Some corn state senators have recently argued that the nation’s biofuel mandate, the Renewable Fuel Standard (RFS), is not doing enough to ensure the production of certain biofuels, specifically biodiesel. In the latest chapter of this worn-out saga, Republican Senator Chuck Grassley blames the Biden administration for recent biodiesel plant closures across America’s corn belt.
His criticism is misguided, and his argument is fundamentally flawed. It ignores the realities of market conditions and decades-old regulations that have enabled advanced biofuel innovation to proliferate and thrive.
The announcement of two biodiesel plant closures in the Midwest impelled some members of Congress to call for what is, basically, a government bailout. They argue that President Biden should revisit mandated biofuel levels under the RFS to rescue the fading biodiesel industry. They also claim failing to do so will in some way hurt farmers.
However, biodiesel plant closures are the result of market participants developing a better product – renewable diesel – that is beating biodiesel on a market basis for a greater share of the biofuel mandate. The closures are not the result of “drastically low” biofuel volume mandates. In fact, the rise of renewable diesel is the very type of market reaction the RFS was intended to create and will create more opportunities for farmers in Wood County and across the Buckeye State.
When the RFS was signed into law, America was contending with surging gas prices and energy security concerns following Hurricane Katrina and war in the Middle East. Lawmakers sought ways to shore up America’s energy independence by reducing reliance on foreign fuels and increasing domestic fuel production. The RFS was, therefore, designed to expand the use of ethanol but, more importantly, to encourage the private sector to help kickstart a nascent advanced biofuel industry that held the promise of lower GHG emitting, “drop-in” transportation fuels.
In the process of pursuing new technologies and unlocking new possibilities with biofuels, researchers discovered biodiesel’s potential—and its pitfalls. They realized biodiesel needed to be blended into petroleum to work, undermining its environmental benefits. They saw how biodiesel froze in low temperatures, undermining its potential use during colder winter seasons.
As businesses began to see these critical flaws in biodiesel, the market shifted toward renewable diesel, which is chemically the exact same molecule as petroleum diesel. Renewable diesel is typically derived from soybean or canola oil. A gallon of renewable diesel can completely replace a gallon of petroleum diesel in existing infrastructure and engines with no seasonal or other compatibility issues. Ultimately, investments and innovation accelerated because renewable diesel is a superior product to biodiesel in all the ways it matters for U.S. consumers, industries, and the environment.
Additionally, as ethanol maxed out at the 10 percent concentration all engines and refueling infrastructure were meant to handle, obligated parties needed to look to new fuels to meet their RFS requirements. Specifically, refiners with no access to the infrastructure needed to blend ethanol into gasoline realized they could produce renewable diesel through traditional refining processes, providing them with a new option for complying with the RFS that minimizes their need to buy costly, unregulated and widely traded RFS compliance credits. They responded to this signal in force.
The net result is that the RFS incentivized renewable diesel use in such quantities that it helped obligated parties meet their RFS requirements while bringing the price of tradeable credits down. Since consumers eventually paid for these credits in the form of higher fuel prices, their falling prices also decreased prices at the pump. Moreover, the same feedstocks used in biodiesel are used for renewable diesel—so not only does the shift from biodiesel to renewable diesel NOT hurt farmers, but it also leads to more opportunities given the ability to use renewable diesel in higher concentrations of the diesel fuel pool.
Farmers throughout Wood County and beyond will reap the benefits as America’s refineries continue to invest in renewable diesel innovation. All signs point to continued investments in renewable diesel, a positive trend for Ohio’s soybean growers and animal agriculture industry, whose products create the main feedstock for renewable diesel.
In short, biodiesel’s plight is the result of the exact type of fuel innovations the RFS was designed to create: a better, more usable biofuel that can be produced in sufficient quantities to actually push more biofuel into the market and reduce the reliance on tradeable compliance credits, lowering gas process in the process. Since renewable diesel uses the same ag feedstocks as biodiesel but holds greater opportunities, it also expands opportunities for Ohio’s farmers.
The RFS was not meant to stand up new fuels in perpetuity through never-ending increases in mandated biofuel volumes, regardless of the cost to consumers. It was meant to kickstart an industry and eventually lessen the need to rely on continuously escalating government mandates in the pursuit of lowering emissions and enhancing energy security. Misguided calls for continuously escalating RFS mandates won’t save biodiesel. It will only drive up consumer costs and diminish U.S. refining capacity.
Philip Chrysler
Philip Chrysler is a candidate for Wood County Commissioner.
