Under the current Renewable Fuels Standards, continued growth in corn-based ethanol use is uncertain do to several factors, including the 10 percent blend wall, slow implementation of higher blend, declining total gasoline demand and ethanol imports from Brazil.
Scott Irwin, University of Illinois professor of agricultural and consumer economics, said the U.S. will likely need to boost production of biodiesel sharply in order to meet EPA mandates as the requirements shift from ethanol to advanced biofuels.
Advanced biofuels include cellulosic biofuels such as miscanthus and switchgrass, biodiesel and undifferentiated biofuels such as sugarcane ethanol.
…“Houston, we have a problem. We’re mandating more ethanol than we can physically use,” Irwin said.
…“Here’s where the EPA did something quietly, but very interesting that could have profound implications for our grain market if they keep doing it,” he said.
“They wrote cellulosic mandate down to zero, but they kept the total for advanced fuel at 2 billion gallons and the ethanol at 13.2 billion gallons. This meant something else had to replace those 500 million gallons.”
Brazilian sugarcane ethanol replaced those 500 million gallons in 2012.
“For 2013, they’ve already announced the biodiesel mandate of 1.28 billion gallons. We’re going to assume they’re going to move the cellulosic level down to zero, although the standards are raised to one billion gallons,” Irwin said.
…“If you pull in Brazilian ethanol because of the (Renewable Identification Number) identities and how that works, for each gallon you pull in from Brazil under a blend wall, you either have to reduce U.S. production by a gallon or export it. You never get ahead in terms of RFS compliance.
…Even with the blend wall, the RFS mandates will continue to increase toward the 36 billion gallon level by 2022.
“Under our assumptions it can only be biodiesel,” Irwin said. “Since biodiesel is an advanced biofuel, it can fill all the gaps on the advanced side, and it can fill in that gap between the ethanol mandate and the blend wall.”