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Thursday, January 26, 2012

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

Kelsi Bracmort
Specialist 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—which will ramp up over time to comprise some 44% of the RFS in 2022.

The U.S. Environmental Protection Agency (EPA) is required to lower the cellulosic biofuel standard if the projected volume of cellulosic biofuel production is less than the volume specified in the statute. The cellulosic biofuel allotment in the mandate, as established by Congress in EISA, was 100 million gallons due in 2010, 250 million gallons in 2011, and 500 million gallons in 2012, increasing to 16 billion gallons by 2022. However, analysis suggested the United States did not have sufficient cellulosic biofuel production capacity to meet the RFS mandate for 2010, 2011, and 2012. As a result, EPA lowered the RFS cellulosic biofuel mandate (actual volume) to 5 million gallons in 2010, 6.6 million gallons in 2011, and 8.65 million gallons in 2012. The cellulosic biofuel community may fare better at achieving the lower mandates set and proposed by EPA if certain obstacles are overcome. Roadblocks include unknown levels of feedstock supply, expensive conversion technology that has not yet been applied commercially, and insufficient financial support from private investors.

EPA reports that very few, if any, facilities are consistently producing cellulosic biofuel for commercial sale. 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 designed to support establishment and production of crops for conversion to bioenergy in selected areas, and to assist agricultural and forest land owners and operators with collection, harvest, storage, and transportation of eligible material for use in a biomass conversion facility. 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 commercialscale 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 the 112th Congress engages in energy legislation debates. EPA compliance data indicate that there was no commercial production of cellulosic biofuel under the RFS for 2010. Results for 2011 are still unclear. Can and will the 2012 and future RFS mandates for cellulosic biofuels be met? What impact will the continued lowering of the cellulosic ethanol mandate have on investment in cellulosic ethanol production? Should the 112th Congress continue to provide support for U.S. cellulosic biofuel production, and if so, how? This report, in a question and answer format, discusses some of the concerns facing the cellulosic biofuel community, including feedstock supply estimates, and potential legislative options to address cellulosic biofuel production uncertainty for the RFS.

Date of Report: January 11, 2012
Number of Pages: 16
Order Number: R41106
Price: $29.95

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Biofuels Incentives: A Summary of Federal Programs

Brent D. Yacobucci
Section Research Manager

With recent high energy prices, the passage of major energy legislation in 2005 (P.L. 109-58) and 2007 (P.L. 110-140), and the passage of a farm bill in 2008 (P.L. 110-246), there is ongoing congressional interest in promoting alternatives to petroleum fuels. Biofuels—transportation fuels produced from plants and other organic materials—are of particular interest. However, many incentives for biofuels production and use expired at the end of 2011, and ongoing congressional debate over budget deficits and the national debt make the prospect of extending these incentives less likely.

Until recently, ethanol and biodiesel, the two most widely used biofuels, received significant government support under federal law in the form of mandated fuel use, tax incentives, loan and grant programs, and certain regulatory requirements. While the mandate remains, several tax incentives and other programs have terminated in recent years. The 22 programs and provisions listed in this report were established over the past three decades, and were administered by five separate agencies and departments: Environmental Protection Agency, U.S. Department of Agriculture, Department of Energy, Internal Revenue Service, and Customs and Border Protection. These programs targeted a variety of beneficiaries, including farmers and rural small businesses, biofuel producers, petroleum suppliers, and fuel marketers. Arguably, in prior years the most significant federal programs for biofuels had been tax credits for the production or sale of ethanol and biodiesel. However, with the establishment of the renewable fuel standard (RFS) under P.L. 109-58, Congress has mandated biofuels use; P.L. 110-140 significantly expanded that mandate. In the long term, the mandate may prove even more significant than tax incentives in promoting the use of these fuels.

The 2008 farm bill—The Food, Conservation, and Energy Act of 2008—amended or established various biofuels incentives, including lowering the value of the ethanol excise tax credit, establishing a tax credit for cellulosic biofuel production, extending import duties on fuel ethanol, and establishing several new grant and loan programs (all of which are set to expire at the end of FY2012).

Several key biofuels incentives had expired or were set to expire (e.g., a tariff on ethanol imported from most countries, as well as tax credits for biodiesel, renewable diesel, and ethanol) before the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312). The incentives included in that law were extended through the end of 2011, and Congress has not acted to extend these incentives into 2012.

This report outlines federal programs that provide direct or indirect incentives for biofuels. For each program described, the report provides details including administering agency, authorizing statute(s), annual funding, and expiration date. The Appendix provides summary information in a table format.

Date of Report: January 11, 2012
Number of Pages: 19
Order Number: R40110
Price: $29.95

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Tuesday, January 24, 2012

The Role of Local Food Systems in U.S. Farm Policy

Renée Johnson
Specialist in Agricultural Policy

Tadlock Cowan
Analyst in Natural Resources and Rural Development

Randy Alison Aussenberg
Analyst in Social Policy

Sales of locally produced foods comprise a small but growing part of U.S. agricultural sales. USDA estimates that farm-level value of local food sales totaled about $4.8 billion in 2008, or about 1.6% of the U.S. market for agricultural products. An estimated total of 107,000 farms are engaged in local food systems, or about 5% of all U.S. farms.

There is no established definition of what constitutes a “local food.” Local and regional food systems generally refer to agricultural production and marketing that occurs within a certain geographic proximity (between farmer and consumer) or that involves certain social or supply chain characteristics in producing food (such as small family farms, urban gardens, or farms using sustainable agriculture practices). Some perceive locally sourced foods as fresher and higher in quality compared to some other readily available foods, and also believe that purchasing local foods helps support local farm economies and/or farmers that use certain production practices that are perceived to be more environmentally sustainable.

