1

August 13, 2013

The Hon. Gina McCarthy

Administrator

United States Environmental Protection Agency

1200 Pennsylvania Avenue, NW

Washington, D.C. 20460

Re: Petition for Partial RFS Mandate Waiver

Dear Administrator McCarthy:

The American Petroleum Institute (“API”) and the American Fuel & Petrochemical Manufacturers 

(“AFPM”) (collectively the “Petitioners”) respectfully submit this petition to the U.S. Environmental 

Protection Agency (“EPA” or “the Agency”) for a partial waiver of the 2014 applicable volumes of the 

Renewable Fuel Standard (“RFS”) pursuant to section 211(o)(7)(A) of the Clean Air Act.1 Petitioners 

represent numerous refiners and importers of transportation fuel and, in that capacity, are “person[s] 

subject to the requirements” of section 211(o)(2) and entitled to petition for a waiver. Petitioners are 

trade associations that appear on behalf of their members before Congress, administrative agencies, 

and the courts on a wide range of issues, including the U.S. supply of transportation fuels.

2 Unless this 

petition for waiver is granted, the RFS will result in inadequate domestic supplies of gasoline and diesel 

fuel and severe economic harm to consumers and the economy. EPA must take action to avoid the 

disastrous consequences of the RFS blendwall.

Introduction

a. The Blendwall Will Limit Domestic Supplies of Gasoline and Diesel Fuel Causing Severe 

Economic Harm. 

Fundamentally, this Petition seeks to avoid the critical threats that the RFS presents to consumers and 

the entire U.S. economy. This year, the United States hit the “blendwall”—the point at which the RFS 

attempts to force the use of more renewable fuels than can be consumed in the United States, due to 

 

1

See 42 U.S.C. § 7545(o)(7)(A).

2

The RFS directly implicates the interests of the Petitioners and their members, threatening—as discussed 

herein—“certainly impending” injuries that are “fairly traceable” to agency action. Clapper v. Amnesty Int’l USA, 

133 S. Ct. 1138, 1143 (2013).
2

fundamental constraints imposed by fueling infrastructure and problems of gasoline engine 

incompatibility. Unless EPA exercises its authority to waive the mandates, the ultimate and unavoidable 

outcome of the RFS-imposed “blendwall” will be significant increases in the cost of fuel and substantial 

fuel supply shortages in the United States—resulting in undeniably severe economic harm to consumers 

and the economy. 

Because of the blendwall, the RFS limits the supply of gasoline and diesel fuel for U.S. consumption. 

Compliance with the RFS is demonstrated through Renewable Identification Numbers (“RINs”). In 

effect, RINs operate like permits to sell specific quantities of gasoline and diesel for U.S. consumption. 

The number of RINs available for compliance depends on the consumption of renewable fuels in U.S. 

transportation fuels. Therefore, as the RFS mandates exceed the ability of the underlying fuel supply

and vehicle and infrastructure compatibility to accommodate additional amounts of renewable fuels, 

there will be a shortage of RINs for compliance. This will in turn limit supplies of gasoline and diesel for 

U.S. consumption, resulting in severe economic harm to consumers and the overall economy. 

b. E15, E85, and Biodiesel Cannot Supply Enough of the Needed RINs. 

As explained in more detail below, there are no options beyond EPA’s waiving of the requirements that 

can avert the potentially disastrous implications of the blendwall. There is no option that can 

realistically supply the necessary RINs to enable the continued adequate supply of gasoline and diesel 

fuel for U.S. consumption. Both E85 and E15 are only compatible with approximately 5 percent of the 

existing vehicle fleet, and the vast majority of retail infrastructure is not compatible with ethanol above 

10 percent volume. In addition, over 95 percent of all retail gasoline stations are independently owned 

and operated—i.e., they are not owned and operated by the RFS obligated parties. Moreover, biodiesel 

cannot fill the gap because of limitations on biodiesel supply resulting from feedstock constraints. Quite 

simply, there is no option other than an EPA waiver to avoid the adverse impacts that the RFS will have 

on domestic supplies of gasoline and diesel fuel. 

c. The Shortage of RINs Will Cause an Inadequate Domestic Supply of Gasoline and Diesel 

Fuel.

