Renewable Fuel Standard

The Renewable Fuel Standard (RFS) is an American federal program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. It originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007. Research published by the U.S. GAO in November, 2016 found the program unlikely to meet its goal of reducing greenhouse gas emissions due to limited current and expected future production of advanced biofuels. The Renewable Fuel Standard (RFS) is an American federal program that requires transportation fuel sold in the United States to contain a minimum volume of renewable fuels. It originated with the Energy Policy Act of 2005 and was expanded and extended by the Energy Independence and Security Act of 2007. Research published by the U.S. GAO in November, 2016 found the program unlikely to meet its goal of reducing greenhouse gas emissions due to limited current and expected future production of advanced biofuels. The RFS requires renewable fuel to be blended into transportation fuel in increasing amounts each year, escalating to 36 billion gallons by 2022. Each renewable fuel category in the RFS must emit lower levels of greenhouse gases relative to the petroleum fuel it replaces. The first RFS, usually referred to as RFS1, required that 4 billion gallons of biofuel be used in 2006. This requirement was scheduled to rise to 7.5 billion gallons in 2012. These requirements were passed as part of the Energy Policy Act of 2005. The Energy Independence and Security Act of 2007 changed and broadened these rules. EISA was signed into law by President George W. Bush and the bill was overwhelmingly supported by members of congress from both parties. The changes required by the 2007 legislation are usually referred to as RFS2. RFS2 required the use of 9 billion gallons in 2008 and scheduled a requirement for 36 billion gallons in 2022. The quota for 2022 was to allow no more than a maximum of 15 billion gallons from corn-starch ethanol and a minimum of 16 billion gallons from cellulosic biofuels. In reaction to the implementation of the RFS, passage of EISA, and other measures to support ethanol, the Organization of Petroleum Exporting Countries (OPEC) expressed alarm. In 2007, OPEC's secretary general, Abdalla El-Badri, said that increased use of biofuels by the United States could cause OPEC to decrease production. Other OPEC leaders openly worried about 'security of demand.' The Renewable Fuel Standard Program (RFS) was introduced as part of the Energy Policy Act of 2005. The Act passed both the House and Senate with strong support, including 275 votes in the House and a remarkable 74 votes in the Senate. The legislation required that certain minimum levels of biofuels be produced and used in the United States by designated dates. The initial RFS, referred to as RFS1 contained in the 2005 Act, mandated that a minimum of four billion gallons of renewable fuel be used in the nation's gasoline supply by 2006 and that the minimum usage volume rise by 3.5 billion gallons by 2012. In 2007, The RFS program was expanded under the Energy Independence and Security Act of 2007, known as EISA. EISA expanded the mandate, now known as RFS2, to require 36 billion gallons of biofuels by 2022.> After passage of the Energy Policy Act of 2005, the EPA was delegated the responsibility of developing a regulatory framework to implement the RFS. To establish this framework, EPA initiated a formal rulemaking process. A federal agency rule-making procedure must follow the process set out in the Administrative Procedures Act. This requires government agencies to formulate a proposed rule and then submit that proposed rule for public comment. Once this comment period ends, agencies may or may not modify the proposed rule after which they issue a final rule. The RFS rulemaking took place between May 26th 2009 and July 27th 2009 with the final rule being announced by EPA on March 26th 2010 via the Federal Register. Under the final RFS Rule, the program is administered by the Office of Transportation and Air Quality within the Office of Air and Radiation (OAR) under the EPA. Each year, by November 30, the OAR is required to establish, via rulemaking, the volumes of biofuel that must be blended with transportation fuels during the following calendar year known as the Renewable Volume Obligation or RVO. An RVO is determined by multiplying the output of the producer by the EPA's announced blending ratios for each of the four standards described above. The producer has to show compliance through the RIN system. It can purchase RINs to makeup for any shortfall in production. Surplus RINs can be sold. This is done through the EPA's Moderated Transaction System. The EPA established an RVO of 18.11 billion gallons total for 2016. On May 29, 2015, the EPA set an RVO lower than the benchmarks established by Congress. This generated criticism from all sides of the issue. The EPA was also blamed for missing legal deadlines to revise the RVO targets. Some say this introduced market uncertainty, harming both consumers and producers. The EPA made this announcement in May to meet a June 1, 2015 deadline established by the settlement to a lawsuit brought by fossil fuel and chemical trade associations. The EPA defended the targets calling them 'ambitious but responsible' and arguing that 'Biofuels remain an important part of the overall strategy to enhance energy security and address climate change.' The EPA announcement called for a 27-percent increase in the use of advanced biofuels from 2014 to 2016. Most gasoline used in the United States is blended to E10, which contains only 10% ethanol. The May 2015 rule changes thus created modest incentives to make greater use of E85 and E15, which contain more ethanol.