EPA Cuts 2012 Cellulosic Blending Target to Zero

by Marlo Lewis on February 28, 2013

in Features

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“U.S. EPA has altered its cellulosic biofuel requirements for 2012 — from 8.65 million gallons to zero,” today’s Climatewire reports. In January, the D.C. Circuit Court of Appeals vacated EPA’s 2012 cellulosic biofuels standard. “As a result,” Climatewire explains, “obligated parties — oil companies required to show EPA that they blend biofuels in their fuel supply — won’t need to provide information on their compliance. The agency will submit refunds to companies that have submitted payments for 2012 cellulosic waiver credits.”

Who says there’s no justice in this world! For several years the EPA has fined refiners for not purchasing and blending ethanol made from switchgrass, wood chips, and other fibrous, non-edible plants. Refiners protested that there was no commercial cellulosic fuel to buy. The EPA argued that didn’t matter because the Renewable Fuel Standard (RFS) is meant to be “technology forcing.” The agency thus based each year’s cellulosic target on aspirational (rather than realistic) projections of how much cellulosic fuel would be produced. It then cheerfully collected fines for all the gallons of phantom fuel refiners did not blend.

The Court held that punishing refiners for what the ethanol industry failed to do is not “technology forcing”:

EPA applies the pressure to one industry (the refiners) [citation omitted], yet it is another (the producers of cellulosic biofuel) that enjoys the requisite expertise, plant, capital and ultimate opportunity for profit. Apart from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry. “Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers.” Given this asymmetry in incentives, EPA’s projection is not “technology-forcing” in the same sense as other innovation-minded regulations that we have upheld.

Zeroing out the RFS cellulosic blending targets established by the Energy Independence and Security Act (EISA) is long overdue. EISA (p. 32) required refiners to sell 100 million gallons of cellulosic ethanol in 2010, 250 million gallons in 2011, and 500 million gallons in 2012. Because hoped-for breakthroughs did not occur, the EPA dumbed down the mandated quantities to 6.5 million gallons in 2010, 6.0 million in 2011, and 8.65 million in 2012. However, even those symbolic targets were unattainable. In 2012, the U.S. biofuel industry produced only 20,069 gallons of cellulosic ethanol, according to Climatewire. As of early 2013, no commercial-scale cellulosic ethanol plants exist.

How come? The ethanol industry is quick to blame others. Supposedly, the E10 blend wall — the EPA policy that, until June 2012, limited to 10% the amount of ethanol permitted in a gallon of gasoline — allowed corn ethanol to saturate the market and crowd out demand for cellulosic fuel. Supposedly also, political attacks on the RFS have created uncertainty about the future of government policy, scaring away investors. Whether or not these factors play some role, the chief barrier to commercialization is cost.

In an article about BP’s recent cancelation of a $350 million cellulosic plant in Highlands County, Florida, MIT Technology Review editor Kevin Bullis observes:

Economists have recently done field studies to determine just how much the feedstocks—the grasses, wood chips, straw, or corn stover—actually cost to grow, harvest, and get to a biofuels plant. Whereas early estimates—the ones that helped spur the cellulosic ethanol mandates—put the cost at $30 a ton, the actual costs are more like $80 to $130 a ton. That means the grass and wood chips required to make a gallon of ethanol will cost $1.30 to $1.48—even before anything is done to process them. (For context, the price of a gallon of processed ethanol made from corn is now $2.40 a gallon.)

Based on the cost for plants like the one BP proposed in Florida, the cost could be 10 times higher for a cellulosic plant than a corn ethanol one, at least for the first plants, says Wallace Tyner, a professor of agricultural economics at Purdue University.

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