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Posts Tagged ‘renewable fuel standard’

EPA’s New RFS Proposal Turns Clarity Into Confusion

December 4th, 2013

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Consistency. Certainty. Clear expectations.

These are critical elements of any successful regulatory policy implementation. The Environmental Protection Agency’s proposed rule on the Renewable Fuels Standard (RFS) could unravel them all.

In only 6 years, the RFS has driven billions of dollars in private capital toward the development of low-carbon advanced biofuels, and propelled these fuels out of the lab and into the market. This level of investment in emerging technologies requires long-term regulatory and market certainty, and the RFS has provided just that.  It has also provided a consistent idea of what is expected of regulated industries.

The RFS was carefully designed to encourage production of increasing amounts of biofuels, without making demands of industry that are not technologically feasible. A perfect example of this flexibility is EPA’s statutory authority to reduce volumetric requirements for cellulosic biofuels annually, to reflect anticipated production.  EPA has used this authority multiple times in cases where production has lagged behind the volumes envisioned by the statute.

But EPA’s proposed rule uses a new and very…creative…interpretation of the RFS statute to expand this authority and reduce the required blending levels of a fuel that is in abundant supply. EPA’s interpretation has struck many as counter-intuitive at best, and inconsistent with the law at worst. As market analyst Ben Salisbury explained in a recent Third Way briefing, the RFS offers little certainty to investors if it is implemented in such an unpredictable way. According to Salisbury, “…that has a chilling effect on not just biofuels but all environmental control investments.”

If inconsistent rulemaking has a chilling effect on investment, then legislative adjustments might as well be a meat locker. The odds of passing thoughtful and productive legislative adjustments to the RFS are about as high as getting Congress to gently reopen Obamacare. And if the existing law were simply “eliminated”, it’s difficult to envision some new and improved renewable fuels bill getting signed in the Rose Garden any time soon.

The bottom line is that the RFS has performed as it was intended to. Most importantly, it has driven investment toward technologies that offer exceptional greenhouse gas emissions reductions compared to petroleum fuels, and that are now starting to enter the market. Creating instability, either by regulation or legislation, will only halt this progress at a critical juncture.  By continuing to implement the RFS consistently, EPA can provide the certainty investors need to maintain this level of support and help drive further innovation in critically-needed advanced fuels.

This piece was originially published via National Journal