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Stable Policy Can Help Assure Unwavering Investment in U.S. Biofuels

January 27, 2014
The Renewable Fuel Standard (RFS) is a unique federal policy that has, just as its bipartisan supporters intended, spurred major domestic and international investment in US biofuels production and it is essential to maintaining a growing market for second generation biofuels. That growing market helps attract investment to advanced biofuel companies who are trying to expand their infrastructure, scale up their production line, and improve their technology foundation. Unfortunately, the Environmental Protection Agency’s (EPA) recent proposal to reduce the RFS could signal instability to investors, which will make it difficult for advanced and cellulosic producers to continue making progress.

Ramping the advanced biofuel technology from the lab, to pilot and demonstration scale, then to commercial status represents an enormous investment of time and capital. The advanced biofuels industry already has invested more than $5.7 billion to develop new technologies, build pilot production facilities, and bring the first commercial biorefineries online, with an average PRIVATE investment of $159 million per facility. This is just a fraction of the total investment necessary over the next decade to meet the goals of the RFS. In fact, scaling up commercial advanced biofuel production would require a total cumulative private investment of $95 billion or more. Ongoing investment and construction depends on growth in the market for these fuels. The existing investments and progress in developing new technology is at risk under the EPA proposal.

Companies that are nearing completion of their first commercial production facilities in 2014 need market predictability, which comes from stable policy. According to Abengoa, the RFS is “the single most important investment and market driver in the biofuels industry…and is the primary reason the company has invested more than $1 billion in the U.S. over the past several years.” Additionally, POET-DSM has argued that with the RFS, Congress intended to ensure a market for advanced biofuel producers but “if the government cannot be counted on to fulfill its side of the bargain, how can anyone expect the private sector to invest in these sorts of endeavors?”

Companies like these and many others are at the cusp of an energy revolution in advanced and cellulosic biofuels here at home in the United States, which will mean American jobs, American energy, American security. The RFS has driven the development of homegrown technology here in the United States, creating more than 6,000 jobs in biotechnology, engineering and agriculture, along with thousands more in construction. That revolution, though, will happen somewhere else if the changes to the RFS shrink the U.S. market for this new technology. One company has indicated that if the EPA’s proposal where enacted, “we could find ourselves shipping these technologies, jobs, and environmental benefits overseas to countries with more stable policy environments.”

The RFS was designed to work over more than a decade in order to encourage development of new, innovative low-carbon fuel technology. Changes in mid-course serve only to disrupt progress. By guaranteeing a market for advanced biofuel producers, and the RFS gives companies and their investors the confidence to make long-term investments in new technologies. The RFS must be kept in place in order to realize the significant benefits of advanced biofuel development.