{ "id": "IN11353", "type": "CRS Insight", "typeId": "INSIGHTS", "number": "IN11353", "active": true, "source": "EveryCRSReport.com", "versions": [ { "source": "EveryCRSReport.com", "id": 625164, "date": "2020-05-18", "retrieved": "2020-05-20T22:17:29.934660", "title": "The 2020 Renewable Fuel Standard (RFS): COVID-19 Impacts ", "summary": "Ongoing COVID-19 mitigation measures may impact the Renewable Fuel Standard (RFS)\u2014a mandate requiring U.S. transportation fuel to contain renewable fuel. Since the beginning of the pandemic, transportation fuel demand has dropped significantly, compared to January through early March 2020 and to projections made when the 2020 volume requirements were finalized. Significant changes in fuel demand and other effects of the pandemic could affect both the implementation of the RFS and the impacts of compliance with the 2020 standard, particularly given the present-day uncertainties with refinery and biorefinery economics, fuel prices, RFS compliance costs, and economic recovery, among other things. Some Members of Congress, governors, and stakeholders in the petroleum and renewable fuel industries, among others, have called on the U.S. Environmental Protection Agency (EPA) to take additional action on the 2020 RFS requirements due in part to COVID-19. Congress may consider whether to intervene or whether EPA should intervene, and if so, whether it has the statutory authority to do so. \nThe Renewable Fuel Standard\nThe RFS is a renewable fuel volume mandate scheduled to ascend over time. The RFS statute specifies minimum annual volume targets for four renewable fuel categories: renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel. Each year EPA establishes the volume of the four renewable fuel categories that will be required for the coming year based on the statutory targets and use of its statutory waiver authority. \nUnder certain conditions, the EPA Administrator has statutory authority to approve waivers of the RFS requirements (in whole or in part). There are various waivers, one of which EPA has used several times\u2014the cellulosic biofuel waiver. For example, although the statute calls for 30 billion gallons of total renewable fuel in 2020, the EPA Administrator used the cellulosic biofuel waiver authority to reduce the total volume to 20.09 billion gallons due to \u201c... a projected shortfall in the availability of cellulosic biofuel, and consistent with our long-held interpretation that the cellulosic waiver authority is best interpreted to provide equal reductions to advanced biofuel and total renewable fuel volumes....\u201d The 2020 final volume requirements correspond to an 11.56% annual percentage standard for total renewable fuel.\nStatutory Volumes, Annual Percentages, and RVOs\nThe RFS statute specifies annual renewable fuel volumes. EPA converts the statutory RFS volumes\u2014after adjusting for any waivers\u2014into annual percentage standards for each fuel category using an equation that accounts for the projected volumes of gasoline and diesel consumed, renewable fuel consumed, and gasoline and diesel exempted. Obligated parties use the annual percentage standards to compute their renewable volume obligation (RVOs) for each fuel category. The RVO is the obligated party\u2019s total gasoline and diesel sales multiplied by the annual percentage standard plus any deficit of renewable fuel from the previous year. The RVO determines how many gallons of the particular renewable fuel type the party must account for in order to be in compliance. \nU.S. Transportation Fuel Consumption and the RFS\nEPA set the annual percentage standards in its 2020 RFS final rule (released in December 2019) using transportation fuel consumption projections at that time. Fuel consumption has dropped considerably since then due in great part to COVID-19 mitigation measures. An obligated party\u2019s RVO is based on the annual percentage standards, not the total volume of fuel to be blended nationwide. An obligated party is only responsible for that percentage of the fuel they actually produce for consumption. Therefore, recognizing the current decline in fuel consumption and the \u201cheightened levels of uncertainty\u201d associated with transportation fuel projections for the remainder of the year due to COVID-19 impacts, the actual renewable fuel blended may fall short of the volume EPA set for 2020 (i.e., 20.09 billion gallons).\nStakeholder Perspectives\nStakeholders have commented on the COVID-19 pandemic\u2019s impact on 2020 RFS compliance and outcomes. Some states have requested a waiver from EPA, citing concerns that \u201ccontinuing to implement the current RVO ... would severely\u2019 harm the [refining] sector, and consequently harm the economy of the States and the Nation.