EPA’s Offers their Renewable Fuel Standard (RFS) Quotas

Under a regulation finalized on Wednesday, the Environmental Protection Agency in 2023 will require the use of 2.82 billion gallons of biomass-based diesel, generally made from soybean and canola oil, a 2.2% increase over the 2.76 billion gallons mandated last year. For 2024 and 2025, the quotas are being set at 3.04 billion and 3.35 billion gallons.  Overall, the EPA will require a record amount of renewable fuel to be mixed into gasoline and diesel over the next three years, an increase of 22.33 billion gallons in 2025.  The quotas govern how much renewable fuels must be blended into US gasoline and diesel supplies.

 

Renewable Fuel Quotas (in billion gallons)	2023	2024	2025
Cellulosic biofuel	0.84	1.09	1.38
Biomass-based diesel	2.82	3.04	3.35
Advanced biofuel	5.94	6.54	7.33
Conventional renewable fuel	15	15	15
Total renewable fuel	20.94	21.54	22.33
Supplemental	0.25	n/a	n/a

 

The biomass-based requirements are well below the increase sought by producers, who warned the White House that recent surges in U.S. production warrant much higher targets and that multi-billion-dollar investments in renewable diesel capacity hang in the balance. The closely watched quotas have long been a source of tension for Republican and Democratic presidents as they seek to balance oft-competing oil refining and agricultural interests. President Biden campaigned on promises to promote corn-based ethanol, but his administration has put muscle into a push for electric vehicles that could limit the market for all liquid fuels, whether made from plants or petroleum. These recent quotas united a range of stakeholders including biodiesel and ethanol producers, rural farm interests and oil refiners in opposition.

The EPA is also limiting the amount of conventional ethanol that could be used to fulfill quotas in 2024 and 2025 to 15 billion gallons each of those years, a reduction from the 15.25-billion-gallon target it had proposed earlier and a defeat for makers of the corn-based fuel.

Some refiners argued the ethanol requirements were still too high. Chet Thompson, president of the American Fuel and Petrochemical Manufacturers Association, said in response to reports of the quotas that the EPA is failing to take advantage of its flexibility under federal law to modernize the Renewable Fuel Standard program and provide greater climate benefits.  Also, the quotas have taken on a new dimension for U.S. renewable diesel producers, whose margins increasingly depend on the price of tradeable credits that refiners and fuel importers use to prove they have fulfilled the annual biofuel-blending requirements.  The U.S. renewable diesel industry’s benchmark margins in 2023 are 3% above five-year averages of $2.27 a gallon, in large part because of an increase in the price of those tradeable compliance credits, known as renewable identification numbers.  Producers this year are receiving $2.86 a gallon for RINs tracking biodiesel, up from an average of $1.63 from 2018 to 2022.