Comments on EPA Notice of Proposed Rulemaking, 2014 standards for RFS2
ICCT comments on “2014 Standards for the Renewable Fuel Standard Program” Notice of Proposed Rulemaking (EPA–HQ–OAR– 2013–0479; FRL–9900-90-OAR)
ICCT supports EPA’s proposed 2014 volumes of 15.21 billion gallons for renewable fuel, 2.20 billion gallons for advanced biofuel, and 1.28 billion gallons for biomass-based diesel, and supports EPA’s methodology in estimating cellulosic biofuel availability. ICCT also supports EPA’s intention to consider the amount of ethanol than can reasonably be consumed in future volume rulemakings, as this will provide some certainty to all stakeholders. Related to this, the best approach to fostering certainty and investment in the renewable fuel industry is to propose as soon as possible a revised compliance schedule for 2016-2022. As a result, the ICCT supports EPA’s publishing of targets for these later years in a manner that similarly makes adjustments based on the amount of biofuel that will likely be consumed.
EPA’s proposed use of the general waiver authority to waive a fraction of the renewable volume mandated in the statute due to insufficient supply is appropriate and legal, as we understand it. Our research supports EPA’s conclusion that insufficient infrastructure to deliver ethanol blends above 10% presents a real and significant barrier to meeting a total renewable fuel volume above 15.21 billion gallons. While E85 consumption can be expected to increase with greater price support, we present an analysis showing that D6 (renewable) RIN prices would likely need to rise above $1/RIN to provide a real financial incentive for the installation of new E85 stations. Using different assumptions, this threshold D6 RIN price could be much higher. Such an outcome would impose a significant burden on obligated parties and consumers. Our analysis is simple and relies on several assumptions, but provides an indication that increased deployment of E85 is unlikely to be easily achieved through increasing the 2014 renewable fuel volume above EPA’s proposal.
EPA has proposed that carryover RINs not be considered in setting volumes for 2014. Carryover RINs provide an important flexibility mechanism to obligated parties, helping to reduce the impact on the RFS2 program and the alternative fuel and RIN markets in the event of drought or other unexpected compliance issues. Given these, we see no need reason for EPA to actively seek to draw down RIN stocks by increasing volume obligations.
EPA’s approach in proposing to reduce the advanced biofuel volume along with the reduction in cellulosic biofuel volume for 2014 is appropriate and provides a clear steer that the slow commercialization of cellulosic fuel will not lead to a vast increase in the mandate for first generation advanced fuels. EPA’s proposal to set the 2015 biomass-based diesel volume at this time will provide a clear and timely signal to all stakeholders. The proposed biomass-based diesel volume of 1.28 billion gallons (1.92 billion ethanol equivalent gallons) is appropriate and allows flexibility for obligated parties to use the best value advanced biofuel pathways to meet their obligations. The biodiesel tax credit has expired and is unlikely to be renewed early enough in 2104 to support production of biomass-based diesel this year; without this tax credit, biomass-based diesel prices and D4 (biomass-based diesel) RIN prices are likely to rise. In addition, increasing demand for waste oils in the EU may divert some of this feedstock from the U.S., limiting availability to meet the 2014-15 biomass-based diesel requirements. For all these reasons, the biomass-based diesel requirement should not be raised above 1.28 billion gallons in 2014 and 2015.
We support EPA’s methodology in determining the cellulosic volume. We request that if EPA approves the proposed pathway for cellulosic RINs from landfill biogas in 2014, they then add the projected volume of this pathway to the cellulosic biofuel volume already proposed for the 2014 standard.