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U.S. Renewable Fuel Standard: Challenges and opportunities on the path to decarbonizing the transportation sector

June 13, 2023 Work Area: Land Systems

Biofuels could play a key role in decarbonizing segments of the transportation sector, but it’s essential that we design our bioenergy policies in ways that ensure their overall climate benefit. To do so, bioenergy policies, like the Renewable Fuel Standard, should prioritize bioenergy feedstocks that are compatible with food production, direct bioenergy to hard-to-decarbonize sectors, and catalyze carbon capture and storage at existing bioenergy facilities. 

For the U.S. to reach net-zero emissions, we need to decarbonize transportation — the country’s largest contributor to greenhouse gas emissions. The National Blueprint for Transportation Decarbonization highlights strategies like electrifying on-road vehicles, directing biofuels to hard-to-decarbonize transport, and capturing emissions with carbon capture and storage. Yet, the Environmental Protection Agency’s (EPA) proposed changes to the Renewable Fuel Standard (RFS) continue directing bioenergy toward on-road light-duty vehicles (which are relatively amenable to electrification) and lack a mechanism to prioritize bioenergy with carbon capture over bioenergy without.  

What is the Renewable Fuel Standard?  

The United States Congress established the RFS in 2005 and expanded it in 2007 (“RFS2”) with the goal of reducing greenhouse gas (GHG) emissions and reliance on foreign oil by incrementally increasing volumes of biofuels in transportation. Under the RFS, anyone producing or importing gasoline or diesel fuel (“obligated parties”) must blend a percentage of biofuels into their fuel supply or purchase credits (called RINs or renewable identification numbers) to meet their compliance obligation.   

The RFS bins biofuels into four categories — conventional biofuels, advanced biofuels, biomass-based diesel, and cellulosic biofuels — and sets annual consumption mandates for each bin. These bins are based on the type of biofuel and how much it reduces GHG emissions compared to petroleum — fuels in the advanced biofuel and biomass-based diesel categories must achieve a 50% reduction in lifecycle GHG emissions, cellulosic biofuels must achieve a 60% reduction, and conventional biofuels — a bin dominated by corn ethanol — must achieve a 20% reduction. Under this structure, once biofuel producers pass the 20%, 50%, or 60% bars, they receive no additional credit for improving the biofuel’s carbon intensity. For example, a facility that makes an advanced biofuel that achieves a 50% reduction in lifecycle GHG emissions as compared to gasoline has no incentive under the RFS to boost that reduction level to 60% or 70%; it will continue to generate the same kind of compliance credit regardless of additional improvement.  

Congress intended the program to increase the biofuel supply to 36 billion gallons in 2022 and for cellulosic biofuels — which offer the highest GHG benefits and other non-GHG environmental co-benefits like improved soil and water quality — to ramp up and account for 44% of the total volume. However, in 2022, obligated parties reported around 20 billion gallons of renewable fuel, of which only 3% was from cellulosic biofuels, far short of the volumes Congress anticipated at the program’s outset.  

There are three significant problems with the RFS:  

  1. Land- and resource-intensive conventional biofuels dominate the RFS. Obligated parties mainly meet RFS volumes with corn ethanol, which accounted for 74% of the mandated biofuel volumes under the program in 2022. Under EPA’s proposed rule, corn ethanol would continue to account for the bulk of RFS compliance, followed by biomass-based diesel. The result: lower climate benefits than Congress intended. Additionally, although corn is high-yielding and farmers have gotten incredibly efficient at producing it, corn is still very land- and resource-intensive requiring significant GHG-intensive inputs like fertilizers made from fossil-derived natural gas. In its draft Third Triennial Report to Congress, EPA documents adverse impacts on air, water, and soil quality and land use change from biofuels that almost exclusively stem from corn for corn ethanol and soybean for soy biodiesel which is often grown in rotation with corn. 
  1. The RFS does not incentivize biofuel producers to reduce emissions beyond the 20%, 50%, and 60% GHG emission reduction bars. Carbon intensity scores are the GHG emissions associated with the production and use of a biofuel per unit of usable energy in the biofuel and depend on decisions across the supply chain. Unlike performance-based fuel standards (e.g., California’s low carbon fuel standard), which incentivize fuels based on their carbon intensity score and provide a higher market value for fuels with a better carbon intensity score, the RFS does not drive improvement beyond clearing the 20%, 50%, or 60% GHG emissions reduction bars. The carbon intensity score can be better or worse depending on the land used to grow biofuel crops (e.g., cutting down forests to grow biofuel crops or to grow commodities displaced by biofuel crops makes the carbon intensity worse), whether fossil or renewable energy is used to power the biorefinery, and whether biorefineries capture the byproduct CO2 streams produced during biofuel production and store it permanently underground.  
  1. The RFS does not prioritize bioenergy for hard-to-decarbonize sectors. As the National Blueprint for Transportation Decarbonization outlines, in the transportation sector, we must direct biofuels to applications that require energy-dense fuels and are harder to electrify, like aviation. The RFS does not incentivize biofuel use in hard-to-decarbonize sectors over sectors that are relatively amenable to electrification. For example, biofuel producers can produce alternative jet fuel (AJF) and renewable diesel from the same feedstocks, but AJF requires more processing steps, energy, and cost. Under the RFS, AJF receives a lower equivalency value than renewable diesel (due to its lower energy content). Consequently, producers are less incentivized to prioritize AJF production for the hard-to-decarbonize aviation sector over renewable diesel for more easily decarbonized on-road transport. Without additional incentives to drive AJF production over renewable diesel, biofuel producers will continue prioritizing AJF feedstocks for on-road transportation, where it is less useful. Absent an unlimited supply of bioenergy feedstocks, we need to ensure that what we have is directed to its best and highest use to reach net-zero emissions.   

