Renewable Fuel Standard Research Articles

A model of state and federal biofuel policy: Feasibility assessment of the California Low Carbon Fuel Standard

Biofuel policy is under near constant review at both the federal and state level. For example, as part of on-going implementation of the California Low Carbon Fuel Standard (LCFS), the California Air Resources Board has recently designed and is implementing a new cost containment mechanism as part of the compliance credit market embedded within the LCFS. This mechanism was born out of concerns that there may be a shortage of LCFS credits, which could lead to an unpredictable rise in the credit price. In general, it is important to develop appropriate mathematical tools with which to estimate the impact of policy changes on biofuel markets. Motivated by the need for such analyses, a novel regional market model is developed that quantifies several categories of impacts across different regional markets. These market impacts include policy-specific effects of California’s LCFS as well as the federal level Renewable Fuel Standard (RFS). Several scenarios are developed to highlight issues of long term LCFS feasibility; in particular, this work highlights the role that biodiesel/renewable diesel might need to play in order for the goals of the LCFS to be met. We find that biodiesel blending will need to increase dramatically within a short period of time (i.e., by 2016 all diesel fuel would need to be 20% blends) in order to generate enough LCFS credits. Additionally, this model highlights the indirect market linkages between the LCFS/RFS credit markets; certain biofuels can register under both programs and generate both credits. As a result, if attempts in the US Congressional to fully repeal the RFS are successful, it is possible that the LCFS credit price could increase more than 50%. Symmetrically, it is also true that if the LCFS program were eliminated, certain RFS credit markets would also be impacted, but to a lesser extent.

Refiner Tesoro Pursues Fuels Made From Trash

The oil refiner Tesoro has unveiled a plan to develop and use fuels made from renewable biomass. The company says the effort could yield a cost-effective means of complying with Federal renewable fuels standards. The company will buy biocrude that Fulcrum BioEnergy will make from municipal solid waste starting in 2018. It will also partner with biofuel start-ups Virent and Ensyn Corp.

Questioning the Final RFS Rule, Part 1: the Rule and a Review

The Environmental Protection Agency (EPA) recently published the final rule that establishes the volume requirements for calendar years 2014, 2015 and 2016 under the Renewable Fuel Standard (RFS). Previous articles have reviewed EPA’s arguments for use of the general waiver authority in the RFS statute to lower the volume requirements contained in a leaked version of the proposed rule and the proposed rule (see farmdoc daily November 6, 2013, January 16, 2014, June 11, 2015 and July 10, 2015). The final rule reduces the volume requirements for renewable fuels from the statutorily-mandated levels, and EPA continues to claim that it has the authority to reduce the mandate based on specific waiver provisions in the statute. This article is the first in a three-part series that will evaluate and question the RFS waiver authority and EPA’s arguments for using it to reduce the mandate in the final rule.

POLICY Ethanol and petroleum industries pan new Renewable Fuel Standard

As climate talks got under way in Paris last week, the Environmental Protection Agency announced its final rule on how much corn ethanol and advanced biofuel will be blended in the U.S. fuel supply in 2016. EPA’s rule finalizes higher volumes of renewable fuel than those the agency proposed earlier this year and is garnering criticism from fuel industry groups that had worked to influence its outcome. The agency’s blend requirements for renewable fuels in 2016 is 68.55 billion L, which is lower than the target set by Congress in the 2007 Energy Independence & Security Act. In comparison, the standard for 2015 is 64.09 billion L. Groups representing ethanol producers and petroleum companies disparaged the new Renewable Fuel Standard (RFS)—the former arguing that the level for ethanol is too low, and the latter claiming it is too high. “As the U.S. enters negotiations with the rest of the world ...

Determining energy and climate market policy using multiobjective programs with equilibrium constraints

Energy and climate market policy is inherently multiobjective and multilevel, in that desired choices often conflict and are made at a higher level than influenced actors. Analyzing tradeoff between reducing emissions and keeping fuel prices low, while seeking compromise among producers, traders, and consumers is the crux of the policy problem. This paper aims to address this issue by combining multiobjective optimization problems, which allow the study of tradeoff between choices, with equilibrium problems that model the networks and players over which these policies are chosen, to produce a formulation called a Multiobjective Program with Equilibrium Constraints. We apply this formulation to the United States renewable fuel market to help understand why it has been so difficult in releasing the 2014 mandate for the RFS (Renewable Fuel Standard). The RFS ensures that a minimum volume of renewable fuel is included in transportation fuel sold in the United States. Determining the RFS volume requirements involves anticipating market reaction as well as balancing policy objectives. We provide policy alternatives to aid in setting these volume obligations that are applicable to a wide variety of climate and energy market settings and explain why the RFS is not an optimal policy for reducing emissions.

