What’s the Plan to Increase Ethanol Use?

FROM THE SEPTEMBER ISSUE: Low Carbon Octane Standard could be the way to increase ethanol use beyond E15.
By Brian Jennings | August 12, 2019

Now that the highest federal hurdle to year-round E15 use has been cleared (assuming the U.S. EPA’s Reid vapor pressure rule prevails over the lawsuits from refiners who want to limit ethanol’s market share to E10), the next major public policy question confronting the ethanol industry is what’s the plan to increase domestic demand beyond E15?

The answer should be the Renewable Fuel Standard. If the RFS were being carried out as specified by Congress, it would indeed drive demand for higher blends. Unfortunately, EPA’s mismanagement of the program has limited, rather than supported, ethanol use.

Consider recent history: During the Obama administration, EPA reduced the RFS based on the “blend wall.” ACE and others were forced to sue. The court ruled in our favor and instructed EPA to restore 500 million gallons back to the 2016 statutory volume. So far, EPA refuses to comply with the court’s order. Under the Trump administration, EPA’s abuse of the small refinery exemption (SRE) provision has added insult to injury by waiving 2.61 billion gallons of RFS demand from statutory levels so far without reallocating the gallons to other refiners. We have been forced to sue yet again. While I am confident we will eventually win in court, EPA’s track record suggests it will refuse to reallocate the waivers.

EPA’s mismanagement of the RFS has reduced the use of U.S. ethanol and stymied investment in advanced and cellulosic biofuel technologies. The consequences are dire for rural Americans already suffering from economic and weather-related crises.

Where does that leave us? What’s the plan to increase ethanol use? Are we simply going to play defense on the RFS and hope the E15 market develops quickly, or can we turn the page, go on offense and initiate a new legislative or regulatory strategy to increase ethanol use far beyond current levels?

ACE has discussed this topic with our industry allies for the past several months, trying to unify around a plan. We have also engaged our board of directors. In May, the ACE board passed this resolution: ACE supports legislative efforts to increase demand and certainty for ethanol through expansion of the RFS post-2022 and/or the establishment of a low-carbon octane standard, which takes advantage of ethanol’s life cycle greenhouse gas (GHG) emission and health benefits.

Unfortunately, there appears to be insufficient support currently to try for RFS 3 in Congress. However, ACE is making progress on the idea of a new Low Carbon Octane Standard that would build upon the RFS to spur additional demand for ethanol by ensuring even greater GHG reductions compared to gasoline, and help automakers needing higher-octane fuel to meet fuel-efficiency targets.

A LCOS would require all motor gasoline in the future to meet a minimum octane (such as 98 RON). To ensure refiners do not use aromatic hydrocarbons to meet the standard, the fuel would also need to meet a minimum threshold for reducing GHG emissions (such as 30 or 40 percent better than baseline gasoline) in order to qualify for the high-octane market. Importantly, the LCOS would require EPA to use the latest U.S. Department of Energy Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) life cycle model to determine GHG emissions instead of the outdated and flawed model the agency uses under the RFS.

There are several advantages to an LCOS. It gives ethanol a one-two punch to gain new market share by capitalizing its low-carbon and high-octane benefits. It allows us to go on offense, appealing to the breadth and depth of political views on Capitol Hill and giving our champions in Congress something to be for. And, instead of sitting on our hands or playing defense on climate, the low-carbon feature allows us to proactively position corn ethanol as part of the solution to addressing climate change.

We think an LCOS is a commonsense policy plan that can build upon the success of the RFS to increase the use of ethanol beyond E15 and provide even greater climate reductions in a way that spurs the rural economy and saves consumers money at the pump. We look forward to working with our industry allies and Congress in support of this new plan to increase the use of ethanol beyond current levels.

Author: Brian Jennings
Executive Vice President
American Coalition for Ethanol