Industry Urges Congress to Continue Renewable Fuel Standard

The Subcommittee on Energy and Power held hearings earlier this month on “The American Energy Initiative.”  The hearings provided an overview of the challenges and opportunities for alternative transportation fuels and vehicles. The hearing explored a number of issues, including the current status of the Renewable Fuel Standard, and implementation challenges facing regulators, producers, and marketers of renewable fuels. The hearing also discussed the prospects for meeting future conventional and advanced biofuels targets under the Renewable Fuel Standard, and issues related to their incorporation into the gasoline supply, as well as the current status of efforts to expand the use of natural gas and electric vehicles, the cost of driving, the economy, jobs, and national security.

In what seems to be a preemptive strike, the Biotechnology Industry Organization (BIO) yesterday joined together with the Advanced BioFuel Association, the Renewable Fuel Association, the Advanced Ethanol Council and the American Coalition for Ethanol, to urge Congress to protect the federal Renewable Fuel Standard. A joint letter was sent to leaders of the House Committee on Energy and Commerce and the Senate Committee on Environment and Public Works, explaining the importance of the program. It is the position of BIO and its allies that the federal Renewable Fuel Standard provides the stable policy essential to attracting private investment to the development of advanced biofuels.  Apparently this coalition does not want to take any chances and is working to convince Congress of the merits behind the Renewable Fuel Standard.

The Renewable Fuel Standard program was created by Congress as a part of the Energy Policy Act (EPAct) of 2005, and established the first renewable fuel volume mandate in the United States. As required under EPAct, the original Renewable Fuel Standard program required 7.5 billion gallons of renewable fuel to be blended into gasoline by 2012.

Under the Energy Independence and Security Act (EISA) of 2007, the Renewable Fuel Standard program was expanded in several key ways.  First, EISA expanded the RFS program to include diesel, in addition to gasoline.  Second, EISA increased the volume of renewable fuel required to be blended into transportation fuel from 9 billion gallons in 2008 to 36 billion gallons by 2022.  Third, EISA established new categories of renewable fuel, and set separate volume requirements for each one.  Finally, EISA required EPA to apply greenhouse gas performance threshold standards to ensure that each category of renewable fuel emits fewer greenhouse gases than the petroleum fuel it replaces.

“The Renewable Fuel Standard, as it has been implemented by the Environmental Protection Agency, provides the stable, market-based policy mechanism that advanced biofuel producers and investors have been looking for,” stated BIO President & CEO Jim Greenwood. “The RFS is an effective mechanism for incentivizing innovation within the biofuels industry. With this policy in place, industrial biotechnology companies already have made significant investments in research and development, producing successes at each stage. Advanced biofuel technology is ready for commercial deployment and it can provide good jobs and new economic opportunities.

“Access to capital remains the biggest challenge for the industry, especially as high oil prices threaten to plunge the country into another recession. Federal support must continue so that the advanced biofuels industry can build on the foundation created by the RFS and reach its potential commercial production levels. It provides both an assured market and a significant degree of price certainty for cellulosic and advanced biofuels, which can significantly mitigate the capital risk associated with commercialization of new technologies.”

The input of capital requires favorable regulatory and legislative environments, and the issue of a stable environment for investing is hardly more important anywhere as much as it is to the biotechnology sector. It is not at all unusual for biotech start-ups to need to rely on funding for upwards of 10 to 12 years before they turn the corner to become profitable. When you are working on the great problems of the day and engaging in fundamental research to provide workable, scalable solutions that takes time, and a lot of money.

Capital is indeed the lifeblood of start-up companies, particularly the high-tech start-up companies that could provide the solutions we in society most want, like cheap and plentiful renewable energy. Unfortunately over the last decade or so venture capital has been harder and harder to come by. That is an unfortunate reality of the technology sector. What Congress needs to do is pursue policies and enact laws the provide incentives to coax out the trillions in dollars in capital that are sitting on the sidelines.

At a time when the economy is not good and our national debt is so high it almost boggles the mind we must still continue to provide incentives to the technologies of the future; that is if they are going to become the technologies of the future. There is no doubt that Congress can play a meaningful role in advancing innovation through policies that encourage adoption, as well as policies and laws that create clear and unambiguous targets.

It was nearly 50 years ago when President John F. Kennedy challenged the United States to safely land a man on the moon and safely return him to Earth, all by the end of the decade. That speech given to a joint session of Congress on May 25, 1961 sparked one of the greatest achievements in the history of man, and it was accomplished in just about 8 years.  See The Decision to go to the Moon.  Without the visionary leadership of President Kennedy would we have put a man on the moon? Perhaps eventually, but the setting of a goal and the funding and backing to achieve it were absolutely critical.

While many people believe that alternative energy is at least several decades away, what is clear is that if we do not set out about making that future a reality it will never been the future we realize. There is tremendous research ongoing relative to battery technologies, solar energy, biofuels, geothermal energy, wind energy, hydroelectric energy and much more. In all likelihood no one, single solution will replace our dependence on fossil fuels, at least not in the foreseeable future, but there does seem to be a light at the end of the tunnel. We only need to choose the path to obtain that reality.