However, the proposed Renewable Fuel Standards for 2026 and 2027 call for an increase of 3 billion gallons of bio-based diesel consumption each year, far exceeding the domestic feedstock availability. This means that the mandates can only be met by increasing imports of feedstock or finished fuels, or by diverting vegetable oil from food markets to fuel markets, which will in turn increase imports of vegetable oil for food.
The EPA’s proposal ignores the reality of limited domestic feedstock availability and the potential negative consequences of overreliance on imports. Increasing bio-based diesel mandates without considering the availability of domestic feedstocks will only lead to higher costs for consumers, harm to the environment, and disruptions in food markets.
A more sustainable approach would be to scale back biofuel mandates to match domestic feedstock availability and prioritize the development of novel feedstocks that can support increased biofuel production without causing harm to food markets or the environment. Supporting the development of underutilized resources like winter cover crops, perennial crops, or agricultural residues can not only increase biofuel production but also improve water quality and soil health in the US Midwest.
In conclusion, the US government must be realistic about the available homegrown resources and scale its policies accordingly to support a sustainable biofuel industry. By scaling back mandates to match domestic feedstock availability, the US can reduce reliance on imports, save consumers money, and protect the environment and food markets. It is crucial that policymakers prioritize the development of novel feedstocks that can support increased biofuel production without causing harm to the environment or food markets. The Draft Regulatory Impact Assessment (DRIA) by the EPA delves into projections of available soybean oil to BBD producers, highlighting discrepancies between USDA estimates and industry suggestions. The USDA projects 50 million gallons a year, while the American Soybean Association proposes 350 million gallons a year. However, the trend yield growth of soybeans over the last 50 years indicates that even if all yield growth was devoted to fuel production, it would only supply less than 60 million gallons of BBD from the approximately 85 million acres of soybeans harvested each year in the US. Exceeding growth rates for soybean oil would require diverting soybeans from existing markets and expanding acreage at the expense of other crops or land uses.
EPA’s analysis for fats oils, greases, and canola oil produces a summary projecting a 250 million gallon annual increase in soybean oil, closer to industry studies than USDA’s projection of 50 million gallons a year. Despite this optimistic estimate, EPA still projects only 275 million gallons per year of available domestic BBD feedstock, with the majority of available feedstock (350 million gallons of BBD) being imported. Adding EPA’s assessment of domestic availability to production from domestic feedstocks in 2024 would support not more than 3.75 billion gallons of domestic BBD in 2026, falling short of the proposed standard by about 3 billion gallons.
EPA’s proposal to discount compliance credits for imported feedstocks and fuels by 50 percent is met with criticism. While prioritizing domestic production aligns with the statutory goals of the RFS, the RIN discounting mechanism is deemed counterproductive. The mechanism would divert US vegetable oils from existing uses to fuel production, potentially leading to extensive diversion of soybean oil from food to fuel uses. This could result in non-fuel markets being backfilled with imported oils, neglecting the environmental implications of using palm oil and soybean oil, which are closely linked to deforestation.
The costs of policies supporting bio-based diesel are substantial, with bio-based diesel prices typically double those of fossil diesel. This cost is often borne by consumers buying gasoline and diesel, as well as taxpayers who fund tax credits. With US BBD consumption exceeding 5 billion gallons in 2024, the total costs surpass $10 billion a year, with no realistic prospect of cost reduction as production scales up.
In conclusion, the EPA’s projections and proposals in the DRIA raise concerns about the sustainability and economic implications of increasing bio-based diesel production. The potential impacts on domestic feedstock markets, environmental consequences of increased imports, and the substantial costs involved all point to the need for a comprehensive assessment of the RFS and its long-term implications. The Renewable Fuel Standard (RFS) was established with the intention of supporting the development of innovative technologies that would produce low carbon cellulosic biofuels from underutilized agricultural residues or high yielding perennial grasses. However, the commercialization of cellulosic biofuels has been slower than anticipated, leading to a focus on mature commodities like soybeans in the RFS proposal.
The costs of the RFS are largely transferred to US fuel consumers, adding around 10 cents per gallon to diesel fuel and 4.5 cents per gallon to gasoline. Taxpayers also subsidize biofuel production through tax credits, further adding to the deficit and debt. The proposal to increase the RFS mandate beyond domestic feedstock availability is expected to benefit palm oil producers and oil companies, while leading to costly feedstock diversion and increased greenhouse gas emissions.
Increasing the RFS mandate may lead to the diversion of domestic feedstocks from existing markets and the diversion of whole soybeans from overseas crushing facilities to domestic facilities. However, this will not significantly expand demand for soybeans, as the global market is ultimately constrained by demand for soybean meal. The proposal may increase the price of domestic soybean oil, but the impact on soybean prices that farmers sell is expected to be minimal.
