The RFS and Domestic Consumption of Conventional Ethanol and Biomass-Based Diesel to 202212/08/2016
In the farmdoc daily article of November 30, 2016, we examined the magnitude of the “push” in production and consumption of biofuels implied by the U.S. Environmental Protection Agency (EPA) final rulemaking for the Renewable Fuels Standard (RFS) for 2017 and the biomass-based diesel volume requirement for 2018 announced on November 23rd. Two important questions arose from that analysis. First, given our projection that domestic consumption of conventional ethanol could reach 14.41 billion gallons in 2017, when will domestic consumption reach the statutory mandate of 15 billion gallons and completely eliminate the conventional mandate gap? The answer has important policy implications, including the value of conventional ethanol (D6) RINs. Second, the advanced biofuels mandate for each year from 2014 to 2017 represent a push in production and consumption in that the write down in the total advanced mandate was less than the write down in the cellulosic mandate. That difference is 520 million gallons in 2017, much larger than in the previous two years. An important issue with regards to future implementation of the RFS, then, is the magnitude of the advanced mandate push, if any, under a new Administration. The answer has important implications for the demand for biomass-based diesel, required feedstocks, and the value of biomass-based biodiesel (D4) RINs. We analyze those questions in detail in this article.