A wide range of farm businesses may be considered to be engaged in local foods. These include direct-to-consumer marketing, farmers’ markets, farm-to-school programs, community-supported agriculture, community gardens, school gardens, food hubs and market aggregators, and kitchen incubators and mobile slaughter units. Other types of operations include on-farm sales/stores, internet marketing, food cooperatives and buying clubs, pick-your-own or “U-Pick” operations, roadside farm stands, urban farms (and rooftop farms and gardens), community kitchens, smallscale food processing and decentralized root cellars, and some agritourism or other types of onfarm recreational activities.

The 2008 farm bill (P.L. 110-246, Food, Conservation, and Energy Act of 2008) contained a few program provisions that directly support local and regional food systems. However, many farm bill-related programs benefiting agricultural producers may provide support and assistance for such food systems. These include federal farm support and grant programs administered by the U.S. Department of Agriculture (USDA), which may be grouped into several broad program categories: marketing and promotion; business assistance; rural and community development; nutrition and education; agricultural research and cooperative extension; and farmland conservation. Examples include USDA’s farmers’ market programs, rural cooperative grants, and selected child nutrition programs, among myriad other grant and loan programs, as well as USDA’s research and cooperative extension service.

Although the farm bill currently contains few specific programs that directly support local and regional food systems, many community and farm advocacy groups have been arguing that such food systems should play a larger policy role within the next farm bill, and that laws should be modified to reflect broader, more equitable policies across a range of production systems, including local food systems. The 112th Congress will likely consider reauthorization of the 2008 farm bill, and may debate options for providing additional support for local and regional producers. To date, a number of bills have been introduced, including comprehensive marker bills, that would expand the benefits for local and regional food systems.

Date of Report: January 20, 2012
Number of Pages: 53
Order Number: R42155
Price: $29.95

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Wednesday, January 4, 2012

Agriculture and Related Agencies: FY2012 Appropriations

Jim Monke, Coordinator
Specialist in Agricultural Policy

The Agriculture appropriations bill provides funding for all of the U.S. Department of Agriculture (USDA) except the Forest Service, plus the Food and Drug Administration (FDA) and, in alternating years, the Commodity Futures Trading Commission (CFTC).

The FY2012 Agriculture Appropriations Act (P.L. 112-55, H.R. 2112) was signed by the President on November 18, 2011, after passing both chambers by more than two-thirds majorities. It was the lead division of a three-bill “minibus” appropriation that also included Commerce-Justice- Science and Transportation-Housing and Urban Development appropriations. The minibus was the first FY2012 appropriation to be enacted, and it also included another short-term continuing resolution, through December 16, 2011, for the remaining nine appropriations bills. The Agriculture bill was the vehicle for the minibus since it was the only one of the three subcommittee bills in the minibus to have passed the House.

P.L. 112-55 provides $20.2 billion of discretionary budget authority, including $367 million of conservation-related disaster assistance that was not subject to the regular budgetary caps. After subtracting the disaster funding and adjusting for CFTC jurisdiction, the $19.8 billion of regular discretionary budget authority reflects a $372 million reduction from FY2011 levels (-1.8%). The bill also includes $116.8 billion of mandatory funding for nutrition assistance and farm supports, up +11% from FY2011 due to a 19% increase in nutrition assistance because of the economy.

The FY2012 Agriculture appropriation spreads its reductions in discretionary spending by trimming most agency budgets in the range of 3%-6%, although some programs have greater reductions. The act makes cuts to rural development programs (-$233 million, -8.8%), discretionary agriculture programs (-$209 million, -3%), discretionary nutrition assistance (-$127 million, -1.8%), foreign assistance programs (-$56 million, -2.9%), and conservation programs (-$45 million, -5.1%). The Food and Drug Administration and Commodity Futures Trading Commission each receive small increases in budget authority of about 1.5% to 2%.

The appropriation increases the amount of limitations on mandatory farm bill programs by 27% to $1.2 billion, though rescissions from prior-year appropriations were smaller by about half, at $445 million. These limitations and rescissions, though greater than most years, were less in total than for FY2011. Reliance on these provisions in FY2011 and relatively less use in FY2012 increased the amount of cuts required to agency programs by about $220 million to meet the bill’s discretionary allocation.

The final appropriation is closer to the Senate-passed version from November 1, 2011, than the House-passed version from June 16, 2011. The Budget Control Act of 2011 (P.L. 112-25, August 2, 2011) set the discretionary limits that were used for the Senate bill and in the conference agreement. The Senate-passed version cut discretionary Agriculture appropriations to $19.8 billion, $2.7 billion more than the House bill in its discretionary total.

The House version of H.R. 2112, passed under the House’s more austere budget resolution, would have cut discretionary Agriculture appropriations to $17.25 billion, a reduction of $2.7 billion from FY2011 levels (-14%), and following a 15% cut in FY2011. Much of the floor debate in the House related to funding reductions for the Women, Infants, and Children (WIC) feeding program (-11%), food safety (-10%), and international food aid (-31%); preventing USDA payments to Brazil in relation to the U.S. loss in the WTO cotton case; and programs promoting locally produced food (USDA’s “know-your-farmer-know-your-food” initiative).

Date of Report: December 1
4, 2011
Number of Pages:
Order Number: R4196
Price: $29.95

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