The Renewable Fuel Standard:  Mend It AND End It

CleantechConservativeBy Douglas L. Faulkner, “The Cleantech Conservative”

President Clinton gave a major speech in defense of affirmative action in 1995 entitled, “Mend It, Don’t End It”, an easily-remembered and clear summary of his policy approach.  So, to borrow a pitch and reformat the goal, my recommendations for fixing the current Renewable Fuels Standard (RFS) work from this slogan:   “Mend It And End It.”

Choosing to work in the middle between two very bad options is the only approach that can both become law and revitalize biofuels as a key national energy insurance policy.

Neither of the other two posited solutions – - holding fast to the current RFS for the indefinite future with no changes at all or shutting down the mandate entirely- – could reasonably be expected to hold off poisoned alternatives or ensure passage in the next Congress and receive Presidential sign-off.  And, just as important, neither extreme option will remove the many obstacles to healthy, long-term growth for the industry.

As I previewed last Spring in my remarks to the “Advanced Biofuels Leadership Conference,” first and foremost, policymakers and activists have to recognize how much has changed since 2007 when the current RFS was passed.

Rising challenges to the RFS

 

Elaborating on my “Sooner or Later” presentation,  multiple, rising challenges are drawing shorter the time for any RFS:

  • Both the left and the right ends of our domestic political spectrum are growing much less supportive (for different reasons) of the current federal approach to supporting the industry, and in some cases, over biofuels in general.  For their part, conservatives largely embrace the fuel choice, but reject the mandate (and the Environmental Protection Agency (EPA) oversight role), even as the public seems to be losing faith in big government-solutions.
  • Fundamental changes in the markets for liquid transportation fuels are underway, not the least being the incredible, unexpected boom of domestic oil and gas production and marked weakening of global crude demand.  These changes, married to possible shifts in society’s historical driving habits and greater fuel efficiencies of vehicles, have pushed back a decade or two the pressing need for biofuels seen at the time of the RFS.
  • Despite (and, possibly because of) huge crops of corn and soybeans, the lack of replacements for fuel oxygenates from ethanol, the unsolved “blend wall,” vibrant export markets and the reliance on food crops as feedstocks, the multifaceted positions of interested parties will lead to even more debate about the value – - and maybe even the necessity- – of some type of mandate for first generation biofuels.  And while those biofuels are coming closer to on-shore wind and solar energy in terms of cost-competitiveness with fossil fuels, later generations of biofuels still need more time to mature.
  • The ticking debt time-bomb in the federal budget and a counter-reaction to the surge of federal regulations in the Obama Administration will shrink financial and other assistance from Washington, D.C. for the industry – - and, ultimately, appetites for government interventions in the marketplace.
  • The industry’s basic message has grown less persuasive, as the many justifications used over the years have been muddied or swept away by surging technological, economic and political forces that have undermined earlier arguments for support.
  • The industry has no more than a ten year window to transition from government mandate to full market exposure.  And, that window might close much sooner, unless the existing Standard is reformed.

A Grand Bargain

I propose the outlines of a Grand Bargain that would attract enough votes in both parties for enactment.  These core elements include:

  • A realistic mandate with teeth for advanced biofuels and cellulosic fuels, featuring solid requirements for volume amounts of purchases;
  • An even faster, or perhaps more efficient, transition to the market for first-generation biofuels;
  • A sunset clause with clear and definitive milestones leading to ending of the overall mandate, but with sufficient time to allow financing for new advanced biofuels production plants now on-the-drawing-boards as well as further technology progress.
  • An end to EPA’s involvement in setting the yearly mandates; instead, use indexing to set yearly levels matched to actual production;
  • Approval of pending pathways, ending the long regulatory delays;
  • Standardized definitions of feedstocks, cleaning up the current legislative patchwork.

Getting the backing

To secure the oil industry’s backing and its political supporters, it may also be necessary to add lifting the decades-old embargo on exporting U.S.-produced petroleum and approval finally for the Keystone XL pipeline.  It might also include amending the Administration’s fuel efficiency standards for cars and light-duty trucks to crack open the door more for intermediate blends of blended biofuels.

