The Biden administration is opening the door to a sweeping rewrite of the 17-year-old U.S. biofuel mandate, including a plan to encourage use of renewable natural gas to power electric vehicles, which could benefit Tesla and other automakers.
An Environmental Protection Agency proposal being released Thursday invites public feedback on an array of changes to the Renewable Fuel Standard, initially designed in 2005 to push more ethanol, biodiesel and other plant-based alternatives into vehicles. The proposal may spur an overhaul that could shift the program from one narrowly focused on gasoline, diesel and other liquid fuels to an initiative broadly aimed at decarbonizing transportation.
The EPA will also seek public feedback on the best way to promote next-generation low-carbon biofuels, while protecting American oil refining assets after a wave of pandemic-spurred closures and the Russian invasion of Ukraine underscored the strategic importance of these facilities.
The measure “will set the stage for further growth and development of low-carbon biofuels in the coming years,” the EPA says in its proposal. During the transition, “maintaining stable fuel supplies and refining assets will continue to be important to achieving our nation’s energy and economic goals as well as providing consistent investments in a skilled and growing workforce.”
The agency is proposing to raise the amount of biofuel that must be mixed into gasoline and diesel over the next three years to as much as 22.68 billion gallons in 2025, up from this year’s 20.87 billion gallons. Under the measure, conventional ethanol may be used to fulfill as much as 15.25 billion gallons. But that exceeds what oil refiners call the “blend wall,” or the 10% ceiling on the amount that can be blended into the most commonly available E10 gasoline.
The EPA is asking the public for feedback on whether it should actually set the conventional renewable fuel requirement below the blend wall. It also wants public comment on how the quota plan will affect the “continued viability of domestic oil refining assets,” including so-called merchant refiners with limited blending facilities that can’t easily generate compliance credits.
Refiners use those credits — “renewable identification numbers” or RINs generated with each gallon of biofuel — to prove they have fulfilled annual blending quotas.
Under a court settlement, the EPA is obligated to finalize the biofuel quotas by June 14 next year. A senior administration official said public feedback could determine the shape of the final rule, prompting the EPA to revise initially proposed blending requirements or even revisit past policy decisions tied to RIN holding thresholds, disclosure requirements and market liquidity.
The EPA would also create an eRIN credit awarded when electricity from certain renewable sources — such as natural gas harvested from landfills and at farms — is used as fuel to power EVs. Under the proposal, that credit could be divided between EV makers and generators of biogas-powered electricity.
As designed, the eRIN plan would add another incentive for automakers to produce electric vehicles, building on tax support in the just-enacted Inflation Reduction Act and other air pollution policies. But the advantage for companies such as Ford and General Motors would come at the expense of the owners and operators of charging stations and other stakeholders.
The plan is likely to set off furious lobbying as charging station operators, biogas producers and utilities vie for a bigger piece of the eRIN credit.