US EPA Recommends Delaying Electric Vehicles Biofuel Program -Sources

May 24, 2023

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by Jarrett Renshaw and Stephanie Kelly (Reuters)The U.S. Environmental Protection Agency has recommended delaying a scheme that would give electric vehicle (EV) manufacturers tradable credits under a federal biofuel program, in a final rule that the White House will now review, two sources familiar with the matter said.

The plan would have given EV automakers, such as Tesla (TSLA.O), credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or land fills. Reuters first reported in early May that the EPA was considering the delay over concerns the plan could trigger lawsuits.

The EPA proposed last year the inclusion of EVs into the nation's Renewable Fuel Standard (RFS) program, a major rehaul of an often contentious law that mandates the amount of biofuels oil refiners must blend into the nation's fuel mix.

The EV industry had expected the new scheme to be finalized under a June 14 deadline, along with final biofuel blending obligations for the years 2023-2025. The delay, however, now throws the EV scheme into political limbo.

The November proposal foresaw EV manufacturers could generate as many as 600 million credits in 2024 and 1.2 billion of them by 2025. Prices for an equivalent cellulosic biofuels (D3) credit have traded at $2.14 each on Tuesday, traders said.

D3 credit prices have risen from around $1.94 each after Reuters first reported on May 1 that the EPA was considering a delay in the EV program, traders said.

That suggests market participants were concerned about potential oversupply of EV credits in the credit pool if the scheme was finalized, said Josh Price, an energy analyst at Capstone LLC, a Washington, D.C.-based firm that advises investors and companies on public policy.

The Biden administration is still hopeful it will pass a final rule on the EV program before the end of the year, even if it is uncoupled from the annual blending mandates, the two sources told Reuters.

President Joe Biden has promised to boost the electric vehicle industry in an effort to reduce carbon emissions and fight climate change. The credits would have added to billions of dollars of incentives under the Inflation Reduction Act to accelerate the energy transition.

The EPA did not comment on the delay, but told Reuters it is currently considering comments on the proposed rule and working to finalize a rule by the June deadline. The agency sent the proposed final rule to the White House for review last week.

Most credits generated under the RFS are for blending liquid fuels such as corn-based ethanol into gasoline. Adding credits for power generated from renewable gas and then used for charging EVs would take the program in a new direction.

Delaying the EV provision, however, would inject uncertainty into ongoing credit negotiations between automakers, biogas and renewable natural gas producers, and marketers, Price said.

The delay in finalizing the EV credit program may also mean more volume is available for other renewable fuel pools under the 2023-2025 mandate, including blending for renewable diesel and sustainable aviation fuel (SAF). READ MORE

EPA might skip using biofuel program as EV incentive: An environmental group cheered after news reports suggested EPA is backing away, at least for now, from using the renewable fuel standard to spur electric vehicle development. (Politico Pr/E&E News)

Clean Fuels advocates for higher biomass-based diesel RVOs (Biodiesel Magazine)

US EPA to remove proposed EV volumes from biofuel blending rule - sources (Reuters)

Tesla Loses Potential $2 Billion Profit Because Farmers Are a Bigger Deal (Barrons)

US EPA to remove proposed EV volumes from biofuel blending rule (Economic Times Auto)

Renewable Fuel Standard Revision Will Undermine Midwest Biofuels (RealClearEnergy)

Draft Regulatory Impact Analysis: RFS Standards for 2023-2025 and Other Changes (U.S. Environmental Protection Agency)

U.S. EPA expected to remove proposed EV volumes from biofuel blending rule - sources -- A final rule is set to be released later this month after review by the White House. (AgWeek/Reuters)

Excerpt from RealClearEnergy: Across the country, a slew of state regulatory proposals seek to mandate the sale of electric vehicles. Never mind if you don’t want one—by 2035, you’ll struggle to find a new gas or diesel car to buy since regulations could outlaw them in a fifth of all states—with Maryland, New Jersey, and Delaware most recently joining the gang of California, Washington, Oregon, Virginia, Vermont, New York, New Jersey, Connecticut, Massachusetts, and Maine.

While state environmental boards (these regulations are mostly bypassing state legislatures) are blindly following California’s utopian vision of banning reliable gas cars in favor of expensive EVs, what’s happening on the federal level through President Biden’s Environmental Protection Agency (EPA) is equally egregious.

Like California, EPA is now openly discussing banning sales of most gasoline and diesel vehicles in the United States in fewer than ten years. But even before that, EPA has been stealthily working to electrify even the most sacred Midwest biofuel policy, the Renewable Fuel Standard (RFS).

In June, EPA will need to finalize its RFS “set” proposal establishing how much renewable fuel the United States will need to consume as a percentage of gasoline and diesel over the next two years. We’ll also find out next month whether EPA is going to move forward with inserting a massive electric vehicle provision into the RFS that essentially will be a cash influx straight to electric vehicle manufacturers like Ford, GM, and Tesla.

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By 2024, EPA would have EV manufacturers join those RIN-generating ranks as sellers of “eRINs,” potentially taking market share away from American biofuel producers. I don’t know of a single EV that runs on ethanol much less any EV maker that plays any part in producing biofuels. This is a wild departure from Congress’s original RFS intent.

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EPA estimates that eRINs could generate billions of dollars every year for massive U.S. automakers. READ MORE

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Renewable Natural Gas (RNG) EPA (Environmental Protection Agency) Electric Car/Electric Vehicle (EV) Battery Electric Vehicles (BEV) methane/biomethane Renewable Fuel Standard (RFS and RFS2) Regulations-Federal D-3 (cellulosic) RINs RINs (Renewable Identification Numbers) renewable volume obligation (RVO) Office of Management and Budget (OMB) White House Renewable Diesel/Green Diesel/HVO/Paraffinic Diesel Aviation Fuel/Sustainable Aviation Fuel (SAF) Jetfuel (Sustainable Aviation Fuel (SAF)) environmental policy Transportation Fuels Policy eRINs/electric pathway internal combustion engine (ICE)/gasoline engine ban Maryland New Jersey Delaware California Washington Oregon Virginia Vermont New York Connecticut Massachusetts Maine

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