This deal is tailor-made for a Congress under Republican control looking for conservative fixes and a President seeking to cement his legacy.  But even if the Senate stays in Democratic hands, the pent-up political demand for energy legislation may still give it impetus in 2015, before the Presidential campaign heats up and stalls substantive legislative activity.  This approach would also have added benefit for political kingmakers and strategists by taking the divisive biofuels issue off-of-the-table before the Iowa caucuses in early 2016.

There does not appear to be a broad appetite for pulling the rug out from under the industry by killing the RFS, which would suggest the fear in some quarters about an uncontrolled chain reaction triggered by its reform is ill-founded.  The threat to the industry is more existential;  the absence of a solution such as I am proposing threatens biofuels’ hard-fought gains – - and, even its very existence in the long-run.

Indeed, I would argue that standing pat, protecting outdated legislation written for a different time and place, will eventually strangle the industry.  Holding tight to the Standard in hand might even paradoxically trigger a backlash resulting in the very outcome industry doesn’t want – - premature abolishment of the RFS.  Reforming the RFS will give the biofuels industry and its financiers the policy stability they seek, ending years of fruitless and costly political strife.

Change is coming

Change is coming to the biofuels arena.  It does not matter whether it is wanted, needed or desired – - or vice-versa.  The biofuels Industry can either deny the realities and fight any change, or embrace it and lead the charge.  Time is running out for winning the best deal possible and setting the stage for biofuels’ resurgence in the twenties and thirties.  It’s high time to revive President George W. Bush’s vision of ending our addiction to oil.

Emitters Protection Agency or Environmental Protection Agency?

ericksonBIO: EPA’s proposed backslide on RFS will increase greenhouse gases

By Brent Erickson
Executive Vice President; Head, Industrial & Environmental Section
The Biotechnology Industry Organization

I cannot remember an EPA rule that would actually cause environmental backsliding, but the recent proposed rule for the 2014 Renewable Fuel Standard (RFS) will if it is not changed. Any major change to the RFS’s statutory growth curve for biofuels requires an evaluation of the impact on the environment, energy security and the future commercialization of advanced biofuels.

EPA has positioned its proposed rule for the 2014 RFS as a “manageable trajectory” for future growth of the biofuel market, so the final rule must also include a full analysis of the impact on those and other factors. BIO recently published an analysis of the proposed rule’s impact on greenhouse gas emissions that should help inform EPA’s evaluation of the rule. We conclude that EPA’s proposal will increase greenhouse gas emissions above 2013 levels for many years to come.

BIO’s study – Estimating Greenhouse Gas Emissions from Proposed Changes to the Renewable Fuel Standard Through 2022 – was recently published in the Industrial Biotechnology Journal. The model we developed begins with Energy Information Administration (EIA) projections of fuel use from 2013 through 2022. EIA suggests that over the next decade fuel economy standards will continue to boost use of diesel fuel even while discouraging gasoline use.

FIg3_Estimated GHG

We next calculated the percentages of blendstock for gasoline and diesel, ethanol, biodiesel, advanced and cellulosic biofuels that would be used each year under various scenarios –EPA’s newly proposed methodology, the statutory RFS rules, and a continuation of EPA’s past practice of setting the advanced biofuel volume obligation at the highest achievable production level.

The volumes of each blendstock were then assigned GHG emission scores – measured in metric tons of CO2 equivalent – and an annual total was tallied for each scenario. The greenhouse gas emission scores are drawn from the GREET1.2013 model, which includes an updated emissions profile for petroleum fuels, since the United States now relies more on marginal sources of petroleum – such as Canadian oil sands – than it did in 2007.

The primary finding of our study is that EPA’s proposed reductions in biofuel use in 2014 would automatically increase use of petroleum and increase the associated emissions of greenhouse gases. The reason is simple: In order to achieve lower emissions in 2014, compared to 2013, EPA must ensure an increase in biofuel use. The scenario in which EPA keeps the obligation at the highest achievable level decreased GHG emissions nearly as much as the statutory levels.

