Office of Transportation EPA420-F-06-060
United States and Air Quality September 2006
Environmental Protection
Agency
Regulatory
Announcement
EPA Proposes Regulations for a
Renewable Fuel Standard Program
for 2007 and Beyond
The U.S. Environmental Protection Agency (EPA) is proposing a
national renewable fuel program (more commonly known as the
Renewable Fuel Standard Program, orRFS program). The proposed
program will be applicable for 2007 and later and is designed to
encourage the blending of renewable fuels into our nation's motor
vehicle fuel. Specifically, this rule proposes the renewable fuel
standards, responsibilities of refiners and other fuel producers, a credit
and trading system, compliance mechanisms, and recordkeeping and
reporting requirements. The proposal also contains preliminary analyses
of the economic and environmental impacts of the expanded use of
renewable fuels.
Background
The Energy Policy Act of 2005 amended the Clean Air Act to establish
an RFS program. The U.S. Congress gave EPA the responsibility to
coordinate with the U.S. Department of Energy, the U.S. Department of
Agriculture, and stakeholders in designing and implementing this first-
of-its kind program. This process could not occur prior to the start of the
RFS program in January 2006, nor could EPA complete a rulemaking of
this magnitude by the one-year deadline set forth in the Act. Therefore,
in a December 2005 rulemaking, EPA set the statutory default standard
requiring that 2.78 percent of the gasoline sold or dispensed in the calen-
dar year 2006 be renewable fuel. The new rulemaking proposes a com-
prehensive, long-term RFS program starting in 2007.
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A renewable fuel is defined in the Energy Policy Act as a motor vehicle
fuel that is produced from plant or animal products or wastes, as opposed
to fossil fuel sources. Renewable fuels would include ethanol, biodiesel
and other motor vehicle fuels made from renewable sources. Under the
proposal, both renewable fuels blended into conventional gasoline or
diesel and those used in their neat (unblended) form as motor vehicle fuel
would qualify.
Credit Trading Program and Compliance Provisions
Credit trading allows obligated parties to comply with the RFS standard
through the purchase of credits if they cannot or do not wish to blend
renewable fuels into gasoline. It also permits renewable fuels that are not
blended into gasoline, such as biodiesel and biogas, to participate in the
RFS program. The proposal defines who can generate credits and under
what conditions, how credits may be transferred from one party to an-
other, and in certain cases, the appropriate value of credits from different
types of renewable fuel.
This proposal also includes compliance and enforcement provisions, such
as for facility registration, recordkeeping and reporting requirements,
program enforcement, and various fuel tracking mechanisms. These
provisions will enable the credit trading program to function properly and
will ensure an adequate foundation for Agency enforcement efforts.
Impact
Currently, renewable fuel demand is projected to exceed the levels re-
quired by the Energy Policy Act. However, the RFS establishes a baseline
that provides market certainty that at least a minimum amount of renew-
able fuel will be used should market conditions change.
Depending on the volume of renewable fuel anticipated to be used in
2012, EPA estimates that this transition to renewable fuels will reduce
petroleum consumption by 2.3 to 3.9 billion gallons or roughly 1.0 to 1.6
percent of the petroleum that would otherwise be used by the transporta-
tion sector.
This proposal also provides a preliminary analysis of the emissions, air
quality and economic impacts of the expanded use of renewable fuels.
With regard to emissions impacts, carbon monoxide emissions from
gasoline-powered vehicles and equipment will be reduced by 1.3 to 3.6
percent. Emissions of benzene (a mobile source air toxic) will be reduced
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by 1.7 to 6.2 percent. Further, the use of renewable fuel will reduce car-
bon dioxide equivalent greenhouse gas emissions by 9 to 14 million tons,
about 0.4 to 0.6 percent of the anticipated greenhouse gas emissions from
the transportation sector in the United States in 2012.
At the same time, other vehicle emissions may increase as a result of
greater renewable fuel use. Nationwide, EPA estimates between a 28,000
and 97,000 ton increase in volatile organic compounds plus nitrogen ox-
ide (VOC + NOx) emissions. However, the effects will vary significantly
by region. EPA estimates that areas such as New York City, Chicago, and
Los Angeles will experience no increase, while other areas may see an
increase in VOC emissions from 3 to 5 percent and an increase in NOx
emissions from 4 to 6 percent from gasoline powered vehicles and equip-
ment.
On average, EPA estimates the cost of this increase in renewable fuels to
range from 0.3 to 1 cent per gallon of gasoline. As part of the final rule-
making, EPA plans to include analysis of other types of impacts, such
as increased revenues to the farming sector and changes to the nation's
energy security in terms of reduced dependence on foreign sources of
petroleum.
Public Participation Opportunities
Comments on the proposal can be submitted until November 11, 2006,
following publication of this notice in the Federal Register. For instruc-
tions on submitting written comments, please see the Federal Register
notice, which is available from the Web site noted below or from the EPA
Air Docket (Phone: 202-566-1742; please refer to Docket No. EPA-
OAR-2005-0161). You can also access the rule and related documents on
EPAs Office of Transportation and Air Quality (OTAQ) Web site at:
www. epa. gov/otaq/renewablefuels
For More Information
For more information, please contact EPA's Assessment and Standards
Division information line at:
U.S. Environmental Protection Agency
Office of Transportation and Air Quality
2000 Traverwood Drive
Ann Arbor, MI 48105
(734)214-4636
E-mail: asdinfo@,epa.gov
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