A policy analysis by two University of Illinois researchers argues that Congress should minimally modify, not repeal, the Renewable Fuel Standard (RFS). In the study, law professor Jay P. Kesan and Timothy A. Slating, a regulatory associate with the Energy Biosciences Institute, argue that RFS mandates ought to be adjusted to reflect current and predicted biofuel commercialization realities; that its biofuel categories be expanded to encompass all emerging biofuel technologies; and that its biomass sourcing constraints be relaxed.
In the paper, to be published in the NYU Environmental Law Journal, Kesan and Slating contend that the RFS can serve as a “model policy instrument” for the federal support of all types of socially beneficial renewable energy technologies.
The RFS is a federal mandate for the commercialization of biofuels first established in 2005 (RFS1) and then fully implemented, in amended form, in 2010 (RFS2). The RFS requires fuel refiners and importers to commercialize increasing volumes of different categories of biofuels through the year 2022.
Although RFS is beginning to produce “significant social benefits”, Kesan and Slating assert, it is currently embroiled in a legal and political struggle over implementation. More recent suits argue that by mandating the commercialization of cellulosic biofuels (which are just now beginning to slowly emerge at commercial scale), the RFS is unrealistic and unfair.
A January 2013 ruling by the US Court of Appeals required EPA to reevaluate projections for cellulosic biofuel to reflect market conditions. As a result, in its latest setting of the percentage standards for the four fuel categories covered for 2013, EPA specified biomass-based diesel (1.28 billion gallons; 1.13%); advanced biofuels (2.75 billion gallons; 1.62%); and cellulosic biofuels (6.00 million gallons; 0.004%)—a significant reduction of earlier projections of cellulosic ethanol production. (Earlier post.)
The RFS is the first and only federal policy that directly mandates the use of renewable energy in the worthwhile effort to displace the use of fossil fuels for our energy needs. As with any pioneering regulatory regime, unforeseen implementation issues will arise. But this does not justify throwing out the baby with the bath water. Every effort should be made to keep the RFS in place, but efforts should also be made to revise its regulatory regime to make it operate as efficiently as possible.—Jay Kesan
By mandating a market for emerging biofuels, it sends a clear signal that if they are produced, they will be effectively commercialized. This, in turn, provides the necessary certainty to free up credit constraints and incentivize investment in the socially beneficial biofuels industry. Additionally, it does so with very little impact on the federal budget because regulated parties bear its costs.—Timothy Slating
But while the current RFS policy is by no means flawless, and some of the current implementation issues would necessitate statutory changes, the authors say it would be more efficient for these changes to be made by the Environmental Protection Agency, as opposed to Congress.
Although the biggest issue with traditional biofuels usually can be reduced to the food vs. fuel argument, the researchers stress that if the RFS is successful in achieving its goals, it will usher in the use of emerging biofuels that will have significantly less impact on food-related markets.
Kesan and Slating’s study also notes that the RFS has only been fully implemented in its current form for three years, and legislatively revising it in an overly reactionary manner would be ill advised at this point.
Despite favoring administrative corrections to the RFS, the duo makes a number of recommendations for legislative options for the RFS, all based on a set of principles:
- Increased use of biofuels is socially beneficial;
- Second-generation biofuels should be incentivized; and
- The importance of protecting the biofuel industry’s investment-based reliance on the existing RFS2 framework.
Major legislative recommendations include:
Yearly mandates. Observing that “There can be no doubt that the RFS’s yearly mandates must be permanently modified to reflect current and predicted commercial production realities and address the problems associated with the E10 blend wall”, Slating and Kesan suggest that most practical means to do so would be a formal rulemaking by the EPA.
Nonetheless, Congress has demonstrated ineptitude in its ability to accurately determine what these mandates should be. With the RFS1, Congress set the mandates too low and with the RFS2, Congress was overly optimistic in regards to the commercial production of cellulosic biofuels and other non-ethanol biofuels capable of mitigating the E10 blend wall problem. We believe that the EPA is best positioned to determine realistic mandate levels in coordination with the USDA, DOE, and all affected stakeholders...Moreover, while EPA rulemaking is somewhat politicized in nature, it is much less so than any attempt to modify the mandates by Congress would no doubt be.
They further suggest that if EPA is forced to waive the mandates for a given biofuel category by at least 20% for two consecutive years or by 50% for a single year, it should then have authority to modify all of the categories’ mandates for subsequent years. This would prevent the situation that the EPA currently finds itself in regarding the permanent modification of the RFS’ mandates.
Biofuel categories. Slating and Kesan argue that the RFS should not be singling out cellulosic biofuels for preferential treatment and essentially picking them as a winner amongst competing technologies. To rectify this situation, they propose that the current cellulosic biofuel category be replaced with a new category simply referred to as “second-generation biofuel.”
Much like the current cellulosic biofuel category, the new second-generation biofuel category could be defined as including any “renewable fuel derived from [any algae or] any cellulose, hemicellulose, or lignin that is derived from renewable biomass and that has lifecycle [GHG] emissions, as determined by the [EPA], that are at least 60 percent less than the baseline lifecycle [GHG] emissions.” To counter any arguments that this definition continues to grant certain biofuels preferential treatment, a statutory provision should be added to the RFS’s framework that allows the EPA to modify this definition, pursuant to formal notice and comment rulemaking, upon a petition by any biofuel producer that can demonstrate that its product is: (1) derived from non- food feedstocks; (2) results in the requisite 60% lifecycle GHG reduction; and (3) is not otherwise capable of satisfying the definition for second-generation biofuel. This recommendation is premised on the idea that the RFS should not be simply forcing the development of cellulosic conversion technologies, but more broadly incentivizing the development of any biofuel conversion technologies that utilize non-food feedstocks and produce comparable GHG benefits.
Renewable Biomass. According to Slating and Kesan, the RFS should allow renewable biomass to be sourced from federal forests in an effort to combat the problems associated with forest fires and insect infestation, so long as it is done so with specific restrictions.
Additionally, the idea is beginning to emerge that a universal definition for renewable biomass should be developed for all biomass-related federal policies...The establishment of a universal definition for renewable biomass in federal policy would help to develop alternate markets for qualifying biomass feedstocks and in time, these alternate markets could help to build a viable and self-sustaining US biomass industry.
Stakeholders and markets must be given time to adjust to the existing regime before serious and informed discussion about significantly altering the RFS, beyond what we propose, can be had. Likewise, you've got to allow some time for the maturation of this pioneering and socially beneficial renewable energy policy.—Jay Kesan
The Energy Biosciences Institute, supported in part by BP, funded the study.
Timothy Slating and Jay Kesan (2013) “The Renewable Fuel Standard 3.0?: Moving Forward with the Federal Biofuel Mandate”, NYU Environmental Law Journal, Forthcoming