This proposal would be a devastating blow to the many companies working today to fulfill the promise of the Renewable Fuel Standard (RFS) by raising capital, building manufacturing facilities and actually producing advanced biofuels that cut greenhouse gases in half compared to gasoline. On behalf of the Advanced Biofuels Association and our nearly 50 companies that produce advanced and cellulosic biofuels, as well as renewable feedstocks, I want to take this opportunity to share our perspective on this drastic policy shift.
In their proposed rule, EPA announced it is considering a range of between 2 billion and 2.5 billion ethanol-equivalent gallons for advanced biofuel in 2014 and has proposed 2.2 billion gallons as the volume target. For comparison sake, 2.2 billion gallons represents a 20-percent reduction from this year’s advanced biofuel requirement of 2.75 billion gallons and a greater than 40-percent cut from the 3.75 billion gallons contemplated by the RFS statute.
If EPA sticks with anything close to 2.2 billion gallons in the final rule, the agency will pull the rug out from underneath the developing advanced biofuels sector and destroy this industry.
Let me be clear that the advanced biofuels industry is here today and investing for tomorrow. Innovative companies have responded to the challenge of producing cleaner, low-carbon fuels by spending a collective $14 billion on the development of advanced and cellulosic biofuels. But EPA’s proposal will devastate that progress and chill any future investments.
As we enter the 60-day comment period that will end on January 28, 2014, here are three key points that ABFA will stress in our future comments to the EPA:
Number One: EPA’s proposed RFS reductions fall disproportionately on advanced biofuels.
The EPA is proposing to cut volume requirements for advanced biofuels by more than 40 percent when compared to the requirements written into the RFS statute. In contrast, EPA is proposing to reduce volume requirements for conventional biofuels by less than 10 percent. We’re left scratching our heads and wondering why EPA would deliver such a disproportionately large blow to the category of renewable fuels that reduces greenhouse gas emissions the most. It’s unfair and counterproductive to the Obama administration’s stated goal of reducing climate change.
Number Two: EPA’s Monte Carlo model will always roll snake eyes for the advanced and cellulosic biofuels industry.
That’s because EPA’s proposed methodology for setting upcoming RFS targets looks backwards at the average of historical data, rather than forward to future production levels. For our evolving industry, such a policy will ensure a continuous oversupply of advanced biofuels compared to what the EPA model forecasts. This imbalance will in turn crater the value of the renewable identification numbers (or RINs) that are assigned to each ethanol-equivalent gallon of biofuel. RIN prices are instrumental to financing the development of future advanced and cellulosic biofuel facilities, and the agency cannot support the emergence of a low-carbon, innovative industry by looking through the rear-view mirror.
Number Three: EPA should set RFS standards that encourage production and consumption of all available advanced biofuels.
There are no other fuels available today that deliver greater reductions in greenhouse gases than advanced biofuels. For an administration that is committed to addressing climate change, this proposal leaves low-hanging fruit still in the tree by setting consumption targets below available levels of advanced biofuels, plus carry-over RINs. As I said, ABFA takes issue with EPA’s Monte Carlo model. But even using the agency’s lowball estimate, EPA predicts up to 3.23 billion gallons of advanced biofuel will be available next year. This estimate is in line with ABFA’s conservative forecast that our industry will generate at least 3.2 billion RINs in 2013 that qualify as advanced biofuels, exceeding this year’s target by at least 500 million gallons and generating that many carry-over RINs.
Keep in mind, this Administration has spent over half a billion dollars from the Department of Energy alone to develop the advanced biofuels industry. To preserve the value of those investments and continue to support new advanced biofuel production, EPA should set a 2014 advanced biofuel target that can be met and exceeded by current production, plus carry-over RINs. Anything less than requiring production and consumption of all available advanced biofuels would be a step backwards from the Obama administration’s commitment to reduce climate change.
The Bottom Line:
As we enter into the 60-day comment period, rest assured that the Advanced Biofuels Association will continue to champion the cause of our industry. Our stated position is that EPA’s proposed rule is a significant departure from previous RFS proposals. It is also a departure from clear Congressional intent to steadily increase the target for advanced biofuels year over year. This reversal, such as EPA’s proposal to put the target below current production by torturing a model or flipping the agency’s own arguments on waiver authority, is a major violation of the statute and the commitment of Congress and the Administration to creating an advanced biofuels industry.
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