Kesan and Slating’s study describes and elaborates on the effects of the federal Renewable Fuel Standard (RFS), and also on the Clean Air Act’s (CAA) regulatory framework for the commercialization of new fuels and fuel additives.

As the CAA’s regulatory framework for new fuels and fuel additives effectively governs the volume of biofuels that can be lawfully blended in finished fuels, it also has the ancillary effect of moderating our ability to capture the social benefits produced by new biofuel-related technological innovations. Therefore, it is of the utmost importance for us to consider whether the regulatory burdens created by this framework are normatively justified. In conducting this normative analysis, we are guided by the principles that: (1) the compliance-related burdens associated with a given regulatory scheme should not outweigh the harms that scheme is intended to prevent; and (2) regulatory innovation is often called for in order to efficiently capture the social value inherent in a regulated activity.

Ultimately, we conclude that the burdens associated with the CAA’s current regulatory framework for new fuels and fuel additives are not normatively justified.

—Kesan and Slating

Kesan and Slating note that under existing regulations, biobutanol can lawfully be blended with gasoline in a concentration of roughly 11.5 to 12.5% by volume, depending on the density of the finished fuel.

Regulations also provide a mechanism whereby fuel manufacturers can seek a fuel waiver from the US Environmental Protection Agency to allow higher blending limits than current regulations allow. But according to the authors, this is currently a very onerous process. While it might be legal to blend 16 to 17% biobutanol with ordinary gasoline based on pre-existing waivers granted in the 1980s, there is a great deal of uncertainty as to whether the EPA would allow this.

One of the things we’re suggesting is to remove this uncertainty by updating the regulations to allow higher blending limits for biobutanol. The interesting thing here is that the EPA could actually do this on their own. The regulation that effectively sets the default blending limit for biobutanol is simply an agency interpretation of an undefined phrase enacted by Congress. Specifically, the Clean Air Act says that no fuel manufacturer can commercialize a new fuel that is not ‘substantially similar’ to the fuel that the EPA uses in its emissions certification process. As Congress opted to not specify what constitutes a ‘substantially similar’ fuel, the task is left to the EPA’s discretion.

—Timothy Slating

The permissible blending limits for alcohol-based biofuels are closely tied to the oxygen content of the finished fuel. In the past, the EPA has agreed that fuels containing up to a certain oxygen-content have no negative effects on engine emissions. Well, if that’s the case, then let’s simplify the regulations and allow all fuels to contain this level of oxygen. This would provide a larger potential market for biobutanol manufacturers without the need for them to endure the unnecessary uncertainty associated with trying to rely on a pre-existing fuel waiver.

—Jay Kesan

A fast-track review process should also be created for new fuel waivers relating to emerging biofuels that have been designated as compliant with the Renewable Fuel Standard, the authors argue.

The authors also note that new biofuels like biobutanol have the potential to spur rural economic development.

The research will be published in a forthcoming issue of the Wisconsin Law Review. The BP-supported Energy Biosciences Institute funded the study.

Resources

• Timothy A. Slating and Jay P. Kesan (2011) Making Regulatory Innovation Keep Pace with Technological Innovation. Wisconsin Law Review; Illinois Public Law Research Paper No. 10-34