EPA Is Trying to Get Out of Its Own Way on the RFS

By Brent Erickson, Executive Vice-President, Biotechnology Innovation Organization

Special to The Digest

In setting the 2014-2016 Renewable Fuel Standards (RFS), the U.S. Environmental Protection Agency (EPA) cited “practical and legal constraints” on the oil industry’s ability to meet the volumes established by Congress. The agency’s methodology in that rule – which it has now proposed to apply to the 2017 rule – gives oil companies an excuse to continue dragging their feet on deploying biofuels and undercutting the RFS. Aside from the RFS, EPA may have unwittingly created new practical and legal constraints to achieving combined higher fuel efficiency standards and greenhouse gas emission reductions, established a few years ago. With the 2017 RFS rule, EPA must put the program back on track and establish a workable, predictable methodology that will carry the RFS past the next five years. The agency has an opportunity to send a strong signal of support to biofuel producers and auto makers who are ready to innovate and invest in a low-carbon future.

The practical and legal constraints on the RFS are mostly of EPA’s own making. As EPA admitted in the final 2014-2016 rule, it set the volume obligations for those years according to “what would have happened in the marketplace absent a rulemaking.”[1] After two years of rulemaking delays – during which, oil refiners escaped deploying infrastructure for higher biofuel blends – EPA issued a final rule that waived volumes based on lacking infrastructure and expanded its own waiver authority beyond the language of the law. Further, the agency absolved the oil industry of any responsibility to deploy infrastructure for increased use of biofuels. Those issues will now be resolved in the U.S. Court of Appeals. More importantly, though, EPA cannot continue to follow this flawed methodology for the future – even past 2022 – without sacrificing the goals of the RFS and undercutting the administration’s goals for combined higher Corporate Average Fuel Efficiency (CAFE) standards and decreased carbon emissions from transportation.

Delays cost carbon

The delays in scaling up biofuel use hamper the nation’s ability to reduce carbon emissions. In April 2010, EPA and the National Highway Traffic Safety Administration finalized rules that would both increase CAFE standards (to 34.1 miles per gallon by 2016) and limit greenhouse gas emissions from cars and light trucks. Two years later in October 2012, the agencies issued a second rule under which automakers agreed to reduce greenhouse gas emissions from new cars and light trucks by 50 percent by 2025 while raising fuel economy standards to 50 miles per gallon. The agencies will conduct a midterm evaluation this year of progress toward the goals, and they will likely find that the delays in implementing the RFS and deploying infrastructure for higher biofuel blends are hampering their objectives.

The path forward is fuel efficiency through higher compression

Higher fuel efficiency standards require more ethanol use. The most viable path for automakers to achieve the higher CAFE standards while reducing greenhouse gas emissions relies on higher blends of ethanol. Reducing vehicle weight and engine size, while maintaining a vehicle’s power and performance, can be done by increasing compression ratios in gasoline engines. High-compression engines perform best with high-octane fuels, and gasoline blends of 25, 30 or 40 percent ethanol would provide the necessary octane at the lowest cost. Moreover, off-the-shelf technology already exists to build these engines and equip them to use higher blends of ethanol – up to E85. What is lacking is the infrastructure to put this type of fuel into the cars and light duty trucks on the highway. This summer when it conducts its midterm evaluation of the combined CAFE and greenhouse gas standards, EPA must recognize that getting the RFS back on track is an integral part in achieving these policy objectives.

Ethanol producers are now deploying the needed infrastructure, and automakers should work with them. Under a public-private partnership, ethanol producers are providing capital to fueling stations to install blender pumps. USDA estimates that nearly 5,000 new fuel pumps will be installed at almost 1,500 fueling stations through this partnership. This represents only 1 percent of the estimated 150,000 fueling stations nationwide; more needs to be done. The U.S. vehicle fleet already has the capacity to consume up to 26 billion gallons of ethanol in the form of E15 and E85. Out of the roughly 250 million vehicles registered in the United States, 80 to 85 percent can run on E15 blends; and 14 million flex-fuel vehicles can use E85. Automakers should get in the game and deploy higher compression engines with flex fuel technology to take advantage of ethanol’s octane.

Some hopeful signs

EPA must get out of its own way on the RFS. The newly proposed 2017 RFS rule doubles down on the disastrous methodology that chased $13.7 billion of investment out of the advanced biofuel sector and delayed deployment of higher biofuel blends. But there are some hopeful – if uncoordinated – signs. EPA is also preparing a Renewables Enhancement and Growth Support Rule that, among other things, will ensure that ethanol blends from E16 to E85 will meet gasoline fuel quality standards. The quality standards could improve drivers’ experience with E85 blends and encourage flex-fuel vehicle owners to use them. EPA has already had a slight delay in proposing the rule; the agency should strive to coordinate and harmonize its rules for the RFS, the combined CAFE and greenhouse gas emissions standards, as well as renewables enhancement and growth. This would send a strong signal to biofuel producers and automakers to continue innovating and investing in low-carbon biofuels.

[1] Fed. Reg. 80 (239), 77487, Monday, Dec. 14, 2015.