Is it Time to Broaden the Scope of the U.S. Renewable Fuel Standard?

By I. Daniel Posen* and Inês Azevedo

Established by the Energy Independence and Security Act of 2007 (EISA), the U.S. renewable fuel standard (RFS2) requires refiners, blenders and importers of transportation fuels to meet biofuel targets that increase progressively through 2022 [1]. 

It’s now a little over seven years later, and the standard is facing two seemingly opposite stumbling blocks: weak supply (of cellulosic biofuel), and weak demand. Although the standard initially called for no less than 3 billion gallons per year of cellulosic biofuel in 2015, existing and proposed cellulosic capacity barely exceeds 100 million gallons per year [2]. Meanwhile, on the demand-side, the ethanol “blend wall” limits the amount of biofuel that can be consumed by the existing vehicle fleet.

Taken together, these factors make it unlikely that the country will be able to meet RFS2 targets for the foreseeable future. Although the Environmental Protection Agency (EPA) has not yet finalized the 2014 or 2015 mandates, there have been strong indications that they plan to issue waivers, reducing target biofuel volumes [3]. The figure below shows RFS2 targets for each of the four congressionally specified categories of biofuel [1], overlaid with actual and projected biofuel production data from EIA [4, 5].

Figure 1. Annual biofuel targets under RFS2, along with actual and projected biofuel consumption. ‘Renewable biofuel’ refers to any renewable source, ‘advanced biofuel’ refers to any renewable source other than corn starch and ‘cellulosic biofuel’ refers to fuel derived from cellulose, hemicelluloses or lignin. Reference gasoline and diesel production volumes are shown for 2008. Figure is adapted from [6].

The present rollback is particularly unfortunate, as it occurs just as the more advanced and cellulosic biofuels were meant to start ramping up. EISA and RFS2 are thought to forward a number of key goals, most prominently including energy security, rural development and greenhouse gas (GHG) mitigation [7]. On the latter goal there has been much controversy surrounding the net GHG balance of corn ethanol – the dominant feedstock to date. A number of studies have even suggested that corn ethanol could result in increased emissions relative to gasoline (e.g. [8-10]). The use of food crops for fuel production has also given rise to concerns about exacerbating global hunger [11, 12]. In contrast, cellulosic biofuels are generally reported to have a more favorable GHG balance [13-16], and less impact on global food prices [12].

Although the corn ethanol industry is now well-established, cellulosic biofuels are still a nascent technology and are unlikely to develop further without strong and consistent market signals. RFS2 was meant to provide stable demand for these 2^nd generation biofuels. It is presently failing in that task. While EPA’s Transportation Chief Christopher Grundler continues to make optimistic statements about getting RFS2 “back on track” [17], the projections above underscore the enormous challenge the agency faces.

In a recent paper, we and our co-authors suggested that the narrow scope of RFS2 is an important contributing factor to its current difficulties [6]. Restricting RFS2 to the transportation sector means there are limited options available to address idiosyncratic hurdles like the ethanol blend wall. Moreover, basic economic theory dictates that restricting one’s choice set leads to potentially sub-optimal results. In the case of RFS2, the transportation focus places competing uses for biofuels (or more generally for biomass) at a disadvantage in the marketplace. For example, it should come as no surprise that companies like Coca-Cola, maker of the ethanol-based PlantBottle^TM [18], has lobbied on multiple bills aimed at repealing or reforming RFS2 [19]. A possible solution to the various problems outlined would be to expand the scope of RFS2.

In the absence of a market-based mechanism for GHG abatement (e.g. carbon tax or cap and trade), we are stuck with less economically efficient command and control style regulation. RFS2 overcomes some of these drawbacks by including a market-based trading scheme for biofuel credits (RINs). The wider the coverage of the RIN trading scheme, the closer this mechanism comes to approaching an idealized market-based GHG mitigation scheme. In our paper, we raised the idea of a comprehensive renewable material standard (RMS) [6] that covers both fuel and chemical use of biomass. There are many details that would have to be worked out before such a policy could be implemented. As a general premise, replacing RFS2 with a RMS would level the playing field across uses of biomass. Further, such a move could provide prospective biofuel producers with greater access to new markets, improving the stability of long-term demand prospects.

In our recent work, we investigated the GHG impact of one alternative use for bio-ethanol: to produce bioethylene. Ethylene is the world’s highest volume organic chemical. Though current ethylene production is almost entirely fossil-based (in the U.S. it is derived predominantly from natural gas liquids), it can also be produced via chemical dehydration of ethanol. In brief, we found that replacing fossil ethylene with bio-ethylene achieves similar GHG savings to replacing gasoline with bio-ethanol [6]. Thus, replacing RFS2 with an RMS has the potential to provide increased flexibility without compromising GHG reduction targets. The degree to which this added flexibility would be exploited depends on production costs and market conditions, and is still an open question.