Overall, the costs of the RFS proposal far exceed the benefits, with limited impact on US farmers and small changes in demand for soybeans. The focus on mature commodities like soybeans in the RFS proposal may lead to unintended consequences and increased costs for consumers and taxpayers. Further analysis is needed to fully understand the implications of the proposal before it is implemented. The expansion of bio-based diesel (BBD) consumption as proposed by the EPA under administrator Zeldin has raised concerns about its climate impact and potential harm to global food consumers. While the Renewable Fuel Standard (RFS) statute aims to reduce global warming emissions, EPA’s analysis indicates that increasing BBD consumption would actually lead to an increase in global warming emissions. This is mainly due to the large expansions of cropland required globally, resulting in emissions from land use change and agriculture.
Two models evaluated by EPA, GCAM and GLOBIOM, differ in their findings but both suggest that expanding BBD consumption will have a negative impact on the climate. While GCAM predicts a net emissions increase of 93 MMT CO2e, GLOBIOM projects a net decrease of 87 MMT CO2e. However, EPA’s assumption that biofuels directly displace petroleum fuels on a one-for-one basis overlooks the rebound effect, where reduced consumption of petroleum in the US leads to increased consumption globally. This means that GLOBIOM’s findings are likely too optimistic.
Despite this, even if we accept GLOBIOM’s results, the emissions reductions from expanding BBD consumption fall short of the statutory requirement that advanced biofuels reduce GHG emissions by 50 percent compared to fossil fuels. The climate benefits obtained from GLOBIOM’s analysis are insufficient to justify the proposed expansion of RFS mandates.
In addition to its climate impact, the expansion of BBD consumption will also have significant implications for global food consumers. The diversion of vegetable oils from food to fuel markets will lead to higher prices and impact vulnerable populations who rely on vegetable oils as an essential cooking item. According to the International Food Policy Research Institute (IFPRI), each metric ton of vegetable oil converted into biodiesel globally could feed more than 10 million people per year. Therefore, EPA’s proposal to divert 11 million metric tons of vegetable oil from food to fuel markets could potentially deprive 100 million people of essential calories annually.
While palm oil production may eventually replace the diverted soybean oil and bring down prices, the expansion of palm oil plantations raises concerns about deforestation. Palm oil is ineligible for the RFS due to its environmental impacts, but the indirect harm caused by the displacement of soybean oil cannot be ignored.
In conclusion, the expansion of BBD consumption as proposed by the EPA has raised serious concerns about its climate impact and potential harm to global food consumers. The analysis presented by EPA indicates that the climate benefits are insufficient to justify the proposal, and the diversion of vegetable oils from food to fuel markets could have far-reaching consequences for vulnerable populations. It is important to carefully consider the implications of such policies on both the environment and global food security before moving forward with any expansions of biofuel consumption. The expansion of soybean and palm oil is a major contributor to tropical deforestation, leading to a significant increase in annual forest carbon loss in the early twenty-first century. Recent analysis has revealed that oil palm and soybeans are the second and third largest drivers of deforestation, following cattle.
In light of these findings, it is crucial to address the impact of biodiesel production on the environment and the need for sustainable practices. The growth of the biodiesel industry must be supported by a consistent increase in the availability of oils and fats. The Environmental Protection Agency (EPA) plays a key role in regulating the biofuel industry and setting mandates that align with feedstock availability.
While the EPA has made efforts to expand the biodiesel market, it is important to consider the risks associated with excessive growth. The current proposal for the Renewable Fuel Standard (RFS) lacks a rational basis as a domestic fuel policy and fails to consider the constraints of domestic feedstock availability. Instead of massive growth, the RFS should be scaled back to support a sustainable domestic biofuels industry.
Data on vegetable oil production and feedstock consumption highlight the need for a balanced approach to biodiesel production. The use of imported feedstocks has created political pressure to focus on domestic resources, but mandates should be set in line with domestic feedstock availability to prevent environmental damage and ensure a reduction in global warming pollution.
The EPA’s analysis of price impacts on gasoline and diesel underscores the need for a balanced approach to biofuel production. The shift of RFS compliance to states with Low Carbon Fuel Standards demonstrates the need for a cap on vegetable oil-based fuels to stabilize and strengthen environmental policies.
In conclusion, the expansion of soybean and palm oil for biodiesel production has significant environmental implications. It is essential to prioritize sustainable practices and align biofuel policies with feedstock availability to mitigate deforestation and reduce carbon loss in tropical regions. By implementing responsible regulations and scaling back excessive growth, we can support a domestic biofuels industry that is environmentally sound and economically viable.
