The Renewable Fuel Standard (RFS): In Brief
Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy
January 16June 29, 2015
Congressional Research Service
7-5700
www.crs.gov
R43325
The Renewable Fuel Standard (RFS): In Brief
Contents
Introduction...................................................................................................................................... 1
The Statute ....................................................................................................................................... 12
Statutory Compliance ...................................................................................................................... 2
The 2014, 2015, and 2016 RFS Proposed Rule ............................................................................... 4
Considerations ................................................................................................................................. 46
Administering Agency ............................................................................................................... 46
Qualifying Biofuels ................................................................................................................... 57
Cellulosic Biofuel Production ................................................................................................... 67
RIN Market................................................................................................................................ 68
Blend Wall ................................................................................................................................. 79
Other Factors ............................................................................................................................. 8 10
Congressional Issues ........................................................................................................................ 8 10
CRS Experts................................................................................................................................... 11
Tables
Table 1. Renewable Fuel Standard Statute, EPA Final and Proposed Volume Amounts ................. 5.. 9
Contacts
Author Contact Information............................................................................................................. 9 11
Congressional Research Service
The Renewable Fuel Standard (RFS): In Brief
Introduction
The Renewable Fuel Standard (RFS), 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 conventional biofuel (e.g., cornstarch ethanol) and
advanced biofuels. In order
for a biofuel to be applied toward the mandate, it must be used for
certain purposes (transportation fuel, jet fuel, or heating oil) and meet certain environmental and biomass
biomass feedstock criteria. A variety of factors (e.g., infrastructure, technology, weather, the “blend wall,”
blend
wall, and federal assistance) have led to challenges, including. These challenges include 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 and to court rulings on EPA’s regulations.2 Because of concerns about the
the implementation and feasibility of the RFS, some Members of Congress have questioned whether
whether it is time to amend or repeal the RFS, or whether the best course is 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 from 2006
1
42 USC 7545(o).
1
42 USC 7545(o).
More specifically, the 113th Congress held seven hearings in which 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. U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on Energy Policy, Health
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
U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Regulatory
Affairs and Federal Management, Re-examining EPA’s Management of the Renewable Fuel Standard Program, 114th
Cong., 1st sess., June 18, 2015; 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 repealhave amended or repealed 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
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The Renewable Fuel Standard (RFS): In Brief
to 2022 contain an 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 contain an
increasing volume of a predetermined suite of fuels (the statute requires 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 , with EPA determining the
volume amounts after 2022 in future rulemaking). The statute identifies four renewable fuel
categories: conventional biofuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel,
each with its own target volume in the statute. To date, the total annual volumes required have
been met mostly with conventional biofuel (e.g., corn-starchcornstarch ethanol). In later
years, the mandate
holds steady the conventional biofuel volume amounts, while the mandate
and 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. ItHowever, 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 tradable credit system.6 Obligated parties7 submit
submit credits—called renewable identification numbers (RINs)8—to EPA that equal the number of
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.
meet compliance
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. , 2015, and 2016.
EPA is statutorily
obligated to revise the cellulosic mandate downward if the agency finds 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).
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The Renewable Fuel Standard (RFS): In Brief
for that 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.
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 iswas described in EPAct05 for the years 2006 through 2011. Beginning in 2013, the annual volume of
renewable fuel iswas to be 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-starchcornstarch 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.
1312
42 USC 7547(o)(5)(D).
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).
13
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The Renewable Fuel Standard (RFS): In Brief
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.
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, and it is generally the ratio of the
energy content of a gallon of the fuel to a gallon of ethanol. For example, . 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.
equal 1,500 RIN gallons of advanced biofuels.
The 2014, 2015, and 2016 RFS Proposed Rule
Each year, EPA is to issue the annual RFS standards partly so that obligated parties can plan for
mandate compliance. Before finalizing an annual standard by November 30 of the preceding year,
as required by the statute, EPA issues a proposed rule to explain its rationale for the renewable
fuel volumes that will be required for the coming year and gather public comment. EPA has been
late in issuing the annual standards.17 On May 29, 2015, EPA issued a three-year proposed rule
for the RFS for 2014, 2015, and 2016, with the intent to finalize the rule by November 30, 2015,
which could put the program back on its statutory schedule for the 2016 calendar year.18
EPA proposes to reduce the total renewable fuel volume compared with the volume identified in
statute for all three years.19 Total renewable fuel for the RFS consists of conventional biofuel
(e.g., cornstarch ethanol) and advanced biofuel (e.g., cellulosic biofuel, biomass-based diesel, and
other advanced biofuels). This proposed rule is unique in that it is the first time EPA has proposed
to reduce the share of the RFS for conventional biofuels. It is also unique because it reduces the
total advanced biofuel category, whereas in previous years only the cellulosic biofuel component
was reduced and other advanced biofuels were allowed to make up for the cellulosic biofuel
reduction.
