BIO: RFS rule continues to chill advanced biofuel investment

By Erin Voegele | June 22, 2016

The Biotechnology Innovation Organization has released an analysis that finds the U.S. EPA’s new methodology for setting annual renewable fuel standard (RFS) volumes is continuing to chill investment in advanced biofuels. According to BIO, investment patterns show EPA is sending sustained market signals that disincentivize advanced biofuels, resulting in a $22.4 shortfall in necessary investment.

According to the analysis, EPA’s rules attempt to force conventional and advanced biofuel producers to compete for limited shares of the transportation fuel market, which discourages investment in new technology. The report also states that the EPA has shifted the responsibility and costs of building biofuel distribution infrastructure to biofuel developers, delaying investments in added advanced capacity. “Moreover, EPA is using past production figures to project future market space for renewable fuels, a method proposed by the oil refining industry specifically to slow growth in renewable fuel production,” said BIO in the report.

“Many advanced biofuel developers also invest in conventional biofuels or intend to collocate production with or license technology to conventional biofuels producers, strategies that create economies of scale in feedstock and production infrastructure,” BIO continued in the report. “EPA’s new methodology forces these developers to choose between protecting sunk capital in conventional biofuel and risking new capital in advanced. Data on investment in the biofuel sector bears out that EPA’s methodology has forced producers to consolidate investment in conventional biofuel production capacity and distribution infrastructure, while sacrificing investment in advanced.”

According to BIO, the EPA can correct course in its 2017 RFS rule by reversing its arbitrary use of the general waiver authority to reduce overall volumes, raising advanced biofuel volumes sufficiently to obviate competition among biofuel developers, and ensuring the U.S. transportation fuel market is open to every gallon of renewable fuel that can be produced, up to the statutory volumes.

“EPA recognizes that its delays in rulemaking from 2013 to 2015 undercut investment in advanced biofuels. The agency fails to recognize, however, that its methodology—including in the newly proposed 2017 rule—also undercuts investment in advanced biofuels,” said Brent Erickson, executive vice president of BIO’s Industrial and Environmental Section. “Data on investment in the biofuel sector bears out that EPA’s methodology has forced producers to consolidate investment in conventional biofuel production capacity and distribution infrastructure, while sacrificing investment in advanced.”

“Following yet another year of policy instability, BIO now estimates that EPA’s rulemaking delays, unwarranted expansion of its waiver authorities, and methodology for setting annual RVOs has caused a $22.4 billion shortfall in investment in advanced biofuels,” Erickson said. “EPA is sending a sustained market signal that disincentivizes and discourages advanced biofuel producers, who have reached a stage where investment in proven technologies and processes could rapidly expand availability of cleaner, low-carbon transportation fuels.”

“EPA can correct course in the 2017 rule by reversing its use of the general waiver authority to reduce overall volumes, raising advanced biofuel volumes sufficiently to obviate competition among biofuel developers, and ensuring that the U.S. transportation fuel market is open to every gallon of renewable fuel that can be produced,” Erickson continued.

A full copy of the report can be downloaded from BIO’s website