Influence of corn oil recovery on life-cycle greenhouse gas emissions of corn ethanol and corn oil biodiesel.

BackgroundCorn oil recovery and conversion to biodiesel has been widely adopted at corn ethanol plants recently. The US EPA has projected 2.6 billion liters of biodiesel will be produced from corn oil in 2022. Corn oil biodiesel may qualify for federal renewable identification number (RIN) credits under the Renewable Fuel Standard, as well as for low greenhouse gas (GHG) emission intensity credits under California’s Low Carbon Fuel Standard. Because multiple products [ethanol, biodiesel, and distiller’s grain with solubles (DGS)] are produced from one feedstock (corn), however, a careful co-product treatment approach is required to accurately estimate GHG intensities of both ethanol and corn oil biodiesel and to avoid double counting of benefits associated with corn oil biodiesel production.ResultsThis study develops four co-product treatment methods: (1) displacement, (2) marginal, (3) hybrid allocation, and (4) process-level energy allocation. Life-cycle GHG emissions for corn oil biodiesel were more sensitive to the choice of co-product allocation method because significantly less corn oil biodiesel is produced than corn ethanol at a dry mill. Corn ethanol life-cycle GHG emissions with the displacement, marginal, and hybrid allocation approaches are similar (61, 62, and 59 g CO2e/MJ, respectively). Although corn ethanol and DGS share upstream farming and conversion burdens in both the hybrid and process-level energy allocation methods, DGS bears a higher burden in the latter because it has lower energy content per selling price as compared to corn ethanol. As a result, with the process-level allocation approach, ethanol’s life-cycle GHG emissions are lower at 46 g CO2e/MJ. Corn oil biodiesel life-cycle GHG emissions from the marginal, hybrid allocation, and process-level energy allocation methods were 14, 59, and 45 g CO2e/MJ, respectively. Sensitivity analyses were conducted to investigate the influence corn oil yield, soy biodiesel, and defatted DGS displacement credits, and energy consumption for corn oil production and corn oil biodiesel production.ConclusionsThis study’s results demonstrate that co-product treatment methodology strongly influences corn oil biodiesel life-cycle GHG emissions and can affect how this fuel is treated under the Renewable Fuel and Low Carbon Fuel Standards.

Fuel price impacts and compliance costs associated with the Renewable Fuel Standard (RFS)

US policy instruments concerning vehicle biofuels are currently being revisited. For example, as part of an on-going annual Renewable Fuel Standard (RFS) implementation, the Environmental Protection Agency (EPA) requests stakeholder feedback/analysis of programmatic effects, including impacts on gasoline/diesel prices and compliance costs. Motivated by the need for regulatory-specific feedback, a novel regional market model is developed that quantifies price impacts across different regional markets for a number of market variables, including several types of compliance certificates known as Renewable Identification Numbers (RINs). An analysis of the most recent EPA proposal suggests that the D4 (biodiesel) RIN price could rise to >$1.00/RIN. Sensitivity results show that the D4 RIN price is highly sensitive to soybean oil prices, while D5/D6 RIN prices are most sensitive to the volume of E85 consumed. It was found that the projected costs associated with the RFS in 2017 could be reduced by approximately 50% if an additional 600 million gallons of E85 were consumed. The analysis also suggests that the RFS does not dramatically affect the retail price of either gasoline and diesel fuels paid by consumers.

