You are here: Home Columns Renewable Accounts Renewable Accounts: Short- and Long-term Implications of the RFS Waiver
 
Document Actions

Renewable Accounts: Short- and Long-term Implications of the RFS Waiver

Images
David Ripplinger, Bioproducts and Bioenergy Economist and Assistant Professor, NDSU Department of Agribusiness and Applied Economics David Ripplinger, Bioproducts and Bioenergy Economist and Assistant Professor, NDSU Department of Agribusiness and Applied Economics
The EPA’s plan essentially reduces the floor for domestic corn-ethanol use from 14.4 billion gallons to 13 billion gallons.

By David Ripplinger, Bioproducts and Bioenergy Economist and Assistant Professor

NDSU Department of Agribusiness and Applied Economics

The rumors are true. The Environmental Protection Agency has announced formally its plan to reduce minimum biofuel volumes for 2014, which roughly match the levels in a leaked October memo. The stated reason is that the EPA doesn’t believe that the nation’s infrastructure and fleet can deliver or utilize the original mandated levels.

The EPA’s plan essentially reduces the floor for domestic corn-ethanol use from 14.4 billion gallons to 13 billion gallons. However, because of high margins, due in part to relatively low-cost corn, domestic production of ethanol next year is expected to exceed the minimum and be somewhere around this year’s level of 13.8 billion gallons.

While more than the proposed minimum, that’s still 600 million gallons less than the original mandated level. It also means that about 215 million bushels of corn have lost their home (few things keep me up at night more than worrying about the plight of homeless corn). If there is some good news in this for agriculture, it’s that this bearish news already appears to have been priced into the market.

However, the bigger implications of the EPA’s plan are long term. If the blend wall limits mandated use, the impact of the Renewable Fuel Standard (RFS) may be altered significantly.

After falling during the 2007-2009 recession, the number of vehicle miles traveled has plateaued. If this continues and fuel efficiency continues to improve, the use of motor fuel will decline year after year. If the EPA sticks to its reasoning, mandated biofuel volumes could decline in coming years.

This is bad news for renewable fuels. We already have more than 14 billion gallons of corn-based ethanol production capacity in the U.S. There are three domestic cellulosic-ethanol biorefineries that are expected to come online in the next eighteen months, in addition to one operating in Florida. There also are dozens of projects planning to use feedstocks other than corn or cellulose, such as energy beets, to produce ethanol. These groups will all be in a fight to push their product in what could be a shrinking market.

So what’s the good news? The EPA did state that it will continue to support the RFS and that changes in the nation’s fueling infrastructure, fleet and ethanol use in future years are expected to impact its views of the blend wall and future mandated levels. Time will tell.


NDSU Agriculture Communication – Dec. 4, 2013

Source:David Ripplinger, (701) 231-5265, david.ripplinger@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
Columns
Spotlight on Economics: Spotlight on Economics: Waters of the United States  (2017-10-10)  Now may be the time for the legislative branch to clarify the scope of the Clean Water Act.  FULL STORY
BeefTalk: BeefTalk: Long-term Cow-culling Rate, Replacement Rate and Cow Age  (2017-10-19)  Knowing how your herd compares with industry numbers is important.  FULL STORY
Prairie Fare: Prairie Fare: Prairie Fare Celebrates 20 Years  (2017-10-19)  The column has covered topics from apples to zucchini and everything in between.   FULL STORY
 
Use of Releases
The news media and others may use these news releases in their entirety. If the articles are edited, the sources and NDSU must be given credit.
 

Powered by Plone, the Open Source Content Management System