stand-alone policy. It interacts with many external factors that are not easily
controlled. For example, advanced biofuel production, at a minimum, requires conversion
technology, which itself requires technical expertise and time to ramp up to commercial scale.
The massive quantity of biomass feedstocks needed to produce biofuels require factors such as
appropriate weather conditions and an expectation of stable markets for feedstock commodities.
Further, some types of biofuel production thus far have proven to be dependent on tax incentives
in order to be economically feasible (e.g., biodiesel).28 Unexpected occurrences (e.g., drought,
failed technology, tax incentive expiration) can impact an entire industry, especially for some
advanced biofuels that are nascent industries compared to conventional transportation fuels.
Congressional Issues
The RFS was established at a time when Congress foresaw the need to diversify the country’s
energy portfolio, strengthen the economy of rural communities by encouraging certain
agricultural commodities that contribute to biofuel production, bolster U.S. standing in an
emerging segment of the energy technology market, and protect the environment, among other
things. Whether the RFS has met, and will meet, those congressional intentions remains to be
seen.
The RFS is a policy with an ambitious agenda. If Congress wants to amend or repeal the RFS,29
three of the main considerations may be:
•
What should be the purposes of the RFS?
•
Is the RFS properly designed to achieve those purposes?
•
What happens when, and if, the RFS has achieved its purposes?
At the outset, some would argue that the first question may seem straightforward; the RFS exists
to introduce more biofuels into the liquid transportation fuel market. However, upon deeper
reflection, it could be argued that the RFS exists to find another market for biomass feedstocks, or
to promote the economy of rural America (e.g., the construction of biofuel facilities that create
jobs).
The second question is perhaps the most difficult to answer. Many questions have been raised
about the challenges in achieving the ambitious RFS targets, given concerns over the blend wall
and the slow development of some advanced biofuels. Whether the RFS should be eliminated,
amended to address the current challenges in the program, or maintained in its current form is an
ongoing question for Congress. A related question is whether the current provisions for EPA to
waive various portions of the RFS mandates, as the agency has proposed doing for 2014, are
28
For more information, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues.
Legislation has been proposed in the 113th Congress that would amend or repeal the RFS (e.g., H.R. 1461, H.R.
1462).
29
Congressional Research Service
7
The Renewable Fuel Standard: In Brief
sufficient to address the current supply challenges, or whether the use of these waivers runs
counter to the goals of the program.
The third question relates to some current congressional debates regarding the elimination of the
conventional (corn-starch) ethanol portion of the mandate. If a segment of the biofuels industry
has consistently reached the annual mandate set by Congress, is the mandate still necessary?
Some contend that the corn-starch ethanol segment of the biofuels industry is in relatively good
financial standing and that a demand exists regardless of congressional involvement. This could
lead to the question: Should Congress have created an exit strategy for the RFS?
CRS Experts
For additional information on policy relating to the RFS and biofuels, please consult any of the
CRS policy specialists identified below.
RFS-Relevant Legislative Issues
Name
Phone
E-mail
Advanced biofuels, Bioenergy
Kelsi Bracmort
7-7283
kbracmort@crs.loc.gov
Renewable Fuel Standard
Brent Yacobucci
7-9662
byacobucci@crs.loc.gov
Agricultural commodities,
Farm Bill energy title
Randy Schnepf
7-4277
rschnepf@crs.loc.gov
Author Contact Information
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy
kbracmort@crs.loc.gov, 7-7283
Acknowledgments
Brent Yacobucci, CRS Section Research Manager, contributed to this report.
