How is the US Incentivising Biofuels for EVs?

Recently, the Biden administration announced that it would be rewriting the United States’ biofuel mandate to encourage use of renewable natural gas in electric vehicles. The Environmental Protection Agency has officially invited public feedback on a set of revisions to the Renewable Fuel Standard, which was passed as early as 2005 as an encouragement for the production of more ethanol, biodiesel and other biofuels. The American public will get a chance to give their input on the best way to promote advanced low-carbon biofuels, which the EPA hope “will set the stage for further growth and development of low-carbon biofuels in the coming years.” 

The most controversial and important measure contained in the Agency’s proposal is to increase the statutory requirement for the volume of biofuel that must be mixed into gasoline and diesel. Over the next three years, it is proposed, the requirement will increase to 22.68 billion gallons, up from 2022’s 20.87 billion gallons. In particular, conventional ethanol might be used to complete as much as 15.25 billion gallons, which will exceed the so-called “blend wall”, the 10% ceiling that can be blended into E10 gasoline. The Agency invites feedback on this point. 

It seems the proposals have managed to frustrate both sides of the equation. These volumes for crop-based fuels came in below market expectations and sudden drops in share-prices are indicative of this disappointment. The producers of biodiesel have criticised the proposed quotas for offering only the smallest of boosts, and as Kurt Kovarik, Vice President of Federal Affairs at the Clean Fuels Trade Group, has noted, the EPA’s plan “significantly undercounts existing biomass-based diesel production and fails to provide growth for investments the industry has already made in additional capacity, including for sustainable aviation fuel.” On the other side, these proposals came as a shock to advocates for oil refining as the measures may dangerously increase the industry’s compliance costs. Indeed, Democratic Senator from Delaware, Chris Coons has gone on record describing the quotas as “unachievable.” 

When it comes to finalising the biofuel quotas, the EPA is currently working to a deadline of June 14, 2023. Once again, officials have stated that public feedback could determine the shape of the requirement. As it stands, a tradeable credit will be awarded when electricity generated by biomass is used in electric vehicles (EVs). Within the proposed parameters, it would be the manufacturers of EVs generating the credit but, of course, its value could be easily shared with the generators of biogas-powered electricity themselves, though a certain amount of politicking is expected as charging station operators, biogas producers and utilities each compete for a portion of the spoils. Nevertheless, such a system would introduce yet another incentive for American automakers to increase their production of EVs.