EPA’s Expanded Definition of Cellulosic Biofuels: A+ Grades for C- Performance

Last month, the Environmental Protection Agency (EPA) issued a final rule expanding the types of fuels that can qualify as cellulosic biofuel under the Renewable Fuel Standards (RFS).[i]   For the EPA this is perfect timing, as it still has yet to finalize the RFS standards for 2014, but is proposing to significantly increase the cellulosic target.  It’s current proposal would require the blending of 17 million gallons of cellulosic biofuel – up 11 million gallons from the 2013 target – [ii] despite the fact that a mere 422,740 gallons of cellulosic biofuel were produced in 2013, and only 72,754 gallons have cellulosic biofuel have been produced through the first six months of 2014.

EPA’s estimates of cellulosic biofuel production have overestimated production by millions of gallons every year. EPA is therefore trying to increase what is defined as “cellulosic biofuel.”

Expanding what qualifies as a cellulosic biofuel increases the volume of cellulosic production, and will help fuel producers meet the overly ambitious 2014 targets.  After all, the RFS mandates the blending of 16 billion gallons of cellulosic biofuel into transportation fuel by 2022, and with just over 800,000 gallons of cellulosic biofuel produced last year[iii]—only 0.0008 percent of the original 2013 target of 1 billion gallons and 0.13 percent of the EPA’s 2013 adjusted target of 6 million gallons—it should come as no surprise that EPA is trying to ramp up cellulosic production.

What is Cellulosic Biofuel?

As defined by the Clean Air Act, cellulosic biofuel is “a renewable fuel derived from any cellulose, hemicellulose, or lignin that is derived from renewable biomass and that has lifecycle greenhouse gas emissions…that are at least 60 percent less than the baseline lifecycle greenhouse gas emissions”.[iv]  However, many plants do not solely contain cellulose, hemicellulose, or lignin, but also include varying amounts of other components that can also be converted into renewable fuel.[v]  For this reason, it may be appropriate to allow de minimis exceptions – such that an entire fuel can be considered cellulosic, so long as a very small portion is derived from a non-cellulosic source.

In light of this, existing RFS regulations specify that “it is appropriate for producers to base RIN assignment on the predominant component and, therefore, to assume that the biogenic portion of their fuel is entirely of cellulosic origin”(emphasis added).[vi]   In other words, the existing RFS regulations suggest that although a fuel may not be entirely made out of a cellulosic source, it can be assigned a total cellulosic RIN value if it is “predominantly” made from feedstock containing cellulose.  Comments on a minimum threshold to be considered “predominant” ranged from 70 percent to 99.9 percent, with some interpretations suggesting that the existing regulations allowed only for minimal exceptions to fuels that were 95 percent to 99 percent cellulosic in origin.[vii]

Rather than minimal exceptions, EPA’s new regulation drastically alters what it defines as cellulosic ethanol, and is now allowing fuel that is 75 percent cellulosic to count as 100 percent cellulosic. Setting such a low threshold means that EPA can now classify other fuels as entirely cellulosic, such as compressed natural gas and liquefied natural gas that is produced using biogas from landfills.[viii]

EPA has gone even one step further in this vein, and will now categorize electricity generated from biogas that is used in the transportation sector to power electric vehicles as cellulosic.[ix]

Fudging What is Cellulosic Biofuel—Even Electricity Can Now Be Called “Biofuel”

EPA’s expanded definition of cellulosic biofuel production quite clearly fudges the Clean Air Act’s definition of a cellulosic biofuel.  Now, any biofuel with a 75 percent cellulosic content is considered to be 100 percent cellulosic, which means that rather substantial portions of fuels that are not “derived from any cellulose, hemicellulose, or lignin” will be considered as such.  Furthermore, including up to 25 percent non-cellulosic fuel in cellulosic production volumes artificially inflates the reported amount of actual cellulosic biofuel produced, which could lead to continually inflated RFS cellulosic targets in the future.[x]

Suspicion also arises over the EPA’s rather low and ambiguous threshold target when political intentions are considered.  Setting such a low threshold allows for a substantial increase in the types of fuel that can be counted as entirely cellulosic, and is an easy way to bring in new constituencies to support the RFS.  With renewable electricity generators now able to obtain valuable cellulosic RINs from transportation fuels produced using biogas, incentives now exist for utilities to support electric vehicle (EV) production and infrastructural improvement, a pleasing development for the EV sector always hungry for subsidies. [xi]

Defining electricity as cellulosic biofuel is quite clearly wrong unless the biogas electricity generator is only connected to an electric vehicle and not connected to the electric grid. Otherwise the electricity that actually reaches the electric vehicle will actually come from numerous sources, such as coal and natural gas instead of the biogas.

Conclusion

As the RFS continues to be less of a success story and EPA is repeatedly forced to lower the original proposed standards, it should come as no surprise that EPA seeks to gain supporters before the final rule on the 2014 RFS standards. Moreover, allowing the EPA to arbitrarily redefine what it means for a fuel to be cellulosic opens the door for further corruption and fraud, as we have already witnessed in RIN trading.

The expanded pathways rule alters the definition of a cellulosic biofuel by allowing fuel containing only 75 percent cellulose, hemicellulose, or lignin to be counted as 100 percent cellulosic biofuel—it’s like assigning an A+ grade to a piece of C-student writing.  Although the rule will undoubtedly increase the reported volume of cellulosic biofuel production, it allows EPA to continue to get away with setting unrealistic and inflated cellulosic targets.  Using this regulation to create new support for the RFS is a dangerous consequence of the political maneuvering that has taken place in order to keep the RFS alive.

This post was authored by IER Summer Associate Sarah Pearce.