In June 2014, the Congressional Budget Office (CBO) published an analysis<\/a> of the feasibility and economic implications of achieving future annual renewable fuel mandate volumes1<\/sup> for the federal Renewable Fuels Standard (RFS). Here in Regulation City, refining industry advocates praised the CBO analysis; ethanol industry advocates trashed it<\/a>. Elsewhere, the report attracted little attention. That’s too bad, because the CBO has made an important contribution to the debate over the RFS.<\/p>\n The CBO report (1) lays out the amount by which supplies of the various RFS renewable fuel categories would have to increase to meet the RFS mandate volumes for 2017, (2) assesses the technical feasibility of producing these volumes, and (3) estimates the effects on renewable identification number (RIN) prices, gasoline and diesel fuel prices, food prices, and CO2 emissions. The analysis covers three assumed RFS regulatory scenarios:<\/p>\n Of these, the CBO deemed 2014 Volumes<\/em> the most likely.<\/p>\n Table 1 shows the mandate volumes specified by the CBO for each scenario.2<\/sup><\/p>\n Table 1<\/strong><\/p>\n EISA Volumes<\/em> requires fuel suppliers to use about 9 billion gallons per year (bgy) more renewable fuel in 2017 than 2014 Volumes<\/em> and about 11 bgy more than RFS Repeal<\/em>.<\/p>\n The headline finding of CBO’s analysis is that EISA Volumes<\/em> poses “significant challenges.”<\/p>\n CBO notes that the supply of cellulosic biofuel (i.e., cellulosic ethanol) has been negligible (less than 0.01 bgy) since the inception of the RFS, and (according to projections by the U.S. Energy Information Administration and others) will continue falling far short of the mandate volumes through 2022 and beyond. Biomass-based diesel and other advanced biofuels (e.g., sugar cane ethanol imported from Brazil) cannot offset this shortfall, for both economic and statutory reasons.<\/p>\n At the same time, the existence of the E10 blend wall, coupled with the projected decline in U.S. gasoline consumption, means that achieving the renewable fuel mandate volumes would entail increased production and use of some combination of E85, biomass-based diesel, and “drop-in” cellulosic biofuels.3<\/sup><\/p>\n CBO concludes that full compliance with the 2017 EISA volume mandates would require both:<\/p>\n Using reasonable economic assumptions, CBO concludes that attaining the EISA 2017 mandate volumes – if that were feasible – would have significant effects on retail fuel prices. CBO estimates that (all else equal) attaining the EISA mandate volumes would cause:<\/p>\n These estimated fuel price effects follow from the CBO’s estimates of the RIN prices that would result from attaining the EISA 2017 mandate volumes:<\/p>\n The RFS program still seems to enjoy Congressional support, leaving EPA with the task of reconciling ever-increasing mandate volumes with the hard constraints that restrict renewable fuel production usage. EPA’s struggles are such that it has yet to issue its final rules governing RFS volume obligations for 2014, let alone for 2015 (both are now overdue). EPA now promises to issue its final rules covering 2014, 2015 and 2016 volume obligations in late 2015. Perhaps they will. But sooner or later, facts and numbers will force Congress to revisit the RFS program.<\/p>\n The CBO’s findings are important contributions to that RFS debate – not because they are novel (other analyses have yielded similar findings) or because reaching them requires any deep methodology (just arithmetic based on subject-area knowledge is all that’s required.) They are important because they come from the CBO, a non-partisan and competent source of objective information and analysis.5<\/sup><\/p>\n 1<\/sup>These mandates were established in the Energy Independence and Security Act of 2007 (EISA). The mandate volumes apply to renewable fuels, advanced biofuels, biomass-based diesel, and cellulosic ethanol, and increase annually out to 2022.<\/span><\/p>\n\n
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