WASHINGTON, Nov. 30, 2016 - A twin set of reports from the Government Accountability Office details some potential issues with the Renewable Fuel Standard, and one report was less surprising than the other.
The first report suggests that advanced biofuels will struggle to achieve the statutory targets set by Congress in the 2007 law that updated the RFS. In a summary, GAO says several advanced biofuels “are technologically well understood and some are being commercially produced.” However, it says some experts believe there is “limited potential for increased production in the near term.”
“Given that current advanced biofuel production is far below Renewable Fuel Standard (RFS) targets and those targets are increasing every year, it does not appear possible to meet statutory target volumes for advanced biofuels in the RFS under current market and regulatory conditions,” the report says.
The GAO notes that some advanced biofuels are already being produced in “significant volumes,” but those fuels will struggle to reach statutory levels due to “feedstock limitations.” Cellulosic biofuels and drop-in biofuels haven’t developed as originally thought when the RFS was approved, leaving a gap between production capacity and mandated consumption levels.
While the news certainly won’t be celebrated in renewable fuel circles, it doesn’t necessarily come as a surprise either. Advocates for the types of advanced biofuels GAO focused on say their production is lagging because of uncertainty in the marketplace created by EPA’s management of the RFS. For several years, the EPA did not release RFS Renewable Volume Obligations (RVOs) under the congressionally mandated timeline, which advocates say led to the uncertainty.
“It is difficult to predict the timing of new technology, and economic, administrative and congressional uncertainty has helped to delay these advancements,” Growth Energy CEO Emily Skor said in a statement. She added that commercial cellulosic ethanol plants are now coming online, so “one of the most helpful things policymakers can do to spur more progress is to let the program work as intended, especially with the recent EPA rulemaking that removed administrative uncertainty.”
GAO said the current low price of fossil fuels, especially compared to the high production costs for advanced biofuels, was cited by some experts as a main driver for the lack of advanced biofuel development. However, uncertainty in RFS governance and the inconsistency in policies like the biodiesel tax credit mean investors “do not see them as reliable and thus discount their potential benefits when considering whether to invest.”
Another GAO report ties the lack of advanced biofuel production to the prediction that the RFS is unlikely to meet greenhouse gas reduction goals. While the statute didn’t set specific overall GHG reduction targets, it classifies a conventional biofuel as one that achieves a 20 percent GHG reduction. The bar is much higher for advanced (50 percent reduction) and cellulosic (60 percent) biofuels. Given that the EPA has consistently called for less advanced biofuels in RVOs than the statutory levels, the GHG reductions have been limited to what can be achieved through higher amounts of conventional biofuel, most typically viewed as corn ethanol.
In its most recent RVO rollout for 2017, EPA called for 19.28 billion gallons of renewable fuels to be blended with conventional fuels. That’s 4.72 billion gallons lower than the figure set by Congress (24 billion gallons), with the entire shortfall coming out of the advanced biofuel carve-out (the 15 billion gallon conventional statutory RVO was achieved). Biofuel advocates were generally supportive of the rule after finally hitting the statutory threshold for conventional biofuels.
Reports were submitted to the Senate Homeland Security and Governmental Affairs Subcommittee on Regulatory Affairs and Federal Management chaired by James Lankford, R-Okla.
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