The second important finding is that if EPA’s proposal undermines development of advanced biofuels – as we expect it will – the United States will forego measurable reductions in greenhouse gas emissions over many years. Most of the future growth in the RFS is reserved for advanced biofuels, which are required to achieve at least a 50 percent reduction in greenhouse gases compared to petroleum gasoline or diesel produced in 2007. If we cut short growth of advanced biofuels and use petroleum instead, more and more of our fuel will likely come from Canadian oil sands and include more lifecycle carbon emissions.

So, if EPA continues to use the proposed methodology for setting the annual RFS obligations in future years, U.S. greenhouse gas emissions from transportation fuels will remain above the 2013 level for many years.

The third important finding of the study is that increased fuel efficiency standards may not by themselves achieve reductions in greenhouse gas emissions. In the short term, economic recovery is expected to unleash pent-up demand for transportation fuel. Diesel fuel emits more carbon during its lifecycle. And, if the petroleum used also emits more carbon over its lifecycle, the impact of decreased use could be offset significantly.

A combination of fuel efficiency and use of lower carbon fuels is needed to achieve year-over-year reductions in carbon emissions in the transportation sector.

We published this study as a contribution to EPA’s evaluation of its rule’s impact on climate change. We will ask EPA to incorporate the findings into its analysis of the final rule. EPA must also evaluate the impact of the final rule on energy security; future commercialization of advanced biofuels; sufficiency of infrastructure to deliver and use biofuel; costs to consumers; and job creation, rural economic development, and food prices.

We believe the negative environmental impact is one factor among many that should prompt EPA to change the draft RFS rule so it won’t hinder robust advanced biofuels development.

ILUC and the Renewable Fuel Standard: hard data appears for the first time

GForestWatchAfter six years of debate — finally a database appears on actual indirect land use change.

The Partners? Including Google, UNEP, Imazon, the Center for Global Development, the University of Maryland, OSFAC, the Jane Goodall Institute

The Funders? Including USAID, the Norwegian Ministry of Climate and Environment and GEF, UKAID, DANIDA, SIDA, the Bobolink Foundation, the Netherlands Ministry of Foreign Affairs, among others.

The Collaborators? Including FAO, Greenpeace, NASA and the Rainforest Foundation UK.

What’s the verdict?

For the past five years, a theory has been going around on the impact of biofuels that goes, essentially, like this: Increases in biofuels demand will not only cause direct land use change (the conversion of, say, wheat acres to corn to produce ethanol), it will produce indirect land use change.

Namely, that an increase in biofuels demand will increase crop prices, and incentivize the conversion of, to use an oft-cited example, pastureland in Brazil into crop land. To replace that pastureland, forests will be converted to pasture, thereby releasing a whole bunch of carbon into the atmosphere. Thereby offsetting some (or all) of the direct benefit in using a renewable fuel to reduce carbon emissions

Since ILUC theory first appeared as a critique of biofuels, both the proponents of the theory and opponents have been hampered by a lack of data.

Specifically, the underlying global database of agricultural usage — and hence forest loss — has not been updated since 2002, well before energy policy shifted in the US to encourage biofuels.

It may sound absurd, but in order to calculate the forest loss impact caused by the Renewable Fuel Standard (RFS2), a database of land use has to be employed that was last updated eight years before RFS2 was first implemented in 2010. If you think that sounds like an awfully sketchy data set for such an important task, you’ll find both friends and fierce enemies in academia.

But this week — some hard data has arrived at last.

Namely, the Global Forest Watch.

As GFW self-describes, it is “a dynamic online forest monitoring and alert system that empowers people everywhere to better manage forests. For the first time, Global Forest Watch unites satellite technology, open data, and crowdsourcing to guarantee access to timely and reliable information about forests. GFW is free and follows an open data approach in putting decision-relevant information in the hands of governments, companies, NGOs, and the public. GFW is supported by a diverse partnership of organizations that contribute data, technical capabilities, funding, and expertise. The partnership is convened by the World Resources Institute.” You can check out the full GFW site here.

