Biden set to raise refiners’ biofuels quotas in green push

The Biden administration is seeking to boost the amount of renewable fuels that oil refiners and importers must blend into their products over the next three years, according to people familiar with the matter. 

The Environmental Protection Agency will ask companies to blend 20.82 billion gallons of renewable fuel into their diesel and gasoline next year – with as many as 15 billion gallons potentially coming from conventional, corn-based ethanol – said the people, who asked not to be identified because the proposal isn’t public. 

The numbers aren’t yet final and could change before publication. The proposal – set to be released as early as Wednesday evening and finalized by the EPA in mid-2023 – is part of a broader push by the Biden administration to promote greener energy sources and support biofuels produced in rural America. 

By setting Renewable Fuel Standard targets through 2025, the EPA will provide more certainty and foster new biofuel projects, said Justin Dirico, a principal at New York-based brokerage OTC Direct. “Having the RFS known through 2025 allows for easier hedging of environmental credits,” Dirico said.

The overall renewable fuel quota would climb to 21.87 billion gallons in 2024 – up from this year’s 20.87-billion-gallon requirement, and up to at least 22.68 billion gallons in 2025. The requirements set for the later years could be subject to change depending on whoever wins the next US presidential election. 

Oil refiners had urged the EPA to pare implied quotas for corn-based ethanol. The agency’s coming proposal appears to be a “missed opportunity” to “modernize the RFS and set it on a more sustainable course for all stakeholders,” said Geoff Moody, senior vice president of government relations at the American Fuel and Petrochemical Manufacturers association. 

Much of the planned increase is driven by expectations for significant growth in the amount of renewable natural gas harvested from landfills and farms. The EPA is also set to propose expanding the 17-year-old Renewable Fuel Standard program to incorporate electric vehicle charging with power produced from some renewable energy sources, such as biogas. 

The proposal would also modestly boost quotas for biodiesel, which is typically made from soybean oil and other fats, up to 2.95 billion gallons in 2025 from 2.76 billion gallons this year. That is likely to be a blow to industry officials who have encouraged higher numbers, citing government forecasts of a 500-million-gallon surge in biodiesel and renewable diesel consumption next year, plus planned increases in renewable diesel production capacity.

US ethanol makers rose in response to the news. Bunge Ltd. gained as much as 2 per cent to its highest price since mid-June. Archer-Daniels-Midland Co. increased as much as 1.5 per cent, and Green Plains Inc. jumped as much as 7.1 per cent. 

Meanwhile, prices for renewable identification numbers tracking ethanol blending compliance in the US are near an all-time high. The tradable credits were offered as high as $1.87 each on Wednesday, according to ethanol brokers.

© 2022 Bloomberg L.P.

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