The Renewable Fuels Standard: A Successful Federal Policy that Must Be Defended

A keynote Address by James C. Greenwood, President & CEO of BIO, to RETECH 2012 in Washington, DC on October 18, 2012.

When Admiral McGinn invited me to be part of RETECH 2012, I agreed immediately. Because now is the time for a call to arms for renewable energy.

With the election just two-and-a-half weeks away, we all know the number one issue for voters is the economy. People want to see jobs created and lots of them.

To get the jobless rate back down to 6 percent our economy would have to produce a net gain of 193,000 jobs a month for 36 months straight.

Whatever the political outcome is in November, generating that level of job growth will take energy and lots of it.

And whichever leaders take their places in Congress and the White House come January, we need to be ready to let them know exactly how and why renewable energy can power America’s future.

Fossil fuels have done the heavy lifting in our economy for more than a century. Our standard of living is largely built on them. It is obvious that we are going to burn coal, oil and natural gas until we are able to displace them with affordable renewables — and hopefully that won’t come too late to leave our children a planet that still looks more like Earth than Mars.

Our children’s future rests upon our ability to shift as fast as possible to renewable energy sources. But we won’t succeed unless we can convince our political leaders that renewables are ready, reliable and competitive — and that our leaders need the vision and the commitment to provide America with the policies, incentives, and investments necessary to make that happen.

We at the Biotechnology Industry Organization – BIO – are hard at work delivering that message.

Let me take a moment to introduce BIO, for those of you who may not be familiar. BIO represents more than 1,100 member organizations across all sectors of the biotech industry. Our members heal, fuel, and feed the world.

Many of our companies are in the health arena, developing breakthrough medicines, diagnostics, and vaccines. BIO also represents the leaders in developing new crop technologies for food, feed, fiber and fuel.

BIO’s Industrial and Environmental Section represents more than 85 leading companies in the production of conventional, advanced and cellulosic biofuels and other sustainable solutions to energy and environmental challenges.

Four billion years of evolution have produced enzymes amazingly efficient at converting matter into energy with minimal waste. Our member companies — whether in drug development, agriculture or biofuels — are among the most innovative on earth.

BIO’s role, on behalf of our members, is to advocate for public policies that support that innovation.

Together we won the battle in Congress to create the Renewable Fuel Standard.

Congress approved the RFS in the Energy Policy Act of 2005 and expanded it in 2007. It set annual standards for production and use of both conventional and advanced renewable fuels, with conventional biofuels on target to reach 15 billion gallons by 2015, and advanced biofuels to reach 21 billion gallons by 2022, for a combined 36 billion gallons of renewable fuel. 

Each year EPA sets an overall target for renewable fuel use based on factors including anticipated gasoline consumption and renewable fuel production capacity. EPA also sets specific targets for advanced, cellulosic, and biomass-based diesel fuels derived from renewable feedstocks and meeting specified greenhouse gas emissions reductions.

By adopting the RFS, Congress sought to encourage development of renewable fuels technology by ensuring the market would be open to renewables. The goal of the RFS is to reduce our dependence on fossil fuels, reduce our need for foreign oil, and stimulate job growth here in the United States by making clean, homegrown renewable fuels a part of our transportation fuel mix.

The RFS is working.

Renewable fuel has helped reduce oil imports from the Persian Gulf by 25 percent since 2000.

Renewable fuels currently provide 10 percent of our nation’s on-road transportation fuel needs.

And we have – according to the Departments of Energy and Agriculture – enough biomass in America to replace nearly one third of our gasoline consumption with renewable fuel by 2030.

Renewable fuels are critical to secure our energy future, to improve our air quality and to reduce greenhouse gas emissions.

The RFS is also strengthening rural communities, driving economic growth and supporting more than 400,000 jobs nationwide—jobs for farmers, rural co-ops, chemical engineers, and construction workers as well as jobs in direct biofuel production and distribution.

The RFS has also attracted $5 billion of investment in advanced and conventional renewable fuel technology.

Renewable fuels have been a lifeline for rural communities. Renewable fuel has driven a $500 billion increase in America’s farm assets since 2007.

There are now renewable fuel facilities in 37 states, and new advanced and cellulosic facilities under construction in additional states.

The RFS is a success story. And our nation needs more success stories. It has accomplished what Congress intended – reduced the need for foreign oil, spurred investment, increased production and created jobs.

Yet despite this successthe RFS has come under criticism and attack. The most prominent of these criticisms is the “food vs. fuels” argument.

Pointing to the recent drought, some food companies and livestock interests argue that the competitive demand for corn for biofuel production raises the price of feed for cattle and other livestock to levels they can’t afford. They argue that the nation should prioritize food before fuel and ensure they can access corn at a low price.

The livestock industry has pushed governors from eight states to formally petition the EPA to waive the Renewable Fuels Standard requirement for a year. The EPA is scheduled to rule on the waiver request by mid-November.

Waiving the RFS would be a disastrous blunder.

The threshold in the law for granting a waiver requires showing that the RFSitself is the cause of economic harm and that there is a high degree of certainty that a waiver would undo that harm. But let me assure you that threshold has not been met.

