Cellulosic Biofuel Standard Guidance
v>EPA
United States
Environmental
Agency
-------
Cellulosic Biofuel Standard Guidance
Assessment and Standards Division
Office of Transportation and Air Quality
U.S. Environmental Protection Agency
United States
Environ marital Prelection
Agency
EPA-420-B-15-027
March 2015
-------
Cellulosic Biofuel Standard Guidance
Issued by the Office of Air and Radiation, Office of Transportation
and Air Quality
EPA-420-B-15-027, March 2015
The Clean Air Act requires the use of increasing volumes of renewable fuel and three sub-
categories of renewable fuel (cellulosic biofuel, biomass-based diesel, and advanced biofuel) in
the nation's transportation fuel supply. This obligation applies to refiners and importers of
gasoline and diesel fuel ("obligated parties"), who determine their individual responsibilities by
multiplying annual percentage standards set by EPA by the volume of gasoline and diesel fuel
they produce or import in a given year. The regulations implementing these requirements are
published in 40 CFR Part 80, Subpart M. This document is intended to provide basic guidance
on the options available for compliance with the cellulosic biofuel standard.1 It does not replace
or supplant the relevant regulations.
Establishing the Cellulosic Biofuel Requirement
The Clean Air Act specifies increasing "applicable volumes" of cellulosic biofuel intended to be
used as transportation fuel for each year from 2010 through 20222. However, the statute requires
that EPA annually project the volume of cellulosic biofuel that will be produced, and if that
projection is less than the statutory applicable volume, the statute requires EPA to use the lower
projected value in determining the blending requirement for cellulosic biofuel for that calendar
year. For each year since 2010, when the first cellulosic biofuel requirement was established,
EPA's projection of cellulosic biofuel production has been substantially lower than the statutory
applicable volume.
Availability of Cellulosic Waiver Credits
The CAA requires that for any year that EPA reduces the required volume of cellulosic biofuel
below the statutory applicable volume, that EPA provide cellulosic biofuel waiver credits for
purchase for that compliance year. These credits can be used to demonstrate compliance with
the cellulosic biofuel standard in lieu of demonstrating compliance through retiring cellulosic
biofuel renewable identification numbers ("RINs") that represent the use of physical gallons of
cellulosic biofuel. Currently, EPA makes available on an annual basis a volume of cellulosic
biofuel waiver credits equal to the reduced cellulosic biofuel volume requirement established by
EPA for a given compliance year. These credits are made available for purchase at the time an
obligated party submits its annual compliance report to EPA.
Price of Cellulosic Wavier Credits
The CAA directs EPA to establish the price of cellulosic biofuel waiver credits according to a
formula, whereby the price of cellulosic biofuel waiver credits for any year in which they were
made available is equal to the greater of:
1 For the purposes of the Renewable Fuel Standard program, cellulosic biofuel is defined as renewable fuel derived
from any cellulose, hemi-cellulose, or lignin that is derived from renewable biomass and that has lifecycle
greenhouse gas emission that are at least 60 percent less than the baseline lifecycle green house gas emissions.
2 These volumes are specified in CAA 211(o)(2)
-------
• $0.25 per cellulosic biofuel waiver credit, adjusted for inflation in comparison with
calendar year 2008
• $3.00 (adjusted for inflation in comparison with calendar year 2008) less the wholesale
price of gasoline
. The wholesale price of gasoline is calculated by averaging the most recent twelve monthly
values for U.S. Total Gasoline Bulk Sales (Price) by Refiners as provided by the Energy
Information Administration that are available as of September 30 of the year preceding the
compliance period (i.e. July 2012 - June 2013 data will be used in calculating the 2014 cellulosic
biofuel waiver credit price). The $0.25 and $3.00 terms are adjusted for inflation based on
information from the Bureau of Labor and Statistics.3
Complying with the Cellulosic Biofuel Standard
There are two basic ways obligated parties can comply with their cellulosic biofuel obligations.
They may either secure cellulosic biofuel (D3) or cellulosic diesel (D7) RINs or they may
purchase cellulosic biofuel waiver credits. Due to the nested nature of the RFS standards, RINs
used to meet an obligated party's cellulosic biofuel obligation are also counted towards their
advanced biofuel and total renewable fuel obligations. Cellulosic biofuel waiver credits,
conversely, do not count towards an obligated party's advanced biofuel or total renewable fuel
obligations. If a company complies with their cellulosic biofuel obligation using cellulosic
biofuel waiver credits, they must purchase sufficient RINs to fully satisfy their non-cellulosic
biofuel obligations.
For example, consider a scenario where an obligated party has a total renewable obligation of 10
RINs, an advanced biofuel obligation of 5 RINs, and a cellulosic biofuel obligation of 2 RINs.
One way for the obligated party to comply with these requirements would be to secure 2
cellulosic biofuel RINs (D3 or D7), 3 advanced biofuel RINs (D5)4 and 5 conventional biofuel
RINs (D6). The cellulosic biofuel RINs can be counted towards meeting the cellulosic biofuel,
advanced biofuel, and the total renewable fuel standards; advanced RINs can be counted towards
meeting the advanced biofuel and total renewable fuel standards. Alternatively, an obligated
party could comply with the same requirements by purchasing 2 cellulosic biofuel waiver credits
and securing 5 advanced biofuel RINs and 5 conventional biofuel RINs. Note that in this case
the cellulosic biofuel waiver credits only satisfy the obligated party's cellulosic biofuel
obligation; they do not count towards the advanced biofuel or total renewable fuel obligations.
As a result, the obligated party must secure an additional 2 advanced biofuel RINs (5 rather than
3) to comply with their advanced and total renewable fuel obligations if they purchase cellulosic
biofuel waiver credits rather than securing cellulosic biofuel RINs. In effect, a cellulosic biofuel
RIN (D3 or D7) is the functional equivalent of a cellulosic biofuel waiver credit and an advanced
biofuel RIN for purposes of compliance.
3 See [DFR Citation] for more detail on the information and methodology used to calculate the CWC price
4 Biomass based diesel RINs (D4) or additional cellulosic biofuel RINs (D3 or D7) could also be used towards
meeting the advanced biofuel standard, as the biomass based diesel and cellulosic biofuel are nested within the
advanced biofuel category. For the sake of simplicity, however, these scenarios are not discussed in the above
example.
-------
Obligated parties may also carry forward a cellulosic biofuel deficit from one year to the next if
they choose not to meet their cellulosic biofuel obligation by securing cellulosic biofuel RINs or
purchasing cellulosic biofuel waiver credits. If they do so, however, they must satisfy their
deficit, along with the next year's full obligation of cellulosic biofuel, in the following year.
Cellulosic biofuel deficits from a previous year cannot be satisfied with cellulosic biofuel waiver
credits. Obligated parties must secure cellulosic biofuel RINs (D3 or D7) to meet any deficits
from a previous year.
Differences between Cellulosic Biofuel RINs and Cellulosic Biofuel Waiver
Credits
The primary difference between cellulosic biofuel RINs and cellulosic biofuel waiver credits is
that, as discussed above, the cellulosic biofuel waiver credits cannot be used to satisfy an
obligated party's advanced and total renewable fuel obligations. Cellulosic biofuel waiver
credits also cannot be used to satisfy an obligated party's cellulosic biofuel obligation carried
over from a previous year. They can only be used for an obligated party's current year cellulosic
biofuel obligation. Finally, cellulosic biofuel waiver credits are only available for purchase from
EPA at the time of compliance and cannot be traded, sold, or banked for used in future years.
------- |