Pulling the Renewable Fuel Pieces Together
We’ve frequently written about the Renewable Fuel Standard (RFS). We’ve noted its tensions and the need to improve how it operates. This includes fostering biofuels that help the environment and minimizing the ones that harm it. It includes establishing a stable investment climate for emerging technologies that isn’t under constant threat of legislative reform. And it includes ensuring that the program deploys sustainable biofuels while still dealing with valid implementation challenges. EPA has the unenviable task of reconciling all of these issues as it sets the RFS targets for 2014. There is no simple fix, but EPA can make the most of its options by tying several pieces together.
A big part of EPA’s task will be to address what’s known as the blend wall. In practical terms, there is a 10% ethanol blending limit applied the nation’s gasoline supply. The problem is that the RFS now requires more ethanol than the 10% limit will allow. How much more? It’s not that simple. The answer depends on a range of assumptions about overall gasoline demand and how different elements of the RFS play out over the next year. Higher blend fuels such as E85 can squeeze more ethanol into the market. But it’s highly uncertain whether the sizable volumes now required can be absorbed within the next twelve months, which is really the issue here. The trick for EPA is to establish a pace that moves beyond blending limitations without pushing the policy past its breaking point.
EPA can address this in a way that promotes other policy goals. As it contemplates the necessary reductions, it can draw down more conventional ethanol for its reductions. This is consistent with the RFS’s structure. The policy allows advanced biofuel to fulfill the conventional requirement but conventional biofuels cannot fulfill the advanced mandate. In other words, the policy embeds a preference for advanced biofuels and EPA should reflect this in its final rule. Greater room for advanced biofuels would provide more opportunities for the right types of alternative fuel that help the environment. Of course, “advanced” is a catchall term that includes many fuel types with varying environmental profiles- some good, others questionable. Any problematic fuels in this category must also be sorted out along the way. But this approach at least tilts the balance towards biofuels with higher emissions obligations and away from controversial first generation ones which have drawn political opposition from a diverse range of stakeholders. That opposition and its legislative implications have had a chilling effect on other biofuel technologies that also rely on RFS.
This rulemaking is not ideal for many but nor are the realities surrounding the RFS. Indeed, if the RFS is to broaden our fuel choices over the long term, it must survive over the long term. That means making adjustments along the way that create a realistic, politically stable, and environmentally sustainable policy.
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