Congressional Research Service
8
1
42 USC 7545(o).
U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on Energy Policy, Health
Care and Entitlements, Examining EPA’s Management of the Renewable Fuel Standard Program, 113th Cong.,
December 10, 2014; U.S. Congress, House Committee on Agriculture, Subcommittee on Livestock, Rural
Development, and Credit, To Review the State of the Livestock Industry, 113th Cong., April 30, 2014. U.S. Congress,
Senate Committee on Agriculture, Nutrition, and Forestry, Advanced Biofuels: Creating Jobs and Lower Prices at the
Pump, 113th Cong., April 8, 2014. U.S. Congress, Senate Committee on Environment and Public Works, Subcommittee
on Clean Air and Nuclear Safety, Oversight Hearing on Domestic Renewable Fuels, 113th Cong., December 11, 2013;
U.S. Congress, House Committee on Energy and Commerce, Subcommittee on Energy and Power, Overview of the
Renewable Fuel Standard: Stakeholder Perspectives, 113th Cong., July 23, 2013; U.S. Congress, House Committee on
Energy and Commerce, Subcommittee on Energy and Power, Overview of the Renewable Fuel Standard: Government
Perspectives, 113th Cong., June 26, 2013; U.S. Congress, House Committee on Oversight and Government Reform,
Subcommittee on Energy Policy, Health Care and Entitlements, Up Against the Blend Wall: Examining EPA’s Role in
the Renewable Fuel Standard, 113th Cong., June 5, 2013; Monroe Energy, LLC v. EPA, 750 F.3d 909 (D.C. Cir. 2014);
American Petroleum Institute v. EPA, 706 F.3d 474 (D.C. Cir. 2013); Vinmar Overseas, Ltd. v. OceanConnect, LLC,
2012 Westlaw 3599486 (S.D. Tex. Aug. 20, 2012), 2012 Westlaw 5989206 (S.D. Tex. Nov 29, 2012); Grocery
Manufacturers Association v. EPA, 693 F.3d 169 (D.C. Cir. 2012); National Petrochemical & Refiners Association v.
EPA, 630 F.3d 145 (D.C. Cir. 2010).
3
Senate Energy and Natural Resources Committee, “Sen. Murkowski Comments on EPA Delay of RFS Standard,”
press release, November 21, 2014; Senator Chuck Grassley, “Grassley, Harkin Join Bipartisan Group in Calling on
EPA to Revise Renewable Fuel Standard,” press release, January 23, 2014. Additionally, legislation was proposed in
the 113th Congress that would amend or repeal the RFS (e.g., H.R. 550, H.R. 796, H.R. 1461, H.R. 1462).
4
This report presents information that can be found in more detail in CRS Report R40155, Renewable Fuel Standard
(RFS): Overview and Issues.
2
Congressional Research Service
1
The Renewable Fuel Standard (RFS): In Brief
to 2022 contain an increasing volume of a predetermined suite of fuels (4.0 billion gallons of
renewable fuel in 2006, ascending to 36.0 billion gallons in 2022). This suite includes renewable
fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. To date, the annual volumes
required have been met mostly with conventional biofuel (e.g., corn-starch ethanol). In later
years, the mandate holds steady the conventional biofuel volume amounts, while the mandate
increases the requirement of advanced biofuels. For instance, the RFS cellulosic biofuel
requirement increases over time from less than 1% of the RFS in 2010 to 44% of the RFS in
2022.5 The statutory language does not explicitly mandate the production of biofuels; rather, it
mandates the use of biofuel. It could be argued that it is difficult to use a fuel that is not being
produced, and that the RFS therefore indirectly does mandate the production of certain biofuels.
Statutory Compliance
The EPA regulates compliance with the RFS using a credit system.6 Obligated parties7 submit
credits—called renewable identification numbers (RINs)8—to EPA that equal the number of
gallons in their annual obligation.9 This annual obligation, referred to as the renewable volume
obligation (RVO), is the obligated party’s total gasoline and diesel sales multiplied by the annual
renewable fuel percentage standards announced by EPA.10 RINs are valid for use in the year they
are generated and the following year.11 Further, obligated parties may carry a deficit from one
year to the next, but, in the year following the deficit, the obligated party must both meet
compliance for that’s year’s renewable fuel volume requirement and purchase or generate enough
credits to satisfy the deficit from the previous year.12 RINs may be used by the party that
generates them or they may be traded with other parties. The EPA Moderated Transaction System
(EMTS) is used to register RIN transactions.
