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The Clean Air Act requires that transportation fuels contain a minimum amount of renewable fuel. This renewable fuel standard (RFS) was established by the Energy Policy Act of 2005 (EPAct05; P.L. 109-58) and amended by the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140). The RFS includes scheduled volume mandates that grow each year (starting with 9 billion gallons in 2008 and ascending to 36 billion gallons in 2022), with the U.S. Environmental Protection Agency (EPA) determining the annual volume amounts following 2022. Within the overall RFS, there are sub-mandates for advanced biofuels, including cellulosic biofuel, biomass-based diesel, and other advanced biofuels.
EPA, which is responsible for administering the RFS, has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail. More specifically, the statute identifies a general waiver for the overall RFS and waivers for two types of advanced biofuel: cellulosic biofuel and biomass-based diesel. The statute requires EPA to announce each year's standards by November 30 of the previous year, except for biomass-based diesel, which must be announced 14 months before the year for which the applicable volume will apply. Further, the final section of the waiver provision—which some refer to as the "reset" section—requires a modification of the applicable volumes of the RFS starting in 2016 if certain conditions are met. The potential for full or partial RFS waivers can contribute to uncertainty for policymakers, industry, financiers, and other interested parties.
Several instances have led to EPA using, proposing to use, or being petitioned to use its waiver authority when implementing the RFS. In late 2015, EPA announced in its final rule for the RFS that it was using its waiver authority to reduce the total renewable fuel volume required for 2014, 2015, and 2016. EPA used both the general waiver and the cellulosic biofuel waiver to do so. ForEPA reports that the volume reductions for 2014, 2015, and 2016 were necessary due to "real-world challenges." This was the first time since the program's implementation, EPA that EPA had issued a general waiver implicitly reducing the volume allowedrequired for conventional biofuel. In contrast, EPA has repeatedly issued a cellulosic biofuel waiver to reduce the volume allowedrequired for cellulosic biofuel. According to the agency, it has done so due to lack of actual production of cellulosic biofuel at the volumes required to meet the RFS cellulosic biofuel mandate. For various reasons, the cellulosic biofuel industry has been unable, by a wide margin, to produce the volume amounts identified in statute. EPA reports the volume reductions for 2014, 2015, and 2016 were necessary due to "real-world challenges." Last, theThe final rule issued by EPA triggers the RFS reset provision for both advanced biofuel and cellulosic biofuel. It is unclear what impact the reset provision will have on RFS standards in future years.
In May 2016, EPA announced the proposed RFS volume requirements for 2017. EPA is again proposing to use the cellulosic biofuel waiver authority and the general waiver authority to reduce the total renewable fuel requirement. The proposed rule is silent on the reset provision.
This report discusses the process and criteria that EPA may use to waive various portions of the RFS, and the modification of applicable volumes and the reset provision and briefly analyzes the potential impacts.
The Renewable Fuel Standard (RFS) requires that the nation's transportation fuel supply contain renewable biofuels.1 This mandate—established in the Energy Policy Act of 2005 (EPAct; P.L. 109-58) and expanded in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140)—requires the use of renewable fuel, but it does not explicitly require the production of that fuel. Obligated parties, such as refiners or importers of gasoline or diesel fuel, are responsible for complying with the RFS requirements. The Environmental Protection Agency (EPA) administers the mandate, which is an amendment of the Clean Air Act, under its authority to regulate fuels.2 The statutory renewable fuel volume amounts increase annually until 2022, with EPA determining the volume amounts after 2022 within certain limitations. In general, EPA has the authority to waive the RFS requirements, in whole or in part, if certain conditions outlined in statute prevail.
The RFS is a complex and highly technical policy initiative. It deals with multiple sectors and requires the use of some advanced renewable fuel technologies that have yet to reach maturity. The RFS also incorporates greenhouse gas emission reduction thresholds. All of this complexity is combined with multiple stakeholders that have unique perspectives ofon what the RFS should accomplish, how it should be implemented, and whether it should even exist, which leads to intense discussions about the RFS and its future. Congressional debate about the RFS is expected to continue, particularly about with special attention to how EPA administers the program.3 As Congress proceeds with discussing the RFS, it may be useful to understand the RFS waiver authority granted to EPA. This report discusses the waiver provisionprovisions of the RFS, including the modification-of-applicable-volumes section.
