The Impending Collision of Biofuels Mandates with Market Reality
In the face of a small corn crop and high prices, there has been a great deal of debate about a partial temporary waiver of the Renewable Fuels Standards (RFS) mandate for ethanol in 2013. Our analysis of the likely impacts of such a waiver can be found here
Before proceeding with the analysis it is important to note two further considerations. First, fuels qualifying as biodiesel can be applied toward the biodiesel, undifferentiated advanced, or the renewable mandate. This reflects the nested structure of the RFS mandates based on the contribution of different biofuels in reducing greenhouse gas emissions. (See this recent post by Nick Paulson and Seth Meyers for further details on the nested structure of the mandates.) Second, biodiesel has an ethanol equivalent of 1.5 for the purposes of RFS compliance so that a physical gallon of biodiesel counts as 1.5 gallons towards the advanced and total mandates, effectively reducing the physical gallons needed to meet the undifferentiated advanced biofuels mandate. In 2013, for example, 1.28 billion gallons of biodiesel would count as 1.92 billion gallons for meeting the advanced biofuels mandate, reducing the effective mandate for undifferentiated biofuels from 2.47 billion gallons to 830 million gallons. That mandate then could be met with an additional 553 million gallons of biodiesel (830/1.5), 830 million gallons of other advanced biofuels, or some combination of the two.
Blend Wall Issues for Renewable Biofuels
We have discussed the issue of the blend wall for renewable biofuels in a previous post
estimated at 2.5 billion gallons
Feedstock Requirements for Biodiesel
Implications
several reasons for being cautious about the likelihood of this actually occurring on a wide scale. Avoiding the collision for advanced biofuels is likely to require not only writing down the cellulosic mandate, but also the total RFS mandate. Otherwise, a new and even larger conflict between food and fuel use of crops is in store due to the huge potential draw on vegetable oil feedstocks. This is a problem that the EPA can solve with the stroke of a pen.
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