The Environmental Protection Agency announced on Tuesday that it would extend the deadline for refiners to meet renewable fuel quotas by four months, though it plans to stay on track with its 16.55 billion gallon target for 2013.
Furthermore, the agency has indicated that it will reduce its 2014 target of 18.15 billion gallons of renewable fuel use. Since 2007’s Renewable Fuel Standard, oil refiners have been required to blend a progressively increasing amount of renewables into the fuel they sell for commercial and industrial use. The RFS allows companies who do not wish to blend renewables such as ethanol into the fuel they put out on the market to offset the cost by purchasing credits, known as Renewable Identification Numbers (RINS), from other companies who have obtained these credits by means of their compliance.
Late last month, a growing struggle between ethanol producers and oil companies such as Valero Energy (VLO) played out in a House Energy and Commerce Committee hearing during which both sides traded accusations over the recent spike in the price of RINS. Oil companies used the hearing to link the rising price of gas at the pump with rising RINS prices. For their part the ethanol industry retorted by accusing oil companies of shifting the blame for higher gas prices onto RINS.
But in the wake of Tuesday’s announcement, the price of corn-based ethanol RINS dropped dramatically, shedding 17 percent to $0.85, the lowest in over two months. The EPA also announced significant cuts to 2013 cellulosic biofuel requirements by more than half, from 14 million gallons to 6 million gallons.
Oil companies have also complained that the RFS goal of replacing 36 billion gallons of gasoline with cleaner biofuels by 2022 through yearly increases in the amount of ethanol required to be used, or offset through the purchase of RINS, does not take into account fluctuations in demand for oil.
[Image: A biodiesel car, courtesy of Flickr Creative Commons]
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