EPA releases final rule for short-term renewable fuel obligations, falling short of biofuel industry’s expectations

EPA announced a final rule Wednesday to establish renewable volume obligations (RVO) and associated percentage standards for cellulosic biofuel, biomass-based diesel (BBD), advanced biofuel, and total renewable fuel for 2023–2025.

The industry had been waiting for this final rule after a disappointing proposed rule months ago. Stakeholders’ reaction to the final rule was consistently negative, as proponents are disappointed, saying the rule shows a lack of foresight by the EPA on the role biofuels play in energy security and lowering greenhouse gas emissions.

Courtesy of EPA

According to the EPA, this final rule will reduce U.S. oil imports by about 130,000 to 140,000 barrels of oil per day over the time frame of the final rule, 2023–2025.

In 2023, EPA will require use of 2.82 billion gallons of bio-based diesel, a 2.2 per cent increase over the 2.76 billion gallons mandated last year, but no increase from the level proposed in December 2022. Bio-based diesel includes the highly anticipated renewable diesel volumes and opportunity for the vegetable oil sector.

For 2024, the EPA will increase the level to 3.04 billion gallons and 3.35 billion gallons in 2025 of which both are slight increases over the December proposed volumes.

Many industry stakeholders were concerned by the conservative December RVO from EPA on renewable diesel related volumes in the short-term would potentially reduce or deter investors in the space.

In terms of the impact on the hype around renewable diesel and what it could mean for canola and soybean demand, the soy oil market traded 6.71 per cent lower on the day of the announcement.

According to biofuel watchers, the EPA’s decision was not only controversial for bio-based diesel, but also for cellulosic biofuels (ethanol).

For the year 2023, the EPA has boosted the level of cellulosic biofuels from the previously proposed 0.72 billion gallons in December to 0.84 billion gallons. However, there has been a reduction in the blending commitments for subsequent years which has many ethanol supporters upset.

The blending requirements for 2024 are now set at 1.09 billion gallons, which is a significant reduction from the 1.42 billion gallons proposed in December. Similarly, the 2025 commitment has been reduced to 1.38 billion gallons, a sharp decrease from the previously proposed 2.13 billion gallons.

“Instead of EPA just ticking off the bio-based supporters, now they have made the ethanol supporters mad, too,” said Chip Flory, on Agritalk following the announcement.

“If EPA’s goal with the Renewable Fuel Standard is to maximize reductions in greenhouse gas (GHG) emissions from the transportation sector, today’s final rule falls short by arbitrarily limiting conventional biofuel use to 15 billion gallons in 2024 and 2025 compared to the Agency’s proposal of 15.25 billion gallons for each of those years. Higher blending targets would enable fuels such as E15 and E85 to quickly displace carbon pollution from gasoline, but EPA’s proposal will rein in those opportunities.” said Brian Jennings, CEO of the American Coalition for Ethanol.

Hear reaction from the executive director of the Canadian Oilseed Processors, Chris Vervaet:

Reaction to bio-based diesel rule

“This announcement is a letdown for soy growers. It threatens the success of the biomass-based diesel industry by significantly dialing back annual increases in volume obligations and failing to account for the progress being made in biofuels investment and growth,” said American Soybean Association president Daryl Cates, a soybean grower from Illinois. “Farmers and biomass-based diesel producers face real, concerning consequences from low RFS volumes that do not reflect current production and demand, and we’re disappointed in this lack of support for the industry.”

“U.S. Canola Association is disappointed by the limited growth represented by the EPA’s biomass-based diesel and advanced biofuels volumes under the Renewable Fuel Standard (RFS) for 2023, 2024 and 2025. Canola is one of several crop feedstocks approved under the RFS for production of clean-burning biofuels, including biodiesel, renewable diesel, naphtha, heating oil, propane and sustainable aviation fuel. The final RFS volumes for 2023-25 limit the opportunity to maximize the production of biomass-based diesel fuels that are available now to reduce greenhouse gas emissions from the transportation sector.”

Reaction to the ethanol levels of the RVO announcement

“Higher blending targets would enable fuels such as E15 and E85 to quickly displace carbon pollution from gasoline, but EPA’s proposal will rein in those opportunities,” Jennings said, sentiments which were echoed by Growth Energy CEO Emily Skor who said that the U.S. “should be expanding market opportunities for higher blends like E15, not leaving carbon reductions on the table.”

“The RFS was intended to drive continual growth in all categories of renewable fuels well beyond 2022; instead, today’s final rule flatlines conventional renewable fuels at 15 billion gallons and misses a valuable opportunity to accelerate the energy sector’s transition to low- and zero-carbon fuels,” RFA president and CEO Geoff Cooper, said in a statement.

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