Clearing the First Hurdle: Regaining Momentum for Federal Fuels Policy

Source: By Jeremy Martin, Senior Scientist, Union of Concerned Scientists • Posted: Friday, July 24, 2015

There are no quick or easy answers, but the Environmental Protection Agency’s (EPA) proposal to get the Renewable Fuels Standard back on track is balanced and flexible. It will take more than one rulemaking process to clean up our fuel system, but the EPA’s proposal is a good start, helping accelerate the transition from oil to clean, renewable alternatives.

 Cleaning up the fuels we use to power our vehicles is a critical step to cut oil use and reduce the emissions responsible for climate change. We are making progress, but the scale of the challenge requires patience. For it is not enough to just make cleaner fuel—the whole supply chain must adapt. The implications reach beyond fuel producers to refiners, gas station operators, automakers and drivers as well. Two specific changes are turning out to be especially complicated:
  • Moving beyond corn ethanol to more diverse sources of cleaner, advanced biofuels that don’t stress food supplies, and
  • Changing how biofuels are used, from low level blends with gasoline (less than 10%, as is current practice) to different biofuels and higher blends of ethanol.

Policy stability is key to investment in advanced biofuels

Important progress has been made in commercializing cellulosic biofuels, but the required scale up is just getting started. Yet continued progress and further investment is stalled because of uncertainty regarding policy and the future of the market for ethanol. The EPA’s initial proposal for 2014 biofuel policies was issued late in 2013 and ultimately withdrawn. It was reissued at the end of May of this yeartogether with rules for 2015 and 2016. The oil and ethanol industry remain dissatisfied, the former saying the proposal calls for too much biofuel and the latter that it calls for too little. However, the EPA’s job with the remainder of the RFS is to support expanded use of advanced and cellulosic biofuels, not satisfy these two deeply entrenched special interests. Resolving the underlying policy uncertainty is the most important challenge facing the EPA in this rulemaking process. Finalizing the proposed rule in November will put the program back on schedule, and is an important first step.

A course correction is needed in the face of real obstacles

For the last several years I have been asking the EPA to update their approach to the RFS, recognizing the need to make adjustments to their approach in light of the slower-than-expected scale up of cellulosic biofuels and infrastructure limitations. While this single rulemaking process won’t solve all the challenges of cellulosic biofuel scale-up, the EPA by and large adopts the approach I have advocated and sets up the future of the RFS in the right way.

I will be submitting detailed feedback to the EPA on their proposal during the comment period and will post a link to my comments as an update to this blog when they are complete.  In the meantime I wanted to share in short form what the EPA got right, what they can improve, and what remains for the future.

What the EPA got right:

  • Getting back on schedule with the annual rulemaking process. The annual rulemaking process is a challenging process overall, and has been especially so in the last few years, but the delayed rules are a major problem. Getting clear rules in place before the year starts is an important first step and is the cornerstone of the policy stability necessary to drive ongoing investments;
  • Recognizing that scaling up biofuels towards the original 36 billion gallons target is only realistic once cellulosic biofuels scale up. This means the policy expansion must be matched to the slower than hoped (but now finally progressing) growth of cellulosic biofuels; and
  • Committing to moving past the so-called E10 blend wall, but being realistic about the time that will take.

What the EPA can improve:

  • Targets for biodiesel and advanced biofuels should carefully consider the availability of feedstocks, especially vegetable oil. The EPA made the right call on adjusting the mandates to reflect the cellulosic shortfall, but their rational for this adjustment failed to explicitly consider the impact of rising biodiesel production on vegetable oil markets. We have done such an analysis, and found that most of the vegetable oil is already being used; and
  • Cellulosic biofuel producers have been reporting some difficulty selling the fuel they produce because of quirks in the credit market. It’s important for the EPA to make the regulations work so that cellulosic biofuel producers can count on the full value of the fuels they produce.

What remains for the future (for the EPA and others):

  • The EPA should initiate a new rulemaking right away to begin collecting information required to update the RFS roadmap beyond 2016. This is required by the law, and is an opportunity to establish a shared vision of where the policy is headed between now and 2022, or even 2030.  It won’t be easy, but the existing roadmap is laughably out of date, and the absence of a plausible roadmap is a major obstacle to progress;
  • Addressing the infrastructure constraints and market access issues that complicate the sale of higher ethanol blends. While the EPA’s proposed rule will help, progress over the long term will require coordination of car-makers, gas stations and numerous private sector actors and government agencies. No single industry or regulatory body can address this by itself, but government has an important role to play coordinating this process and keeping changes focused on cutting oil use and emissions; and
  • State policies can supplement the RFS by providing additional support for the cleanest fuels. This is what California and Oregon are doing with their Low Carbon Fuel Standard and Clean Fuels Program.

About the author: Jeremy Martin is a scientist with expertise in the technology, lifecycle accounting, and water use of biofuels. He is working on policies to help commercialize the next generation of clean biofuels (made from waste and biomass rather than food) that can cut U.S. oil dependence and curb global warming. He holds a Ph.D. in chemistry with a minor in chemical engineering.