Policy & Politics
Renewable Fuel Standard (national policy)
AFBF Policy Development
When the current Renewable Fuels Standard (RFS2) was passed, the nation expected that gasoline consumption would continue to increase. At that time, experts projected consumption levels of around 150 billion gallons of gasoline a year by 2014 or 2015. On that basis, the requirement that 15 billion gallons of conventional (corn- or grain-based) ethanol be used was entirely consistent with a 10 percent blend of ethanol in gasoline. Since almost the day the bill was passed, gasoline consumption has decreased. We now consume the same amount of gasoline as in 2003, and use is projected to continue falling over the next few years. U.S. gasoline consumption determines what is often referred to as the “ethanol blend wall.” Consequently, the gap between a 10 percent ethanol blend and the RFS2 mandate is expected to continue to grow because projections of gasoline consumption are decreasing and the mandate is increasing.
One way to eliminate the “ethanol blend wall” is to increase the percentage of ethanol blended into gasoline. The Environmental Protection Agency (EPA) has issued provisions allowing for the blending of up to 15 percent ethanol in gasoline, but only for vehicles produced after model year 2000. To date, there has been very little pick-up of this product because gasoline stations are unwilling to put in pumps for this restricted market. Several organizations are working through the courts to stop EPA from allowing for a 15 percent blend. Many in the liquid fuels industry, and certainly those in the gasoline distribution sector, are pushing for legislative changes to the mandate or even complete repeal. The issue is expected to come to a head in 2014 as we get closer to hitting the “blend wall” and will be debated heavily in 2013.
The RFS2 mandate is met through a compliance of ethanol-equivalent obligations, or Renewable Identification Numbers (RINs), and not through actual physical gallons; one gallon of ethanol generates one RIN. Actual ethanol use was well above the mandate in 2010 and 2011 so there were more RINs generated than were needed to meet the mandate. With the help of excess RINs rolled over from previous years (there is a 20 percent roll-over provision), the industry should be able to meet the standard for 2013. However, the issue is whether or not obligated refiners will have enough RINs to satisfy the increased RFS2 mandate in 2014, when gasoline consumption is projected to fall further and the mandate will rise from 13.8 billion gallons to 14.4 billion gallons.