August 29

August 29, 2019: The RFS is Really a Foreign Biofuels Mandate

The ethanol industry claims that the Renewable Fuel Standard (RFS) helps farmers. Well, for once we agree. The RFS does help farmers – foreign farmers.

That’s because the RFS is really a foreign biofuels mandate.

Data show that forcing refiners to blend more biofuels only helps foreign farmers.  In each of the last three compliance years, U.S. refiners relied on between one to two BILLION foreign Renewable Identification Numbers (RINs) to comply with the RFS. (Note: RINs are the credits refiners need to collect to show biofuel mandated under the RFS has been used domestically.)  Even with import tariffs on biofuel last year from our largest foreign suppliers of biofuel – Argentina and Indonesia – RINs from foreign fuel hovered around one BILLION.

An assessment of the Environmental Protection Agency (EPA) Moderated Transaction System (EMTS) data shows that as the number of small refinery exemptions (SREs) increased, foreign imports of biofuels have dropped.  SREs are the critical waivers that EPA grants to small refineries that would face disproportionate economic hardship if forced to meet the RFS’ stringent ethanol blending requirement. The previously mentioned import tariffs certainly played a role in this occurrence, but since domestic biodiesel production and consumption have increased over the last few years, as has the ethanol blend rate, the data indicate the only parties seemingly impacted by SREs are foreign biofuel producers.

One reason for the need to use so much foreign fuel is EPA’s aggressive conventional biofuel requirement (e.g. ethanol).  Since the conventional biofuel (e.g. ethanol) mandate exceeds the “blend wall” – the amount of ethanol gasoline companies are permitted to blend with fuel – domestic refiners are forced to over-comply with the biomass-based diesel and advanced biofuel mandates to meet their overall RFS requirements (since those fuels can be used in the conventional category). However, not enough domestic biodiesel, renewable diesel or other “advanced biofuels” are produced in such volumes.  As a result, refiners end up relying on foreign advanced biofuels to fill the 700 million gap between the 15 billion gallon ethanol requirement and what can actually be blended into the fuel supply.  This is on top of the foreign biofuel refiners need to import to meet the advanced and biomass-based diesel requirements.  We previously showed that there is no impact on domestic biofuel consumption due to the SREs (click here).  The data therefore shows that the only possible outcome of fewer SREs or higher RFS volumes is yet another increase in foreign fuel to meet the RFS.

The bottom line here is that the data is clear: the only effect that increasing volumes of biofuels blended has is to raise the amount of foreign fuel that refiners import in order to meet their RFS obligation.

And that doesn’t help American farmers or advance U.S. energy security.