The Second Renewable Fuel Standard

The second (current) renewable fuel standard (RFS2) was passed in 2007 as part of the Energy Independence and Security Act (EISA) and took effect in 2008.  It contains a biofuels mandate that increases each year, reaching 36 billion gallons of total biofuels that must be blended into American transportation fuels in 2022.  Furthermore, 16 billion gallons of the 2022 mandate must come from cellulosic biofuels, 1 billion gallons from advance biodiesel (this number is subject to increase), and 4 billion gallons from unspecified advance biofuels.  However, the EPA may revise these numbers downward for a variety of reasons.  Figure 1 graphically displays the mandated volumes of biofuels for the RFS2.  The biodiesel mandate after 2013 may be revised upward by the EPA [1].

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Figure 1. Graphical representation of the RFS2 biofuels mandate by year.  The EPA may revise any of mandates downward and may revise the biofuels mandate upwards after 2013.

Under the RFS2, any company producing gasoline or diesel for commercial sale in the U.S. is given a Renewable Volume Obligation (RVO).  This RVO is equal to the company’s fuel sales for the year multiplied by the mandate volume for that year divided by estimated total U.S. fuel demand.  At the end of each year, any company producing American transportation fuels must have enough RINs to meet its RVO for that year.  A RIN (renewable identification number) is a 38 digit number assigned to every batch of biofuel that is to be blended into U.S. transportation fuels.  This RIN is created with the production of the biofuel and changes hands with the batch of biofuel until that biofuel is blended into transportation fuels.  At this point, the RIN is separated from the batch of biofuel and may be sold separately to any company trying to meet its RVO.  The price of each RIN (theoretically) should be equal to the cost of production of the biofuel less is market value.  Each year, up to 20% of a company’s RVO may be met with prior year RINs [1].

To date, the vast majority of the biofuels mandate has consisted only of corn starch ethanol.  Many have criticized corn starch ethanol using the common “food vs. fuel” argument and because of its low reduction in GHG emissions (18-29% reduction) and its low overall energy balance and the common.  It takes approximately 1.3 units of energy input to produce one unit of energy with corn ethanol.  However, the results of studies estimating this value have varied greatly, and some actually estimate an energy balance value of less than one for corn ethanol.  Brazilian sugarcane ethanol, on the other hand, has an energy balance of about 8.  Through 2011, corn ethanol exceeded the mandate.  This was largely due to the existence of a 45 cent per gallon corn ethanol subsidy.  However, this subsidy expired on January, 1 2012.  Since that date, many corn ethanol plants in the U.S. have closed, reducing ethanol production capacity in the U.S. from 15.2 billion gallons per year in September 2011 to 14.2 billion gallons per year in September 2012 [2]. 

Also, because of slowly decreasing domestic fuel demand (that is expected to continue) and the low penetration of E15 and E85 in the U.S., many predict the U.S. will hit an “ethanol blend wall” in the near future.  Virtually all gasoline in the U.S. is currently E10, or 10% ethanol by volume.  The EPA has determined E10 completely safe for use in virtually all gasoline vehicles currently on the road.  Currently, the EPA maintains the E15 is also safe for use in all vehicles with a model year of 2001 or newer.  However, many automobile manufacturers dispute this.  A joint lawsuit was filed by several entities (including the API, AAM and others) against the EPA’s decision, but the case was dismissed.  Figure 2 pictures the gas cap of a model year 2013 Toyota that states specifically to not use E15 – E85 with the car.  Furthermore, infrastructure is not yet in place for E15 distribution.

     Image Figure 2. MY 2013 Toyota gas cap stating that the car is not compatible with E15 fuel [3].

E85 is fuel that is made up of up to 85% ethanol, with the rest gasoline.  E85 can only be used in special “flex fuel” vehicles, which account for approximately 4% of total vehicles on the road.  However, in 2010, E85 accounted for less than 0.1% of total U.S. fuel sales at 8,100 bpd.  Between 2006 and 2010, this number increased approximately linearly with about a 1000 bpd/year increase in consumption [4].  These very low sales of E85 are largely due to the higher cost of E85 compared to E10 on an energetic basis, the fact that many people who own flex fuel vehicles due not actually realize that they own them, and the lower available of E85 as compared to E10.

Cellulosic biofuels, at 16 billion gallons, account for the largest single part of the RFS2 mandate in 2022.  These biofuels must provide at least a 60% reduction in GHG emissions and be produce from cellulose, hemicellulose or lignin.  Currently, many of the possible feedstocks for cellulosic biofuels are treated as waste and discarded.  These include most plant waste and paper waste.  Another commonly discussed popular feedstock includes switchgrass, which is easy to grow and can be grown on land that is not suitable for the production of other crops, such as corn.  As a result, raw materials for cellulosic biofuels are cheap and readily available today.  Despite this, however, production has yet to take off.  The mandate for cellulosic biofuels was revised downward in 2010, 2011, and 2012 by an average of over 96% due to lack of supply.  The space left in the mandate after these revisions could be met by any advanced biofuel.  It will more than likely be similarly revised down this year and in the coming years as well, unless significant new sources of supply come on line.  These issues could really become problematic in the next few years as the cellulosic biofuels mandates become more significant.

Biodiesel production has been very close to the mandates.  In 2012 970 million gallons of biodiesel were produced domestically, while the mandate was for 1 billion gallons to be blended into fuels.  However, much of the produced biodiesel was exported, and other biodiesel was imported to meet the mandates [4].  Most biodiesel in the U.S is produced from soy.

The “other advance biofuels” category may be met with any type of “advanced biofuel,” including cellulosic biofuels or biodiesel.  For a fuel to qualify as an advance biofuel, it must provide at least a 50% reduction in GHG emissions.  This includes virtually all biofuels, except for corn starch ethanol.  In 2012, 92% of this category’s relatively small mandates was met with Brazilian sugarcane ethanol.  This situation could become problematic in the future, as the mandate for this section continues to grow (especially if the cellulosic biofuels mandate is replaced with a mandate for any advanced biofuel).  Furthermore, Brazil has been experiencing a relative shortage of ethanol over the past few years, due to poor sugarcane harvests.  This could actually lead to the peculiar situation in which Brazil is importing American corn ethanol to meet its own ethanol mandates, while the U.S. would be importing Brazilian sugarcane ethanol to meet its advanced biofuel mandate.  However, it is unlikely that this will ever happen a large scale.

Lastly, biofuels are a very land intensive and water intensive resource.  Additionally, their production often competes with that of food (with the notable exception of cellulosic fuels) and large energy inputs are commonly needed to produce them.  This begs the question that although biofuels may be a renewable resource, are they (at least on a somewhat large scale) a sustainable resource.  Table 1 shows the land intensiveness of several sources of renewable energy.  Also, take note that solar and wind power use very little water.

Table 1: Land intensiveness of Different Forms of Renewable energy

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[1] http://www.fas.org/sgp/crs/misc/R40155.pdf

[2] http://ethanolproducer.com/articles/9325/ftc-us-ethanol-market-remains-unconcentrated-in-2012

[3] http://www.newfuelist.com/link/~4wna#.UTjmPleyKSo

[4] www.eia.gov

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