On Friday, Sept 14, the U.S. Environmental Protection Agency announced a biomass-based diesel volume requirement of 1.28 billion gallons in 2013, an increase from 1 billion gallons in 2012. The Energy Independence and Security Act of 2007 (EISA) required EPA to mandate certain volumes of biomass-based diesel through 2012 and to determine “applicable volumes” from 2013-2022. A volume of 1.28 billion gallons was determined based on an assessment of biodiesel feedstock availability. EPA initially proposed this 2013 requirement in July, 2011 in a Notice of Proposed Rulemaking (NPRM) and had planned to finalize this along with the release of the 2012 advanced and cellulosic requirements on Jan 9, 2012, but could not do so due to the volume of comments from stakeholders. This final rule addresses many of those comments and provides further information and analysis to the RFS2. However, it does not finalize the percentage standards, which determine the required composition of fuel for blenders, which will be done in a separate NPRM.
A number of comments opposed the volume requirement of 1.28 billion gallons, citing insufficient capacity of the biodiesel industry to meet the target. However, EPA pointed out that as of February, 2012, the total production capacity of the industry exceeded 2.5 billion gallons, and that actual 2011 production was 1.07 billion gallons, more than the 1 billion gallons required in that year. EPA also believes that the demand for biomass-based diesel will be high enough – one reason is that EPA has decreased the required volume of cellulosic fuels but not that of advanced fuels. Both cellulosic fuel and biomass-based diesel can satisfy the advanced requirement, but corn ethanol, classified as a ‘renewable fuel’, cannot. With an expected demand of biomass-based diesel in excess of 1 billion gallons, EPA wishes to provide market certainty to farmers and producers.
In response to concerns about the economic impacts of an increase in U.S. biodiesel production, EPA conducted an analysis assuming that the entire 280 million gallon increase would come from soy oil. They found that this increase would result in soy oil prices rising from 42¢ per gallon to 45¢ per gallon and also lead to a decrease in exports of soy oil. While EPA did not conduct an analysis of the environmental impacts of this biodiesel increase specifically, they refer to the expected greenhouse gas (GHG) reduction benefits reported in the Renewable Fuels Standard (RFS2) final rule. The RFS2 final rule was accompanied a comprehensive environmental impact analysisdetermining that, in 2022, soy oil biodiesel will result in a 57% reduction in GHGs compared to fossil diesel. This analysis found that soy oil biodiesel would cause an increase in international indirect land use change (iLUC) emissions of 43 kgCO2 per mmBTU of biodiesel (fossil diesel releases 97 kgCO2/mmBTU for comparison), but would actually decrease domestic iLUC emissions by 9 kgCO2/mmBTU. The impact analysis also predicted that indirect effects to domestic agriculture would save 10 kgCO2/mmBTU; this savings appears to come predominantly from a reduction in methane-intensive U.S. rice farming due to higher cropland prices.