By Tom Hance
On Dec. 1, 2022, when the U.S. Environmental Protection Agency (EPA) issued its final rule for Renewable Fuel Standard (RFS) pathways for canola oil-based renewable diesel and related biofuels, it also issued a proposed rule for Required Volume Obligations (RVOs) for 2023-25. While biomass-based diesel (BBD) RFS volumes have largely been at the EPA’s discretion, this is the first time the agency has control of all RFS volumes and will set them for three years forward. Up to 2022, RFS volumes were set by legislative statute and implemented annually by the EPA.
Below is a chart showing proposed volumes for 2023-25 for each RFS category. The Clean Fuels Alliance America, formerly the National Biodiesel Board, and the BBD industry were disappointed by the proposed BBD volumes because they are below existing production levels and will undercut the industry’s plans to expand capacity. The number the EPA used for renewable diesel capacity is outdated; it cited 1.5 billion gallons even though capacity is now over 2 billion gallons per year, according to the U.S. Energy Information Administration (EIA). The EPA cited concerns over feedstock availability as the primary reason for its conservative volumes. These proposed volumes will be analyzed during a public comment period and subsequent final rule to be issued in June 2023.
EPA’s Proposed Renewable Fuel Standards 2023-25
|Proposed Volume Targets (billion RINs*)|
*One RIN equals one ethanol-equivalent gallon of renewable fuel
Clean Fuels Alliance America pointed out that when setting RFS volumes, the EPA must consider the infrastructure and rate of future commercial production for advanced biofuels like biodiesel, renewable diesel and sustainable aviation fuel. The minor increases for BBD volumes in 2023, 2024 and 2025 are below the clean fuel industry’s existing production and ignore its significant investments in new capacity. The EPA’s data from the RFS program show that the U.S. market reached 3.1 billion gallons of BBD in 2021 and produced 2.9 billion gallons through October 2022 with two months still to go. The EIA’s Short-Term Energy Outlook, which informs the EPA’s decisions on annual RFS volumes, currently projects 3.9 billion gallons – a 500-million-gallon increase – in biodiesel and renewable diesel consumption for 2023. The EIA has also projected 2.4. billion gallons of additional renewable diesel capacity by 2024 and calculated another 1.8 billion gallons in announced, planned capacity. Moreover, the EPA’s proposed RFS volumes provide no additional space for sustainable aviation fuel and short-circuit the nation’s goals to cut carbon emissions.
EPA’s Proposed Biomass-Based Diesel Volumes for 2023 and Beyond
|(billion gallons)||2023||Growth from 2022||2024||Growth from 2023||2025||Growth from 2024|
Market analysts also view the EPA’s proposed volumes for BBD as very conservative. For example, a recent report from J.P. Morgan said: “The EPA’s volume mandates assume that total biomass-based diesel consumption increases by only 123 million gallons over the next 3 years, which could quite abruptly change the outlook for renewable diesel growth in the U.S. … We are surprised by certain assumptions that were cited by the EPA as reasons for posing such low volume increases for renewable diesel.”
The U.S. Canola Association and other stakeholders will share perspectives and data about RFS volumes with the EPA during the public comment period and throughout the process leading up to what will hopefully be an improved final rule in 2023.
Tom Hance is a policy expert at Gordley Associates in Washington, D.C.