Spillover Effects of Sector-Specific Renewable Energy Policies: Implications for GHG Emissions

Jointly implemented Renewable Fuel Standard (RFS) with the state Renewable Portfolio Standards (RPSs) can interact in complex ways that affect the mix of renewable energy and its greenhouse gas (GHG) intensity used to meet the RPS and the mix of fossil fuels displaced as both policies compete for bioenergy for electricity generation and biofuel production. We quantify the spillover effects of the RFS on the GHG mitigation potential of the RPSs by developing a spatially explicit, dynamic, integrated model of the agricultural, electricity, and transportation sectors in the US to examine the mix of renewable electricity under the RPS, the extent to which it will be affected by the RFS and its consequences for GHG emissions from these sectors. We find that the implementation of the RFS with the RPSs results in spillover effects in two opposing directions (1) it lowers the share of bio-electricity relative to wind and increases the extent to which renewable electricity displaces natural gas instead of coal, and (2) it decreases the average carbon intensity of bioenergy by increasing the share of energy crops; the net result is 6% lower GHG savings from the two policies combined compared to the sum of the reductions that would have been achieved by each policy independently over the 2007-2030 period. Our analysis shows the importance of market-mediated effects of concurrently implemented renewable energy policies in determining the mechanisms and extent to which they lead to GHG benefits.

Managing Multiple Mandates: A System of Systems Model to Analyze Strategies for Producing Cellulosic Ethanol and Reducing Riverine Nitrate Loads in the Upper Mississippi River Basin.

Implementing public policies often involves navigating an array of choices that have economic and environmental consequences that are difficult to quantify due to the complexity of multiple system interactions. Implementing the mandate for cellulosic biofuel production in the Renewable Fuel Standard (RFS) and reducing hypoxia in the northern Gulf of Mexico by reducing riverine nitrate-N loads represent two such cases that overlap in the Mississippi River Basin. To quantify the consequences of these interactions, a system of systems (SoS) model was developed that incorporates interdependencies among the various subsystems, including biofuel refineries, transportation, agriculture, water resources and crop/ethanol markets. The model allows examination of the impact of imposing riverine nitrate-N load limits on the biofuel production system as a whole, including land use change and infrastructure needs. The synergies of crop choice (first versus second generation biofuel crops), infrastructure development, and environmental impacts (streamflow and nitrate-N load) were analyzed to determine the complementarities and trade-offs between environmental protection and biofuel development objectives. For example, the results show that meeting the cellulosic biofuel target in the RFS using Miscanthus x giganteus reduces system profits by 8% and reduces nitrate-N loads by 12% compared to the scenario without a mandate. However, greater water consumption by Miscanthus is likely to reduce streamflow with potentially adverse environmental consequences that need to be considered in future decision making.

The implications of the US renewable fuel standard programme for farm structure

ABSTRACTWe investigate the impact of the 2005 Renewable Fuel Standard (RFS) on farm structure, particularly farm size. We rely on the salience of a new ethanol plant in a farmers’ local neighbourhood to identify the impact of the RFS mandate on these spatially advantaged farms. To control for the nonrandom selection of ethanol production facilities, we utilize a propensity score matching estimator, and to remove impact of farm-level or market shifting unobservables resulting from shifts in commodity prices we employ a difference-in-difference (DD) matching approach. We estimate the treatment effect of an ethanol production facility on farm size prior to the RFS mandate and after the RFS programme. The effect of the RFS policy on farm size is obtained as the difference between these two DD matching estimators. Overall, our results suggest that the RFS programme raised the probability of farm size increase by roughly 12–18%, on average, for farms located within a 30-mile radius of new ethanol plants. In addition, the programme contributed to a net increase in farm size of 25–32%, on average, for those spatially advantaged farms.

Mix of First- and Second-Generation Biofuels to Meet Multiple Environmental Objectives: Implications for Policy at a Watershed Scale

Biofuel mandates are being widely used by countries to achieve multiple objectives of energy security and climate change mitigation. The Renewable Fuel Standard (RFS) in the US specifies arbitrarily chosen volumetric targets for different types of biofuels in the US based on their greenhouse gas intensity only. Cellulosic biofuels from high yielding energy crops like miscanthus have the potential to co-generate multiple environmental impacts, including reducing nitrate runoff, being a sink for Greenhouse Gas (GHG) emissions and providing a given volume of biofuel with less diversion of land from food crop production than corn ethanol, but at a significantly higher cost. This paper quantifies the tradeoffs between profitability, food and fuel production, GHG emissions and nitrate runoff reduction with different types of biofuels in the Sangamon watershed in Illinois and analyzes the optimal mix of biofuels as well as the policies that should supplement the mandate to achieve multiple environmental outcomes. We find that a two-thirds share of cellulosic biofuel in the mandated level could reduce nitrate run-off by 20% while reducing GHG emissions by 88–100% but would reduce profits by 15–27% depending on whether a GHG policy or a Nitrate policy is used relative to the case where the mandate is met by corn ethanol alone. Additionally, the ratio of corn stover to miscanthus used to produce cellulosic biofuels is higher under a GHG policy compared to a Nitrate policy that achieves the same level of nitrate reduction. Our results show that the optimal mix of different types of biofuels and the policy to induce it depend on the environmental objectives and the tradeoffs that society is willing to make between low cost energy security, food production and various environmental benefits.

