EPA Proposes 15.2 Billion Gallon Biofuel Mandate for 2012; 50 Percent Jump in Advanced Biofuels

by Jim Lane (Biofuels Digest) ...EPA proposes to mandate the blending of 15.2 billion gallons of renewable fuel into the US fuel supply, and increased the proposed mandate for advanced biofuels by 48 percent, to 2 billion gallons.
...The proposed 2012 overall volumes and standards are:
Biomass-based diesel (1.0 billion gallons; 0.91 percent)
Advanced biofuels (2.0 billion gallons; 1.21 percent)
Cellulosic biofuels (3.45 – 12.9 million gallons; 0.002 – 0.010 percent)
Total renewable fuels (15.2 billion gallons; 9.21 percent)
Based on analysis of market availability, EPA is proposing a 2012 cellulosic volume that is lower than the EISA target for 2012 of 500 million gallons. EPA said it will continue to evaluate the market as it works to finalize the cellulosic standard in the coming months. The agency remains optimistic that the commercial availability of cellulosic biofuel will continue to grow in the years ahead.  In addition, EPA is proposing a volume requirement of 1.28 billion gallons for biomass-based diesel for 2013.
...The EPA is essentially creating a 2 billion gallon pool of advanced biofuels, which must meet a 50 percent carbon reduction target including both indirect and direct emissions – from there, it is up to market forces to determine which fuels are most efficient to manufacture – and whether it is more effective to import or domestically manufacture fuels to meet the standard.
...As we have pointed out in the past, so long as the mandate is tuned exactly to commercial production, the industry has no pricing power based on competition. If the industry, for example, had the opportunity to divert 5 million gallons of cellulosic biofuels to the ethylene market – the oil refiners do not want to compete for the fuel by raising price. They simply want the mandate, in that fictional example, reduced by 5 million gallons.
By contrast, the EPA method gives the cellulosic producers an opportunity to get a green premium for their fuels – an opportunity to divert 5 million gallons of cellulosic biofuels to the ethylene market at, say, a 30 percent price premium to ethanol, would not relieve oil refiners of their obligations to blend low-carbon cellulosic biofuels. So, they will either have to find alternative sources (spurring higher production), or bid up the price (spurring higher margins). READ MORE (includes industry reaction) and MORE (EPA) and MORE (EPA RFS2) and MORE (Detroit News) and MORE (DomesticFuel.com) and MORE (Advanced Ethanol Council)