US seeks higher biofuel targets for 2023-25

President Joe Biden's administration is proposing to steadily increase the amount of renewable fuels required to be used for US transportation over the next three years, including a plan to begin offering credit to electric vehicle manufacturers.

The US Environmental Protection Agency (EPA) through its closely-watched "set" proposal is seeking a nearly 1pc increase in renewable fuel mandates in 2023, to a total of 20.82bn USG that year. The proposal would increase the blending mandates by 5pc to 21.87bn USG in 2024 and by 3.7pc to 22.68bn USG in 2025, with the majority of the blending increases those years coming from electric vehicles charged from power plants fueled with renewable biomass.

The market for RIN credits used to comply with fuel blending mandates traded sharply lower across the board this morning after the proposed targets fell short of market expectations for higher biofuel blending targets, translating into lower perceived demand for 2022 and 2023 vintage RINs.

The proposed "set" rule marks the first time since the biofuel program was created that EPA will not be following volumetric blending targets the US Congress set for 2010-22. The lack of statutory targets has given EPA far more discretion over the stringency and shape of the program over the coming years.

"The Renewable Fuel Standard program is critical to helping incorporate more homegrown biofuels into the market," EPA administrator Michael Regan said. "This proposal supports low-carbon renewable fuels and seeks public input on ways to strengthen the program."

EPA's proposal would seek to have 15bn USG of conventional biofuel such as ethanol count for this year's blending volumes, along with a supplemental volume of 250mn USG that would address a 2017 court ruling that found flaws with an earlier blending rule. For 2024 and 2025, conventional biofuels including ethanol could fill up to 15.25bn USG of the annual mandates.

The proposal for the first time seeks to offer compliance credits for charging electric vehicles with power derived from renewable biomass, such as natural gas collected from landfills, starting in 2024. EPA wants to offer credits, named eRINs, exclusively to automakers that sell electric vehicles and enter into contracts with grid-connected biogas power plants.

The availability of eRIN credits would allow EPA to significantly increase its blending targets for cellulosic biofuels, which would more than triple to a mandate of 2.13bn USG in 2026. Of cellulosic volumes that year, the agency expects 1.2bn USG would come from eRINs.

EPA's plan to offer compliance credit for electric vehicle charging is facing criticism from the oil industry officials, who say the idea is too far removed from the original structure of the program. The plan to create eRINs would be "yet another massive regulatory subsidy for electric vehicle manufacturers," refining group the American Fuels &amp; Petrochemical Manufacturers government relations senior vice president Geoff Moody said.

EPA is only seeking small increases in the volumes of biomass-based diesel that would be blended into the fuel supply, with volumes increasing only to 2.95bn USG in 2025 from 2.76bn USG this year. That prompted criticism from groups that represent the sector.

"The volumes EPA is proposing for 2023, 2024 and 2025 ignore the more than 3bn USG currently in the market and fail to take into account the planned growth of the clean fuels sector," Clean Fuels Alliance America federal affairs vice president Kurt Kovarik said.

But the set rule won praise from ethanol-focused industry groups. Growth Energy chief executive Emily Skor applauded the agency for "keeping clean energy on an upward trajectory." EPA's decision to propose three years of blending targets would "finally provide certainty and stability to the entire supply chain," Renewable Fuels Association chief executive Geoff Cooper said.

EPA is required to finalize the blending targets by 14 June 2023, under a settlement with biofuel industry groups.

By Chris Knight and Thom Dwyer

Proposed 2023-25 Renewable Volume Obligations bn USG Fuel type 2023 2024 2025 Cellulosic biofuel 0.72 1.42 2.13 Biomass-based diesel 2.82 2.89 2.95 Advanced biofuel 5.82 6.62 7.43 Total renewable fuel 20.82 21.87 22.68 Supplemental proposal 0.25 - EPA

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