Because the number of RINs available for compliance depends on the consumption of renewable fuels in 

U.S. transportation fuels, constrained consumption will result in a shortage of RINs. Indeed, the 

volumes of renewable fuels currently required by the RFS in 2013 are unachievable—the “blendwall”—

and can be satisfied only through the use of previously banked RINs. The problem becomes more acute 

in 2014. Although the RFS requires industry to blend 14.4 billion gallons of corn-based ethanol, and 

hundreds of millions of gallons of imported sugarcane-based ethanol in 2014, the effective, practical 

limit imposed by the existing domestic distribution infrastructure and vehicle fleet will cap the amount 

of ethanol that can actually be blended into our gasoline supply at roughly 13 billion gallons.3 

“Therefore, after exhausting all other available options for compliance, individual obligated parties, each 

acting independently,” will have no practical option but “to reduce their RIN obligation by decreasing 

the volume of transportation fuel supplied to the domestic market—either by reducing production,”

reducing imports, or increasing exports.

4

 Obligated parties can legally supply only as much gasoline and 

diesel as they have permits (i.e., RINs) to supply.

 

3

U.S. ENERGY INFORMATION ADMINISTRATION, SHORT TERM ENERGY OUTLOOK Table 4a (July 2013). 

4 NERA ECONOMIC CONSULTING, ECONOMIC IMPACTS RESULTING FROM IMPLEMENTATION OF THE RFS2 PROGRAM 2 (2012) 

(hereinafter NERA STUDY) (Attachment 1).
3

d. An Inadequate Domestic Supply of Gasoline and Diesel Fuel Will Severely Harm 

Consumers and the Economy.

As domestic fuel supplies decrease, large increases in transportation fuel costs would impose significant 

costs on society.5As the RFS mandate is ratcheted up every year, the annual increase in the mandates 

will further exacerbate the decreased fuel availability and increased fuel costs to society.6These 

increased fuel costs will have a broad impact across the economy and will increase over time as this

process repeats itself yearly.7“As domestic supply continues to decline, the blending percentage 

obligation becomes increasingly untenable.”

8

The severe economic impact is seen most acutely first in the diesel fuel market. “The tightening of the 

diesel supply (up to 15% decline in 2015)” likely will cause “large fuel cost increases to ripple through 

the economy, adversely affecting employment, income, consumption, and GDP.”

9

This disruption in fuel 

supply will result in severe economic harm to consumers and to the overall economy of the United 

States.10 “By 2015, the adverse macroeconomic impacts” are estimated to “include a $770 billion 

decline in GDP and a corresponding reduction in consumption per household of $2,700.”

11 EPA can 

avert this outcome by exercising its authority to grant the partial waiver requested in this Petition.

e. EPA’s Issuance of a Waiver Will Provide Relief Because It Will Remove the Limitation on 

Gasoline and Diesel Supplies Resulting From the RIN Shortage.

EPA has previously considered two other requests for waivers of the RFS standards. In both cases, the 

Agency denied the waivers primarily because issuance of the waiver would not likely have impacted the 

amount of ethanol blended during the waiver period and therefore would not have had any real world 

impact. Now that the blendwall has been reached, that underlying reason no longer applies. Here, a 

waiver would have a very clear and necessary practical impact—it would lift the limitations on gasoline 

and diesel supplies that arise due to the blendwall. 

f. Specific Relief Requested

To avoid the inevitable severe economic harm described herein, Petitioners respectfully request that 

EPA partially waive the RFS 2014 applicable volumes. Due to the nested nature of the four renewable 

fuel categories, this waiver request comprises the following elements:

 Biomass-Based Diesel: Biodiesel production is expected to meet the 1 billion gallon statutory

minimum volumetric requirement, and EPA need not waive this obligation at this time provided 

other renewable requirements are waived in accordance with this Petition.12

 

5

Id.

6

Id.

7

Id.

8

Id. at 3.

9

Id.

10 Id.

11 Id.

12 For purposes of this waiver request, Petitioners assume that EPA’s mandate for 1.28 billion gallons of biomassbased diesel will be fulfilled. This amount of biomass-based diesel would create 1.92 billion RINs. Petitioners filed 

for reconsideration of the 2013 biomass-based diesel mandate, in addition to filing for review with the U.S. Court 
4

 Cellulosic Biofuels: Because actual production of cellulosic biofuels remains minimal (less than 

75,000 gallons have been produced in 2013 as of this petition), the 2014 cellulosic biofuel 

mandate of 1.75 billion gallons is impossible to meet and therefore EPA should use its authority 

to reduce the cellulosic mandates to reflect actual production.