5
Calculations include the annual mandate required by statute in 2007 and do not take into account EPA’s revision of
the cellulosic biofuel mandate that occurred for 2010, 2011, 2012, and 2013, and proposed for 2014. EPA is statutorily
obligated to revise the cellulosic mandate downward if there is insufficient domestic supply.
6
42 USC 7547(o)(5).
7
EPA reports that an obligated party is any refiner that produces gasoline or diesel fuel within the 48 contiguous states
or Hawaii, or any importer that imports gasoline or diesel fuel into the 48 contiguous states or Hawaii during a
compliance period.
8
A RIN is a unique 38-character number that is issued (in accordance with EPA guidelines) by the biofuel producer or
importer at the point of biofuel production or the port of importation. Each qualifying gallon of renewable fuel has its
own unique RIN.
9
For more information, see CRS Report R42824, Analysis of Renewable Identification Numbers (RINs) in the
Renewable Fuel Standard (RFS).
10
For 2013, the overall renewable fuel standard was 9.74%, the advanced biofuel standard was 1.62%, the biomassbased diesel standard was 1.13%, and the cellulosic biofuel standard was 0.004%. U.S. Environmental Protection
Agency, “Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Final Rule,” 78 Federal Register
158, August 15, 2013. EPA has not yet finalized the 2014 or 2015 standards.
11
§80.1427(6)(i) in the EPA RFS regulations. Exporters of renewable fuel may use RINS generated in the previous
year to meet up to 20% of their current year exporter renewable volume obligation. U.S. Environmental Protection
Agency, “RFS Renewable Identification Number (RIN) Quality Assurance Program; Final Rule,” 79 Federal Register,
July 18, 2014.
12
42 USC 7547(o)(5)(D).
Congressional Research Service
2
The Renewable Fuel Standard (RFS): In Brief
Differences Between the 2005 RFS and the 2007 RFS
The RFS was established in 2005 by the Energy Policy Act. Specifically, Section 1501 (Renewable Content of Gasoline)
of EPAct05 amended Section 211 of the Clean Air Act (CAA) by adding a Renewable Fuel Program. CAA Section 211
requires any gasoline and diesel fuel and fuel additives produced and commercially distributed for use in highway
motor vehicles to be registered with EPA. Section 1501 directed the EPA Administrator to ensure that gasoline sold
or introduced into commerce in the United States contained a volume of renewable fuel. This “original” 2005 RFS
required 4.0 billion gallons of renewable fuel for 2006, ascending to 7.5 billion gallons by 2012. The amount of
renewable fuel is described in EPAct05 for the years 2006 through 2011. Beginning in 2013, the annual volume of
renewable fuel is determined by the EPA Administrator and the Secretaries of Agriculture and Energy. Additionally,
the RFS established in EPAct05 would have required that 250 million gallons of the renewable fuel be derived from
cellulosic biomass starting in 2013.
The RFS was expanded in 2007 by the Energy Independence and Security Act. There are at least five major changes in
the RFS as expanded by EISA:
•
much larger annual volumes,
•
the establishment of separate requirements for different classes of biofuels (e.g., cellulosic, advanced),
•
the addition of greenhouse gas accounting requirements,
•
a more selective renewable biomass definition, and
•
an expansion of EPA’s waiver authority to lower RFS volumes.
The renewable biomass definition for the 2007 RFS does not allow for biomass removed from federal lands, and
excludes crops from forested lands. Further, the 2007 RFS waiver authority directs the EPA Administrator to set the
annual standard for cellulosic biofuels under the RFS for the following year by November 30 of each year, and to
lower the cellulosic biofuel standard if projected production is less than the volume in the statute. The 2007 RFS
waiver authority also allows the EPA Administrator to reduce the renewable fuel and advanced biofuel requirements
of the standard, if the cellulosic biofuel requirement is lowered.
