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Friday, August 13, 2010

Meeting the Renewable Fuel Standard (RFS) Mandate for Cellulosic Biofuels: Questions and Answers

Kelsi Bracmort
Analyst in Agricultural Conservation and Natural Resources Policy

The Renewable Fuel Standard (RFS) was expanded under the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140) in an effort to reduce dependence on foreign oil, promote biofuel use, and stabilize transportation fuel prices, among other goals. Over a 15-year period, the RFS seeks to establish a market for biofuels in the transportation sector by requiring that increasing amounts of biofuels—36 billion gallons by 2022—be blended into transportation fuel. The mandate is to be accomplished with an assortment of advanced biofuels, including cellulosic biofuels—fuels produced from cellulosic materials including grasses, trees, and agricultural and municipal wastes. The cellulosic biofuel allotment in the mandate, as established by Congress in EISA, was 100 million gallons due in 2010, increasing to 16 billion gallons by 2022. However, on March 26, 2010, the U.S. Environmental Protection Agency (EPA) issued a final rule for implementation of the RFS that sets a new, lower cellulosic biofuel mandate of 6.5 million gallons for 2010.

Recent analysis has suggested that the United States might not have sufficient cellulosic biofuel production capacity to meet the 2010 RFS mandate of 100 million gallons instituted by Congress in EISA. The cellulosic biofuel community may fare better at achieving the new mandate set by EPA if certain obstacles are overcome. No commercial-scale cellulosic biofuel plants are currently operating. Roadblocks include unknown levels of feedstock supply, expensive conversion technology that has not yet been applied commercially, and insufficient financial support from private investors and the federal government.

Some financial support from the Departments of Energy and Agriculture is available to expedite cellulosic biofuel production. For example, the Biomass Crop Assistance Program (BCAP), created under the Food, Conservation, and Energy Act of 2008 (2008 farm bill; P.L. 110-246), is to support establishment and production of crops for conversion to bioenergy. Financial support available thus far via BCAP is for collection, harvest, storage, and transportation of eligible material. BCAP support for the establishment and production of eligible crops for the conversion to bioenergy is anticipated to begin in 2010. Also, the Department of Energy's Loan Guarantee Program, created under the Energy Policy Act of 2005 (EPAct05, P.L. 109-58), distributes loan guarantees to eligible commercial-scale renewable energy systems, including cellulosic biofuel plants, although criticisms have been raised that the program has been slow to get started.

Many questions regarding cellulosic biofuels and the RFS may arise as Congress engages in energy legislation debates. Can and will the 2010 and future RFS mandates for cellulosic biofuels be met? What impact will significantly lowering the 2010 cellulosic ethanol mandate have on investment in celluosic ethanol production? What are the next steps Congress could take to expedite cellulosic biofuel production? Proposed legislation (H.R. 2454, S. 1462, H.R. 2283, and S. 943), if enacted, may influence cellulosic biofuel production by providing additional financial, infrastructure, and environmental support. This report, in a question and answer format, discusses some of the concerns facing the cellulosic biofuel community, including feedstock supply estimates, an expected time frame for the first commercial cellulosic biofuel projects, and potential legislative options to address cellulosic biofuel production uncertainty for the RFS.

Date of Report: July 28, 2010
Number of Pages: 17
Order Number: R41106
Price: $29.95
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