WASHINGTON, Aug. 7, 2013 – The E10 “blend wall” is an economic barrier that can be overcome, and Renewable Fuel Standard (RFS) requirements can be met in 2014, by increasing incentives for drivers to use E85, according to a study released today by the Renewable Fuels Association (RFA).
The study, conducted by the Center for Agricultural and Rural Development (CARD) at Iowa State University, finds that pricing E85 low enough to generate fuel cost savings could quickly increase ethanol consumption by three billion gallons within two years.
The study, “Price It and They Will Buy: How E85 Can Break the Blend Wall,” said it demonstrates how the Renewable Identification Number (RIN) market works to lower the effective cost of E85 at the retail level, and explains the interaction among corn, ethanol, gasoline and RIN prices.
“Current RIN prices are high enough to achieve modest increases in ethanol consumption above 13 billion gallons and to create incentives to increase the ability to consume lower-carbon ethanol in 2016 and beyond,” the study said. “Current high RIN prices create a large incentive for oil companies to increase consumption of E85 because expansion in E85 consumption will decrease RIN prices.”
The study concludes that it would be less expensive for oil companies to invest in E85 infrastructure than it would be to continue to pay high RIN prices.
Further, the study notes that RINs will encourage increased ethanol consumption only if EPA resists pressure from the oil industry to dramatically reduce RFS requirements in 2014.
Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, said the study “underscores the fact that there are workable and economic pathways around the so-called E10 blend wall.”
“The CARD study exposes the absurdity of Big Oil’s contention that RFS requirements in 2014 and beyond can’t be met,” he said. “In addition to E15, increased E85 sales offer a clear and sensible pathway to compliance for obligated parties in the next several years.”
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