Major Surgery or Physical Therapy? Why Stability, Balance and Flexibility are the Right Prescription to Put the Renewable Fuel Standard Back on Track

March 13, 2015 | 9:12 am
Jeremy Martin
Senior Scientist and Director of Fuels Policy

The Renewable Fuel Standard (RFS) is in rough shape after a couple years of controversy and uncertainty, and some critics are calling for the removal of major elements of the policy.  But the RFS is needed to maintain steady progress on clean fuels, and such invasive surgery is the wrong prescription to fix what ails it. Instead something like physical therapy is required. EPA—and all of the key stakeholders—need to be flexible, build stability, and focus on making steady progress towards a more balanced approach to biofuels.

Physical therapyFinding a balanced bioenergy path forward

In a recent World Resources Institute report, long-time biofuels critic Tim Searchinger (together with coauthor Ralph Heimlich) argues that there is a global food crisis looming and “the world is already full,” so there is no land available to grow crops for fuel or energy.  While I agree that protecting food production, farmland, and forests is a primary concern, I disagree that the world is full and that all crop based bioenergy should be phased out.  This oversimplifies things, and ignores the productive role bioenergy can play in a sustainable agricultural system.

The land use decisions we make in the coming decades are critical to meeting needs for healthy food, healthy farms and a stable climate. But I am not convinced these goals rule out a meaningful role for bioenergy. Instead biofuels must steadily improve over time, moving to lower carbon production processes and more sustainable feedstocks. And the scale of biofuel production should balance food needs, forest protection, and other land uses. Searchinger and his coauthors make many useful suggestions in their series of reports, and I agree with them that biofuel targets should not be based on an arbitrary fraction of total energy use like 10% or 20%.  But it does not follow that the right number is zero.

While diverting crops or land into fuel production can obviously cause problems, the oversimplified idea that we should use all our land to fill a looming global “calorie gap” also misses the mark. This formulation of the problem suggests we should put US agricultural land to work producing affordable calories to feed the world’s growing population.  But we have tried this before, and ironically exports of cheap US grain to “feed the world” end up undermining the growth of sustainable food production in the developing world by harming farmers in those counties. As any student of agricultural history knows, “feed the world” is not the right rallying cry for a just and sustainable food system. So while high and unstable food prices are indeed a problem, it does not follow that the lowest possible prices are ideal either. Balance is required to move agriculture steadily in a low carbon, healthy and just direction.

Stability is key to steady progress

The US already devotes tens of millions of acres of productive land to growing corn for ethanol, and the last thing we need to do is to stop making ethanol and instead dump the 5 billion bushels of corn produced on those acres onto global markets. Instead we need to shift those acres gradually but steadily to crops like perennial grasses, which will make US agriculture more sustainable, multifunctional and productive over the long term while sequestering carbon in deep roots and soil, and addressing critical water quality problems. More sustainable crops will produce lower carbon biofuels as well as a better agricultural system. These perennial grasses play a major role in our vision for biomass resources to produce clean energy and fuel.

But this transformation is not going to happen overnight and it will require investment and smart policy over many years. Biofuels policy is a small but significant piece of this puzzle, and no federal policy is as important as the RFS.

SurgeryRecent proposals to “reform” the Renewable Fuels Standard are misguided

Recently, proposals to “reform” the RFS has been made in the House and Senate. The proposed bills are short, with the common element being a proposal to cut just a few lines of text to strip corn ethanol from the RFS. The House bill also blocks EPA from moving forward with ethanol blends beyond 10% (E10) and changes the way EPA sets standards for cellulosic biofuels made from non-food sources like corn stalks. On their face, these proposals seems reasonable. After all, corn ethanol has been the source of plenty of problems, and the bills leave in place the language that was designed to support advanced and cellulosic biofuels.

But in fact, this “reform” will turn the goals of the RFS upside down. This apparently targeted operation to surgically remove the problems of corn ethanol will actually have little impact on corn ethanol and will stop investment into the next generation of cellulosic biofuels. They would turn a program designed to stimulate investment in US renewable fuels production into a counter-productive shell game that will drive up costs without environmental benefits. The reasons for this are complicated, so I put them in a technical appendix below, but the bottom line is these proposals create rather than solve problems.

I’m not sure these bills are actually intended to be implemented; they seem like attempts to kill the RFS under the guise of reform. Rather than taking responsibility for giving up on renewable fuels, these proposals suggest removing a vital organ or two, ensuring the patient never leaves the operating room.

Flexibility to keep moving forward at a measured pace

Don’t get me wrong, I know the RFS is not in great shape. But in this case, physical therapy is a better treatment than invasive surgery. I have been arguing for several years that flexibility and a more measured pace of growth is the key to EPA’s administration of the RFS. The original pace of the RFS was aspirational, but is now clearly unrealistic.