The EPA is considering changes to the RFS and is finalizing its third Triennial Report to Congress reporting on the program’s environmental impacts. CATF submitted comments on the proposed changes and draft report 

Here are three things the agency can do to improve the RFS:  

  1. Don’t increase land- and resource-intensive conventional biofuel volumes. EPA shouldn’t increase incentives for land- and resource-intensive biofuels that result in detrimental environmental impacts and uncertain climate outcomes. The scientific literature reports that corn ethanol’s carbon intensity varies from better to worse than gasoline. Additionally, in its draft third Triennial Report, the EPA documents adverse soil, water, air quality, and land use change impacts from corn ethanol. These impacts can be significant to local communities and detrimental to already stressed ecosystems. Competition for land and resources for agricultural production on land will continue to grow as the global population increases and climate change intensifies. We need to make efficient decisions on the best and highest uses of those resources. Conservation and agricultural best management practices in corn and soybean production systems can help reduce adverse effects, and EPA correctly highlights the need to integrate practices like reduced tillage, riparian buffers, and cover crops into existing corn and soybean systems and convert annual cropland to perennial systems to reduce soil erosion, nitrate, and phosphorus loss.  

    EPA could incentivize biofuels from non-dominant herbaceous perennial and winter cover crop feedstocks (non-food crops); this could also help improve soil and water quality and reduce land and resource constraints, depending on their management and the land used to grow these feedstocks. Recently, Malone et al. (2023) found energy cover crops — bioenergy crops grown on land that is seasonally fallow and does not compete with food production — in a five-state area in the Midwestern U.S. could provide 2.3 billion gallons of ethanol-equivalent gallons of biofuel (more than three times 2022 U.S. cellulosic biofuel production) and could sequester up to 7.5 million Mg CO2 per year while reducing nitrate-nitrogen losses to the Gulf of Mexico.  
  1. Incorporate carbon intensity scores in biofuel policies and a GHG emissions analysis in the Triennial Report. EPA should incentivize biofuels with low carbon intensity scores over biofuels with high carbon intensity scores, like corn ethanol grown on existing cropland over corn ethanol grown on new cropland or corn ethanol with carbon capture and storage over corn ethanol without carbon capture. Ethanol fermentation produces an easily capturable, almost pure CO2 stream. With the increased value of carbon capture tax credits in the Inflation Reduction Act, there is a greater economic incentive for installing carbon capture at ethanol plants, which could theoretically capture 95 million tons of fermentation-generated CO2 under a 15-billion-gallon corn ethanol mandate, equivalent to greenhouse gas emissions from >20 million gasoline-powered vehicles driven for one year.  

    Additionally, since Congress created the RFS to reduce GHG emissions, analyzing the GHGs associated with the RFS is essential to understanding its impacts. Congress broadly directed EPA to examine the RFS’s environmental effects triennially, and EPA should include GHG emissions in its Triennial Report.   
  1. Direct bioenergy towards difficult-to-decarbonize sectors. Bioenergy will better support climate change mitigation by directing it in difficult-to-decarbonize sectors for which high energy-density carbon fuels are necessary, especially because climate-beneficial bioenergy resources are not unlimited. Policy mechanisms like sector-specific clean fuel standards and targeted tax credits are needed to direct climate-beneficial bioenergy resources to their best and highest use.  

EPA should finalize a rule that lives up to the Renewable Fuel Standard’s intended goals, achieves greater reliance on truly clean fuels, and supports the administration’s transportation decarbonization strategy.  

Biofuels can help us achieve transportation sector decarbonization, but policies need to be designed to ensure overall climate benefit. The RFS has historically resulted in increasing fuels with high carbon intensity scores, more significant adverse environmental impacts, and lower climate benefits than Congress intended.  

Bioenergy policies should direct bioenergy to hard-to-decarbonize sectors to maximize their climate change mitigation impacts; encourage climate-beneficial feedstocks over conventional food-based biofuels; and advance performance-based policies that rely on carbon intensity scores like a low- or zero-carbon fuel standard that achieves environmental and climate-beneficial outcomes. 

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