Different biofuels are not treated equally within the RFS, meaning that some biofuels can be used
to meet the annual standard for multiple RFS categories. The categories are nested within each
other, such that some fuels qualify for multiple categories (e.g., cellulosic ethanol), while others
(mainly corn-starch ethanol) may only be used to meet the overall RFS but not the advanced
category or its nested subcategories. For example, a gallon of cellulosic biofuel may be used to
meet the cellulosic biofuel mandate, the advanced biofuel mandate, and the overall RFS, possibly
making it a more highly-valued fuel.13
A key part of the definition of each fuel category is whether the fuel achieves certain greenhouse
gas (GHG) reductions relative to gasoline and diesel fuel. Each fuel is assigned a lifecycle GHG
emission threshold (in proportion to baseline lifecycle GHG emissions for gasoline and diesel).14
For example, a fuel must achieve at least a 50% GHG reduction to be considered an “advanced
biofuel,” at least a 60% reduction to be considered a “cellulosic biofuel,” and at least a 50%
reduction to be considered “biomass-based diesel.” Similarly, biofuel from new facilities must
achieve at least a 20% GHG reduction to qualify as a generic renewable fuel.
13
The value of any biofuel within the RFS depends on the RIN price at a given time. As different categories of RINs
are used to meet the various standards, there is often a price difference between RINs (e.g., advanced biofuel RINs are
generally more expensive than conventional RINs).
14
For more information, see CRS Report R40460, Calculation of Lifecycle Greenhouse Gas Emissions for the
Renewable Fuel Standard (RFS).
Congressional Research Service
3
The Renewable Fuel Standard (RFS): In Brief
In addition, some biofuels generate more RINs per volume than others because of the equivalence
value (EV) of the biofuel. Biofuels vary in energy content and renewable content, and the EV
takes this into account.15 The EV of a renewable fuel represents the number of gallons that can be
claimed for compliance purposes for every physical gallon of renewable fuel used. For example,
because biodiesel has an EV of 1.5 when being used as an advanced biofuel,16 1,000 physical
gallons of biodiesel would equal 1,500 RIN gallons of advanced biofuels.
Considerations
Implementation of the RFS has been complex, and compliance with some of its parts has been
challenging. These challenges have raised concerns with many stakeholders. This section briefly
explains some of the general issues and associated challenges.
Administering Agency
EPA administers the RFS.17 This includes evaluating renewable fuel pathways eligible for the
RFS.18 In addition, EPA must evaluate the ability of the biofuel industry to produce enough fuel to
meet the annual volume standard, release an annual volume standard based on its research
findings,19 and ensure that annual compliance by obligated parties is met. All of the above must
be completed within a one-year time frame, taking into consideration comments from other
government agencies, the public, and, recently, court decisions. These responsibilities could be
viewed as a significant addition to EPA’s regulatory authority, and required EPA to develop new
capabilities in order to carry them out. It is not clear, more than four years after the 2010 issuance
of the amended RFS final rule,20 whether EPA has mastered those capabilities, in large part
because it must rely on critical information from the very biofuel plants that it is evaluating.
One of the concerns some have raised is the accuracy of EPA’s projections of the annual
renewable fuel volume requirements. Using its waiver authority,21 the EPA may lower the volume
requirements for biofuels if the projected production is lower than what is in the statute. For
instance, EPA used this waiver authority to consistently lower the cellulosic biofuel mandate from
15
40 CFR 80.1415.
All EVs are in relation to the energy content of ethanol. The EV for ethanol is 1.0. One gallon of biodiesel contains
roughly 1.5 times the energy of one gallon of ethanol, and thus has an EV of 1.5.
17
Although the RFS is administered by EPA, programs under other federal departments may indirectly assist biofuel
production that may be used to meet the mandate. For example, the U.S. Department of Agriculture provides resources
and support for biofuel feedstock development and supply (e.g., Biomass Crop Assistance Program) as well as biofuel
infrastructure development (e.g., Rural Energy for America Program, Biorefinery Assistance Program, etc.).
