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March 16, 2018
Riding the recent wave of Renewable Fuel Standard (RFS) reform talks, Representative Welch (D-VT) and Senator Udall (D-NM) introduced the Growing Renewable Energy through Existing and New Environmentally Responsible Fuels Act (GREENER Fuels Act) (H.R.5212 and S.2519) on March 8. On balance, the bill would hinder the development of even lower carbon cellulosic fuel feedstocks and pathways that may also provide additional environmental benefits beyond greenhouse gas mitigation, such as improved water quality or wildlife habitat.
While corn ethanol production is, on average, 43 percent less greenhouse gas intensive than conventional gasoline according to USDA, there is still tremendous potential to further revolutionize agricultural landscapes and the energy sector through the use of purpose-grown biomass crops that may be converted to cellulosic ethanol or other uses.
In recent years, some have pointed to the tremendous successes of the corn ethanol industry as the reason for the failures in the cellulosic fuels space. However, the two industries are fairly intertwined. As the U.S. biofuels industry continues to develop, the investors and technologies developed by corn ethanol producers are what will lead to further development of the advanced and cellulosic industries. Therefore, efforts to reform the RFS will be more damaging to the growth of cellulosic feedstocks than the mature corn ethanol industry. EESI has briefly summarized three of the twelve sections of the bill; these three would have especially damaging effects on the development of lower carbon cellulosic biofuels.
Section 3: Limit Corn Production: Prohibit Any Part of Corn Kernel for Qualifying as Cellulosic Fuel
Rationale: The production of cellulosic fuel from corn kernel fibers “continues to drive more corn development and have the same environmental concerns as corn ethanol.”
Background: In 2014, the EPA approved a cellulosic fuel pathway for corn kernel fiber -- the outer coating of the corn kernel. If an ethanol producer could separate the corn kernel and convert to ethanol, these gallons could count as cellulosic fuel and generate more valuable cellulosic RINs. The first facilities to “bolt-on” this 1.5 gen technology included Quad County Corn Processers and ICM Inc. in 2017. The overall result is a new technology at existing ethanol plants that could potentially squeeze anywhere from 1.5 billion to 2 billion gallons of cellulosic ethanol from existing corn feedstocks, and many first-gen ethanol facilities are beginning to bolt-on these systems.
Conclusion: There is not any evidence that allowing corn kernel fiber to count as cellulosic ethanol will drive the additional production of corn. The price of corn per bushel is the main driver of planting decisions. While it is difficult to tease out the exact relationship between the RFS and crop prices, the RFS is only one economic factor driving corn planting. Other impacts on corn prices must be considered as well, such as growing feed demand for a rapid rise in meat consumption globally, input prices, yield improvements and other factors. Both the U.S. and major global grain markets are currently experiencing a grain glut and low prices for corn, soy and other commodity crops. Instead of helping grow cellulosics, this would place downward pressure on the industries’ push to find lower carbon fuels from a variety of novel feedstocks.
Section 6: Set New Volumes and Sunset the RFS Fuel Categories
Rationale: The bill would “sunset the 4 biofuel categories: conventional ethanol, biomass-based diesel, cellulosic advanced and non-cellulosic advanced” in the following manner:
Additionally, the bill would set fuel volumes based on “the previous year’s renewable fuel production volumes with a mid-year adjustment.”
Background: Within the RFS, Congress set renewable fuel volumes through 2022. Afterwards, the program is given to EPA to administer. This has given Congress, as well as the oil and ethanol industry heartburn from time to time. The fuel volumes in the RFS are roughly split between conventional ethanol and advanced and cellulosic ethanol, at 15 and 16 billion gallons, respectively. While the corn ethanol industry could produce more than 15 billion gallons at this point, the cellulosic industry has struggled to produce significant volumes. As the 2022 deadline approaches, more and more proposals of ways to change or sunset the program are appearing.
Conclusion: This proposal is particularly nonsensical. Setting annual production volumes based on actual production levels has already been shown to significantly stifle investment in the development of cellulosic fuels and pathways, as it provides no room for upward growth from the industry. Therefore, this provision would be incredibly damaging to the future growth of the cellulosic industry. Plus, incentives to invest in producing these low-carbon fuels would be stifled if there is only a 10 year horizon for the fuel.
Section 7: Cap Ethanol Blending at Under 10 Percent, Prioritize Cellulosic Biofuel Use
Rationale: The bill would “cap ethanol at 9.7% of the fuel supply, ensuring we remain below the blend wall … [and] would also require EPA to prioritize the use of cellulosic biofuels ahead of other biofuels.”
Background: As a result of declining gasoline use and increased engine efficiency, the biofuels industry hit a milestone in 2013 that wasn’t expected for many years – the so-called “blend wall”. The blend wall is when the gasoline supply is fully saturated with 10 percent ethanol. To utilize higher blends, modest changes are needed to gasoline infrastructure and vehicles. In 2013, the industry was capable of producing much more than 10 percent by volume of the domestic gasoline supply, but the problem was now, where to put it? While the biofuels industry has been pushing for greater use of higher blends, this has led other interests to insist that we pump the brakes on biofuels policy because of the blend wall.
Conclusion: While this sounds like it would be a boon to cellulosic biofuels production by prioritizing it over corn ethanol – it would actually be quite damaging. Corn ethanol will continue to be the cheapest octane provider, a necessary component of fuel, with or without the RFS. To truly incentivize the use of cellulosic fuels, we need to increase blending well above 10 percent ethanol. Should we not be concerned about reducing the amount of fossil fuels and GHGs in transportation fuels?
Conclusions:
While there are more provisions in the bill, these three would be particularly damaging to the development of lower carbon cellulosic biofuels feedstocks and pathways. Unfortunately, as written, the bill lacks a basic understanding of the mechanisms that motivate the biofuels industry to innovate and grow the cellulosic fuel space. Additionally, some of the measures called for in the bill are duplicative of excellent research already undertaken by the U.S. Department of Energy, USDA, and others.
Unfortunately, these changes would do more to stifle the growth of the cellulosic space than to help, for a variety of reasons. Primary among them is that this bill would weaken, not strengthen, existing policy signals to the business community that investing in the development of low carbon biofuels is a wise investment.
For more information see:
Sen. Udall, Rep. Welch Introduce Legislation to Mitigate Environmental Impacts of Renewable Fuel Standard, Senator Udall
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