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1 1 (June 19, 2015)

handle is hein.crs/govcbyv0001 and id is 1 raw text is: 01;0i E.$~ & Updated June 19, 2015 The Renewable Fuel Standard (RFS): Compliance and Penalties The Renewable Fuel Standard (RFS) requires that renewable fuel be blended into the nation's transportation fuel supply. However, it does not explicitly require the production of biofuels. The mandate-based on volume (in billions of gallons)-increases annually from 9.0 billion gallons in 2008 to 36.0 billion gallons in 2022 (see Figure 1). Within the overall RFS mandate, there is a smaller mandate to use advanced biofuels, which include fuels other than cornstarch ethanol that meet greenhouse gas emission reduction requirements relative to gasoline. Two subcategories of the advanced biofuel category specifically identified in the Energy Independence and Security Act (EISA; P.L. 110-140) are cellulosic biofuels and biomass- based diesel. The advanced biofuel category also includes other fuels, such as biogas and butanol. Outside of the advanced biofuel requirement, the remainder of the RFS generally is met using ethanol produced from cornstarch. Responsibility for administering the RFS lies with the U.S. Environmental Protection Agency (EPA). The agency approves fuels that are eligible for the RFS, establishes annual standards for the various categories given certain conditions (i.e., reducing the volume amounts set in statute), and ensures industry compliance, among other things. Figure I. Renewable Fuel Standard (RFS) Mandate (in billions of gallons) 40 3 0 ........ ... .. . .... .... ...:::::: ... ..... ... . .... . ..... ... ..... .... . ..... .... . ... . .:.:.:. .:.:.:.: :.:.:.:. .:.:.:. .:.:.:.: :.:.:.: ...... ..... .... . .... . ..... .... . ... . 2 o ......~~~ ~~ ~ ~~~~... ....:::::: ....:::: ....:::: ....i:i: ....:::: ...:i: i::i:: i::i: N N rN N N N ~~N N r- N kCap on Co,- Starch Et~a om i Total Ad, va -,ced B'cfs Source: Energy Independence and Security Act (EISA; P.L. 110-140), §202. Notes: Volume requirements for years following 2022 are to be determined by the Environmental Protection Agency (EPA) in future rulemaling. Annual RFS compliance is accounted for using an EPA credit system that tracks the movement of renewable fuel from production (or importation) to the blending stage. The foundation of the system is the credit the Renewable Identification Number (RIN) assigned to each gallon of renewable fuel. Every year, EPA sets the annual standard, in volume and in percentage, for the various renewable fuel categories. For instance, EPA set the 2013 cellulosic biofuel standard at 810,185 ethanol-equivalent gallons and calculated the percentage standard to be 0.0005% of total U.S. transportation fuel use. The obligated parties-those that refine or import gasoline or diesel fuel-must submit credits to EPA indicating they have met their annual renewable volume obligation to confirm RFS compliance. This annual obligation is calculated by multiplying the annual percentage standard announced by EPA by the total gasoline and diesel sales of the obligated party. D.x'oe, N<o Exi, k,' Compliance necessitates that renewable fuels be supplied at the levels specified in the annual standard. To date, compliance has not been an issue for the overall mandate (it is largely met using cornstarch ethanol). However, insufficient supplies of cellulosic biofuel have obligated EPA to lower the cellulosic portion of the RFS each year. Conventional biofuel, which constituted approximately 83% of the RFS for 2013 (13.8 billion gallons), is being produced at levels needed to meet the annual standards. In addition, biomass-based diesel-which constituted close to 8% of the RFS for 2013 (1.28 billion gallons)-has been produced at the levels needed to meet the annual standards. Cellulosic biofuels would have constituted nearly 6% of the RFS for 2013 (1 billion gallons) under the schedule in the statute. Congress gave EPA authority to reduce or waive the cellulosic biofuel mandate under certain conditions, mainly if EPA concludes there will be insufficient supply to meet the level set in statute. EPA reduced the cellulosic biofuel standard for four consecutive years starting in 2010 and proposes to do so again for 2014, 2015, and 2016 (see Table 1). If EPA reduces the cellulosic biofuel mandate, statute requires it to set the new required volume by November 30 of the preceding year, and it must issue cellulosic biofuel waiver credits for obligated parties to purchase for that compliance year. The per-gallon waiver credits provided by EPA must equal the reduced cellulosic biofuel volume requirement set for that year. Obligated parties can use only the waiver credits to meet their cellulosic biofuel annual obligation. The cellulosic biofuel waiver credit price (set in statute) has decreased over time from $1.56 per credit in 2010 to $0.42 per credit in 2013. A legal challenge of EPA's methodology for estimating actual cellulosic biofuel production volumes led to the 2012 standard being vacated by the court and EPA proposing to .O 'T rq\\ - , gn'a', ggmm 'S a X 11LULANJILiN,

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