The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard

AbstractThe US Renewable Fuel Standard (RFS) requires blending increasing quantities of biofuels into the surface vehicle fuel supply. The RFS requirements are met through a system of tradable permits called Renewable (fuel) Identification Numbers, or RINs. We exploit the large fluctuations in RIN prices during 2013–15 to estimate the pass-through of RIN prices to US wholesale and retail fuel prices. We control for common factors by examining spreads of physically similar fuels with different RIN obligations. Pooling six different wholesale petroleum fuel spreads, we estimate a pooled long-run or equilibrium pass-through coefficient of 1.00 with a standard error of 0.11. This pass-through occurs within two business days. The only fuel for which we find economically and statistically significant failure of pass-through is retail E85, which contains up to 83% ethanol; the pass-through of RIN prices to the retail E85–E10 spread is precisely estimated to be close to zero.

Are there Carbon Savings from U.S. Biofuel Policies? The Critical Importance of Accounting for Leakage in Land and Fuel Markets

We develop an analytical and numerical multi-market model that integrates land, fuel, and food markets, and link it with an emissions model to quantify the importance of carbon leakage relative to the intended emissions savings resulting from the Renewable Fuel Standard (RFS) for conventional biofuels. The expansion of biofuels mandated by the RFS can increase or decrease GHG emissions depending on the policy regime being evaluated. For example, replacing the Volumetric Ethanol Excise Tax Credit (VEETC) with the RFS, as occurred at the end of 2011 when the VEETC was allowed to expire, would reduce emissions by 2.0 tgCO2e in 2015 for an expansion of ethanol of 11.4 billion liters. A policy regime consisting of the RFS alone would increase emissions by at least 4.5 tgCO2e for the same expansion of ethanol. Our findings highlight an important tension between land and fuel market leakage. Policy regimes that result in less land market leakage tend to lead to more domestic fuel market leakage per liter of ethanol added.

Are there Carbon Savings from US Biofuel Policies? The Critical Importance of Accounting for Leakage in Land and Fuel Markets

We develop an analytical and numerical multi-market model that integrates land, fuel, and food markets, and link it with an emissions model to quantify the importance of carbon leakage relative to the intended emissions savings resulting from the Renewable Fuel Standard (RFS) for conventional biofuels. The expansion of biofuels mandated by the RFS can increase or decrease GHG emissions depending on the policy regime being evaluated. For example, replacing the Volumetric Ethanol Excise Tax Credit (VEETC) with the RFS, as occurred at the end of 2011 when the VEETC was allowed to expire, would reduce emissions by 2.0 tgCO2e in 2015 for an expansion of ethanol of 11.4 billion liters. A policy regime consisting of the RFS alone would increase emissions by at least 4.5 tgCO2e for the same expansion of ethanol. Our findings highlight an important tension between land and fuel market leakage. Policy regimes that result in less land market leakage tend to lead to more domestic fuel market leakage per liter of ethanol added.

Unintended Consequences of Carbon Policies: Transportation Fuels, Land-Use, Emissions, and Innovation

Renewable fuel standards, low carbon fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land-use costs from erosion and habitat loss are between $277 and $693 million. A low carbon fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to fuels and can over or under-incentivize innovation. These results highlight the potential negative effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy.

Unintended Consequences of Carbon Policies: Transportation Fuels, Land-Use, Emissions, and Innovation

Renewable fuel standards, low carbon fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land-use costs from erosion and habitat loss are between $277 and $693 million. A low carbon fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to fuels and can over or under-incentivize innovation. These results highlight the potential negative effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy.

