A report produced by the National Research Council at the request of Congress claims the U.S. is likely to be unable to meet some specific biofuel mandates under RFS2, the federal renewable fuel standard, unless polices are changed or new innovative technologies are developed. The report, titled “Renewable Fuel Standard: Potential Economic and Environmental Effects of U.S. Biofuel Policy,” further states that the program may be ineffective at reducing global greenhouse gas emissions and that achieving the standards established by RFS2 would likely increase federal budget outlays and have mixed economic and environmental effects. Those in the biofuels industry have spoken out questioning various aspects of the analysis.

Regarding the production of adequate volumes of biofuel to meet the volume requirements of RFS2, the authors of the report note the industry is expected to produce enough conventional biofuels and biomass-based diesel to meet targets. However, they claim that there is uncertainty over how the cellulosic mandate will be met. “Currently, no commercially viable biorefineries exist for converting cellulosic biomass to fuel,” said the NRC in a press release. In addition, the authors note that policy uncertainties and high production costs may deter investors from entering the space.

The report also points out uncertainties related to greenhouse gas reductions. According to the report, dedicated energy crops will be needed to meet the RFS2 targets; however, their cultivation will probably require the conversion of uncultivated land or the displacement of commodity crops and pastures. The authors also point out that the RFS2 program can neither prevent market-mediated efforts nor control land-use or land-cover changes in other countries.

In addition, the report notes that biofuels face challenges related to price competitiveness, and that RFS2 will lead to government spending in relation to grants, loans, loan guarantees, and other payments to support biofuel production. The authors also claim that the specific environmental outcomes from increased biofuels production cannot be guaranteed.

Key findings of the report include:

- Absent major technological innovation or policy changes, the RFS2-mandated consumption of 16 billion gallons of ethanol-equivalent cellulosic biofuels is unlikely to be met in 2022.

- Only in an economic environment characterized by high oil prices, technological breakthroughs, and a high implicit or actual carbon price would biofuels be cost-competitive with petroleum-based fuels.

- RFS2 may be an ineffective policy for reducing global GHG emissions because the effect of biofuels on GHG emissions depends on how the biofuels are produced and what land-use or land-cover changes occur in the process.

- Absent major increases in agricultural yields and improvement in the efficiency of converting biomass to fuels, additional cropland will be required for cellulosic feedstock production; thus, implementation of RFS2 is expected to create competition among different land uses, raise cropland prices, and increase the cost of food and feed production.

- Food-based biofuel is one of many factors that contributed to upward price pressure on agricultural commodities, food, and livestock feed since 2007; other factors affecting those prices included growing population overseas, crop failures in other countries, high oil prices, decline in the value of the U.S. dollar, and speculative activity in the marketplace.

- Achieving RFS2 would increase the federal budget outlays mostly as a result of increased spending on payments, grants, loans, and loan guarantees to support the development of cellulosic biofuels and forgone revenue as a result of biofuel tax credits.

- The environmental effects of increasing biofuels production largely depend on feedstock type, site-specific factors (such as soil and climate), management practices used in feedstock production, land condition prior to feedstock production, and conversion yield. Some effects are local and others are regional or global. A systems approach that considers various environmental effects simultaneously and across spatial and temporal scales is necessary to provide an assessment of the overall environmental outcome of increasing biofuels production.

- Key barriers to achieving RFS2 are the high cost of producing cellulosic biofuels compared to petroleum-based fuels and uncertainties in future biofuel markets.

The National Biodiesel Board has issued a response to the report. According to NBB Vice President of Federal Affairs Anne Steckel, the NBB is happy that the authors of the report recognize a wide variety of environmental and economic benefits that are associated with biodiesel. “We were pleased to see the authors reaffirm that biodiesel is an advanced biofuel that can meet the biomass-based diesel targets under the EPA's Renewable Fuel Standard (RFS2),” said Steckel. “In fact, biodiesel—as an advanced biofuel under RFS—is also well-positioned to help fill the program's general volume requirement for advanced biofuels.”

Regarding greenhouse gas emissions, Steckel noted that the report clearly shows that significant uncertainties are associated with hypothetical modeling used to calculate indirect land use change. “We believe the evidence demonstrates that biodiesel compares very favorably when compared to petroleum, as the EPA found in its most recent analysis, which shows that biodiesel reduces greenhouse gas emissions by 57 percent to 86 percent, depending on the feedstock used,” she added.

The Advanced Ethanol Council has also spoken out in response to the report. According to a statement issued by AEC Executive Director Brooke Coleman, the NRC missed an opportunity to cast the RFS program in a proper light. “It is discouraging,” he said. “The most glaring problem is the council analyzed the ongoing development of the biofuels industry in a vacuum, as if these fuels are not displacing the marginal barrel of oil, which comes at great economic and environmental cost to the consumer. Congress was seeking a sober analysis of the RFS, and regrettably, this is not it.”

Novozymes has also weighed in on the analysis, criticizing the NRC’s conjectures. “The report makes broad assumptions about environmental performance of current and future biofuels producers who are continually improving energy and water usage,” said Novozymes North America President Adam Monroe. “The report also ignores the environmental impact of marginal oil production and compares biofuels to standard or best case oil. Biofuels will replace more expensive marginal oil first, so comparisons of biofuels environmental performance should be benchmarked against these sources.”

A full copy of the 447-page report can be downloaded from the NRC website.