What is a Renewable Fuel Standard?
A Renewable Fuel Standard (RFS) requires a certain percentage of transportation fuels sold to contain a minimum blend of domestically produced renewable fuels (e.g., ethanol, biodiesel, and cellulosic biofuels) with the primary objective of reducing oil imports. However, depending on how it is designed, an RFS can reduce the lifecycle carbon emissions intensity of vehicle fuels. Nearly all transportation sector emissions now come from the combustion of petroleum. Switching to lower-carbon content fuel is one way to help reduce emissions from the transportation sector. The life-cycle carbon intensity of renewable fuels depends on a variety of factors, including characteristics of the biomass feedstock, the process utilized in converting that feedstock into a fuel, and the combustion of that fuel in a vehicle.
How does a Renewable Fuel Standard work?
An RFS places an obligation on a fuel supplier to supply a specified amount of renewable fuel to the market. That obligation can be met by blending an amount of qualifying renewable fuels with gasoline or by obtaining tradable credits from another party. The standard offers suppliers a guaranteed market for their products, thus accelerating the penetration of renewable fuels. An RFS can drive innovation in renewable fuel production to the extent that the implementing agency provides timely approval of new innovative fuels.
The intent of an RFS isn’t necessarily to reduce emissions but to grow the use of domestic biofuels to enhance fuel security. However, an RFS could take emissions reductions into account by requiring renewable fuels to be low carbon on a lifecycle basis compared to gasoline.
Key Design Considerations
How should the policy treat different types of biofuels? Should biofuels be explicitly defined and categorized in statute or should a regulatory agency be given authority to determine eligibility?
What volume of transportation fuels must include renewable fuels and by what date must these requirements be met? Should different categories of renewable fuel have different targets and timeline requirements? Should these volumetric targets be established by statute or determined by a regulating agency? Should a regulatory agency have the authority to adjust statutory targets based on market conditions?
Who will be required to demonstrate compliance under the policy?
Should RFS compliance credits be tradable with other entities? Could covered entities over-comply and generate credits? Should credits be allowed to be carried over and used to demonstrate compliance in future years?
What is the methodology for calculating GHG emissions in the lifecycle of the fuel? How are the boundaries of the GHG lifecycle defined (e.g., are land use changes from growing biomass to produce biofuels included, and if so, how)?
How does the RFS interact with other state and national policies to reduce GHG emissions in the transportation sector?
U.S. experience with Renewable Fuel Standards
The federal U.S. Renewable Fuel Standard was created by the Energy Policy Act of 2005 and was later expanded under the Energy Independence and Security Act of 2007. Refiners and fuel importers have annual renewable volume obligations under the U.S. RFS, with compliance achieved by submitting credits for each gallon, called Renewable Identification Numbers (RINs).
The original and primary objective of the RFS was displacing oil and thereby reducing oil imports. The amended RFS increased annual volumetric targets and includes requirements that the four renewable fuel categories (e.g., conventional biofuel, advanced biofuel, cellulosic biofuel, and biodiesel) be increasingly low-carbon on a lifecycle basis compared to petroleum-based fuels. It also requires new renewable fuel producers – those that commenced construction after the RFS was enacted – to achieve a 20 percent lifecycle GHG reduction compared to the average lifecycle GHG emissions for gasoline or diesel fuel.
The U.S. Environmental Protection Agency (EPA) administers the RFS and determines whether a fuel qualifies under the program by assessing the lifecycle emissions of its “pathway” — how its biomass feedstock is grown and processed into fuel.
The EPA currently has the authority to adjust renewable fuel volumes below the statutory requirements, but may not exceed the current statutory targets. EPA has used its authority multiple times to adjust renewable fuel volumes downward. For example, the 2020 targets for total renewable fuel and for total advanced biofuels were adjusted about 33 percent and about 66 percent below their respective statutory targets. EPA does, however, have the authority to set new volume targets after 2022 but must justify that increase using an analysis of the environmental impact from production and use of renewable fuels, the impact of renewable fuels on U.S. energy security, and the expected future production of renewable fuels.
Since 2014, the total renewable fuel statutory target has not been met, primarily due to a shortfall in production of cellulosic biofuels. It is unlikely that the United States will meet the 2022 statutory total fuels target. A number of factors have contributed to the failure to meet the statutory targets, including a lack of private investment capital, technology setbacks, and delays in EPA approving new fuels for compliance.
- C2ES Decarbonizing U.S. Transportation
- C2ES Policy Options for Reducing GHG Emissions from Transportation Fuels
- C2ES Policies to Reduce Emissions from the Transportation Sector
- CBO The Renewable Fuel Standard: Issues for 2014 and Beyond
- EPA Renewable Fuel Standard
- DOE Alternative Fuels Data Center: Renewable Fuel Standard Program
- EIA The Renewable Fuel Standard Program, RVOs, and RINs explained
- ICCT Renewable Fuel Standard