\u201d Some in the petroleum industry argue that a waiver is needed, in part, to alleviate RFS compliance costs\u2014which they may view as better spent on retaining employees and continuing operations during the pandemic. However, some in the biofuel industry assert that such a waiver would \u201cdevastate renewable fuel producers\u201d and \u201ccost essential infrastructure jobs in multiple states,\u201d among other things. Further, 24 Senators wrote the President to request that he reject the requests for a waiver of the RFS, as granting a waiver would \u201ccause further harm to the U.S. economy\u201d and \u201cexacerbate the effects experienced by the biofuel sector as a result of COVID-19, causing far-reaching detrimental impacts on employment, farmers, food security, fuel prices, and the environment.\u201d \nThe RFS statute gives the EPA Administrator the authority to waive the overall RFS requirements, in whole or in part, if \u201cimplementation of the requirement would severely harm the economy or environment of a state, a region, or the United States\u201d or \u201cthere is an inadequate domestic supply.\u201d In response to past waiver requests, EPA has acknowledged that \u201cidentifying severe economic harm ... is a difficult and complex issue.\u201d EPA has also stated, \u201cwaiver decisions are based on current circumstances and market conditions.\u201d Under the statute, the EPA Administrator has 90 days to decide to approve or disapprove a waiver petition. \nPrior to requests for a 2020 waiver, one biofuel group called on EPA to increase the 2020 RVO to \u201cthe percentage necessary to ensure that the full 20.09 billion gallons required by law are used,\u201d among other things. Should EPA change the 2020 annual percentage standards accordingly, it could lead to a situation where EPA has issued a final volume requirement far beyond the ethanol blend wall, i.e., for significantly more renewable fuel than can be blended and consumed based on the amount of gasoline actually consumed.\nCongressional Considerations\nThe COVID-19 pandemic may present a unique challenge for the 2020 RFS. The 2020 final annual percentage standards were issued in December 2019\u2014prior to the start of the COVID-19 mitigation measures\u2014when transportation fuel consumption projections differed greatly from current conditions. Congress, EPA, stakeholders, and others are navigating unfamiliar territory in dealing with the novel coronavirus. There is uncertainty on several fronts, including the duration of COVID-19 mitigation actions, both formal (e.g., state \u201cstay-at-home\u201d order) and informal (e.g., consumer choice to stay home). Congress gave EPA the authority to waive the RFS to respond to certain conditions that arise. Whether and how EPA uses its waiver authority for the 2020 RFS as currently requested remains to be seen.\nAdditional Resources\nCRS Report R43325, The Renewable Fuel Standard (RFS): An Overview \nCRS Report R44045, The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN11353", "sha1": "7c60137a915aeecf6afcfaf19848994eea3475df", "filename": "files/20200518_IN11353_7c60137a915aeecf6afcfaf19848994eea3475df.html", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4927, "name": "Renewable Energy & Efficiency" } ] }, { "source": "EveryCRSReport.com", "id": 622822, "date": "2020-04-22", "retrieved": "2020-04-22T22:13:09.428424", "title": "The 2020 Renewable Fuel Standard (RFS): COVID-19 Impacts ", "summary": "Ongoing COVID-19 mitigation measures may impact the Renewable Fuel Standard (RFS)\u2014a mandate requiring U.S. transportation fuel to contain renewable fuel. Since the beginning of the pandemic, fuel demand has dropped significantly. The RFS is based, in part, on projections of transportation fuel use. Significant deviations from these projections could affect compliance with the 2020 standard. Congress may consider whether to intervene or whether the U.S. Environmental Protection Agency (EPA) should do so; and, if the latter, does the existing statute provide EPA with adequate authority? \nThe Renewable Fuel Standard\nThe RFS is a volume mandate scheduled to ascend over time. The RFS statute specifies minimum annual volume targets. Each year EPA establishes the volume of four renewable fuel categories (renewable fuel, advanced biofuel, cellulosic biofuel, and biomass-based diesel) that will be required for the coming year based on the statutory targets, fuel supply, and other conditions. The total renewable fuel target consists of both conventional biofuel (e.g., corn starch ethanol) and advanced biofuel (e.g., cellulosic ethanol).\nUnder certain conditions, the EPA Administrator has statutory authority to approve waivers of the RFS requirements (in whole or in part) based on particular conditions. For example, although the statute calls for 30 billion gallons of total renewable fuel in 2020, EPA\u2019s 2020 final rule calls for 20.09 billion gallons of total renewable fuel. The 2020 final rule corresponds to an 11.56% annual percentage standard for total renewable fuel.