 Advanced Biofuels: EPA is on record before Congress as identifying a 2013 advanced biofuels 

domestic supply shortfall of 666 million gallons. This shortfall will increase in 2014 as the 

advanced biofuel statutory mandate increases. Because the domestic supplies of advanced 

biofuels (e.g., biomass-based diesel) and cellulosic biofuels are inadequate, a waiver of at least

1.83 billion gallons from 3.75 billion gallons to 1.92 billion gallons is necessary in 2014. This 

number represents the actual supply of biomass-based diesel and cellulosic biofuels expected to 

be produced in 2014. As EPA reduces the cellulosic mandate, EPA must reduce the advanced 

category by the commensurate amount.

 Total Renewables: Waiving the cellulosic and advanced nested biofuel mandates, along with a 

corresponding downward adjustment to the total renewable fuel mandate, would be 

insufficient to overcome the severe economic harm caused by the E10 blendwall and thus EPA 

must reduce further the 2014 total renewable requirement. Based on the EIA 2014 gasoline 

consumption estimate of 132.8 billion gallons, the maximum amount of ethanol that can be 

blended into the gasoline supply at levels that are safe, effective, and practical given the existing 

vehicle fleet and distribution systems, is 13.28 billion gallons (i.e., 10 percent ethanol levels, or 

E10). To avoid severe economic harm resulting from a breach of the E10 blendwall, the total 

renewable fuel volume must be reduced by 3.35 billion gallons – from 18.15 billion gallons to 

14.8 billion gallons. This number represents the total amount of ethanol, drop-in cellulosic 

gasoline, cellulosic diesel, and biomass-based diesel that can be safely blended into U.S. 

transportation fuels in 2014. Given the variability of approximately 3 percent in EIA’s 

projections, total ethanol usage (i.e., the sum of corn, advanced, and cellulosic) should not 

exceed 9.7% of EIA’s projected gasoline demand.13

Congress explicitly authorized EPA to waive the RFS mandates, under Section 211(o)(7) of the Clean Air 

Act, in whole or in part, where there would be either (1) an inadequate domestic supply or (2) severe 

adverse consequences to the U.S. economy. As this Petition demonstrates below, the inadequate 

supply and severe economic consequences projected to occur in 2014 independently establish both

grounds for a waiver. In 2014, there will be an inadequate supply of RINs—as already definitively 

recognized by EPA—to satisfy the various mandates of the RFS, forcing the overall reduction of supplies 

of gasoline and diesel for U.S. consumption. This will result in an inadequate domestic supply of 

 

of Appeals for the D.C. Circuit. Petitioners maintain their arguments that the Agency failed (a) to apply properly 

the statutory criteria set forth at section 211(o)(2)(B)(ii) when promulgating the 2013 biomass-based diesel 

mandate and (b) to take into account the fraudulent RINs that affected the biomass-based diesel industry. 

13 The E10 blendwall reflects the technological limitations of existing gasoline engines and fuel dispensing 

equipment. To avoid the harmful economic effects described herein, however, the maximum amount of ethanol 

mandated should be no more than 9.7 percent (i.e., 12.88 billion gallons). This level reflects the normal variability 

in gasoline consumption forecasted by EIA, as well as the need to accommodate some continuing sales of E0, 

account for geographic areas where it is not practical to blend ethanol, and provide a small cushion to ensure RIN 

liquidity. 
5

gasoline and diesel fuel. The impact of this fuel shortage will create severe harm across the economy, 

establishing the second ground for granting a waiver.

As set forth more fully below, the RFS will result in inadequate domestic supplies and severe economic 

harm. Moreover, and also more fully set forth below, no option other than EPA’s granting of a partial 

waiver can avoid the potentially disastrous implications of the blendwall. Granting a waiver will alleviate 

the adverse impacts of the RFS on gasoline and diesel supplies and the severe adverse economic impacts 

of the blendwall.

I. Enforcement of Existing Renewable Volume Obligations Will Result in Inadequate Domestic 

Supplies of Gasoline and Diesel in 2014.

