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Thursday, July 14, 2011

Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic Biofuels: Questions and Answers

Kelsi Bracmort
Analyst in Agricultural Conservation and Natural Resources Policy

The Renewable Fuel Standard (RFS) was expanded under the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140) in an effort to reduce dependence on foreign oil, promote biofuel use, and stabilize transportation fuel prices, among other goals. Over a 15-year period, the RFS seeks to establish a market for biofuels in the transportation sector by requiring that increasing amounts of biofuels—36 billion gallons by 2022—be blended into transportation fuel. The mandate is to be accomplished with an assortment of advanced biofuels, including cellulosic biofuels—fuels produced from cellulosic materials including grasses, trees, and agricultural and municipal wastes. However, analysis suggested the United States did not have sufficient cellulosic biofuel production capacity to meet the 2010 and 2011 RFS mandate instituted by Congress in EISA, and this is likely to continue for the 2012 mandate.

The U.S. Environmental Protection Agency (EPA) is required to lower the cellulosic biofuel standard if the projected volume of cellulosic biofuel production is less than the applicable volume specified in the statute. The cellulosic biofuel allotment in the mandate, as established by Congress in EISA, was 100 million gallons due in 2010, 250 million gallons in 2011, and 500 million gallons in 2012, increasing to 16 billion gallons by 2022. EPA lowered the RFS cellulosic biofuel mandate to 6.5 million gallons in 2010 and 6.6 million gallons in 2011. For the 2012 cellulosic biofuels mandate, EPA proposed a range of volumes from 3.55 to 15.7 million ethanolequivalent gallons from which to consider a value. EPA is accepting comments on what the final value should be. The cellulosic biofuel community may fare better at achieving the lower mandates set and proposed by EPA if certain obstacles are overcome. Roadblocks include unknown levels of feedstock supply, expensive conversion technology that has not yet been applied commercially, and insufficient financial support from private investors and the federal government.

EPA reports that very few, if any, facilities are consistently producing cellulosic biofuel for commercial sale. Some financial support from the Departments of Energy and Agriculture is available to expedite cellulosic biofuel production. For example, the Biomass Crop Assistance Program (BCAP), created under the Food, Conservation, and Energy Act of 2008 (2008 farm bill; P.L. 110-246), is to support establishment and production of crops for conversion to bioenergy in selected areas, and to assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation of eligible material for use in a biomass conversion facility. Also, the Department of Energy’s Loan Guarantee Program, created under the Energy Policy Act of 2005 (EPAct05, P.L. 109-58), distributes loan guarantees to eligible commercial-scale renewable energy systems, including cellulosic biofuel plants, although criticisms have been raised that the program has been slow to get started.

Many questions regarding cellulosic biofuels and the RFS may arise as the 112
th Congress engages in energy legislation debates. EPA compliance data indicate that there was no commercial production of cellulosic biofuel (RINS or volume) under the RFS for 2010. Can and will the 2011, 2012, and future RFS mandates for cellulosic biofuels be met? What impact will the continued lowering of the cellulosic ethanol mandate have on investment in cellulosic ethanol production? What are the next steps the 112th Congress could take to influence cellulosic biofuel production? This report, in a question and answer format, discusses some of the concerns facing the cellulosic biofuel community, including feedstock supply estimates and potential legislative options to address cellulosic biofuel production uncertainty for the RFS.

Date of Report: July 8, 2011
Number of Pages: 18
Order Number: R41106
Price: $29.95

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