EPA intends to use its waiver authority to reduce the volume amounts for 2014, 2015, and 2016
for total renewable fuel and advanced biofuel.20 EPA reports that the volume reductions are
necessary due to
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
For more information on EPA’s delayed issuance of the annual standards, see the “Administering Agency”section of
this report.
18
U.S. Environmental Protection Agency, “Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016
and Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal Register, June 10, 2015.
19
The proposed rule contains other major actions (e.g., rescinding the cellulosic biofuel standard for 2011). However,
the reduction of the total renewable fuel volume amount and EPA’s reasoning for the reduction (e.g., the blend wall,
lack of certain types of advanced biofuel production) is viewed as the most significant action in the proposed rule by
many stakeholders.
20
For more information on waiver authority, see CRS Report R44045, The Renewable Fuel Standard (RFS): Waiver
Authority and Modification of Volumes.
16
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substantial limitations in the supply of cellulosic biofuel, insufficient supply of other
advanced biofuel to offset the shortfall in cellulosic biofuel, and practical and legal
constraints on the supply of ethanol blends to the vehicles that can use them (in the form of
E10, E15, and higher level ethanol blends), driven in part by lower gasoline consumption
than was expected in 2007 when the target statutory volumes were established.21
Table 1. Renewable Fuel Standard Statute, EPA Final and Proposed Volume Amounts
(in billions of gallons)
2010
Total Renewable
Fuel
2012
S
F
S
F
12.95
12.95
13.95
13.95
15.2
12
12
12.6
12.6
0.95
0.95
1.35
0.1
0.0065
0.65
Nov 2009
Cap on
Conventional
Biofuel
Total Advanced
Biofuels
Cellulosic
Biomass-Based
Diesel
Date of Final Rule
2011
S
F
15.2
16.55
16.55
13.2
13.2
13.8
13.8
1.35
2
2
2.75
2.75
0.25
0.006
0.5
0.0105a
1
0.0008
1.15
0.8
0.8
1
1
≥1
1.28
Feb 2010
Nov 2010
Nov 2010
Nov 2011
Dec 2011
Nov 2012
Aug 2013
2014
S
2013
2015
2016
P
18.15
15.93
20.5
16.3
22.25
17.4
24
TBD
Cap on
Conventional
Biofuel
14.4
13.25
15
13.4
15
14
15
TBD
Total Advanced
Biofuels
3.75
2.68
5.5
2.9
7.25
3.4
9
TBD
1.75
0.033
3
0.106
4.25
0.206
5.5
TBD
≥1
1.63
≥1
1.7
≥1
1.8
≥1
1.9
Nov 2013
TBD
(Nov
2015)
Nov 2014
TBD
(Nov
2015)
Nov 2015
TBD
(Nov
2015)
Nov 2016
TBD
Cellulosic
Biomass-Based
Diesel
Date of Final Rule
P
S
2017
S
Total Renewable
Fuel
S
F
P
S
P
Source: Energy Independence and Security Act of 2007 (EISA; P.L. 110-140); Contact the author for EPA final
and proposed rule citations.
Notes: S = Statute, F = Final, P = Proposed, TBD = To be determined by EPA. All volumes are ethanol
equivalent, except for biomass-based diesel, which is actual. The 2010 biomass-based diesel requirement of 1.15
billion gallons equals the 0.5 billion gallon requirement for 2009 plus the 0.65 billion gallon requirement for 2010.
a.
RFS Final Rule 2012, Federal Register, January 9, 2012. Subsequently vacated under American Petroleum
Institute v. EPA.
21
U.S. Environmental Protection Agency, “Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016
and Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal Register, June 10, 2015.
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The Renewable Fuel Standard (RFS): In Brief
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.1722 This includes evaluating renewable fuel pathways eligible for the
RFS.1823 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,1924 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 workload, and they have required EPA to
develop new
capabilities in order to carry them out. It is not clear, more than fourfive years after the
2010 issuance
of the amended RFS final rule,2025 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 requirementsproduction capacity. Using its waiver authority,2126 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.
172010 to 2013, and it has proposed to do so again for 2014, 2015, and 2016 because industry has
yet to meet the mandate.27 Legal challenges have been brought against the EPA regarding its
annual fuel volume projections. 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.28
22
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.).
1823
A fuel pathway consists of three components: a biomass feedstock, a biofuel production process, and a fuel type
(e.g., ethanol made from corn starchcornstarch 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.
1924
On occasion, EPA has approved annual standards for some biofuels different from what was originally scheduled in
statute.
2025
Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard
Program; Final Rule,” 75 Federal Register, March 26, 2010.
2126
For more information, see CRS Report RS22870, Waiver Authority Under the Renewable Fuel Standard (RFS).