EPA needs to recognize that it will take longer than originally hoped to reach the ambitious goals of the RFS. Moreover, the ethanol blending challenges that precipitated the current crisis are a significant bump in the road, and to move forward we need an approach to ethanol blending that allows for gradual growth of cellulosic ethanol and also makes sense for automakers and fuel consumers. But these challenges are something EPA should work through with all the stakeholders rather than having Congress intervene.

EPA needs to lay out a plan to get the RFS on track, and stakeholders need to recognize this is not going to happen overnight and be flexible themselves. Failing to do so will maintain the status quo of 10% corn ethanol and 90% gasoline. What is at stake is progress on clean fuels made from non-food resources that we need in order to cut oil use and emissions over the long term.

A predictable and steady road forward for the RFS is important not only to the advanced and cellulosic biofuels industry, but to automakers, gas station owners and states pursuing low carbon and clean fuels policies as well.  They all need to know what to expect from the RFS over the next 5 years to make their own plans. To make this work we need everyone to be flexible, and figure out how a balanced path forward will keeps us on the road to half the oil.


Appendix: Why removing conventional biofuel from RFS would be counterproductive

The RFS does not have a specific category for corn ethanol, but corn ethanol provides most of undifferentiated renewable fuel required by the standard, up to 15 billion gallons of the total. The corn ethanol industry is already built out to essentially this volume, and independent analysts agree that corn ethanol will continue to be produced at similar levels with or without the RFS because ethanol is a cost effective high octane blending component of gasoline. However, the proposed changes to the RFS would remove the motivation to expand biofuels beyond the so-called blend wall—the infrastructure limitations that make it hard to sell ethanol beyond the 10% currently blended into gasoline (E10). This would change the blend wall from what is now a treatable malady slowing the growth of renewable fuels into something closer to a terminal diagnosis for investment in advanced biofuels.

The reality is that investors in the next generation cellulosic plants will base their investment decisions on the future market for ethanol. Under the existing RFS, building a cellulosic ethanol facility provides the opportunity to be the one of the lowest carbon producers of cellulosic biofuel in a steadily growing market where policies like the RFS and West Coast Low Carbon and Clean Fuel Standards reward the lowest carbon producers of cellulosic biofuel. But if these RFS reform bills become law, the future US demand for ethanol will be stagnant and will even shrink slowly as more efficient cars and electric vehicles reduce demand for gasoline, and with it, E10. In this case, cellulosic ethanol producers have to compete in a shrinking market against mature incumbents (the corn ethanol industry) whose facilities are depreciated. And to add insult to injury, the same parties who have made huge investments in cellulosic biofuels (like Poet/DSM, Abengoa, DuPont and Novozymes) are also deeply invested in the first generation biofuels industry, so the faster they scale up cellulosic biofuels, the faster they lose market share at their existing facilities. The drag on investment is not just my hunch, I have heard this directly from the leaders of the companies struggling to raise money to scale up cellulosic biofuel production.

What about the reformed RFS? Don’t the requirements for advanced and cellulosic biofuels remain?

Yes, the requirements would remain on the books, but in a stagnant market for biofuels, new investments in currently expensive biofuels won’t make sense. Instead the obvious way to comply with the remaining RFS requirements will be for the US and Brazil to scale up the existing circular trade in ethanol, with the US using Brazil’s sugarcane ethanol (which qualifies as advanced biofuel), and the Brazilians using US corn ethanol, which would be squeezed out of the shrinking US market for ethanol to blend into E10 by the Brazilian imports (in Brazil, ethanol is ethanol, regardless of feedstock). Without a growing market for ethanol, this kind of counterproductive shuffling will be the lowest cost strategy to comply with the RFS, and investors in neither country will have a motivation to invest in the next generation of cleaner biofuels.

What about so called “drop-in biofuels” like renewable gasoline or diesel?  Why not just move beyond ethanol?

The key to understanding this is to recognize that the most important obstacle to scaling up low carbon biofuels over the long term is not what biofuels are made into (ethanol versus gasoline or diesel) but what they are made out of (cellulosic biomass versus starch, sugar or vegetable oil). To scale up biofuels sustainably, we need to look beyond the food based resources we are using today, and focus on sustainable sources of cellulosic biomass (described here). And the fastest way to speed up the development of all kinds of cellulosic biofuels is to build real world experience with the supply chains for cellulosic biomass and the conversion technology to make these feedstocks into intermediates like sugars, syngas or hydrocarbons. This is just starting to happen as the first cellulosic ethanol production facilities move to a commercial scale. So putting the brakes on investment in cellulosic ethanol will slow rather than speed up progress on cellulosic drop in biofuels.

The RFS was intended to cut oil use and reduce carbon emissions by supporting a steadily growing market for renewable fuel and channeling this growth toward cleaner advanced and especially cellulosic biofuels. The proposed RFS reform instead protects oil’s share of the market and directs new biofuel producers to compete against existing biofuel producers in a steadily shrinking market. This is not the right prescription to put the renewable fuels industry on the road to recovery.