It’s goal? Hard data.

What we found interesting is this. ILUC predicts significant deforestation in the Amazon as a result of RFS2.

So let’s look at 2000-2007 – the years before RFS2, to get a baseline. Pink represents forest loss. Blue represents forest gain.

ILUC-2001-2007

Right away you see all the reasons people get agitated about the Amazon. Lot of pink.

So, let’s go to 2007-2013.

ILUC-2007-2013

What do we see. A whole lot of blue – meaning forest gain, not forest loss. Not much pink at all. You just can’t see the effects predicted by ILUC.

Which suggests that indirect land use change theory, as formulated, may be nullified by the observational data. Or, that the Global Forest Watch data is fundamentally flawed. We’ll see how the battle over that plays out.

Last day! Get your comments on RFS to the EPA

In Washington, today is the final day to submit comments to the EPA regarding the 2014 proposed volumes for the Renewable Fuel Standard. Submit your comments,
identified by Docket ID No. EPA–HQ–OAR–2013–0747 via here or email to [email protected]

You can also fax comments to (202) 566–1741. If you submit an electronic comment, EPA recommends that you include your name and other contact information.

For more details, click here.

Background

The American Petroleum Institute and the American Fuel & Petrochemical Manufacturers submitted a petition to the Administrator, dated August 13, 2013, on behalf of their members requesting a partial waiver of the 2014 applicable volumes under the RFS.

The petitions generally argue that there is an inadequate domestic supply of renewable fuel and therefore RINs for 2014, due both to ethanol ‘‘blendwall’’ constraints and limitations on the production of non-ethanol fuels like biodiesel.

Petitioners argue that this inadequate supply of renewable fuel (and RINs) will lead to an inadequate supply of gasoline and diesel, because refiners and importers, faced with a shortage of RINs, will reduce their production of gasoline and diesel for the domestic market. Petitioners argue that this will in turn severely harm the economy based on increased domestic gasoline and diesel prices.

Petitioners attached an analysis, dated October 2012, conducted by NERA Economic Consulting, titled ‘‘Economic Impacts Resulting from Implementation of RFS2 Program [sic].’’ The petition requests that EPA exercise its waiver authorities under section 211(o)(7) to reduce the required national volume of total renewable fuel and advanced biofuel to certain specified levels.

EPA is proposing to find that there is an inadequate domestic supply of renewable fuels in 2014 under section 211(o)(7)(A). EPA is also proposing to reduce the applicable volume of cellulosic biofuel under section 211(o)(7)(D).

Based on these findings, EPA is proposing to reduce the applicable volumes of total renewable fuel and advanced biofuel. EPA is not, however, proposing to find that implementation of the standards would severely harm the economy.

NBB Buzz: Heard on the floor at the 2014 Biodiesel Convention

NBBSo, NBB packs it up and the delegates go home. What are the trends — what’s are the takeaways?

The Digest’s overall take — and items heard on the floor this week.

In California, NBB is now officially over. Key trends? We saw four.

1. In general, traffic and spirits were down from previous years. The RFS debate has a lot of people staying at home and “keeping the powder dry.” There’s general concern that the rise of low-cost natural gas has substantially weakened the energy security and emissions legs that hold up the renewable fuels stool.

2. Renewable diesel is hot, as is diversification of all kinds, especially in feedstock but also in downstream molecules. Just look at RG’s acquisition of LS9.

3. California is hot. Strong biodiesel opportunities in the Golden State buoyed spirits throughout the week.

4. B20 acceptance is growing — potentially pushing back future “blend wall” issues for years.

And, here are the items we heard buzzing on the floor.