The RFS statute calls for the consumption of 9 billion gallons of total renewable fuel in 2008 and ascends to 36.0, ascending to 36 billion gallons in 2022, with EPA determining the annual volume amounts after 2022. The statute identifies four categories of renewable fuels that must be used to meet the mandate, but essentially these four categories can be aggregated into two major categories: unspecified biofuel (i.e., cornstarch ethanol) and advanced biofuel (i.e., cellulosic biofuel, biomass-based diesel, and other advanced biofuels). (See Figure 1.) Over time, the growth in the RFS slowly transitions from consisting primarily of biofuelsbiofuels that, in practice, are made mostly from food and feed crops to biofuels made from non-food and non-feed crops. If actual renewable fuel production were to match what is in the statute for 2022, advanced biofuels would constitute close to 60% of the 36.0 billion gallon mandate and unspecified biofuel would constitute about 40%.
Figure 1. Scheduled Renewable Fuel Standard (RFS) Mandates Under EISA |
Sources: Congressional Research Service (CRS) |
Congress gave the EPA Administrator waiver authority to adjust the renewable fuel volume amounts identified in statute given certain conditions (e.g., inadequate domestic renewable fuel supply).4 The EPA Administrator is required to set all of the standards by November 30 of the preceding year (e.g., the 2017 standard should be announced by November 30, 2016).5 Further, when the EPA Administrator reduces the cellulosic biofuel volume amount, she also may reduce the total renewable fuel and total advanced biofuel volume amounts by the same or a lesser volume. For biomass-based diesel, the statute specifies volume amounts for four years (2009-2012) and requires EPA to announce the remaining annual biomass-based diesel volume amounts "14 months before the first year for which such applicable volume will apply" (e.g., the 2018 biomass-based diesel standard should be announced by November 2016).
EPA issued the 2014, 2015, and 2016 standards (and the 2017 standard for biomass-based diesel) in late 2015, putting the RFS back on statutory schedule.6 In May 2016, EPA announced the proposed volume requirements for 2017.7 The RFS statutory requirements and the EPA requirements for those years2014 through 2017 are provided in Table 1.
Year |
Total Renewable Fuel |
Unspecified Biofuel |
Advanced Biofuel (cellulosic biofuel component) a |
2014 Statutory |
18.15 |
14.4 |
3.75 (1.75) |
2014 EPA Final |
16.28 |
13.61 |
2.67 (0.033) |
2015 Statutory |
20.5 |
15.0 |
5.5 (3.0) |
2015 EPA Final |
16.93 |
14.05 |
2.88 (0.123) |
2016 Statutory |
22.25 |
15.0 |
7.25 (4.25) |
2016 EPA Final |
18.11 |
14.5 |
3.61 (0.230) |
Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register 239, December 14, 2015.
Note: All volumes are ethanol-equivalent.
One indicator of whether the goals of the RFS are being met is actual renewable fuel gallons produced.7 The actual volumes produced for both unspecified biofuel and biomass-based diesel were generally in alignment with what the RFS required through 2015 (see Table 2). Cellulosic biofuel production has been produced only in very limited quantities, far short of the quantities called for in statute.
Year |
RFS Unspecified Biofuel Requirement |
|
RFS Biomass-Based Diesel Requirement |
|
RFS Cellulosic Biofuel Requirement |
|
2009 |
10.5 |
10.9 |
0 |
0.55 |
0 |
— |
2010 |
12.0 |
13.3 |
1.15 |
0.31 |
0.0065 |
0 |
2011 |
12.6 |
13.9 |
0.80 |
1.10 |
0 |
0 |
2012 |
13.2 |
13.2 |
1.00 |
1.10 |
0 |
|
2013 |
13.8 |
13.3 |
1.28 |
1.80 |
0.0008 |
|
2014 |
13.61 |
14.3 |
1.63 |
1.75 |
0.033 |
|
2015 |
14.05 |
|
1.73 |
|
0.123 |
|
Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency RFS Final Rules.
Notes: RFS requirements for 2014 are the statutory requirements, except for the biomass-based diesel requirement, which EPA was authorized to set starting in 2013.
a.
Renewable Fuels Association, Historic U.S. Fuel Ethanol Production, 2015.
b.
