WASHINGTON – The federal government has agreed, in essence, to lower quotas for renewable fuels as U.S. production of next-generation sources and demand for gasoline have lagged projections.
In issuing long-overdue final quotas this week, the Environmental Protection Agency gave refiners an additional four months to reach the goal of using 16.55 billion gallons of renewable fuel for 2013.
It also signaled it will cut the 18.15 billion gallon mandate for 2014, a looming requirement that had driven up the price of ethanol credits that refiners buy to comply when they don’t make renewable fuels.
“EPA’s decision … should help to prevent unnecessary increases in gasoline prices,” said Jason Bordoff, director of Columbia University’s Center for Global Energy Policy.
Under the Renewable Fuel Standard, passed by Congress in 2007, refiners such as Exxon Mobil must use a certain amount of renewable fuels each year, with their contribution determined by share of the fuel market.
Refiners complain that declining demand for gasoline means next year they would be forced to blend in more than 10 percent of ethanol, which they say isn’t safe for all engines and lacks support from consumers.
The EPA pledged Tuesday to lower the quota next year based on the estimated 13.2 billion gallons of ethanol that could fit within the 10 percent so-called blendwall, plus additional biodiesel or cellulosic fuels that would qualify.
Without a change, “in 2014 compliance is expected to become significantly more difficult,” according to the rule.
Because the 2013 quotas were issued late in the year, EPA also extended the deadline to comply by four months, to June 30, 2014.
If refiners don’t make a renewable fuel, they can buy credits for it, known as Renewable Identification Numbers. Those RINs surged in price this year, as refiners worried there wouldn’t be adequate gasoline demand to mix in a safe level of ethanol and other renewables this year or next.