- In 2007, Congress passed a law requiring the US to use more and more ethanol and other biofuels in vehicles each year.
- This is known as the Renewable Fuel Standard.
- In recent years, gasoline refiners and biofuels producers have been bickering over how much ethanol American cars can safely handle, with refiners saying they can't take any more.
- In response, the EPA is now proposing to reduce its biofuels quotas for 2014, 2015, and 2016. Refiners will have to use significantly less ethanol than the original law required — though the amount will still keep rising each year.
- And ... lots of people are unhappy. Corn farmers and biofuels producers hate the new, lower quotas. Gasoline refiners say the quotas still aren't low enough. Meanwhile, environmental groups argue that corn-based ethanol is a poor alternative to gasoline — but it's been difficult to transition to even cleaner biofuels.
Why refiners and corn farmers are fighting over biofuels
Back in 2007, Congress passed a law that would push the United States to use more and more ethanol and other plant-based biofuels in its cars and trucks. This was called the Renewable Fuel Standard, and the hope was that it would help wean America off oil and help address climate change.
Under the original law, gasoline refiners and blenders were supposed to mix 16.55 billion gallons of ethanol into the gasoline they produced by 2013 (the vast majority of this was ethanol made from corn). That amount was supposed to keep rising until it hit 36 billion gallons in 2022.
There was just one problem: When Congress originally passed the law in 2007, lawmakers expected that US gasoline use would keep rising indefinitely, and all that ethanol would make up a small fraction of the total. Instead, the opposite happened. Americans started buying more fuel-efficient cars and driving less. US gasoline use has actually fallen in recent years.
That means biofuels now make up approximately 10 percent of the nation's gasoline supply. Refiners and automakers call this the "blend wall," arguing that cars will get damaged if we go above the 10 percent mark, because ethanol is more corrosive. Biofuels producers, for their part, argue that there are ways around the wall — oil companies are just blocking them. (More on this debate below.)
At the same time, many green groups argue that corn-based ethanol hasn't lived up to its promise of curbing greenhouse gas emissions. One worry with crop-based fuels is that it pushes farmers to plant more of these crops, which can indirectly exacerbate deforestation. In theory, the law was supposed to help create incentives for next-generation biofuels (like cellulosic ethanol) that didn't have this problem, but that technology is still in its infancy.
The EPA proposed tweaking the biofuels targets in 2013 — and everyone got angry
Faced with all these criticisms, the EPA took the unusual step in 2013 of proposing to cut the total amount of biofuels that refiners had to mix into their gasoline for 2014, in the hopes of avoiding that dreaded "blend wall" that would damage cars.
But that proposal set off a frenzy of criticism and recriminations. Ethanol producers and corn growers didn't want the EPA to relax its limit at all, since this would hurt the budding biofuels industry and screw over corn farmers who had already made planting decisions for the coming year (about one-third of the US corn crop now goes toward ethanol).
Meanwhile, oil refiners sensed an opening and began lobbying Congress to repeal the law entirely. After all, even the EPA was conceding that the original targets were unworkable. So why not just scrap the whole thing?
At that point, the EPA dithered for nearly two years on a final decision, leaving refiners to essentially guess how much biofuels they should use in 2014.
Now the EPA is proposing new targets for 2014-'16 — and everyone's still angry
So that brings us to today. On May 29, the agency proposed new biofuel targets for the 2014-'16 period. These targets will require refiners to use less ethanol than the original law required, although the amount will still rise each year. In essence, this is supposed to be a compromise measure.
More specifically, the biofuel quotas will be set at 15.93 billion gallons for 2014, 16.3 billion gallons for 2015, and 17.4 billion gallons for 2016. (By comparison, the original law passed by Congress had the mandate rising to 22.25 billion gallons by 2016.) In theory, these new targets will help refiners avoid the dreaded "blend wall."
The EPA also dealt with the question of advanced biofuels. When Congress enacted the law in 2007, it declared that a certain portion of biofuels eventually had to come from cellulosic materials or other sources. The idea was to slowly shift the nation's biofuels industry away from corn- and crop-based ethanol, so as not to put a strain on the food supply and to address those environmental concerns.
But so far, cellulosic ethanol has been slow to materialize, with a few plants opening only last year. As such, the EPA now wants to lower the target for advanced biofuels to around 3.4 billion gallons in 2016 (down from the original 7.25 billion gallons).
Few people seem happy with this new compromise. Oil refiners have won a partial victory by getting the EPA to agree that the "blend wall" is a real problem — the targets are written so that the total amount of ethanol in the gasoline supply will hover around 10 percent. Still, some refiners are worried that the 2016 target is too high and we'll run into that wall again.
Meanwhile, biofuel producers are irate at the changes, which essentially amount to less support for the industry. Here's what Bob Dinneen, president of the Renewable Fuels Association, told the Houston Chronicle: "The EPA plan fundamentally places the potential growth in renewable fuels in the hands of the oil companies — empowering the incumbent industry to continue to thwart consumer choice at the pump with no fear of consequence for their bad behavior."
Green groups, meanwhile, appear to be split. In an emailed statement, Jeremy Martin of the Union of Concerned Scientists argued that the most important thing here, from an environmental standpoint, is to shift away from corn ethanol and toward cleaner next-generation biofuels. And the EPA's new rule at least tries to do that by maintaining slowly rising targets for advanced biofuels. "This is really the only realistic path forward," he notes.
By contrast, other cellulosic ethanol manufacturers argue that the new, lower advanced biofuels targets are undercutting R&D just as the industry was finding its footing. In a different vein, the Environmental Working Group argues that the law still allows too much old-fashioned corn ethanol — 14 billion gallons next year — which, they say, is more destructive for climate change than gasoline. As such, they want the law revamped entirely.
How big a deal is the "blend wall," anyway?
Currently, biofuels make up about 10 percent of the gasoline supply in the United States. And one of the big debates here is whether we can go above that point.
Most cars and fuel pumps in the United States can easily handle gasoline with 10 percent ethanol or less, a blend known as "E10." But if we started mixing even more ethanol into that gasoline — moving up to 15 percent, or "E15" — things get trickier.
E15 is more corrosive, and it's not deemed suitable for cars built before 2000, heavy-duty vehicles, motorcycles, or non-road engines like boats or snowmobiles. Meanwhile, for newer cars, the government has declared the fuel safe after extensive testing, but even so, many automakers have said their warranties won't cover any damage caused by fueling with E15.
That's why that 10 percent number is often called the "blend wall." If the targets for biofuels keep going up and up each year, it's going to be increasingly difficult to mix ethanol into the gasoline. Blenders and refineries say they'll have to keep buying up renewable credits instead to comply with the law — and that will raise their costs.
In theory there are ways the wall could be knocked down. The country could find ways to use more E15, which is fine for newer cars. What's more, there are currently about 11 million "flexible-fuel" vehicles in the United States that can technically handle E85, or fuel that's 85 percent ethanol. The problem? There aren't many fueling stations that offer E85 outside of the Midwest.
Oil refiners and blenders say these stations aren't popping up quickly enough — and won't anytime soon. Renewable fuels advocates, for their part, claim the biggest obstacle is actually the oil industry itself, which (they say) has hindered the expansion of E15 and E85 fueling infrastructure.