Because the US Environmental Protection Agency has received few accolades in this space since, oh, the beginning of Barack Obama's presidency, the chance to cheer something emanating from that energetic realm is welcome. The EPA deserves applause for proposing to lower next year's volumetric sales requirements under the Renewable Fuel Standard. Let elation begin.
Now let elation cease. The agency has simply accommodated its action to market realities clear to nearly everyone. While this is progress, for an important federal agency it should be standard operating procedure, not a reason to celebrate.
The proposal
The EPA proposes to require sales of 15.21 billion gal of renewable fuel in 2014, all in ethanol-equivalent volumes except for 1.28 billion actual gal of biomass-based diesel. That's down from the total of 16.55 billion gal required this year. The decrease acknowledges that the US gasoline market can absorb no more ethanol at the standard blending concentration of 10 vol %. It also underscores the error Congress made when it set the statutory mandate for 2014 at 18.15 billion gal. And it has dollars-and-cents consequences for refiners and others obliged to sell renewable fuel. They must buy credits to cover shortfalls against individual requirements.
This injustice alone is a powerful reason for the EPA to lower RFS volumes. It's compounded by a mandate for sales of cellulosic biofuel exceeding amounts commercially available, deficiencies against which also must be compensated by the purchase of credits. For cellulosic biofuel, EPA optimistically set the 2014 target at 17 million gal in a range of 8-30 million gal. Even the low end of that range probably will exceed supply. Following a pattern, this year's supply of cellulosic biofuel will fall short of the EPA-mandated level of 6 million gal. Still, EPA approximates the market better than Congress did in 2007 when it set requirements for cellulosic biofuels at 1 billion gal in 2013 and 1.75 billion gal in 2014.
For other reasons, the decision to lower the renewable-fuel requirement had to be easy for EPA to make. Lawsuits pending and threatened challenge various aspects of the agency's RFS implementation. Now, moreover, the program has political support only from farm-state lawmakers and the biofuel lobby. Ethanol from grain, holder of the commanding share of biofuel supply, has wrecked the credibility of renewable transport fuel in general. It legitimately receives blame for raising prices of corn and other food. It has strained water supply because of the irrigation needs of expanded corn agriculture. And in other ways it has proven not to provide the environmental benefits promised when lawmakers were setting mandates. Major environmental groups, in fact, oppose fuel ethanol.
Outburst of rationality
EPA's outburst of rationality over the RFS program, compromised as it is by yet another target for cellulosic material that aims too high, therefore should surprise no one. Still, nothing has changed at EPA. The agency remains enchanted by environmental pressure groups and ever eager to do their bidding. Real, constructive change at EPA would be signaled by withdrawal of environmentally unnecessary Tier 3 gasoline regulations governing sulfur content and by suspension of plans to regulate greenhouse gas emissions from refineries. But those changes would make the environmental groups howl and therefore are not in prospect. Given those groups' loss of enthusiasm for ethanol, the question arises why EPA took so long to begin injecting realism into RFS regulation.
It's time now for Congress to get real. Lawmakers should acknowledge that the RFS program is an intrusive, bipartisan mistake rooted in the rich compost of political favoritism and dead-wrong assumptions. Alas, repeal probably is too much to ask. But adjustment of RFS targets to practicalities of the market should be feasible. If EPA can show it's able to connect, however reluctantly, however infrequently, with a world in which real people drive and spend real money to buy real fuel for real cars and trucks, Congress ought to want to do so, too.