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Biodiesel Update: Now with More Soy

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I’ve said before that the food versus fuel debate is about more than corn, and specifically that using a large share of America’s vegetable oil for fuel would be counterproductive, and would do more to expand unsustainable palm oil production than to sustainably cut oil use and reduce carbon emissions.

Unfortunately, a perfect storm of poor policy choices led soy biodiesel production to increase by 45 percent in 2013, which represents about 30 percent of the soybean oil produced in the U.S. Now the EPA has decided to take a breather for 2014 and 2015, which makes good sense.

Biodiesel is made from all sorts of different sources, ranging from used cooking oil — which converts a waste into a valuable fuel — to food-grade vegetable oil — which turns valuable food into less valuable fuel. Unfortunately, despite encouraging growth in the production of waste-based biodiesel, the majority of the expansion is coming from soybean oil — causing the problems detailed in the infographic below and which, as I explained in April, does more to drive palm oil expansion and deforestation in Southeast Asia than increase planting of soybeans in the U.S.

biodiesel deforestation

In 2013 we called on the EPA to use its authority to ensure that blending constraints for ethanol and delays in the cellulosic biofuel scale up did not lead to biodiesel volumes increasing beyond what was sustainable. Under the Renewable Fuel Standard (RFS), other advanced biofuels (currently sugarcane ethanol from Brazil and biodiesel are the main options) can be used to meet the shortfall in cellulosic production. (You can check out our fact sheet on the complex mandate structure here.)

Unfortunately, the EPA did not take our advice, and, unable to meet the ethanol targets because of the lack of blending infrastructure, obligated parties (that is to say oil companies) turned to biodiesel instead to meet the standards. This phenomenon was amplified by the $1/gallon tax credit for biodiesel, which made blending biodiesel even more attractive (i.e. cheaper). All of this led to biodiesel use growing from a billion gallons in 2012 to a projected total of almost 1.5  billion gallons in 2013, with the majority coming from soy biodiesel, which appears likely to have grown about 45 percent to about 780 million gallons.

780 million gallons of soy biodiesel may not seem like much compared to the 13 billion gallons of corn ethanol produced this year, but the vegetable oil market is much smaller than the corn market, so a smaller amount of vegetable oil-based biofuel can make a big difference. The 780 million gallons of soy biodiesel projected for this year would consume about 30 percent of U.S. soy oil production for the 2013/2014 marketing year. This is up from about 20 percent the previous two years, and less than 10 percent before that. This rapidly escalating share is reminiscent of the escalation of corn used for ethanol (now about 40 percent), and is the reason I have been saying all year that the food versus fuel fight is about much more than just corn.

Soybean oil trends. 2013 data based on projection (details below)

Soybean oil trends. 2013 data based on projection (details below)

Non-food biodiesel: good, but limited

As I mentioned, there are “good” sources of biodiesel that come from true waste products — but the scale of policy-driven demand for biodiesel is outstripping the low-carbon resources. Let’s look at the trends over the last few years:

U.S. biodiesel feedstock trends. 2013 data based on projection (details below)

U.S. biodiesel feedstock trends. 2013 data based on projection (details below)

I’ve organized the categories roughly from the lowest carbon waste-based biofuels on the left to the more troublesome food-based fuels on the right. It’s encouraging to see healthy growth from the low-carbon end of the spectrum — recycled oils are up almost 47 percent and corn oil, primarily inedible oil recovered from ethanol production, is up 77 percent. But as you can see, most of the growth continues to come from soy biodiesel and other vegetable oils.

EPA breather is a wise move

In their recent proposed rule, the EPA has proposed to hold the biodiesel mandate at 1.28 billion gallons for 2014 and 2015. Since the low-carbon fats and oils, indeed everything aside from edible vegetable oil, still accounts for less than half of this year’s total, that leaves plenty of room for these sources to continue to grow. And the nested structure of the RFS means biodiesel has the opportunity to grow by competing with other advanced biofuels in the rest of the advanced mandate. Using this approach instead of raising the biodiesel-specific mandate allows flexibility for the biodiesel market to grow further if circumstances warrant. I think the EPA would be smart to stick with this proposal, and reject calls to use the exceptional circumstances of 2013 to set a floor for biodiesel production going forward.

A note on the graphs: the numbers are estimates at this point. The Energy Information Administration publishes monthly reports on biodiesel production, but I had to do some extrapolation because the breakdowns have only been published through October. What I did was assume the breakdown of sources for the full year would match the average results for January through October, but that the totals would scale up to meet the 1.479 billion gallons based on the latest EMTS data from the EPA. I got the soy oil production statistics from the Foreign Agricultural Service of the U.S. Department of Agriculture. It takes 7.5 pounds of vegetable oil to make a gallon of biodiesel.