18
A fuel pathway consists of three components: a biomass feedstock, a biofuel production process, and a fuel type
(e.g., ethanol made from corn starch using a dry mill production process). The fuel pathway is assigned to a renewable
fuel category (known by its D code provided in Table 1 of § 80.1426 in the RFS regulations) which signifies which
RIN the biofuel is eligible for to be in compliance with the RFS. EPA maintains a list of approved fuel pathway and
fuel pathway petitions on its website.
19
On occasion, EPA has approved annual standards for some biofuels different from what was originally scheduled in
statute.
20
Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard
Program; Final Rule,” 75 Federal Register, March 26, 2010.
21
For more information, see CRS Report RS22870, Waiver Authority Under the Renewable Fuel Standard (RFS).
16
Congressional Research Service
4
The Renewable Fuel Standard (RFS): In Brief
2010 to 2013, and has proposed to do so again for 2014 since industry has yet to meet the
mandate.22 Legal challenges have been brought against the EPA regarding its annual fuel volume
projection. For instance, the American Petroleum Institute objected to EPA’s 2012 cellulosic
biofuel production projection, among other things, and challenged it in court. The federal court
vacated the 2012 cellulosic biofuel standard and provided principles that EPA will have to apply
to future annual projections.23
Another pressing issue for EPA is the timing of the annual announcement of the volume
requirements. For the last four years, EPA only once has announced on time the final rule for the
RFS standards for the following year.24 Even if EPA is exercising the highest level of due
diligence and using the most dedicated suite of federal resources, the agency’s lack of timely
rulemaking and inaccurate volume projections affect private investment. Last, another concern is
the amount of time it takes the agency to approve new fuel pathways.
Qualifying Biofuels
One potentially confusing aspect of the RFS is understanding which biofuel is eligible for which
part of the mandate.25 There are a number of nested categories within the RFS, and a fuel may
qualify as an advanced biofuel for one or more portions of the mandate.26 Difficulty in
understanding which advanced biofuels qualify for the RFS can lead to more difficulty in
determining how compliance is being met.
Not all fuels from a renewable source are eligible biofuels under the RFS. The RFS operates as a
biofuel standard, with priority assigned to liquid transportation fuels from biomass feedstocks.27
Other renewable sources (e.g., wind) do not qualify. Notably, imported biofuels that meet the
22
U.S. Environmental Protection Agency, “2014 Standards for the Renewable Fuel Standard Program; Proposed Rule,”
78 Federal Register, November 29, 2013. EPA has not yet finalized the 2014 standard. U.S. Environmental Protection
Agency, “Notice of Delay in Issuing 2014 Standards for the Renewable Fuel Standard Program,” Pre-publication copy,
November 21, 2014.
23
American Petroleum Institute v. EPA, 706 F.3d 474 (D.C. Cir. 2013). More information about this legal challenge is
provided in CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels.
24
Under the CAA, each year’s standards are required to be announced by November 30 of the previous year. EPA
announced the 2011 final rule in November 2010, the 2012 final rule in December 2011, and the 2013 final rule in
August 2013. In November 2014, EPA announced that it intends to take action on the 2014 standards (e.g., issue the
final rule) in 2015. EPA’s late announcement of the annual requirements may be due to the depth of the analysis (e.g.,
difficulty in obtaining reliable and timely information from the industry) or to other factors.
25
For example, there were questions by some about the eligibility of algae-based biofuels for the RFS. For more
information, see CRS Report R42122, Algae’s Potential as a Transportation Biofuel.
26
Approved RFS fuels and feedstocks are provided by EPA at http://www.epa.gov/otaq/fuels/renewablefuels/newpathways/approved-pathways.htm.
27
In July 2014, EPA approved new cellulosic and advanced biofuel pathways to include the production of compressed
natural gas, liquefied natural gas, and electricity from biogas from landfills, municipal waste-water treatment facility
digesters, agricultural digesters, and separated municipal solid waste digesters. Another category of a compliant fuel for
the RFS is heating oil—fuel oils which are produced from qualifying renewable biomass and used to generate heat to
warm buildings or other facilities where people live, work, recreate, or conduct other activities. U.S. Environmental
Protection Agency, “Regulation of Fuels and Fuel Additives: RFS Pathways II, and Technical Amendments to the RFS
Standards and E15 Misfueling Mitigation Requirements; Final Rule,” 79 Federal Register 138, July 18, 2014. U.S.
Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Modifications to Renewable Fuel
Standard Program,"78 Federal Register, October 22, 2013.
Congressional Research Service
5
The Renewable Fuel Standard (RFS): In Brief
biomass feedstock qualifications and GHG reduction thresholds are eligible to meet the RFS
volume requirements (e.g., Brazilian sugarcane ethanol).
Cellulosic Biofuel Production
Cellulosic biofuel is the fuel category poised to comprise nearly half of the total renewable fuel
mandate in 2022. However, the annual cellulosic biofuel production volume established by
Congress is not being met, and actual cellulosic biofuel production volumes (e.g., cellulosic
ethanol) are below expectations. This is due to several factors, including lack of private
investment, technology setbacks, and uneven support from the federal government (among other
factors).28 These factors, coupled with the fact that annual volumes in the statute were established
during favorable economic conditions, may indicate unrealistic targets for some advanced
biofuels for the near future.
EMTS data indicate a significant jump in the number of cellulosic biofuel RINs issued for
cellulosic biofuel production in 2014. A majority of the RINs produced are for two new pathways
approved by the EPA in 2014: cellulosic biofuel renewable compressed natural gas and cellulosic
biofuel renewable liquefied natural gas.
RIN Market29
The RFS created a market for RINs, which may be traded and sold like other commodities. If a
party has RINs beyond those it needs for compliance in a given year, that party may bank the
RINs for the following year, or sell the RINs to other parties.30 Two key questions have been
raised about the RIN market and how the system operates: (1) What safeguards are in place to
prevent fraud in the system; and (2) what safeguards exist to prevent volatility and excessively
high RIN prices?
RINs are currently a largely unregulated market, although various stakeholders are considering
ways to increase regulation and oversight of the market. EMTS is the clearinghouse for RIN
transactions registered with the EPA; trading parties are responsible for all due diligence. Under
this “buyer beware” system, trading parties must verify the legitimacy of the RINs they are
selling or purchasing. The parties are responsible for any fraudulent RINs they pass on to other
buyers or submit to EPA for compliance.31 In the past, questions have been raised about the
validity of the RINs due to fraudulent activity that occurred in the biodiesel RIN market in 2010
and 2011. EPA has since taken steps to establish a voluntary quality assurance program (QAP) for
verifying the validity of RINs.32
28
For more information, see CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels.
This section prepared by Brent Yacobucci, CRS Section Research Manager. For more information on the RIN
market, see CRS Report R42824, Analysis of Renewable Identification Numbers (RINs) in the Renewable Fuel
Standard (RFS).
30
It should be noted that the RIN market is not limited to obligated parties. Individuals and companies that are not
involved with fuel production and/or supply may also own, buy, and sell RINs.
31
Obligated parties who purchase fraudulent RINs must pay fines for each RIN submitted, and must submit valid RINs
to offset the fraudulent RINs.
32
Environmental Protection Agency, “RFS Renewable Identification Number (RIN) Quality Assurance Program;
Proposed Rule,” 79 Federal Register 42078, July 18, 2014.
29
Congressional Research Service
6
The Renewable Fuel Standard (RFS): In Brief
While the QAP could help prevent RIN fraud going forward, concerns over high prices and
volatility remain. Starting in January 2013, spot prices for conventional ethanol RINs rose
dramatically through the first half of the year, spiking to particularly high prices in mid-March
and mid-July. After mid-July 2013, when the possibility was raised by some stakeholders that the
2014 obligations might be lowered, prices dropped steadily. Some stakeholders have questioned
the level of transparency surrounding RIN transactions and the role of non-fuel market players.