Section 211(o)(7)(A)(ii) authorizes the Administrator to issue a waiver of the RFS upon a determination 

“that there is an inadequate domestic supply.”14 The blendwall will result in an inadequate domestic 

supply of gasoline and diesel fuel. The domestic supply of fuels will be dramatically curtailed under the 

current RFS because of various factors outside the control of the obligated parties. Put simply, domestic 

demand for fuels has dropped in a way that no one anticipated when Congress passed the Energy 

Independence and Security Act (“EISA”) in 2007. This drop in demand is reflected globally and has been 

predicted to peak at a level of less than 92 million barrels per day in the next few years.

15 Furthermore, 

the consumption of higher blends of ethanol (i.e., E15 and E85) depends on a multitude of factors 

beyond the control of obligated parties: (1) only 5 percent of vehicles on the road are compatible with 

such fuels; (2) the majority of retail infrastructure is not compatible with ethanol blends above 10 

percent volume; and (3) obligated parties do not own the vast majority of retail stations and, therefore, 

cannot make the necessary infrastructure upgrades. As the GAO noted in 2011, federal safety standards 

do not allow ethanol blends over E10 to be dispensed with existing equipment at most retail fueling 

locations.16 Because of that drop in demand, and vehicle and infrastructure compatibility issues, there 

will be insufficient RINs to maintain adequate domestic supplies of gasoline and diesel fuel.

“Inadequate domestic supply” can take the form of (1) an insufficient supply of RINs, (2) an insufficient 

supply of transportation fuel such as gasoline and diesel, or (3) an insufficient supply of certain 

renewable fuels required by the RFS. All three supply impacts are “certainly impending”—indeed, they 

are actually present.

A. The Inability To Consume the Statutory Amounts of Renewable Fuels Leads to an 

Inadequate Domestic Supply of RINs, and Therefore an Inadequate Domestic Supply of 

Gasoline and Diesel Fuel.

EPA has already determined that insufficient RINs can be the basis for a finding of an inadequate 

domestic supply. Former Administrator Jackson plainly stated that “[f]or most biofuels EPA believes that 

a demonstration by a petitioner that there were insufficient RINs available from the previous year 

(subject to the 20% carryover limitation) and the current year’s production to allow for compliance with 

 

14 42 U.S.C. § 7545(o)(7)(A)(ii).

15 See Yesterday’s Fuel, THE ECONOMIST, Aug. 3, 2013, at 12.(citing studies by Citi).

16 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-11-513, BIOFUELS - CHALLENGES TO THE TRANSPORTATION, SALE, AND USE OF 

INTERMEDIATE ETHANOL BLENDS 23 (2011).
6

the standard could be a basis for finding that there was an ‘inadequate domestic supply.’”17 This 

situation is precisely what we face today. 

Obligated parties must report (retire) RINs to demonstrate compliance with their respective Renewable 

Volume Obligations (“RVOs”) in any given year. As long as RVOs are realistic, obligated parties can meet 

them by using the requisite quantity of renewable fuel—detaching and reporting RINs as the fuel is 

used. Surplus RINs generated by the fuel can be banked for later use by the obligated party, or put on 

the RINs trading market where they can be purchased by other obligated parties who require additional 

RINs to meet their own RVOs.

The number of RINs available for compliance with the RFS depends on the consumption (not 

production) of renewable fuels in the U.S. transportation system.18 As the mandates in the law exceed 

the ability of the transportation system to consume the mandated levels of renewable fuel, the number 

of RINs available for compliance falls short of the mandated levels. Basic law of supply and demand, not 

surprisingly, anticipates this scarcity of RINs will be reflected in the market price of RINs. Indeed, the 

recent volatility in RIN prices suggests that the blendwall has arrived.

The system becomes more complex when the renewable fuel requirements exceed what is realistic 

(e.g., requiring 1.75B gallons of cellulosic biofuel in 2014 when virtually none physically exists) or what 

can be accommodated by banked RINs and the RINs trading market. For example, although EPA’s final 

RFS for 2013 requires ethanol use that will exceed the E10 blendwall, EPA has stated that it believes a 

sufficient number of banked or traded RINs from 2012 are available for obligated parties to ensure 

compliance with the RFS for 2013. In other words, rather than exceed the E10 blendwall in 2013, 

manufacturers can continue to produce gasoline with a 10 percent ethanol blend and fulfill their higher 

RVO mandates by drawing down on banked or market-traded RINs.

But this complexity devolves into near impossibility as RVOs continue to increase in 2014 and beyond. 

