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February 8, 2016

EPA Sets Renewable Fuel Mandate Below Legal Requirement

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Heartland Institute

By Bonner Cohen

The Environmental Protection Agency (EPA) established its blend requirements for renewable fuels.

The EPA blend requirements were announced after much delay on the November 30 court-ordered deadline.

EPA set a goal for refiners to blend 18.11 billion gallons of biofuels into gasoline and diesel for 2016 and retroactively set the level at 16.93 billion gallons for 2015 and 16.28 billion gallons for 2014.

Under a waiver provision in the Energy Independence and Security Act of 2007 (EISA), EPA was allowed to require biofuel blends in transportation fuels lower than the standards required by the statute, a step the agency was forced to take when the market didn’t develop as expected.

The newly established requirements are well below those set out in the 2007 statute. For example, the 2016 statutory level was set at 22.25 billion gallons, 4.14 billion gallons more than EPA’s new mandate. 

Benefits of RFS Claimed

The renewable fuels standard (RFS) was created as part of the Energy Policy Act of 2005. The amount of ethanol required to be blended in gasoline significantly expanded in the EISA. Proponents of the renewable fuel mandate claimed it would cut carbon dioxide emissions and reduce U.S. dependence on foreign oil.

At the time of its passage, proponents of the law claimed it would inspire a technological revolution in ethanol production bringing about “advanced biofuels” such as cellulosic ethanol, made from switchgrass and other carbohydrates. The EISA mandates annual increases in the proportion of biofuels that must be blended into the U.S. fuel supply, reaching a total of 36 billion gallons by 2022. 

Unrealistic Assumptions

Implementation of RFS has been plagued by a host of problems. Significantly increased domestic oil and gas production resulting from the widespread use of fracking in the late 2000s, combined with decreased gasoline consumption resulting from the sluggish economy in the wake of the 2008 recession, has resulted in lower carbon dioxide emissions and substantially reduced oil imports.

Renewable fuel mandates have played little or no factor in either result.

“The United States no longer needs renewable fuels to reduce its dependence on energy from foreign sources, because the United States has usurped Russia and Saudi Arabia as the world’s top oil and natural gas producer,” said Merrill Matthews, a resident scholar at the Institute for Policy Innovation. 

Approaching ‘Blend Wall’

According to the American Automobile Association (AAA), declining gasoline use, combined with increasing mandates for biofuels, means the transportation fuels sector is approaching a “blend wall,” a point beyond which blending ethanol into gasoline could damage engines in many vehicles. Only the newest engines have been designed to handle fuel with more than 10 percent ethanol (E10). According to AAA, blending at levels higher than E10 could “result in significant problems such as accelerated engine wear and failure, fuel-system damage, and false check engine lights.”

The failure of cellulosic ethanol to become a commercially viable product has also caused significant problems for implementing RFS. At the end of 2014, only one, heavily subsidized cellulosic ethanol plant was operating in the United States, according to the Energy Information Administration.

Refiners reacted negatively to EPA’s reduced blend standards. On December 1, The Wall Street Journal reported Chet Thompson, president of the American Fuels and Petrochemicals Manufacturers, said, “Today’s rule is further proof that the RFS program is irreparably broken and that the only solution is for Congress to repeal it outright.”

Thompson told the Journal, “The simple truth is that 10 years after promulgation of the program, the advanced biofuels industry still has not delivered on its promise of commercially viable fuels ...” 

Calls for Repeal

Matthews says repealing the mandate would be good for the economy and the environment.

“While the decline in oil prices is good for consumers, it is dragging down stock markets [and] domestic oil production and posing a threat to energy companies and jobs,” Matthews said. “Ending the Renewable Fuel Standard would immediately and dramatically increase the demand for oil, stabilize energy markets, boost the economy, and likely reduce carbon-dioxide emissions.”

Marita Noon, executive director of Energy Makes America Great, says any congressional effort to repeal RFS is unlikely to succeed.

“Under this administration, even if both houses [in Congress] voted to repeal the RFS, it would likely be vetoed,” said Noon. 

Bonner R. Cohen, Ph.D. (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research in Washington, DC.


 

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