The March 2013 spike in RIN prices led some lawmakers, as well as stakeholders in the
petroleum, livestock, and other industries, to request EPA’s intervention in the RIN market to help
lower RIN prices.33 However, others, including biofuel proponents and many economists, have
argued that high RIN prices are a necessary market signal to promote the development of new
fuels and infrastructure that would otherwise be uneconomical.34 RIN price fluctuations similar to
what occurred in 2013 were not observed in 2014.
Blend Wall
The “blend wall”—the upper limit to the total amount of ethanol that can be blended into U.S.
gasoline and still maintain automobile performance and comply with the Clean Air Act—is
viewed by many to be in direct conflict with the biofuel volumes mandated in the RFS.35 Thus far,
the largest volume being met under the RFS is for the non-advanced biofuel segment of the
mandate, and this has been met mainly with corn-starch ethanol blended into gasoline. Due to a
variety of factors, ethanol content in gasoline is generally limited to 10% (E10). With a relatively
fixed supply of gasoline, the amount of ethanol that can be supplied this way is also limited. If the
ethanol content of gasoline remains at 10%, and depending on fuel consumption rates, in the near
future the RFS may actually require more ethanol than can technically be blended into gasoline.
However, the declining oil and gasoline prices observed in the winter of 2014 may lead to higher
fuel consumption, which could delay when the ethanol industry meets the blend wall. If ethanol
remains the primary biofuel produced to meet the RFS, at some point the blend wall will have to
be addressed or the scheduled levels of biofuels in the RFS cannot be met. The EPA proposed to
reduce the 2014 advanced biofuel and total renewable fuel standards below what was in the
statute, acknowledging the blend wall as a concern.36 EPA announced that it will take action on
the 2014 final rule in 2015.37 In the longer term, the development of non-ethanol biofuels may
obviate these concerns, but currently these fuels are not available in sufficient supply to help meet
the RFS mandates.
33
See, e.g., Letter from The Honorable David Vitter, Ranking Member, Senate Committee on Environment and Public
Works, and The Honorable Lisa Murkowski, Ranking Member, Senate Committee on Energy and Natural Resources,
to The Honorable Gina McCarthy, Assistant Administrator, Office of Air and Radiation, Environmental Protection
Agency, March 20, 2013, http://www.vitter.senate.gov/newsroom/press/vitter-murkowski-ask-epa-to-protectamericans-from-rising-gas-prices.
34
For example, see Bruce A. Babcock and Sebastien Pouliot, The Economic Role of RIN Prices, Iowa State University
Center for Agricultural and Rural Development, CARD Policy Brief 13-PB 14, Ames, IA, November 2013,.
35
For more information, see CRS Report R40445, Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol
“Blend Wall.”
36
U.S. Environmental Protection Agency, “2014 Standards for the Renewable Fuel Standard Program; Proposed Rule,”
78 Federal Register, November 29, 2013.
37
U.S. Environmental Protection Agency, “Notice of Delay in Issuing 2014 Standards for the Renewable Fuel Standard
Program,” Pre-publication copy, November 21, 2014.
Congressional Research Service
7
The Renewable Fuel Standard (RFS): In Brief
Some recent developments could alleviate blend wall concerns in the near term. One option
would be to blend higher levels of ethanol into conventional gasoline. In 2010 EPA granted a
Clean Air Act waiver that allows gasoline to contain up to 15% ethanol for use in model year
2001 and newer light-duty motor vehicles. However, infrastructure and automobile warranty
concerns have precluded widespread offering and purchase of E15, gasoline blended with 10.5%
to 15% ethanol. Widespread use of E15 could postpone hitting the blend wall for a few years.
Another option to address the blend wall would be an aggressive push for flexible-fuel vehicles to
use E85, a high-level gasoline-ethanol blend containing 51% to 83% ethanol.38 There are
infrastructure concerns with the use of E85. There are a limited number of E85 fueling stations,
largely clustered in the Midwest, where many flex-fuel vehicles are concentrated. Most of the rest
of the flex-fuel vehicles in the United States are on the East Coast and in Texas, which contain far
fewer E85 stations.39
Other Factors
The RFS is not a stand-alone policy. It interacts with many factors that are not easily controlled.