With overall demand for gasoline falling, the number of RINs being generated and made available in the 

RINs trading market is insufficient to fulfill the mandates under the RFS.

The 2013 Annual Energy Outlook (“AEO 2013”) projects a continuing decline in motor gasoline 

consumption, due to a combination of a sluggish economy in the short term, more stringent CAFE 

standards, increased use of diesel, and an increasing number of natural gas-powered vehicles.19 Motor 

vehicle gasoline consumption is projected to decline by approximately 1.6 million barrels per day from 

2011 to 2040 in AEO 2013’s Reference Case.20 EIA projects gasoline consumption in 2014 to reach only 

132.8 billion gallons.21 Assuming that E10 represents the primary means of RFS compliance for 2014, 

the maximum amount of ethanol that refiners could practically blend is 13.28 billion gallons. The RFS 

conventional biofuel (i.e., corn-based ethanol) implied statutory requirement is 14.4 billion gallons, 

 

17 Letter from Lisa P. Jackson, U.S. EPA, to Robert Greco III, API Group Director of Downstream and Industry 

Operations, and Letter from Lisa P. Jackson, U.S. EPA, to Charles Drevna, AFPM President, denying petitions for

reconsideration of portions of the December 9, 2010 RFS Rule and requests to waive the 2011 RFS cellulosic 

biofuel standard, at 17 (May 22, 2012).

18 See 40 CFR § 80.1401. Under the RFS, U.S. transportation fuels generally exclude jet fuel, heating oil, and fuel 

consumed in the State of Alaska. 

19 U.S. ENERGY INFORMATION ADMINISTRATION, DOE/EIA -0383 (2013), ANNUAL ENERGY OUTLOOK 2013 2.

20 Id. at 80.

21 U.S. ENERGY INFORMATION ADMINISTRATION, SHORT-TERM ENERGY OUTLOOK Table 4a (July 2013).
7

which in and of itself is beyond the 10 percent ethanol saturation point.22 Add a small amount of 

cellulosic ethanol and hundreds of millions of gallons of sugarcane ethanol needed to meet the 

advanced biofuel requirement, and obligated parties are faced with too much ethanol to fit into the 

gasoline supply.

Tellingly, the AEO 2013 reveals fundamental inaccuracies in earlier projections of energy demand on 

which the RFS was initially based and subsequently amended. Estimates available at the time EISA was 

enacted in 2007 projected gasoline demands for 2013 and 2022 that are 12 percent and 28 percent

higher than what is projected today.23 AEO 2013’s updated data highlight the incorrect assumptions 

underlying the renewable volumes mandated for 2013, 2014, and 2015. AEO 2013 now projects that 

this downward trend will continue for years, with projected gasoline demand falling by approximately 

625,000 barrels per day from 2011 to 2022:

Drastic Unanticipated Drop in Gasoline Demand

Because of this demand drop illustrated above, refiners cannot physically meet the 2014 RFS total 

renewable fuel volume of 18.15 billion gallons.24 While some have argued that refiners can simply blend 

either E15 or E85 in order to avoid the blendwall (at least for a year or two), neither offers a viable 

 

22 The implied corn-based ethanol mandate is calculated by subtracting the advanced biofuel mandate from the 

total RFS mandate. In 2014, the implied corn-based ethanol mandate is 14.4 billion gallons (18.15 – 3.75).

23 See U.S. ENERGY INFORMATION ADMINISTRATION, ANNUAL ENERGY OUTLOOK 2013 84 Figure 102.

24 Even if one assumes that there will be 2 billion biomass-based diesel RINs, the 2014 total RFS volume of 18.15 

billion gallons would require more than 16 billion gallons of ethanol, which cannot be practically folded into the 

nation’s existing gasoline pool. 

110

120

130

140

150

160

170

180

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Gasoline Demand (Billions of Gallons per year)

AEO 07

AEO 2012

AEO 2013

Source: EIA/AEO Reference Case Tables, 

Table 11 - Liquid Fuels Supply and Distribution

(converted to billion gallons per year),

Editions 2007, 2012 & 2013.