Blending renewable diesel with jet fuel

Green Air Online is reporting that Boeing is considering an option to blend green diesel with jet fuel — thereby accessing a ready supply of biofuels. More than 700 million gallons of green diesel capacity exists between Neste Oil’s capacity in Rotterdam, Singapore and Finland — and the Diamond Green Diesel and Dynamic Fuels plants in Louisiana. Boeing said that the FAA among others are working on certifying the fuel. Boeing also noted that — with existing fuel incentives — green diesel is cost-competitive with petroleum-based jet fuel.

Update on PETRO

ARPA-E’s Jonathan Burbaum was on hand to discuss the PETRO project, which aims to develop a plant’s capacity to accumulate significant amounts of oil in its leaf structure — as a opposed to just the oilseeds. “We’re combining many advanced traits — taken from different research projects. The idea is to pull together all the traits and stack them in one plant, such as camelina. And if we could export those traits to C4 grasses, then we could see as much as 5X more oil content per acre compared to today.

“A group of Australian researchers have reported that they have been able to concentrate as much as 16% oil content, by weight, in tobacco. So we’re adding traits, for example, for CO2 uptake, to lighten the leaves to spread light energy more evenly through plants. Now, tobacco per acre yields, for example, aren’t suitable today for energy production. But we’ve also seen that you could increase tobacco per-acre yields by up to 7X if you planted for biomass density.”

80 bushels per acre for soybeans?

Beth Calabotta of Monsanto says it’s just a matter of time. There has been discussion of doubling soybean yields by 2030 and Calabotta says that that the science will be there, but it is all a question of how soon. “Today, the winner of the soybean yield contest is getting 120 bushels per acre, so we know it can be done. But can it be done economically, and on broad acreage — that’s the key. It also will come down to grower practices. After all, anyone with a houseplant knows that you can have the most wonderful plant in the world but if you don’t water it, it will die. Growers have a key role to play in terms of taking new hybrids and finding the right ways to cultivate them.

Futures contracting for key biodiesel feedstocks?

Corn oil, tallow, greases trading at the Chicago Board of Trade? Don’t hold your breath, warns Joe Riley of FEC Solutions. “The volume is just not there for greases and tallow, and there’s just no indication that the kind of volume needed would be there for corn oil”

Indirect Land Use Change – light at the end of the tunnel.

One of the most persistent critiques of Indirect Land Use Change — calculated and added to a given biofuel pathway’s carbon intensity — is that the databases measuring ILUC are forced to use data collected before the signing of the 2005 Energy Policy Act and the explosion of biofuels. In fact, Purdue’s GTAP database uses 2004 data. Turns out that the National Biodiesel Foundation is active in efforts to raise funds to update the database through 2011. So that ILUC can be run off at least some data that reflects real-world effects measured during the period when biofuels have been active.

What’s happening in Canada?

Ian Thompson of the Western Canada Biodiesel Association gave an update on the incentives and markets in Canada. “Incentives include a $0.13/liter credit tin Saskatchewan that sunsets in 2016 and is limited to the first 5 million gallons of production, and a $0.14/liter credit in Manitoba that sunsets in 2015. In British Columbia, there is much emphasis on the Pacific Coast Collaborative, a cross-border group including US states and Canadian provinces,. In Alberta, there is a RFS review expected in 2014. In Orntario, an RFS proposal is on the table for consideration in 2014, and in Quebec there is RFS discussion, along with officials looking at a Low Carbon Fuel Standard.

“The diesel market in Canada divides up as follows: 29 percent, Ontario; 22 percernt Quebec; 23 percent Alberta; 11 percent, British Columbia; 4 percent, Saskatchewan; 2 percent, Manitoba; 11 percent, the rest of Canada.”

REG on the move

We noticed quite a lot of activity on the floor from REG. Perhaps the most interesting — the amount of interaction between South Americans and REG staff. Is REG looking down south for long-term expansion options?

Fmr Sen. Byron Dorgan and Fmr. Congressman Kenny Hulsof on defending the RFS

Dorgan

The EPA’s proposal on biodiesel volumes for 2014 — it’s inexplicable to me. The Obama Administration knows they are below what they should be. We should celebrate not penalize success. The Administration ought to say ‘go for more!’ Biodiesel and renewable fuels are winners. You’re not asking for help — you are asking for an opportunity to do what you know we can do. As far as the tax credit, it’s sad that those running a business cant rely on credits, that we have this stutter and stop. These should be done in 3-5 year increments to give certainty.

