EPA’s plan for electric vehicles could upend RFS politics

Source: By Eric Wolff, Politico • Posted: Wednesday, October 12, 2016

The Obama administration’s newest plan to stimulate sales of electric vehicles could deliver a political boost to supporters of the Renewable Fuel Standard, aligning automakers with biofuel backers against the oil industry’s attacks on the program.

As part of EPA’s proposal to add electricity produced from biogas to the program that mandates the use of ethanol and biodiesel in the U.S. fuel market, the agency floated the possibility that the RFS could provide financial incentives to either the companies that make electric vehicles or the customers who buy them.

The automakers and drivers were among the four potential groups that could receive the Renewable Identification Numbers, or RINs, that can be sold or traded to help stimulate demand for EVs, creating a financial incentive to help them increase their tiny share of the U.S. car fleet. Under its request for comments issued last week, EPA also suggested the RINs could go to the electric utilities that generate power from biogas that’s emitted by municipal dumps or agricultural digesters, or to the owners of the public charging stations needed to power up the cars.

Providing the RINs to the automakers or EV buyers could bring a fresh wave of political support to the RFS, a program the oil industry has identified as one its top targets to reform or repeal.

The EPA must still make some crucial decisions for this program, and put it through the full administrative rulemaking process, which won’t be completed until there’s a new president. But some biofuels lobby groups were already welcoming the move that could strengthen their hand in protecting the program that has been a boon to the agricultural industry.

“The RFS has been wrongly criticized by some as an ethanol mandate or just a biofuels,” said Geoff Cooper, senior vice president for the Renewable Fuels Association, an ethanol trade association. “It is much broader than that. I think this proposal is reflective of that, and I think you potentially broaden the base of political support.”

EPA originally opened the door to using RINs for electric vehicles when it approved using electricity produced from biogas as a “pathway” for the RFS in 2014. At the time, the agency left unresolved who would get the credit.

Carmakers, who didn’t respond to requests for comment on the EPA proposals, may soon lose a tax credit that provides consumers as much as $7,500 toward the purchase of an EV for the first 200,000 EVs each manufacturer sells. But sources keeping a close eye on the program said the companies are battling to get the tax credit extended, and they see the possibility of getting RINs as another lucrative incentive for EVs, or at least means to ease the pain of the tax credit’s potential demise. The program would allow them to offset the high cost of EVs, and likely make them RFS program converts, locking arms with ethanol-makers and corn growing interests in defending the program.

Promoting the use of EVs has long been a priority of the Obama administration, which forecast that a million of the plug-in vehicles would be on the road by 2015, about double the actual number. But the high cost and limited range of the cars – coupled with the drop in gasoline prices – has kept sales at a modest 1 percent of the overall market.

“There’s interest within the administration of allowing for the president to take credit for the launching of the EV industry, that included loans to manufacturers like Tesla, GM and Ford, to stand up production facilities, it included the establishment of the tax credit for the EV purposes, and this could be an addition to that that could last far longer than the tax credit could, at least in its current incarnation,” said a former Obama administration official who worked in energy and climate issues.

Not only would the automakers would be a powerful ally for EPA and the biofuel industry, bringing biogas in the RFS could generate enthusiasm from the environmental groups that have become ambivalent about the program they say does little to help fight climate change and promotes unsustainable farming practices.
Environmental groups are big backers of EVs – the Sierra Club has a “Go Electric” Campaign” and the Natural Resources Defense Council has a Clean Vehicles and Fuels to promotes electric vehicles – and though neither group would comment on the EPA proposals, Jeremy Martin, a senior scientist in the Union of Concerned Scientists Clean Vehicles program, says he plans to brief green groups on the new biogas effort.

“We think there’s a lot to like in opening the renewable fuel standard to low carbon fuels of all types, including electricity,” he said.

And that’s something that could hold sway in a potential Hillary Clinton administration.

“Critics of the RFS have pushed studies for years questioning the climate benefits of conventional ethanol,” the former Obama administration official said. “But if you were to include renewable electricity used to power electric vehicles, it would certainly create opportunities to engage more directly on a climate message for supporters of the RFS.”

Emily Skor, head of the ethanol industry group Growth Energy, agreed that adding the incentives for EVs would help her group’s defense of the RFS.

“At a very major level, this might broaden the appeal politically and maybe from an environmental perspective, this might broaden the tent politically and make it more politically palatable for certain people who might be more on the fence,” she said.

But the oil industry is hoping to build momentum in Congress to alter or kill the RFS, and the new biogas pathway doesn’t change its stance.

“The RFS program is broken and the last thing we need is more complexity by expanding scope and scale of the RFS,” API spokeswoman Sabrina Fang said in an email. “What EPA should be working on is a set of RFS volumes that reflects market realities until Congress repeals or significantly reforms this dysfunctional program.”

And the biofuels sector isn’t entirely comfortable with allowing a new industry into the RFS.

“We’re looking at it and we like the upside of being inclusive on RFS eligibility,” said Brooke Coleman, executive director of the Advanced Biofuels Business Council. “But the details matter.”

Renewable fuels groups are still conducting their analysis to make sure the biogas for electric vehicles, which would qualify as a cellulosic biofuel, won’t squeeze out their liquid fuels.

“The key condition is, as long as there’s room for them in the tent, you’re improving your politics,” said one ethanol industry source.

The mandate for biofuels calls for 32 billion gallons of renewable fuels by 2022, half of which should be advanced fuels like cellulosic, though production of those fuels has come nowhere near the projections lawmakers used when setting that mandate. And EPA anticipates that in its first year, the biogas-to-electric vehicles pathway would generate the equivalent of 30 million gallons of fuel, hardly enough to affect the market.

“When they do the math they’ll find it’s a big enough tent to accommodate all of these low carbon fuel options,” UCS’ Martin said.