What is RFS2?
The revised Renewable Fuel Standard (RFS2) is a mandate implemented by the U.S. Environmental Protection Agency (EPA) in 2010 under the Clean Air Act (CAA), which aims to boost biofuel production in the United States. The mandate updates RFS1, a precursor to RFS2, in accordance with the Energy Independence and Security Act (EISA). EISA requires biofuels to be integrated into the transportation fuel supply in order to: a) reduce dependence on foreign oil; and b) encourage further biofuel innovation.
RSF2 is staggering in its scale, complexity, and requirements. As such, this guide focuses on its key features and is intended to provide brief orientation to the rule.
What are the key differences between RFS1 and RFS2?
Although RFS2 retains the underlying system of compliance under RFS1 requiring stakeholders to utilize Renewable Identification Numbers (RINs), it has integrated three changes that make it much more complex than the previous mandate. First, RFS2 establishes multiple types of RINs to correspond with new categories of renewable fuels. Second, RFS2 mandates that biofuels production grow from 11.1 billion gallons in 2009, the year the mandate used to benchmark volume requirements, to 36 billion gallons by 2022. This represents a 480% increase over the 7.5 billion gallon mandate under RFS1. RFS2 also caps corn-based ethanol production at 15 billion gallons and mandates that the remaining 21 billion gallons come from advanced biofuels. Third, RFS2 introduces the first ever greenhouse gas regulatory system in the U.S. transportation fuel industry, scoring fuels based on their upstream and downstream GHG performance. RFS1 treated all fuels equally.
What is a RIN?
Renewable Identifications Numbers (RINs) serve as markers to track the amount and type of renewable fuels being produced, imported, or exported in or from the United States. A RIN is a unique number generated to represent a volume of renewable fuel.
What are the types of fuels classified under RFS2?
Under RFS2, there are 4 types of fuel classifications:
- Type C. Cellulosic Biofuels must meet various requirements including at least a 60% GHG reduction.
- Type B. Biomass-Based Diesel must meet various requirements including at least a 50% GHG reduction.
- Type A. Advanced Biofuels must meet various requirements including at least a 50% GHG reduction.
- Type R. Renewable fuel must meet various requirements including at least a 20% GHG reduction. However, existing ethanol production facilities are subject to grandfathering requirements that exempt them from the GHG performance requirements for a defined period of time.
Who must comply with RFS2?
Parties obligated to meet RFS2′s Renewable Volume Obligations (RVOs) include refiners that produce, or importers that import, gasoline and diesel fuel within the 48 contiguous states and Hawaii. Note that Alaska and U.S. territories are exempt from RFS2 requirements. Both marketers that blend and trade less than 125,000 gallons per year of renewable fuel into gasoline and diesel fuel, and parties that simply add renewable fuel to gasoline, are not obligated to produce RINs under RFS2.
What is the penalty for noncompliance?
According to the rule, violators will incur civil penalties of up to $37,500 per day and per each individual violation, plus the amount of any economic benefit or savings resulting from each violation.
What is the anticipated market impact of RFS2?
RFS2 has proved to be a complex rule to implement. One of the more significant criticisms levied to date is that the rule sets too high of volume requirements. Requirements for cellulosic biofuels have had to be decreased in 2010 and 2011 to accommodate lagging production. Additionally, some argue that the rule is too restrictive and does not foster the scale of innovation needed in the renewable fuels market.
1. An Overview of the Renewable Fuels Standard, Renewable Energy Institute International (REII).
2. America Advances to Performance-Based Biofuels: The Advanced Renewable Fuel Standard / RFS2, White Paper, February 26, 2010.
3. RFS2 Final Rule, EPA.