Finding Pathways for Biofuels Advocates Say State Low-Carbon Fuel Policies Could Drive More Ethanol Demand

by Chris Clayton (DTN The Progressive Farmer) Just a few blocks from the commotion and crowds at the Global Climate Action Summit, biofuel advocates gathered Thursday to champion more low-carbon fuel standards that could take the country's biofuels industry in new directions.

While the climate summit focused on all the various ways states, cities and businesses can commit to reducing greenhouse-gas emissions, the "Driving Decarbonization" event highlighted how biofuel demand can grow if more states adopt low-carbon fuel standards.

"The thought leadership is moving in that direction here, and we've been hearing from particular organizations and people involved with the Governors' Biofuels Coalition that there are active discussions going on," said Graham Noyes, executive director of the Low Carbon Fuels Coalition. "People are seeing how valuable California's LCFS (low-carbon fuels standard) is. Midwest producers are asking that same question, 'Why don't we have this here?,' and they are seeing the unfortunate instability in the RFS program and realizing that having a backup or supplemental program is a very good thing to have in times like now."

Trying to boost demand through federal policy, traditional ethanol groups launched a Twitter campaign Friday directed at President Donald Trump, EPA Acting Administrator Andrew Wheeler and Agriculture Secretary Sonny Perdue with hashtags, including #IWantMyE15 and #RFSWorks. Ethanol groups are continuing the push to get EPA to commit to year-round E15 sales. The annual summer restrictions on E15 end on Saturday.

Gerard Ostheimer, a senior adviser for the group below50, said one of the issues with the RFS is its "static nature." The RFS does not reward ethanol companies for reducing the carbon intensity of their production, which is why so many Midwest ethanol companies work to export their product to California.

"The carbon intensity of ethanol for a number of plants has been coming way down, but the way the RFS is currently structured, that never gets scored and they will never get a reward for that," Ostheimer said.

Noyes noted California has become a leader in selling products such as E85, which has seen volumes triple in the state. "What's happened is the economics work," Noyes said. "You've got RFS, plus the LCFS and E85 typically selling at an 80-cent-a-gallon discount. So it's the best place in the world to sell E85, and people are switching to it for economic reasons and we're seeing 25% to 30% year-on-year growth every year."

California service stations and convenience stores are adding 25 new flex-fuel stations every year, and the state can now consume roughly 1 billion gallons of E85. "The LCFS is driving that, and it can do the same for mid-level blends and E85 blends in the Midwest," Noyes said.

Low-carbon fuel standards also have the support of health groups such as the American Lung Association. The group in California calculates long-term health benefits of low-carbon fuel standards in the state at $8.3 billion in avoided health impacts by 2025. That translates into reducing asthma attacks by more than 38,000 and avoiding more than 74,000 lost workdays to health issues. The American Lung Association wants to see more states embrace such standards.

Yet, more California startups are also trying to stem the tide of Midwest ethanol to keep California fuel dollars in the state. Companies are working on converting solid waste to biofuels, and at least one company is in the development stage for a sugar-cane ethanol plant. That facility, though, would need farmers in California's Imperial Valley to convert at least 50,000 acres to sugar-cane production to sustain the operation.

"I think the Midwest is uniquely situated to have a regional LCFS, which is something we have not been able to have before," said Batchelor (Stephanie Batchelor, a director for Biotechnology Innovation Organization). READ MORE