A Look at the 2018 Renewable Fuel Standards

For more than a decade, the federal Renewable Fuel Standard (RFS) program has sought to improve the emissions characteristics of fuel and support the domestic biofuels sector, while increasing American energy independence and security. The program calls for increasing volumes of renewable fuels—known as renewable volume obligations (RVOs)—to be blended into the nation’s transportation fuel supply every year.

The RVOs are given as four separate categories: (i) total renewable fuel (generally corn ethanol); (ii) advanced biofuel (including Brazilian sugar cane ethanol); (iii) biomass-based diesel (including biodiesel and renewable diesel); and (iv) cellulosic biofuel. In setting RVOs for each of these four categories, the Environmental Protection Agency (EPA) has generally published annual blending targets that encourage NATSO’s members to blend more and more renewable fuel into their fuel supply.

Congress, however, charged EPA with implementing the RFS program in a way that incentivizes blending the greatest possible volume of biofuels, while preventing severe economic or environmental harm. As such, EPA has waiver authorities that allow it to lower certain RVOs below statutory levels set by Congress if EPA finds that harm will occur or if there is an inadequate domestic supply of renewable fuels. EPA also has latitude to use its discretion to increase blending targets for certain fuel categories that are already meeting Congressional requirements.

For the 2018 RVOs, announced by EPA on Nov. 30, 2018, the agency exercised its cellulosic waiver authority to lower the volume requirements for cellulosic biofuel below statutory levels due to a “significant shortfall in cellulosic biofuel production.” Since cellulosic biofuel requirements are nested within advanced biofuel and total renewable fuel requirements, EPA also lowered the levels for advanced biofuel and total renewable fuels by a corresponding amount. As shown in the graphic below, the 2018 RVOs have generally been set well below statutory targets. On the other hand, Biomass-based diesel (biodiesel) requirements, also displayed below, are meeting congressional targets and appear to have room to grow. 

In general, NATSO supports EPA’s historical approach of incentivizing as much blending of renewable fuels as possible, while adhering to market realities. From NATSO’s perspective, the 2018 numbers represent a general continuation to the Obama Administration’s approach to the RFS, although the current EPA appears intent on slowing the program’s growth relative to previous years. NATSO, however, thinks that biodiesel blending requirements can be more aggressive.

In 2018, the RVO for biodiesel increased just 100 million gallons from 2017 levels (2.0 billion gallons) and is set to flatline at 2.1 billion gallons in 2019. Consumption of biodiesel, however, is projected to exceed these levels significantly. NATSO understands that if biodiesel RVOs are set too high, prices for diesel fuel could increase. Nevertheless, NATSO thinks that there is room to increase biodiesel blending levels set by the annual RVOs.

via Business Feeds

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