National Biodiesel Board, Production Statistics, 2015; National Biodiesel Board, "National Biodiesel Board Calls for EPA to Act on RFS," press release, January 30, 2015.
c.
EPA Moderated Transaction System (EMTS) RFS2 Data.
d.
Production amount from cellulosic ethanol (20.1 thousand gallons) and cellulosic diesel (1.0 thousand gallons).
e.
Production amount from cellulosic renewable gasoline (281.8 thousand gallons) and cellulosic diesel (232.8 thousand gallons).
f.
Renewable compressed natural gas (CNG) and renewable liquefied natural gas (LNG) consisted of approximately 98% of the 2014 cellulosic biofuel production total (17.4 million gallons of renewable LNG; 15.2 million gallons of renewable CNG; 728.5 thousand gallons of cellulosic ethanol; 50.4 thousand gallons cellulosic heating oil; 29.4 thousand gallons of cellulosic renewable gasoline; and 5.2 thousand gallons of cellulosic diesel). EPA reports that 2014 was the first year where some Renewable Identification Numbers were generated using imported cellulosic biofuel, specifically cellulosic heating oil.
g.
"US ethanol production rises to 14.53 billion gallon annual rate," Biofuels Digest, October 25, 2015.
h.
January to November 11-month total for 2015; U.S. Energy Information Administration, Monthly Biodiesel Production Report, January 2016.
2017 Statutory 24.0 15.0 9.0 (5.5) 2017 EPA Proposed 18.8 14.8 4.0 (0.312) Sources: EISA (P.L. 110-140); U.S. Environmental Protection Agency (EPA), "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register 239, December 14, 2015; EPA, "Renewable Fuel Standard Program: Standards for 2017 and Biomass-Based Diesel Volume for 2018; Proposed Rule," 81 Federal Register 34778-34816, May 31, 2016. Note: All volumes are ethanol-equivalent. Ethanol equivalent is the amount of fuel needed to give the same amount of energy as one gallon of ethanol. i.
Renewable compressed natural gas (CNG) and renewable liquefied natural gas (LNG) consisted of approximately 98% of the 2015 cellulosic biofuel production total (72.8 million gallons of renewable CNG; 53.2 million gallons of renewable LNG; 2.2 million gallons of cellulosic ethanol; and 275.3 thousand gallons cellulosic heating oil)
The RFS statute contains a waiver provision.8 The provision contains three waivers that the EPA Administrator may useseparate waivers—a general waiver, a cellulosic biofuel waiver, and a biomass-based diesel waiver—that the EPA Administrator may use to waive, in whole or in part, the volume of renewable fuel mandated by statute. If a waiver is issued, it expires after one year (60 days for the biomass-based diesel waiver), butunless the Administrator may renewrenews the waiver. Additionally, starting in 2016, the waiver provision allows for a modification of applicable volumes. The waivers and the modification of applicable volumes are described in further detail in the following sections of this report.
The general waiver gives the EPA Administrator the authority to waive the overall RFS requirements, in whole or in part, if
The Administrator may issue the general waiver at her discretion or if petitioned by a state or fuel provider. In those instances in which the Administrator receives a petition for a waiver, she has 90 days after receipt of the petition to approve or disapprove the petition. Further, priorit.10 Prior to making her decision, the Administrator is to consult with the Secretaries of Agriculture and Energy and to allow for public notice and the opportunity for comment. If a general waiver is granted, any adjustment applies to the total national renewable fuel requirement. Thus, EPA may not issue a general waiver to waive the requirement for an individual state or supplier within a state.