For example, advanced biofuel production, at a minimum, requires conversion technology, which
itself requires technical expertise and time to ramp up to commercial scale. The massive quantity
of biomass feedstocks needed to produce biofuels require factors such as appropriate weather
conditions and an expectation of stable markets for feedstock commodities. Further, some types
of biofuel production thus far have proven to be dependent on tax incentives in order to be
economically feasible (e.g., biodiesel).40 Unexpected occurrences (e.g., drought, failed
technology, tax incentive expiration) can impact an entire industry, especially for some advanced
biofuels that are nascent industries compared to conventional transportation fuels.
Congressional Issues
The RFS was established at a time when Congress foresaw the need to diversify the country’s
energy portfolio, strengthen the economy of rural communities by encouraging certain
agricultural commodities that contribute to biofuel production, bolster U.S. standing in an
emerging segment of the energy technology market, and protect the environment, among other
things. Whether the RFS has met, and will meet, those congressional intentions remains to be
seen.
The RFS is a policy with an ambitious agenda. Policy questions surrounding future consideration
of the RFS might include
•
What should be the purposes of the RFS?
38
The U.S. Energy Information Administration reports that in 2011, there were close to 10 million flexible-fuel
vehicles (FFVs) on the road designed to use any mix of gasoline and/or E85. However, most of these FFVs are not
using E85.
39
Bruce A. Babcock and Sebastien Pouliot, How Much E85 Can Be Consumed in the United States, Iowa State
University Center for Agricultural and Rural Development, CARD Policy Brief 13-PB 15, Ames, IA, November 2013,
http://www.card.iastate.edu/publications/dbs/pdffiles/13pb15.pdf.
40
For more information, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues.
Congressional Research Service
8
The Renewable Fuel Standard (RFS): In Brief
•
Is the RFS properly designed to achieve those purposes?
•
What happens when, and if, the RFS achieves its purposes?
At the outset, some would argue that the first question may seem straightforward; the RFS exists
to introduce more biofuels into the liquid transportation fuel market. However, upon deeper
reflection, it could be argued that the RFS exists to find another market for biomass feedstocks, or
to promote the economy of rural America (e.g., the construction of biofuel facilities that create
jobs).
The second question is perhaps the most difficult to answer. Many questions have been raised
about the challenges in achieving the ambitious RFS targets, given concerns over the blend wall
and the slow development of some advanced biofuels. Additionally, the delay in announcing final
annual standards by EPA has led to significant uncertainty by biofuel producers, feedstock
growers, and refiners. Whether the RFS should be eliminated, amended to address the current
challenges in the program, or maintained in its current form is an ongoing question for Congress.
A related question is whether the current provisions for EPA to waive various portions of the RFS
mandates, as the agency has proposed doing for 2014, are sufficient to address the current supply
challenges, or whether the use of these waivers runs counter to the goals of the program.
The third question relates to congressional debate regarding the elimination of the conventional
(corn-starch) ethanol portion of the mandate. If a segment of the biofuels industry has
consistently reached the annual mandate set by Congress, is the mandate still necessary? Some
contend that the corn-starch ethanol segment of the biofuels industry is in relatively good
financial standing—although it is not clear what impact decreasing oil and gasoline prices may
have on the industry—and that a demand exists regardless of congressional involvement. Others
counter that the RFS is needed to help lower GHG emissions and to assure that the biofuels
industry has access to a fuel distribution infrastructure that is largely controlled by petroleum
interests.
CRS Experts
For additional information on policy relating to the RFS and biofuels, please consult any of the
CRS policy specialists identified below.
RFS-Relevant Legislative Issues
Name
Phone
E-mail
Renewable Fuel Standard, Biofuels,
Bioenergy
Kelsi Bracmort
7-7283
kbracmort@crs.loc.gov
Agricultural commodities,
Farm Bill energy title
Mark McMinimy
7-2172
mmcminimy@crs.loc.gov
Author Contact Information
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy
kbracmort@crs.loc.gov, 7-7283
Congressional Research Service
9