Correction: January 27th, 2014
Since posting this blog, several experts in the biodiesel industry have pointed out some oversimplification in my extrapolation that has led to some errors in my detailed estimates. I have corrected the numbers and graphs accordingly, but my basic conclusions are unchanged.

Posted in: Biofuel, Vehicles Tags: , ,

About the author: Jeremy Martin is a scientist with expertise in the technology, lifecycle accounting, and water use of biofuels. He is working on policies to help commercialize the next generation of clean biofuels (made from waste and biomass rather than food) that can cut U.S. oil dependence and curb global warming. He holds a Ph.D. in chemistry with a minor in chemical engineering. See Jeremy's full bio.

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  • Liam Vogel

    And if ethanol production were to be done the RIGHT way, food production would not have to be impacted AT ALL! For more info, check out alcoholcanbeagas.com. In particular, this page will clear up LOTS of the lies and half-truths regarding ethanol: http://www.alcoholcanbeagas.com/node/490.
    Thanks for getting the info out there,
    Liam Vogel

  • http://www.biodieselsustainability.com/ Don Scott

    Jeremy,

    You fail to mention that soybean oil prices are down 25% relative to what they were in 2012 and down 6% relative to what they were in 2010. Increased biodiesel production is not causing vegetable oil prices to rise. This is clear evidence that we have adequate domestic supplies to meet the responsible goals of the U.S. biodiesel industry without any negative impacts on international trade. Soybean oil is a byproduct of producing protein meal for livestock feed. In order to satisfy the demand for livestock feed, we co-produce more soybean oil than we can use for food products. When you calculated that we used 35% of the soybean oil produced last year, you failed to count all the soybean oil that is exported in whole beans. We export an average of 45 million metric tons of whole beans every year. International importers, like China prefer to receive their soybean oil in the form of whole beans. Whole beans are easier to store and transport. When China imports whole beans, they get protein meal and vegetable oil, just like we do. They can’t match the efficiency of American farmers, so they buy our beans, but they crush them in their country, because that saves them money.

    The efforts within the biodiesel industry to diversify to other feedstocks deserves more attention. Growth using recycled oils and other wastes has been increasing faster than soybean oil use. This is true of the individual categories of recycled oils and waste. Add them together, and we had a lower ratio of soybean oil-based biodiesel in 2013, than we have ever had in the history of the industry. This is another sign that the RFS is having positive impacts as long as it includes responsible growth for biodiesel. This positive growth into more waste feedstocks is a result of overall industry growth. It is easier to produce high quality fuel from virgin oils. As the industry grows toward more effectively removing the existing surplus soybean oil from the domestic market, this increasingly favors wastes as the next-lowest cost feedstock.

    EPA’s proposal to reduce 2014 production relative to what was produced in 2013 is a mistake. EPA’s proposal does not provide any environmental benefit. Rather, it is pure capitulation to political pressure from the oil companies that do not want to compete with any renewable fuel. Every gallon of biodiesel put into the market last year had the effect of displacing real GHG emissions from petroleum. EPA is proposing to reverse that progress next year. The proposal will reduce biodiesel production by 25-50%. This contraction won’t affect all companies evenly. The worst part is, many of those innovative small businesses that are working so hard to diversify the industry and evolve to even greater GHG benefits will be hit the hardest. This could be a temporary setback for some. It will mean permanent closure for some. Capital investments are required to venture into a new paradigm of waste conversion. Three years of industry progress is not enough to pay off those investments and ensure that we can continue to turn wastes into renewable fuel. We need consistent policy toward greener fuels.

    The biodiesel industry is taking responsible action by asking EPA to set next year’s requirement equal to actual production from 2013. We agree with a conservative approach to avoid potential indirect impacts. EPA’s proposal is not conservative. It is foolish. We did great things in 2013 displacing petroleum and diversifying to more low-carbon feedstocks. There is no reason to reverse course.

    Don Scott
    Director of Sustainability
    National Biodiesel Board

  • Richard Solomon

    Thanks for the update on this very important issue.

    I look forward to and stand ready to send an email to the EPA, my reps in Congress, or the President regarding the need to shift the focus away from food based sources of biodeisel. I know Senator Boxer of California is interested cellulosic sources of alternative fuels, for example.

    Thanks again!

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