In its narrowest form, the RMS could simply add bio-ethylene as an approved use for bio-ethanol in RFS2. It would be a simple matter (conceptually, not politically), to allow bio-ethylene producers to sell credits into the RIN market. This scheme would largely accomplish the goals of RFS2 (energy security, rural development and GHG mitigation). There could be many products other than (or instead of) bio-ethylene, which would be worth considering as part of an RMS. Limiting such a scheme specifically to alternative uses for biofuels (i.e. ethanol) could help ease the transition to higher biofuel blends, without necessarily detracting from the long-term transportation focus of RFS2. Of course, the more flexible the standard, the greater the benefits will be. So, is it time to broaden the scope of the renewable fuel standard?

REFERENCES

1.            Energy Independence and Security Act of 2007 (EISA). Public Law 110-140. Code of Federal Regulations, 2007.

2.            Renewable Fuels Association (RFA). Biorefinery Locations. 2013. http://www.ethanolrfa.org/bio-refinery-locations/ (Accessed March 4, 2015).

3.            Environmental Protection Agency. 40 CFR Parts 80. 2014 Standards for the Renewable Fuel Standard Program. Federal Register 2013, 78, (230), 71732-71784.

4.            U.S. Energy Information Administration (U.S. EIA), Annual Energy Outlook 2014; 2014.

5.            U.S. Energy Information Administration (U.S. EIA), Annual Energy Review 2013; 2014.

6.            Posen, I. D.; Griffin, W. M.; Matthews, H. S.; Azevedo, I. L., Changing the Renewable Fuel Standard to a Renewable Material Standard: Bioethylene Case Study. Environ Sci Technol 2015, 49, (1), 93-102.

7.            Renewable Fuels Association (RFA). Renewable Fuel Standard. 2015. http://www.ethanolrfa.org/pages/renewable-fuel-standard (Accessed March 15, 2015).

8.            Mullins, K. A.; Griffin, W. M.; Matthews, H. S., Policy Implications of Uncertainty in Modeled Life-Cycle Greenhouse Gas Emissions of Biofuels. Environ Sci Technol 2011, 45, (1), 132-138.

9.            Searchinger, T.; Heimlich, R.; Houghton, R. A.; Dong, F. X.; Elobeid, A.; Fabiosa, J.; Tokgoz, S.; Hayes, D.; Yu, T. H., Use of US croplands for biofuels increases greenhouse gases through emissions from land-use change. Science 2008, 319, (5867), 1238-1240.

10.          Cassidy, E., Ethanol’s Broken Promise: Using Less Corn Ethanol Reduces Greenhouse Gas Emissions; Environmental Working Group: 2014.

11.          Pimentel, D.; Marklein, A.; Toth, M. A.; Karpoff, M. N.; Paul, G. S.; McCormack, R.; Kyriazis, J.; Krueger, T., Food Versus Biofuels: Environmental and Economic Costs. Hum Ecol 2009, 37, (1), 1-12.

12.          Rathmann, R.; Szklo, A.; Schaeffer, R., Land use competition for production of food and liquid biofuels: An analysis of the arguments in the current debate. Renew Energ 2010, 35, (1), 14-22.

13.          United States Environmental Protection Agency (U.S. EPA), Renewable Fuel Standard Program (RFS2) Regulatory Impact Analysis; EPA-420-R-10-006; Office of Transportation and Air Quality: Washington, DC, 2010.

14.          Mullins, K. Evaluating Biomass Energy Policy in the Face of Emisisons Reductions Uncertainty and Feedstock Supply Risk. Ph.D. Thesis, Carnegie Mellon University, Pittsburgh, PA, 2012.

15.          Wiloso, E. I.; Heijungs, R.; de Snoo, G. R., LCA of second generation bioethanol: A review and some issues to be resolved for good LCA practice. Renew Sust Energ Rev 2012, 16, (7), 5295-5308.

16.          Borrion, A. L.; McManus, M. C.; Hammond, G. P., Environmental life cycle assessment of lignocellulosic conversion to ethanol: A review. Renew Sust Energ Rev 2012, 16, (7), 4638-4650.

17.          Peterka, A., Biofuels: Beleaguered EPA vows to get RFS ‘back on track’. GreenWire February 20, 2015.

18.          The Coca-Cola Company. PlantBottle: Frequently Asked Questions. 2012. http://www.coca-colacompany.com/stories/plantbottle-frequently-asked-questions (Accessed May 25, 2014).

19.          The Center for Responsive Politics. Lobbying Spending Database-Coca-Cola Co, 2013. http://www.opensecrets.org/lobby/firmbills.php?id=D000000212&year=2013 (Accessed March 5, 2015).

*Corresponding Author Email: daniel.posen@gmail.com

**Note: an earlier version of this article reported that Coca-Cola has “lobbied for multiple bills aimed at repealing or reforming RFS2″. The cited data-base does not specify whether the company lobbied for or against the listed bills.