16
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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
R44045, The Renewable Fuel Standard (RFS): Waiver Authority and
Modification of Volumes, by Kelsi Bracmort.
27
U.S. Environmental Protection Agency, “Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016
and Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal Register, June 10, 2015. EPA has not yet
finalized the 2014 standard.
28
American Petroleum Institute v. EPA, 706 F.3d 474 (D.C. Cir. 2013). More information about this legal challenge is
(continued...)
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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 five years, EPA has announced the final rule on time for the RFS
standards for the following year.24 only once.29 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 can affect private investment. Last, another An additional
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.2530 There are a number of nested categories within the RFS, and a fuel may
qualify as an advanceda biofuel for one or more portions of the mandate.2631 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.2732
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
biomass feedstock qualifications and GHG reduction thresholds are eligible to meet the RFS
volume requirements (e.g., Brazilian sugarcane ethanol). Before a fuel can generate RFS RINs,
that fuel pathway must be approved by EPA, a process that can take a considerable amount of
time.
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
(...continued)
provided in CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels.
2429
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 . 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.
2530
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.
2631
Approved RFS fuels and feedstocks are provided by EPA at http://www.epa.gov/otaq/fuels/renewablefuels/newpathways/approved-pathways.htm.
2732
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.
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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 conditions7
The Renewable Fuel Standard (RFS): In Brief
factors).33 These factors, coupled with the fact that annual volumes in the statute were established
when market conditions for raising investment capital for new biofuel technologies were more
favorable, 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 cellulosic biofuel 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 Market29Market34
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.3035 Two key questions have been
raised about the RIN market and how the system operates: (1) Whatwhat 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.3136 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
2837
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.38 However, others, including biofuel proponents and many economists, have
33
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).
3035
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.
3136
Obligated parties who purchase fraudulent RINs must pay fines for each RIN submitted, and must submit valid RINs
to offset the fraudulent RINs.
3237
Environmental Protection Agency, “RFS Renewable Identification Number (RIN) Quality Assurance Program;
Proposed Final
Rule,” 79 Federal Register 42078, July 18, 2014.
2938
See, e.g., Letter from The Honorable David Vitter, Ranking Member, Senate Committee on Environment and Public
(continued...)
34
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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”8
The Renewable Fuel Standard (RFS): In Brief
argued that high RIN prices are a necessary market signal to promote the development of new
fuels and infrastructure that otherwise would be uneconomical.39 Biofuel proponents and others
also have observed that the volume of trade on which RIN prices are based is an important
indicator that is not disclosed. 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.3540 Thus far,
the largest volume being met under the RFS is for the non-advanced biofuel (conventional) biofuel
segment of the
mandate, and this has been met mainly with corn-starchcornstarch 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
If ethanol remains the primary biofuel produced to meet the
RFS, at some point the blend wall willwould have to
be addressed or the scheduled levels of biofuels
in the RFS cannot be metwould not be achievable. The EPA proposed to
reduce the 2014 , 2015, and 2016
advanced biofuel and total renewable fuel standards below what was in the
statute, acknowledging
acknowledging that the blend wall asis a concern.3641 EPA announced that it will take action on
the 2014 final rule in 2015.37intends to finalize the
2014, 2015, and 2016 standards by November 30, 2015. 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 the expanding RFS mandates.
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 the use of ethanol in
flexible-fuel vehicles capable of using E85, a gasoline-ethanol blend containing 51% to 83%
ethanol.42 There are infrastructure concerns with the use of E85. For example, the number of E85
(...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.
3439
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.
40
For more information, see CRS Report R40445, Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol
“Blend Wall.”
3641
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.
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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.39Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016
and Biomass-Based Diesel Volume for 2017; Proposed Rule,” 80 Federal Register, June 10, 2015.
42
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
(continued...)
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The Renewable Fuel Standard (RFS): In Brief
fueling stations is limited, and stations are 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
located on the East Coast and in Texas, areas that contain far fewer E85 stations.43
Other Factors
The RFS is not a stand-alone policy. It interacts with many factors that are not easily controlled.
For example, advancedcellulosic 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 such biofuels requirerequires factors such as appropriate weather
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).4044 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
thingsobjectives. 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.
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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
(...continued)
using E85.
43
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.
44
For more information, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues.
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The Renewable Fuel Standard (RFS): In Brief
annual standards by EPA has led to significant uncertainty forannual standards by EPA has led to significant uncertainty by biofuel producers, feedstock
growers, and refiners. Whether the RFS should be eliminated, amendedor 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, 2015, and 2016, 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) ethanolbiofuel (e.g., cornstarch 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 ethanolconventional biofuel segment of the biofuels industry is in relatively good
financial standing—well established, so it
should not require a use mandate, although it is not clear what impact decreasing oil and gasoline
prices may
have on the industry—and. In addition, it has been argued 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 hascontinues to have 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
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