EPA Doubles Down on Questionable Reading of the RFS Statute

In November 2013, EPA proposed volume requirements under the Renewable Fuel Standard (RFS) for the 2014 calendar year. In December 2014, it announced that it would not be finalizing the standards for 2014 during that calendar year. In April 2015 it provided a timeline for proposed standards by June 1, 2015. On Friday, May 29, 2015, EPA released a proposed rule to set the volume requirements for the 2014, 2015 and 2016 years. Previous articles (farmdoc daily, November 6, 2013; January 16, 2014) evaluated EPA’s authority to waive the RFS requirements and the new proposed rule returns to that issue. This article further evaluates EPA’s waiver arguments.

Environmental life cycle impacts of cellulosic ethanol in the Southern U.S. produced from loblolly pine, eucalyptus, unmanaged hardwoods, forest residues, and switchgrass using a thermochemical conversion pathway

The cradle-to-grave environmental impacts of thermochemical ethanol from loblolly pine, eucalyptus, unmanaged hardwoods, forest residues, and switchgrass biomass feedstocks were determined and compared to gasoline. The Tool for the Reduction and Assessment of Chemical and Other Impacts (TRACI) method was implemented in SimaPro 7.3 to calculate midpoint environmental impacts. Two normalization value sets were used and weighting was performed to produce a single environmental score.Greenhouse gas (GHG) emission reductions of cellulosic ethanol as compared to gasoline were 65%–77%, depending on the biomass feedstock, qualifying these biofuels as cellulosic ethanol under the Renewable Fuel Standards (RFS2). Effects of direct land-use change were significant (~18%) and could increase the GHG emissions for switchgrass derived ethanol above the federal GHG reduction thresholds for cellulosic ethanol. The production and use of cellulosic ethanol reduced fossil fuel consumption by between 95% and 97% and by 81% for forest and switchgrass derived ethanol, respectively. Cellulosic ethanol, however, did not reduce all environmental impact categories (e.g., eutrophication, ozone depletion respiratory effects, acidification, and smog) compared to gasoline. The fuel scenario ranking from lowest impact to highest impact consistently remained the same for GHG emissions, fossil fuel use, and the two single weight score analysis methods and was, in ascending order, forest residues with no forest establishment burdens, forest residues with forest establishment burdens, natural hardwood, pine, switchgrass, and finally gasoline. The GHG emission reductions from the use of cellulosic ethanol at the renewable fuel standards mandated production volume of 16 billion gallons of cellulosic ethanol per year by 2020 would result in 9–10 billion metric tonnes of GHG emissions avoided.

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Environmental impacts of bioethanol using the NREL biochemical conversion route: multivariate analysis and single score results

AbstractMandated Environmental Protection Agency biofuel qualifications focused on greenhouse gas (GHG) emissions and fossil fuel use are limited in perspective and have the potential to encourage burden shifting. When a broader host of environmental impacts are examined, environmental trade‐offs often exist when biofuels are compared to gasoline. Multivariate analysis methods examining a wide variety of weighting value systems and methodology assumptions were used to determine process design options with the lowest overall environmental impact. A multivariate environmental analysis was applied to the dilute acid pre‐treatment process followed by enzymatic hydrolysis and the fermentation process for converting loblolly pine, eucalyptus, natural hardwood, switchgrass, and sweet sorghum biomass to ethanol. The influence of co‐product treatment method choices, inclusion of direct land‐use change, and electrical grid assumptions were examined using 16 different weighting methods to create a single score result. Biofuel system rankings based on GHG emissions following the Renewable Fuel Standards 2 (RFS2) methods were very sensitive to the co‐product treatment method, inclusion of land‐use change emissions, and energy grid assumptions. The multivariate analysis ranking was heavily influenced by other environmental impacts resulting from the production of process chemicals used in ethanol conversion. Weighting methods examined had no influence on the environmental preference ranking of the biofuel scenarios. Additionally, the biofuel ranking based on the RFS2 methodology was different than the ranking following the multivariate approach examining additional impacts. These findings demonstrate a robust approach to biofuel life cycle assessment (LCA) scenario analysis and suggest that the limited scope of the RFS2 environmental analysis could result in burden shifting. © 2015 Society of Chemical Industry and John Wiley & Sons, Ltd