Groups say new standards undermine RFS, biofuel goals

Source: Jason Plautz, E&E reporter • Posted: Wednesday, September 5, 2012

The Obama administration’s new fuel economy and tailpipe emissions rules — aimed at reducing oil consumption and boosting alternative-fuel cars — may hurt government efforts to promote biofuels, promoters of those fuels say.

Some biofuel advocates argue that fuel economy rules released last week are in direct opposition to the renewable fuel standard designed to boost ethanol and other biofuels, because of incentives for alternative vehicles.

“We’ve got conflicting national priorities at play,” said Ernie Shea, project coordinator for the 25 by ’25 Alliance. “What the rule has done is create an unlevel playing field because it doesn’t recognize the full life cycle benefits that biofuels can provide.”

At issue, Shea said, are incentives for alternatives like electric vehicles, plug-in hybrids and, in a late addition, natural gas vehicles. The fuel economy standards for model years 2017-2025 released by U.S. EPA and the National Highway Traffic Safety Administration provide incentives for manufacturers to produce and sell alt-fuel vehicles that can boost their impact in meeting the goal of 54.5 mpg fleetwide fuel economy by 2025.

Under the rules, electric vehicles and hybrids get a multiplier incentive starting in 2017, allowing them to count extra against a company’s fleetwide consumption. EVs would get a 2.0 multiplier through 2021, allowing each vehicle sold to count double, while plug-in hybrids start at a 1.6 multiplier in 2017 (both scale down over the eight-year life span of the program).

EPA’s rules, which govern greenhouse gas emissions, also offer incentives by not counting emissions from EVs and plug-in hybrids up to a sales cap per company. Other liquid fuels, including E85, will count for only 15 percent of fuel burned, a standard calculation from the agency.

But an existing EPA incentive for flex-fuel vehicles (FFVs) that run on high-blend biofuels like E85 will phase out in model year 2015, although corporate average fuel economy (CAFE) incentives will stay in place. According to analysts who have reviewed the rule, the new standards measure compliance by the use of fuel, not production of vehicles, to encourage the adoption of E85 fueling.

Although there are millions of FFVs on the road, “historically consumers have fueled these vehicles with E85 a very small percentage of the time,” and FFVs are similar in cost to conventional cars, the rule states.

Responding to comments from groups like the Clean Fuels Development Coalition and the Association of Global Automakers, including requests to give credits to cellulosic biofuels, EPA leaned on the existence of the RFS program. “Given that renewable fuel use is already required by and accounted for under the RFS program, it therefore would be inappropriate to provide additional incentives in the [model year] 2017-2025 program,” EPA wrote.

Shea, whose group representing agriculture and renewable interests filed a comment on the draft rule, said that means there’s a financial incentive to build electric cars but not FFVs, which he sees as a dig at biofuels and their role in meeting the emissions reduction goals.

Advocates say it also presents a conflict with the administration’s other work in promoting biofuels through the renewable fuel standard, established in the same 2007 energy law that provided the impetus for the fuel economy standards.

“The 2007 energy bill … contains fairly explicit requirements and authorizations for the use of incentives for nonpetroleum fuels, including but not limited to ethanol,” said Boyden Gray, a former White House special counsel to President George H.W. Bush. EPA’s actions “basically eliminate the statutory incentives contained in the 2007 bill,” he said.

“It’s hard to believe,” he added, “Congress would have meant for statute be in conflict with another part.”

RFS in center of political storm

The RFS established a goal of 36 billion gallons of alternative fuels by 2022. It’s been the center of significant political discussion because of its impact on corn supply and food and fuel prices, and difficulty in meeting some targets for advanced biofuels.

Combine that with the CAFE rules, Shea said, and it’s not hard to imagine a “chicken-and-egg problem” where there is no real-life use for the fuels.

“In establishing the GHG standards, [EPA] says they recognize that the use of biofuels has potential, but then they go on to say there are other programs like the RFS that already require the increasing use of renewable fuels,” Shea said. “That’s all well and good, but without the vehicles to use those fuels, you won’t recognize the benefits.”

Gray said that if he had written the rule, he would have offered larger incentives for nonpetroleum fuels and considered life cycle emissions related to production. He said that with electric vehicles deriving power from a coal-heavy grid, it’s possible that biofuels would offer a better overall environmental benefit.

He said it was also important for EPA to consider fuel rules — including the RFS and potential tier 3 fuel standards that would target the sulfur content of gasoline — in concert with the CAFE standards because there could be “unfortunate side effects” if dirty fuels end up in clean cars.

Environmentalists say such concerns are overblown. Michal Rosenoer, biofuels policy coordinator for the environmental group Friends of the Earth, said merely having flex-fuel cars doesn’t guarantee people will use the cars, especially with concerns that high ethanol blends can cause engine damage (Greenwire, April 4).

“And to make it worse, the EPA’s analysis of corn ethanol shows that the biofuel actually produces more [greenhouse gases] than gasoline, not less, which would make any credits for FFVs ironic at best and extremely dangerous at worst,” Rosenoer said. “If the EPA hadn’t grandfathered in almost all corn ethanol plants, corn ethanol never would have qualified as a ‘renewable fuel’ in the first place and we wouldn’t be in this mess.”

Rosenoer was referring to EPA’s 2010 decision to allow certain first-generation corn ethanol plants into the RFS. Opponents have pointed to a variety of studies, notably a 2011 National Research Council study, that charge that producing feedstock for biofuels has a negative economic and environmental impact.

The rule does contain a midterm review period, and EPA officials said they could reconsider elements of the rules as early as 2017. But Shea said even a five-year wait is too long.

“The investments being made into next-generation biofuels are enormous, and they’re looking for signals,” Shea said. “These on-again, off-again signals are maddening to the community. At the end of the day, we have to ask … are we really after greenhouse gas emissions or not? If they are, they need to start aligning public policy.”