When Americans think of exporting goods, they rarely, if ever, think of ethanol. But America has a growing ethanol export industry being constrained by the Environmental Protection Agency(EPA). A few minor changes to rules within the EPA can create a substantial increase in ethanol exports, which means more work for everyone in the value chain for ethanol from the farmer to tanker. Creating more demand for your product makes economic sense.
The Renewable Fuel Standard (RFS) is a federal program that requires transportation fuel to contain a minimum amount of renewable fuels. The program originated in the Energy Policy Act of 2005, H.R. 6. The RFS was later amended with the passage of the Energy Independence and Security Act of 2007, H.R.6. The statute required the U.S. to use four billion gallons of renewable fuel starting in 2006 reaching thirty-six billion gallons in 2022.
In the current system, Renewable Identification Numbers (RINs) are generated for each denatured gallon of ethanol produced in the U.S. When the biofuel is exported the RINs are retired, satisfying the Renewable Volume Obligation (RVO). It is important to remember, the RINs themselves have value, and are traded like commodities.
Blending ethanol domestically results in RIN value that encourages increased ethanol production and use. The majority of export gallons are never assigned a RIN. The export gallons that are assigned RINs also receive a matching RVO, thus creating a disincentive for exporting ethanol relative to domestic blending of both US-produced ethanol and imported ethanol.
The President and the EPA can make two minor changes to EPA rules to increase the amount of ethanol exported, thereby increasing overall U.S. exports. [Read more…]