US to boost biofuel mandates over next three years, but not for ethanol

Ethanol producers and corn farmers like the mandates because they provide a market for their product

NEW YORK (Reuters) – The Biden administration plans to increase the amount of biofuels that oil refiners must blend into the nation's fuel mix over the next three years, but the plan includes lower mandates for corn-based ethanol than it had initially proposed, two sources familiar with the matter told Reuters.

The US Environmental Protection Agency plans to finalize biofuel blending volumes at 20.94 billion gallons in 2023, 21.54 billion gallons in 2024 and 22.33 billion gallons in 2025, the sources said. That compares with the initial proposal announced in December of 20.82bn in 2023, 21.87bn in 2024, and 22.68bn in 2025.

But the finalized volumes include just 15bn gallons of conventional biofuels like corn-based ethanol in all three years, plus a 250 million-gallon supplemental amount for 2023, the sources said. That represents a decline from the initial proposal, which included 15bn gallons of conventional biofuels in 2023 and 15.25bn in both 2024 and 2025.

The cut to ethanol drew consternation from the biofuels industry.

"If the reports are accurate, EPA's decision to lower its ambitions for conventional biofuels runs counter to the direction set by Congress and will needlessly slow progress toward this administration’s climate goals," said Emily Skor, CEO of biofuels trade association Growth Energy.

The EPA is expected to announce the final rule on Wednesday

The agency did not immediately respond to a request for comment.

The final rule marks a new phase in the US Renewable Fuel Standard programme, which is more than a decade old and frequently pits the powerful oil and biofuel industries against each other. Under the RFS, oil refiners must blend billions of gallons of biofuels into the nation's fuel mix, or buy tradable credits from those that do.

Ethanol producers and corn farmers like the mandates because they provide a market for their products, while the oil industry finds the requirements too pricey.

While Congress set out specific goals for the program through 2022, the law expands the EPA's authority for 2023 and beyond to change the way the RFS is administered.

Renewable fuel (D6) credits fell after the news on Tuesday, trading at $1.425 each versus $1.46 earlier in the session.

EPA ABANDONS EV SCHEME

The final rule will not include a much-anticipated pathway for electric vehicle manufacturers to generate lucrative credits under the RFS, though it was included in the original proposal in December. Reuters previously reported that the administration was planning to abandon the scheme over worries about lawsuits.

The plan would have given EV automakers, such as Tesla, credits for charging vehicles using power generated from renewable natural gas, or methane collected from sources such as cattle or landfills.

Because the EPA removed the EV plan, the agency had to exclude in the final rule volumes previously apportioned to the scheme, including an expected 600m credits generated by EV manufacturers in 2024 and 1.2bn by 2025.