1 The Renewable Fuels Standard: A Status Report Dr. Michael Shelby EPA’s Office of Transportation and Air Quality March 7 th

2 The RFS – The Program Basics Section 1501 of the Energy Policy Act (EPAct) of 2005 requires EPA to establish a program to ensure that the pool of gasoline sold in the contiguous 48 states of the U.S. contains specific volumes of renewable fuel Section 1501 of the Energy Policy Act (EPAct) of 2005 requires EPA to establish a program to ensure that the pool of gasoline sold in the contiguous 48 states of the U.S. contains specific volumes of renewable fuel 2006: 4.0 billion gallons/yr 2006: 4.0 billion gallons/yr 2007: : : : : : : : : : : : : Same percent of renewables for 2012 (0.25 billion gallon of which must be cellulosic ethanol) 2013+: Same percent of renewables for 2012 (0.25 billion gallon of which must be cellulosic ethanol) Each year EPA must convert RFS into percent of gasoline production standards that apply to refiners, importers, gasoline blenders Each year EPA must convert RFS into percent of gasoline production standards that apply to refiners, importers, gasoline blenders

3 Relative Value of Different Renewables Under EPAct, EPA is required to establish an “…appropriate amount of credit” for biodiesel, and to provide for “…an appropriate amount of credit” for using more renewable fuels than are required to meet the RFS Under EPAct, EPA is required to establish an “…appropriate amount of credit” for biodiesel, and to provide for “…an appropriate amount of credit” for using more renewable fuels than are required to meet the RFS EPAct also specified that 1 gallon of cellulosic ethanol counts as 2.5 gallons for RFS compliance purposes EPAct also specified that 1 gallon of cellulosic ethanol counts as 2.5 gallons for RFS compliance purposes EPA proposed (September 22, 2006) to base the “Equivalence Value” or credit for other renewables on volumetric energy content in comparison to ethanol (adjusted for renewable content): EPA proposed (September 22, 2006) to base the “Equivalence Value” or credit for other renewables on volumetric energy content in comparison to ethanol (adjusted for renewable content): Corn-ethanol: 1.0 Corn-ethanol: 1.0 Cellulosic biomass ethanol: 2.5 Cellulosic biomass ethanol: 2.5 Biodiesel (alkyl esters): 1.5 Biodiesel (alkyl esters): 1.5 Renewable diesel: 1.7 Renewable diesel: 1.7 Biobutanol: 1.3 Biobutanol: 1.3

4 Demand for Ethanol In Marketplace Outpacing RFS Requirement 76% of all E10 If 100% of all Gasoline is E10

5 Not Pictured AK: 0% ETOH HI: 100% ETOH DC: 100% ETOH What The Country May Look Like in Bgal Ethanol 100% E10 <10% E % E % E10

6 Emissions & Air Quality* Nationwide Localized maximum CO % decrease N/A Benzene % decrease N/A NOx + VOC % increase 3 - 6% increase (Summer) Ozone ~ 0.1 ppb increase ppb increase Impacts will vary by region, since renewable fuel use varies significantly Impacts will vary by region, since renewable fuel use varies significantly * Incremental Impacts in 2012 compared to 2004 Reference Case

7 Lifecycle GHG Analysis: Methodology Using the Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET) model developed by Argonne National Laboratory to estimate the GHG impacts of replacing a gallon of conventional fuel with an energy-equivalent gallon of renewable fuel Using the Greenhouse gases, Regulated Emissions, and Energy use in Transportation (GREET) model developed by Argonne National Laboratory to estimate the GHG impacts of replacing a gallon of conventional fuel with an energy-equivalent gallon of renewable fuel We combine GREET results with estimates of lifecycle inventories of GHGs and fossil fuel consumption for the transportation sector to estimate the GHG impacts of RFS We combine GREET results with estimates of lifecycle inventories of GHGs and fossil fuel consumption for the transportation sector to estimate the GHG impacts of RFS