\nStatutory Volumes, Annual Percentages and RVOs\nThe RFS statute specifies annual renewable fuel volumes. EPA converts the statutory RFS volumes\u2014after adjusting for any waivers\u2014into annual percentage standards for each fuel category using an equation which accounts for the projected volumes of gasoline and diesel consumed, renewable fuel consumed, and gasoline and diesel exempted. Obligated parties use the annual percentage standards to compute their renewable volume obligation (RVOs) for each fuel category. The RVO is the obligated party\u2019s total gasoline and diesel sales multiplied by the annual percentage standard plus any deficit of renewable fuel from the previous year. The RVO determines how many gallons of the particular renewable fuel type the party must account for in order to be in compliance. \nThe Blend Wall and U.S. Gasoline Consumption\nFor years, there has been discussion about the impact a \u201cblend wall\u201d could have on the RFS. Ethanol is the predominant fuel used to meet the RFS, and the blend wall is the upper limit of ethanol that can be blended into U.S. gasoline and still maintain automobile performance and comply with the Clean Air Act. The ethanol content for gasoline used in most vehicles is 10% (E10), although many newer vehicles can use E15. Assuming the blend wall is approximately 10% of U.S. gasoline consumption, that limit would be approximately 14.2 billion gallons in 2019 (based on 142.2 billion gallons of motor gasoline consumed). \nIn 2018 and 2019, the blend wall was breached, although RFS targets were still met. However, recent COVID-19 mitigation measures (e.g., stay at home) have caused a significant drop in fuel consumption. This drop could lead to a situation where EPA has issued a final volume requirement (20.09 billion gallons) far beyond the blend wall, for significantly more renewable fuel than can be blended and consumed. Compliance for individual obligated parties is based on the percentages set before the start of the year. Because an obligated party\u2019s RVO is based on the percentage standard (11.56%), it is not clear\u2014given recent gasoline supply projections\u2014if the 2020 percentage standards will lead to the total 2020 volume requirement being met.\nStakeholder Perspectives\nStakeholders have commented on the COVID-19 pandemic\u2019s impact on the ability to meet the 2020 RFS standards. Five states requested a waiver from EPA citing concerns that \u201ccontinuing to implement the current RVO ... would severely\u2019 harm the [refining] sector, and consequently harm the economy of the States and the Nation.\u201d Some in the petroleum industry argue that a waiver is needed due, in part, to RFS compliance costs\u2014which might be better spent on retaining employees and continuing operations. However, some in the biofuel industry assert that such a waiver would devastate renewable fuel producers and cost essential infrastructure jobs in multiple states, among other things. The RFS statute gives the EPA Administrator the authority to waive the overall RFS requirements, in whole or in part, if \u201cimplementation of the requirement would severely harm the economy or environment of a state, a region, or the United States\u201d or \u201cthere is an inadequate domestic supply.\u201d In response to past waiver requests, EPA has acknowledged that \u201cidentifying severe economic harm ... is a difficult and complex issue.\u201d EPA has also stated, \u201cwaiver decisions are based on current circumstances and market conditions.\u201d Under the statute, the EPA Administrator has 90 days to decide to approve or disapprove it. Prior to requests from multiple governors for a 2020 waiver, one biofuel group called on EPA to increase the 2020 RVO to \u201cthe percentage necessary to ensure that the full 20.09 billion gallons required by law are used,\u201d among other things.\nCongressional Considerations\nThe COVID-19 pandemic may present a unique challenge to 2020 RFS compliance. The 2020 standards were issued in December 2019\u2014prior to the start of the COVID-19 mitigation measures\u2014when gasoline consumption projections differed greatly from current conditions. Congress, the EPA, stakeholders, and others are navigating unfamiliar territory\u2014how to adhere to RFS requirements, and protect the health of the nation\u2019s citizens and sustain the economy, while dealing with the novel coronavirus. There is considerable uncertainty on several fronts, including the duration of COVID-19 mitigation actions, both formal (e.g., state order to stay home) and informal (e.g., consumer choice to stay home). Congress gave EPA the authority to waive the RFS given certain conditions so that it could respond to uncertainties. Whether and how EPA uses its waiver authority for the 2020 RFS as currently requested remains to be seen.\nAdditional Resources\nCRS Report R43325, The Renewable Fuel Standard (RFS): An Overview \nCRS Report R44045, The Renewable Fuel Standard (RFS): Waiver Authority and Modification of Volumes", "type": "CRS Insight", "typeId": "INSIGHTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/IN11353", "sha1": "144ef3960b822177221085d4b739752b2710580d", "filename": "files/20200422_IN11353_144ef3960b822177221085d4b739752b2710580d.html", "images": {} } ], "topics": [] } ], "topics": [ "CRS Insights" ] }