Economists: RFS needs to adjust for blend wall, other limitations

By Susanne Retka Schill | February 14, 2013

In their continuing analysis of implementing the renewable fuels standard (RFS) and the blend wall, University of Illinois economists Scott Irwin and Darrel Good say something has to give.

“One source of give is a much more rapid expansion in the blend wall stemming from large increase in consumption of E85 and/or E15,” they write in the Feb. 13 edition of FarmDocDaily. But it would take an expansion of about 2 billion gallons, which seems unlikely given the current infrastructure limitations.  It would also not necessarily slow a projected boom in biodiesel production that would ripple impacts in the agriculture sector.

The second source of give, they suggest, is that the U.S. EPA exercise its flexibility. To date, the agency has only chosen to write down cellulosic volumes. “This effectively means that the cellulosic mandate has been transferred to biodiesel and Brazilian ethanol imports,” they write. “Reversing this policy and writing down the totals at the same time that cellulosic is written down would not entirely solve the near term problems of implementing the RFS but it would provide much needed breathing room for the markets. The EPA has the statutory authority to write the advanced mandate down to at least the existing biodiesel production capacity if not further. This may be the only realistic path for implementing the RFS in the next several years.”

To see the complete analysis and accompanying charts, click here