The RFS didn’t cause corn prices to spike. The drought did. And a waiver would have little or no impact on corn prices and cannot possibly provide relief from this year’s drought. Any effect a waiver could have on corn prices wouldn’t be felt for a year — and even then would only amount to a few cents per bushel.

But the impact of an RFS waiver on advanced biofuels would be devastating. In fact, it could extend by several years the drought that has endured in investment capital for new advanced biofuels technology.

America is at a critical juncture in the development of advanced biofuels. A waiver now would hurt investment in advanced biofuels at a time when the industry is finally just beginning to get plants built.

The first commercial gallons of cellulosic biofuel were produced in April of this year – a facility in Wyoming registered just over 20,000 gallons under the RFS. New commercial facilities – INEOS Bio in Florida and KiOR in Mississippi – are expected to begin production by the end of the year.

There are additional commercial facilities — such as Abengoa, Fiberight, POET-DSM, BP Biofuels, ZeaChem, Sapphire, and Beta Renewables — currently under construction and scheduled to begin production in 2013, 2014 and 2015.

These investments in biotech innovation are moving us beyond conventional ethanol – produced from corn – to advanced biofuels like cellulosic ethanol, biobutanol, isobutanol and other drop-in fuels. These can be made from next-generation feedstocks like algae, agricultural waste, switchgrass and other dedicated energy crops, and even household trash.

Almost two-thirds of future RFS volumes are allocated for advanced renewable fuels with an overall target of 21 billion gallons of advanced biofuels by 2022. But to sustain our momentum and reach our goal, we need a stable, predictable policy.

Conventional ethanol producers need the continued assurance that the market will accept their product. And the private companies that have made substantial investments and rapid progress in developing advanced biofuels need a stable policy in order to raise additional investment to complete the job.

Building commercial-scale advanced biorefineries isn’t cheap. It requires large capital investments. It could cost as much as $168 billion to build the biorefineries we will need to produce 21 billion gallons of advanced biofuels in 2022.

But capital formation has been hampered by the recent economic downturn. We must have federal leadership and policy stability to assure investors that if they make those investments, they can rely on an open market for advanced biofuels.

Companies across the United States have made substantial long-term investments to bring advanced biofuel research and development to the point where it is beginning to make real contributions to U.S. energy security.

Annual biofuel production five years ago stood at about 3.9 billion gallons of ethanol and 112 million gallons of biodiesel. Now annual ethanol production is more than 13 billion gallons and biodiesel is more than a billion gallons.

Five years ago there were five cellulosic biofuel pilot plants and about 20 other demonstration and commercial projects on the drawing board. There were also two operating biobased plastic biorefineries.

Today, there are more than three dozen pilot and demonstration biorefineries in operation, each testing and developing a different technological approach.

The first commercial biorefineries are opening too, bringing years of research and development to fruition. They range from advanced and cellulosic biofuels, to algae production, to biobased products and renewable chemicals.

A new study by the Union of Concerned Scientists confirms there is more than enough available U.S. biomass to sustainably produce advanced biofuels on the scale that the RFS requires.

So this is not the time to kick the legs out from under renewable fuels. And we should not turn our backs on the 400,000 Americans whose jobs are supported by the biofuels industry.

As the advanced biofuel industry grows, good employment opportunities will be within reach for many more Americans. By 2022, the advanced biofuel sector could add 800,000 new jobs.

The potential for additional job creation and rural economic development from advanced biofuel production remain strong, as long as the RFS remains stable.

The RFS is one of the most successful energy policies ever, because it does what it was intended to do — the RFS has made the U.S. the world’s leader in renewable fuel innovation.

This policy has enjoyed bipartisan support from the beginning. It was signed by President Bush and continues to be supported by President Obama. Governor Romney also supports the RFS.

Renewable fuel is more important than ever – driving economic growth in communities that need it, improving our nation’s energy security, and attracting millions in new technology dollars to invest in America’s future.

That is why the entire biofuels community has joined forces to form a new coalition to make sure our voice is heard over the shrill and often exaggerated attacks on the RFS.

The new coalition, which launched two weeks ago, is called Fuels America. The Fuels America Coalition includes BIO, ACORE, 25 X ’25, Advanced Ethanol Council, American Coalition For Ethanol, American Security Project, National Farmers Union, National Association of Wheat Growers, National Corn Growers Association, National Sorghum Producers, the Renewable Fuels Association, and numerous biofuels companies.

We have made common bond at this critical time to protect our progress and defend the RFS. We invite you to join us.

You can voice your support at FuelsAmerica.org, and get more background on how the RFS is working, and “take the pledge” to show policymakers your support.

If RFS supporters stick together, and focus our energy, we will win this fight.

We need to make our voices heard loudly, clearly and firmly. Renewable fuel is making a critical positive difference for our economy, for our environment and for America’s energy security.

In uncertain times, renewable fuel is a strong and reliable catalyst for growth, creating jobs while promoting a cleaner environment.

Let’s keep this progress moving forward – and keep America’s Renewable Fuel Standard in place.

We owe our children no less. Thank you.