Renewable diesel isn’t just the hottest biofuel on the market, it also is swiping a significant slice of corn ethanol’s share of the Renewable Fuel Standard, according to EPA. 

EPA’s new biofuel usage targets, or Renewable Volume Obligations, for 2023 through 2025 project strong growth for biomass-based diesel, which includes conventional biodiesel as well as renewable diesel, and stagnating sales of corn ethanol. 

The overall RVO for this year is 20.9 billion ethanol-equivalent gallons. That grows to 21.5 billion in 2024 and 22.3 billion in 2025, with virtually all of that increase coming in the form of renewable diesel. 

The targets include carveouts in each year's RVO of 15 billion gallons for conventional renewable fuel, a category that has traditionally been devoted to corn ethanol. EPA expects refiners to use less than 13.9 billion gallons of corn ethanol a year to fill that requirement, with the rest coming from biomass-based diesel, renewable diesel or its older cousin, biodiesel. 

“What EPA is doing is they're essentially forcing biomass-based diesel to compete into the conventional category,” said Scott Gerlt, an economist with the American Soybean Association. “They’re getting their numbers by essentially assuming that ethanol production goes down, so that we need to fill that with renewable diesel and biodiesel.” 

EPA is forecasting 13.85 billion gallons of corn ethanol will be used this year, 13.96 billion gallons in 2024 and 13.78 billion gallons in 2025. 

Scott GerltScott Gerlt, ASA

That approximately 1.2 billion-gallon gap in 2025 between the 15-billion gallon conventional biofuel carveout and EPA’s forecast of corn ethanol usage is the equivalent of about 700 million gallons of renewable diesel, according to Gerlt. (For purposes of the RFS, a gallon of renewable diesel is equivalent to 1.7 gallons of ethanol.)

Meanwhile, EPA expects consumption of renewable diesel to grow from less than 1.36 billion gallons last year to 2 billion gallons this year and 2.6 billion gallons by 2025. Biodiesel consumption is expected to slip from 1.71 billion gallons in 2022 to 1.62 billion gallons in 2025. Renewable diesel, which can be blended with conventional diesel at higher rates than biodiesel, is rapidly becoming the low-carbon fuel of choice for the trucking sector. 

EPA’s rather gloomy forecast for corn ethanol consumption is based on projections of overall gasoline demand, which has been declining as cars get more efficient, and the agency’s expectation of only modest growth in higher blends of ethanol. EPA’s forecast, for example, assumes that regulations will continue to limit year-round sales of E15. (EPA has proposed a vapor pressure waiver allowing E15 sales year-round in the Midwest, starting next year, but limits will continue elsewhere.)

“The expected annual rate of future commercial production of corn ethanol will be driven primarily by gasoline demand as most gasoline is expected to continue to contain 10% ethanol in the foreseeable future,” EPA says in the regulatory impact analysis of its 2023-25 RVOs. 

The biofuel sector — and fuel retailers — aren’t satisfied with the overall RVOs set by EPA despite the projected boom in renewable diesel usage. Industry officials believe the agency should have pushed the requirements higher to more closely reflect the expanded soybean processing capacity that is planned for coming years. 

“Instead of hitting the accelerator, the EPA is keeping the RFS in neutral,” said David Fialkov, executive vice president of government affairs for NATSO and SIGMA, trade groups that represent truck stops and gasoline retailers.

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“It is particularly perplexing that EPA is not doing all it can to maximize investment in lower-carbon renewable diesel and biodiesel for heavy-duty trucks. These fuels are commercially available today, and every truck that runs on them emits at least 50 percent fewer greenhouse gas emissions than trucks running on diesel. The final rule is a missed opportunity to meaningfully increase commercial penetration of these lower-carbon diesel alternatives.”

In last week's final rule, EPA disclosed the blending targets in Renewable Identification Numbers, or RINS, which are the compliance credits generated through the blending or production of biofuels and equal one ethanol-equivalent gallon of renewable fuel. The overall RVO for this year of 20.94 billion ethanol-equivalent gallons, or Renewable Identification Numbers, or RINS, includes 5.94 billion RINs for advanced biofuel, with that number set to grow to 7.33 billion RINs by 2025.

EPA did raise the advanced biofuel requirements from the levels it proposed last November, in part because of a recent regulatory change that will allow canola oil to qualify as a feedstock for biomass-based diesel, but the agency was concerned about the potential impact on food uses of vegetable oil. 

If all of the planned production expansion occurs, renewable diesel production would top 5.5 billion gallons by the end of 2025, but the agency argues feedstock limitations could force delays or cancellations of projects. Cargill Inc. put on hold plans announced last year for a new soybean crushing operation in southeastern Missouri.

Gerlt believes EPA may have overestimated the competing needs for soybean oil; the agency assumes 20% of the increased soybean oil production will go to non-fuel uses.

Still, American Bakers Association President and CEO Eric Dell said in a statement to Agri-Pulse that his group was “cautiously optimistic” that EPA had heard his industry’s concern that the RFS would continue driving up vegetable oil costs. Prices have soared as high as 80 cents a pound in May 2022 but have since settled closer to 50 cents, according to EPA.

“Until soybean oil markets reach equilibrium, food producers throughout America will remain concerned that biodiesel producers are outcompeting food producers for agricultural crops,” Dell said. 

 “Propelled by RFS quotas, in recent years, soy oil prices have tripled due to the rapid growth in demand for biodiesel and renewable diesel. The EPA needs to constantly assess the new RVOs to ensure food makers will not face an edible oils crisis as they have in the past several years.”

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