Policy update

EPA proposal for Renewable Fuel Standard 2017 volumes

On May 18, 2016 EPA released the pre-publication version of its proposed rule for volume standards for the Renewable Fuel Standard (RFS) program in 2017, as well as the biomass-based diesel (BBD) volume for 2018. This policy proposal provides an overview of the main elements of the proposed rule, how the proposed volumes have changed in comparison with those for 2016, and what this indicates for EPA’s approach moving forward.

In this proposal, EPA follows its approach from the 2014–2016 volume rulemaking in utilizing both the cellulosic waiver authority and the general waiver authority to set volumes lower than those specified in the statute for all biofuel categories. The total renewable fuel volume for 2016 is 18.8 billion gallons, compared to 24 billion gallons as set in the statute (the RFS categories are nested: cellulosic biofuel and biomass-based diesel are both subsets of advanced biofuel, which is a subset of renewable fuel). The cellulosic waiver is used because production of cellulosic biofuel is expected to fall below the statutory target, as it has every year of the RFS program. EPA has invoked the general waiver authority based on a constraint in renewable fuel supply to vehicles that can consume it. In essence, this reflects the fact that the U.S. market has become saturated with E10 (10% ethanol in gasoline), and there are significant constraints on supplying higher blends of ethanol, including manufacturer warranties for vehicles and fueling infrastructure.

The proposed volumes for 2017 are modestly higher than for 2016 for all fuel categories. EPA expects the increase in non-advanced renewable fuel to be met with additional corn ethanol blended as E10, due to increasing demand for motor gasoline. The proposal does not indicate an expectation for a significant growth in consumption of ethanol through higher blends such as E15 (15% ethanol in gasoline) and E85 (51-83% ethanol in gasoline). Growth in biomass-based diesel and other advanced biofuel is expected to come largely from increased domestic production of biodiesel and renewable diesel. EPA has proposed the biomass-based diesel volume for 2018, and it follows the pattern of a slow increase that EPA indicated in the previous rulemaking. Much of the increase in cellulosic biofuel in 2017 is anticipated to be from cellulosic biogas used in LNG and CNG vehicles, although production of liquid cellulosic biofuels (mostly cellulosic ethanol) is expected to grow substantially from 4 million gallons in 2016, to 27 million gallons in 2017.

This proposal indicates that EPA is likely to follow the same approach in setting RFS volumes beyond 2017, although implementation may change with the introduction of a new presidential administration.

Alternative fuels