Ethanol Looks beyond Trump-Biden Bluster to Biofuel Reset

by Kim Chipman and Jennifer A Dlouhy (Bloomberg Green) Presidential, Iowa Senate races put biofuel in spotlight; Renewable Fuel Standard uncertainty clouds ethanol outlook -- ... The winner will oversee a “reset” of the congressional mandate to blend biofuels with gasoline. This new phase of the Renewable Fuel Standard, created in 2005 to curb oil consumption and greenhouse gases, could determine ethanol’s role alongside oil in a low-carbon energy economy.

“The RFS is at a critical point,” said Neelesh Nerurkar, a ClearView Energy Partners analyst and former energy adviser to the Obama administration. “Whoever is in power and making the rules two years from now matters a lot.”

Unless lawmakers come up with new policy, the Environmental Protection Agency will begin calling the shots on yearly biofuel-gasoline blend quotas in 2023. The law outlines annual targets only through 2022.

The RFS, which will fall far short of its original goal of requiring 36 billion gallons of biofuels blended with gasoline in 2022, has taken on an almost mythic quality as an economic engine for Iowa and other Midwest states that produce corn, soybeans and the renewable fuels made from them.

‘Peak Ethanol’?

Yet the law’s benefits increasingly flow away from the Heartland, as refineries nationwide are converted to renewable diesel plants and some oil companies get in the business of selling biogas harvested at landfills and wastewater-treatment facilities. And even as they battle Big Oil for share of a shrinking gasoline market, biofuels producers also face the threat of electric vehicles eating into fuel demand.

Former Iowa Governor Tom Vilsack, who served as Obama’s agriculture secretary, says worrying about electric cars filling up the highways anytime soon is not realistic.

“We’re talking about generations that will pass before we have a vehicle fleet that is even remotely close to being all electric,” Vilsack said in an interview, adding that he sees opportunity to expand ethanol to ships and planes.

Biden has touted “advanced” biofuels on the campaign trail, a phrasing that feeds fears his focus is on next-generation alternatives that are still being developed, rather than traditional corn starch-based ethanol.

How aggressively Biden might get behind a call for a national low-carbon fuel standard is also a question.

A push in Congress for a low-carbon fuel policy is likely if Democrats win back control of the U.S. Senate. Some Democrats want to use the RFS reset as a chance to replace explicit biofuel-usage targets with a broader low-carbon fuel standard, using California as a guide. The state’s program brings together renewable fuel and electricity stakeholders in its goal to reduce vehicle emissions 20% by 2030.

“If one is truly technology- and feedstock-neutral and doesn’t favor one technology or vehicle system over another, we feel very good about ethanol’s ability to compete in that sort of policy framework,” Renewable Fuels Association President Geoff Cooper said in an interview.

Trump in Des Moines, Iowa, earlier this month ribbed the crowd about never returning to Iowa if he doesn’t win its six electoral votes November 3.

While he appeared to be joking, Trump said out loud what some have been silently wondering.

“There are a lot of people in our industry that are concerned about what would happen after the election if Trump is re-elected and he doesn’t have to campaign in Iowa again,” Iowa Renewable Fuels Association Executive Director Monte Shaw said.

Regardless of who wins next week, the industry will continue to have “bipartisan champions” as well as “detractors from the far fringes of both parties,” Shaw said.

“No matter which party is in charge of the House, Senate, or White House, we have our work cut out for us.” READ MORE