Major Study Says “Cut Cellulosic Ethanol out”, RFA Says “No Way Jose”

by Helena Tavares Kennedy (Biofuels Digest) In Iowa, a new tractable multi-market model study finds that the RFS has substantially benefited the U.S. economy by lowering gasoline, crude oil prices, and crude oil imports, while increasing prices and benefits for corn and soy farmers and reducing U.S. greenhouse gas emissions.

Those in the cellulosic ethanol and biodiesel industries, like the Renewable Fuels Association and National Biodiesel Board, are picking their chins up off the floor and asking “say what?” to those chopping block recommendations.

Predicting the future is not easy, and while using history, data, market conditions, and pricing helps, the Digest, as well as the RFA and NBB, just don’t have 100% confidence in the 2022 predictions and recommendations that the study offers. As we’ve learned in the recent past, so many unexpected things can happen with markets, politics, and more, yet the study recommends totally obliterating cellulosic ethanol, decreasing biodiesel and only increasing corn-based ethanol. Really? Really.

The Digest caught up with Renewable Fuels Association VP Geoff Cooper who said, “The real value of this study is its 2015 results because it compares what actually happened in the real world with the RFS to a “counterfactual” scenario where the RFS didn’t exist.”

So what about the study’s recommendations for 2022? Cooper told the Digest, “The 2022 results are much less relevant and we don’t put much stock in them because both the “baseline” (with RFS) and no-RFS case are totally assumption-driven. They include some fairly pessimistic assumptions regarding the future development and economics of cellulosic and advanced biofuels between now and 2022, and there is too much uncertainty around those assumptions to put much stock in the 2022 numbers.”

They assume that biodiesel is coming mostly from soybeans and “Because biodiesel biases demand of soybean products, the RFS increases soybean oil price by 49% whereas soybean meal price actually declines (by 3.6%).”

As we all know, biodiesel uses a variety of feedstocks like tallow, used cooking oil, vegetable oils and more, but the study assumed that 71% of biodiesel in 2015 was coming from vegetable oils with soybean oil the most widely used. The study then assumed that further expansions of biodiesel production would have to rely on redirecting vegetable oils from other uses and assumes much of it would come from virgin soy oil, but that isn’t necessarily the case.

For their 2022 forecast, the study predicts that biodiesel prices go up by $0.83 per gallon compared to only $0.05 per gallon price increase for ethanol, leading the researchers to say that “biodiesel produced from vegetable oil turns out to be a costly way to increase biofuel supply.” However, the study didn’t consider how RIN values have helped, and could further help, with competitive consumer pricing.

The Digest caught up with Jessica Robinson, Director of Communications for the National Biodiesel Board who agreed something seems amiss in the study’s slamming of biodiesel. Robinson told the Digest, “Countless environmental studies show biodiesel significantly reduces greenhouse gas emissions compared to petroleum diesel, and economic studies show positive impacts on rural communities and U.S. markets, due in part to the diversity of the feedstocks we can utilize. Though the study reinforces crop and livestock producers have benefited from biodiesel production, several assumptions miss the mark.”

Cooper also points out that “the study appears to have neglected the likely effects of the Paris agreement” and that “the study’s GHG emissions are based on very conservative assumptions…they assume a 21% reduction for corn ethanol, when the latest study from Argonne says 35% and the latest from USDA says 43%.”

Apparently, the use of more biofuels does reduce U.S. carbon emissions by about 29 million tCO2e – hip, hip, hooray! However, the study said it is offset by increased worldwide emissions caused by the RFS based on lower crude oil prices which would increase the consumption of crude oil elsewhere in the world. Say what?!

Gasoline consumers (that’s pretty much all of us, folks) made out pretty well with the RFS too. The study found that the RFS caused crude oil price to decline by 1.4% and gasoline prices to decline by 9.5% in 2015. Even better, the RFS helped create a small contraction domestic crude oil production and a larger decline in imports of crude oil of about 6%, meaning we rely less on oil from overseas improving our country’s energy security. READ MORE Download study