Hulsof

Obama has been an ardent supporter of renewable energy and biofuels. To me, it looks like biodiesel has caught shrapnel in a debate between ethanol and certain moneyed interests. But you have the power of the vote. Gat involved in the comment process. And see you member. You canb’t just rely on DC, you have to use your power as a constituent. Everybody ought to have a comment in by January 28, and you can show up somewhere where your congressman is going to be. And say this:

“Look, I invested. I am at risk because of our success. This is affecting our livelihood. You’ve always supported us. I need you to get active.”

Especially, there’s an education effort with the new members not around in the 2005 and 2007 policy debate. They’ll tell you that Congress shouldn’t pick winners and losers — let the market do that. But Adam Smith left the building long ago, as far as energy is concerned. Just because we are in a different spot with oil and gas — and we thought demand would increase more than it has — we still need diversification.

The NBB Eye on Biodiesel Awards

This year, the NBB gave its Eye on Biodiesel Awards to:

Impact: The California Air Resources Board.

“The State of California continues to serve as a national and world leader in regulations related to environmental sustainability, and the California Air Resources Board is at the heart of those efforts. In January of 2010, Air Resources Board staff successfully implemented the first ever market-oriented carbon reduction policy for transportation fuels, a policy known as the Low Carbon Fuel Standard. Since that time, use and production of biodiesel and other renewable fuels has increased significantly. Californians have since enjoyed the benefits of cleaner air, growth in green jobs, and increased fuel diversity.”

Innovation: General Motors, the B20-Approved Chevrolet Cruze.

“General Motors continues to be a leading biodiesel supporter among Original Equipment Manufacturers. This year the company took another step forward introducing the 2014 Chevrolet Cruze Clean Turbo Diesel – the first light-duty diesel passenger sedan in the U.S. to be fully approved for use with B20 biodiesel blends. The Cruze’s new ECOTEC 2.0L Turbocharged Diesel engine powered by ultra-low sulfur biodiesel blends provides tailpipe emissions as clean as or cleaner than natural gas and gasoline, while providing superior performance and industry-leading fuel economy of over 46 MPG highway. The Chevy Cruze is the cleanest diesel passenger car model ever produced by General Motors, and with the use of clean, renewable B20, it’s also now the greenest.”

Industry Partnership: Kirk Leeds, Iowa Soybean Association.

“Kirk Leeds, CEO of the Iowa Soybean Association, has been a leader among soybean organizations in supporting biodiesel efforts since the industry’s inception. ISA’s support of the National Biodiesel Board over the years has allowed the industry to prepare and face the challenges of being a billion-plus-gallon Advanced Biofuel. His visionary leadership has helped to maintain a mutually-beneficial, strong connection between the soybean and biodiesel industries. Kirk and ISA have been at the forefront of improving agriculture’s environmental performance. Through partnerships with farmers, environmental groups, agri-business and academia, ISA is helping lead efforts to identify practical solutions for complex environmental issues.”

Inspiration: Len Hering, RADM, USN, California Center for Sustainable Energy.

“Rear Admiral Len Hering, Sr. (USN, retired), is a prominent military and civilian sustainability leader instrumental in bringing B20 to naval bases. In his 32 years of Navy service he was known as a top expert in base operations and facility support with an emphasis on sustainability. His efforts included everything from renewable energy, including biodiesel, to responsible water use, photovoltaic technology, and conservation. Within three years, his team reduced energy consumption by nearly 42 percent, diverted 75 percent of Navy waste from landfills and reduced water consumption by more than one billion gallons, saving tens of millions of taxpayer dollars. President Bush awarded Hering a 2005 Presidential Award for Leadership in Federal Energy Management. Today he serves as executive director of the California Center for Sustainable Energy.