The cellulosic biofuel waiver obligates the EPA Administrator to reduce the cellulosic biofuel mandate when the projected production capacity for a given year is less than what is identified in statute.1011 As written, the law does not require the EPA Administrator to consult with the Secretaries of Agriculture or Energy when issuing a cellulosic biofuel waiver, or to give public notice and opportunity for comment,; but the Administrator must base the projection on the U.S. Energy Information Administration estimate provided under the applicable percentages provision.1112 Although it is not required by the statute to do so, EPA has consulted with federal agencies, industry, and others when EPAthe agency has considered issuance of a cellulosic biofuel waiver. EPA has also provided opportunity for public comment. The Administrator must set the new required amount at the "projected available volume during that calendar year" by November 30 of the preceding year. Should the Administrator reduce the cellulosic biofuel volume, she also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume. When a cellulosic biofuel waiver is issued, the Administrator must offer cellulosic biofuel waiver credits for obligated parties to purchase for that compliance year in lieu of using actual cellulosic biofuel.13.12
The biomass-based diesel waiver gives the EPA Administrator the authority to reduce the amount of biomass-based diesel mandatedrequired for up to 60 days if she determines that there are significant market circumstances (including feedstock disruptions) "that would make the price of biomass-based diesel fuel increase significantly."1314 If these market circumstances continue past the initial 60-day period, the Administrator may issue another waiver for an additional 60 days. The Administrator is to consult with the Secretaries of Energy and Agriculture prior to issuing such a waiver. If the Administrator issues a biomass-based diesel waiver, she also may reduce the volumes of advanced biofuel and renewable fuel by the same or lesser volume.
The modification-of-applicable-volumes section of the RFS islast section of the waiver provision is the modification-of-applicable-volumes section, referred to by some as the "reset" section for the RFS.1415 This section givesrequires that the EPA Administrator the authority to adjustmodify the applicable volumes of the RFS in future years starting in 2016 if certain conditions are met. Specifically, it provides that, starting in 2016, the EPA Administrator shall modify the applicable volumes of the RFS for subsequent years if the Administrator waives the renewable fuel mandate, the advanced biofuel mandate, the cellulosic biofuel mandate, or the biomass-based diesel mandate by at least 20% for two consecutive years or by at least 50% for a single year. The section does not state that the Administrator must "reduce" the volume amount, nor does it allude to what the modified amount must be (i.e., projected available volume during that calendar year).
The EPA Administrator has issued onea general waiver and sevenfor the three-year final rule (2014 through 2016), and repeatedly issued cellulosic biofuel waivers for 2010 through 2016.1517 The Administrator used the waivers for 2014, 2015, and 2016 to reduce the total renewable fuel (including a lowering of the unspecified biofuel mandate), advanced biofuel, and cellulosic biofuel volume requirements. EPA reports that it used the general waiver and cellulosic biofuel waiver to reduce the 2014, 2015, and 2016 standards to address "real-world challenges," including fuel infrastructure, lack of advanced biofuel production, and other constraints.1618 The Administrator has not granted a biomass-based diesel waiver.
Waiver authority can impact RFS implementation and market confidence, as well as contribute to RFS uncertainty. Waiver authority is intended to assist EPA with In May 2016, EPA announced the proposed RFS volume requirements for 2017, whereby the agency proposes to again use a general waiver and a cellulosic biofuel waiver to reduce the total renewable fuel requirement, including the advanced biofuel volume requirement, for 2017.19
RFS Waiver Impacts
Waiver authority is intended, in part, to assist EPA with implementation and timely administration of the RFS. In practice, it appears to have done the opposite, by at times contributing to the delay of final standards. Waiver authority20 Granting of waivers, in conjunction with other factors, could weaken confidence in renewable fuel markets and the chosen technologies, specifically cellulosic biofuel.17 21 At the same time, the waivers have provided EPA with the flexibility to establish volume requirements that are attainable. Many aspects of the RFS and biofuelsbiofuel production could be viewed as unstable (e.g., approval of fuel pathways for the RFS, bringing advanced biofuels on line at a sizeable scale, issuing federal support for biofuels, and biofuel infrastructure) partly because Administration decisions—including the use of RFS waiver authority—have not been made in a timely manner.