8 GHG Percent Reductions* * The use of 1 Btu of corn-ethanol instead of 1 Btu of gasoline reduces the lifecycle GHG emissions by 25.8% Corn Ethanol Cellulosic Ethanol Biodiesel Fossil Fuel 40.1%96.0%47.9% Petroleum 92.3%92.7%84.6% CO %110.1%56.8% GHG 25.8%98.1%53.4%

9 Energy and CO 2 * Petroleum consumption in the transportation sector will be reduced % Petroleum consumption in the transportation sector will be reduced % Equivalent to billion gallon of petroleum in 2012 Equivalent to billion gallon of petroleum in 2012 ~95% of the reduction is estimated to be from oil imports ~95% of the reduction is estimated to be from oil imports Transportation sector greenhouse gases (CO 2 equivalent) will be reduced by % Transportation sector greenhouse gases (CO 2 equivalent) will be reduced by % Equivalent to million tons in 2012 Equivalent to million tons in 2012 * Incremental Impacts in 2012 compared to 2004 Reference Case

10 Costs of Renewable Fuels Increase in the use of renewable fuels is expected to add c/gal to the cost of gasoline for the nation as a whole (at $47/bbl crude)* Increase in the use of renewable fuels is expected to add c/gal to the cost of gasoline for the nation as a whole (at $47/bbl crude)* Ethanol $ per gallon Biodiesel $ per gallon Production & Distribution Costs * Incremental Impacts in 2012 compared to 2004 Reference Case

11 New Analyses for Final Rule Rule is being developed on accelerated schedule Rule is being developed on accelerated schedule Not enough time before proposal to undertake a full suite of analyses of the impacts of the RFS Not enough time before proposal to undertake a full suite of analyses of the impacts of the RFS In RFS Proposal, EPA committed to undertake two additional sets of analyses: In RFS Proposal, EPA committed to undertake two additional sets of analyses: Examine the impacts of the wider use of renewable fuels on the U.S. agricultural sector Examine the impacts of the wider use of renewable fuels on the U.S. agricultural sector Examine the energy security implications of the use of renewable fuels Examine the energy security implications of the use of renewable fuels

12 Ag Sector Analysis Using the Forest and Agriculture Sector Optimization (FASOM) model developed by Dr. Bruce McCarl of Texas A&M Using the Forest and Agriculture Sector Optimization (FASOM) model developed by Dr. Bruce McCarl of Texas A&M Evaluating impacts of the RFS on changes in crop commodity prices and usage patterns, net U.S. farm income, fertilizer use, and changes in land use patterns Evaluating impacts of the RFS on changes in crop commodity prices and usage patterns, net U.S. farm income, fertilizer use, and changes in land use patterns

13 Energy Security Analysis EPA is using Oak Ridge National Laboratory (ORNL) to estimate the energy security implications of the wider use of renewable fuels EPA is using Oak Ridge National Laboratory (ORNL) to estimate the energy security implications of the wider use of renewable fuels ORNL energy security methodology used in the DOT NHTSA CAFE Standard for Light Trucks Model Year , which was finalized in 2006 ORNL energy security methodology used in the DOT NHTSA CAFE Standard for Light Trucks Model Year , which was finalized in 2006 NHTSA estimates based on ORNL 1997 study; EPA updating same methodology using AEO 2006 projected fuel market estimates NHTSA estimates based on ORNL 1997 study; EPA updating same methodology using AEO 2006 projected fuel market estimates

14 What’s Next? RFS Rule likely to go final soon RFS Rule likely to go final soon The President has called for an expansion of the RFS program The President has called for an expansion of the RFS program 35 billion gallons of renewable and alternative fuels by billion gallons of renewable and alternative fuels by 2017 Part of the “20/10” program – a 20% reduction in U.S. gasoline usage within 10 years from now (in 2017) Part of the “20/10” program – a 20% reduction in U.S. gasoline usage within 10 years from now (in 2017) Stay tuned for more Stay tuned for more