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Inexact Projections Drive Fuel Policy

The Renewable Fuel Standard underscores the difficulties of trying to plan for the future.

In 2007, projections by the Energy Information Administration predicted that the U.S. appetite for transportation fuels would grow from 145 billion gallons a year to 176 billion gallons a year by 2022. In the early 2000s, the United States was importing 60 percent of the liquid fuel it used, and lawmakers were concerned that dependence on imports could climb even higher.

For House and Senate supporters of biofuels, those projections bolstered their arguments for a bigger federal push to generate production and use of renewable fuels. In December 2007, Congress approved wide-ranging energy legislation (PL 110-140) that included, among other things, an expansion of the Renewable Fuel Standard from a target of 7.5 billion gallons by 2012 to 36 billion gallons by 2022.

In March, the Energy Information Administration lowered its projection of annual transportation fuel consumption by the early 2020s to 120 billion gallons. Net liquid fuel imports dipped to 45 percent in 2012 and are expected to decline further this year and next.

The declines in projected gasoline use and imports highlight some of the challenges to meeting RFS mandates.

Five features of the renewable-fuel policy:

• To qualify for one of the four energy categories, a biofuel must meet a minimum threshold for life cycle reductions in greenhouse gas emissions and the feedstock needed to produce the energy must meet a federal definition of renewable biomass. The four biofuel categories are: renewable (corn ethanol), advanced biofuels, cellulosic and biomass-based biodiesel.

• Imported Brazilian sugarcane qualifies as an advanced fuel, meaning it reduces life cycle greenhouse gas emissions by at least 50 percent. Corn ethanol does not qualify as an advanced fuel.

• The EPA calculates annual percentage standards for the four biofuel categories that are applied to fuel refiners, blenders and importers and used to determine an individual company’s renewable volume obligation.

• The EPA administrator has the authority to reduce one or more mandates if there is insufficient domestic supply or if a mandate would inflict severe harm on the economy or environment of a state, a region or the nation.

• The EPA has lowered the mandate for cellulosic biofuels made from non-corn sources each year since 2010 because of limited investment in commercial scale production plants. After losing a lawsuit by the American Petroleum Institute, the agency wrote down the 2012 cellulosic mandate to zero.

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