The volume requirements announced by EPA in theRFS Modification of Applicable Volumes
With its RFS three-year final rule triggerfrom 2015, EPA triggered the "reset" provision for both advanced biofuels and cellulosic biofuels. Many have questions and concerns about how EPA will implement the reset provision (the modification-of-applicable-volumes section of the RFS) in 2016. This provision allowsrequires the EPA Administrator to modify the applicable volumes of the RFS in its entirety starting in 2016 if certain conditions are met. It is not clear how the provision will be implemented. The Administrator has the sole EPA will implement the provision. In November 2015, EPA reported that its intent was to address the reset requirements with a separate rulemaking.22 The Administrator has the discretion to set the modified amounts, which in theory could be similar to or completely different from what is listed in statute. Some mayA key policy question is whether the impact of this provision could be limited to one renewable fuel category (e.g., cellulosic biofuel) or whether there would be a domino effect whereby other renewable fuel categories (e.g., advanced biofuel) would be impacted. For instance, could public and private investment for other advanced biofuels be influenced by a significant reset of the cellulosic biofuels requirement? Finally, if the reset provision were implemented solely for cellulosic biofuels, with EPA drastically lowering the cellulosic biofuel volumes, would the opportunity to satisfy one of the original purposes of the policyRFS (i.e., promoting a steep expansion in the use of advanced biofuels) be undermined? Going forward, the implementation of this provisionreset implementation could have important implications for the biofuel industry, with agiven the potential for EPA to significantly reduce the applicable volumes or to maintain ambitious targets.
Author Contact Information
1. |
For more information on the Renewable Fuel Standard (RFS), see CRS Report R43325, The Renewable Fuel Standard (RFS): In Brief, by [author name scrubbed]. |
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2. |
Clean Air Act, Section 211(o); 42 U.S.C. 7545. |
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3. |
Legislation has been proposed in the 114th Congress that would repeal or modify the RFS (e.g., S. 1584, S. 577, S. |
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4. |
These conditions are further explained in the "RFS Waiver Provision" section of this report. |
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5. |
42 U.S.C. 7545 (o)(3)(B)(i). |
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6. |
U.S. Environmental Protection Agency (EPA), "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register 239, December 14, 2015. For |
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7. |
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8. |
42 U.S.C. 7545(o)(7). |
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9. |
42 U.S.C. 7545(o)(7)(A). |
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10. |
42 U.S.C. 7545(o)(7)(D). |
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11. |
42 U.S.C. 7545(o)(3)(A). |
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8.
|
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42 U.S.C. 7545(o)(7). 9.
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42 U.S.C. 7545(o)(7)(A). 10.
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It is not clear what would happen should the Administrator take no action for a considerable amount of time following the 90-day deadline, as the timeframe to approve or disapprove a petition under the waiver provision has not been interpreted by the courts or by EPA in its federal regulations. Information regarding petitions, including the time frame for EPA to issue a denial for 2008 and 2012 waiver requests, is available at the EPA Requests for Volume Requirement Waiver under the Renewable Fuel Standard Program website. 11.
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42 U.S.C. 7545(o)(7)(D). 12.
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42 U.S.C. 7545(o)(3)(A). |
The formula to calculate the price of these credits is written in statute. For more information on cellulosic biofuels and the RFS, see CRS Report R41106, The Renewable Fuel Standard (RFS): Cellulosic Biofuels, by [author name scrubbed]. |
42 U.S.C. 7545(o)(7)(E); for more information on biodiesel, see CRS Report R41282, Agriculture-Based Biofuels: Overview and Emerging Issues, by [author name scrubbed]. |
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42 U.S.C. 7545(o)(7)(F). |
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17.
The Administrator is directed to promulgate a rule that modifies the applicable volumes in compliance with 42 U.S.C. 7545(o)(2)(B)(ii). |
The three-year final rule issued in 2015 marks the first time the Administrator has used the general waiver. Previously, the Administrator had not issued a general waiver, even when petitioned to do so by states in 2008 and 2012. For more |
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U.S. Environmental Protection Agency, "Renewable Fuel Standard Program: Standards for 2014, 2015, and 2016 and Biomass-Based Diesel Volume for 2017; Final Rule," 80 Federal Register 239, December 14, 2015. |
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EPA, "Renewable Fuel Standard Program: Standards for 2017 and Biomass-Based Diesel Volume for 2018; Proposed Rule," 81 Federal Register 34778-34816, May 31, 2016. 20.
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For a list of final rule release dates for the RFS, see table 1 in CRS Report R43325, The Renewable Fuel Standard (RFS): In Brief, by [author name scrubbed]. |
Advanced Ethanol Council, "33 Advanced Biofuel Companies Ask President Obama to Reconsider the Proposed RFS Rule for 2014," press release, May 16, 2014; Advanced Ethanol Council, "AEC, BIO Joint Letter to White House over Proposed 2014 RFS Volumetric Blending Requirements," October 29, 2013.
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