-12% in 2013

-28% in 2022
8

solution as discussed further below. The availability of surplus RINs in 2014 will be extremely limited. In 

fact, EPA already has expressed concerns that the RIN supply in 2014 will not be sufficient to avoid the 

blendwall, and NERA also projects that surplus RINs may be depleted in 2014. As the number of 

available RINs for compliance is depleted, one would expect their price to rise with their growing 

scarcity. This will in turn likely result in increased exports, reduced imports, and reduced production for 

domestic consumption, as supplying transportation fuels for U.S. consumption becomes less economic

and increasingly infeasible.

25 Then, as the RIN supply becomes even tighter as the mandates continue to 

escalate in disproportion to vehicle use and infrastructure, refiners and importers will be left with no 

practical option but to reduce their RFS obligation by reducing supplies of gasoline and diesel for U.S.

consumption.26

This year, conventional biofuel RIN prices have increased by as much as 2,700 percent.

27

The chart referenced above from the Oil Price Information Service (“OPIS”) illustrates this dramatic rise 

in conventional biofuel D6 RIN prices.28 Recent drastic increases in the price of RINs serve as objective 

market-derived evidence that there is an inadequate domestic RIN supply relative to demand (i.e., when 

expected supply is lower than expected demand, RIN prices increase).

29

In light of the projected demand decline, there will simply not be enough RINS and not be enough fuel 

sold to meet the RFS mandates in the Clean Air Act.30 The conditions described above more than meet 

 

25 NERA STUDY,supra note 4, at 36-37.

26 Id.

27 See Robert Wagner, Ethanol RIN Prices Up 2740% Year To Date, SEEKING ALPHA (July 19, 2013),

http://seekingalpha.com/article/1558892-ethanol-rin-prices-up-2740-year-to-date?source=bloomberg. 

28 Oil Price Information Service, “Biofuels Update” (Aug. 12, 2013).

29 USDA ECONOMIC RESEARCH SERVICE, FDS-13d-SA, HIGH RIN PRICES SIGNAL CONSTRAINTS TO U.S. ETHANOL EXPANSION 1 (Apr. 

12, 2013) (stating that “as for any product, prices for RINs reflect underlying supply and demand factors.”).

30 See University of Illinois, Exploding Ethanol RINs Prices: What’s the Story?

http://farmdocdaily.illinois.edu/2013/03/exploding-ethanol-rins-prices.html (Mar. 8, 2013) (stating that “The 
9

the statutory test for an “inadequate domestic supply.” Indeed, RINs need only be “insufficient” in 

number and availability to authorize the exertion of the EPA’s waiver authority under section 211(o)(7) 

of the Clean Air Act. Moreover, EPA’s authority for the current RIN system is based on section 211(o)(5), 

which provides for the generation of an appropriate number of credits for (1) persons that refine, blend,

or import gasoline, (2) biomass-based diesel, and (3) small refiners.31 This section authorizes EPA to 

issue regulations providing for the generation, use, and transfer of credits for the purpose of complying 

with RFS volume requirements. RINs are, therefore, inextricably linked to the production, use, and 

supply of renewable fuel, in addition to the need to have a fungible supply of RINs allowing for 

compliance in all geographical areas of the United States.32 Where this supply is challenged or 

threatened—as here—the exercise of EPA’s waiver authority is necessary to avoid severe economic 

harm resulting from obligated parties’ continued compliance with the RFS. 

B. The Scarcity of RINs Leads to an Inadequate Domestic Supply of Diesel and Gasoline.

As discussed above, obligated parties can only supply as much gasoline and diesel fuel as they have RINs 

to meet the obligations that supplying such fuel incurs. Each gallon of gasoline and each gallon of diesel 

fuel supplied for U.S. consumption incurs an obligation under each of the four RFS mandate categories—

biomass based diesel, cellulosic, advanced, and general renewable. The number of RINs available for 

compliance depends on the consumption of the renewable fuels in the U.S. transportation system. As 

the mandated levels of renewable fuel exceed the ability of the vehicles and infrastructure to consume 

the renewable fuel, a shortage of RINs relative to the mandated levels occurs, which in turn limits the 

amount of gasoline and diesel fuel that can be legally supplied for U.S. consumption. 

The blendwall problem likely will be seen most acutely in the diesel market.33 This is because ethanol 

comprises the vast majority of current U.S. biofuels and ethanol cannot be blended into diesel. An 

obligated party’s total RVO is derived from its production of both gasoline and diesel fuel. For each 

gallon of diesel fuel produced or imported, however, a RIN deficit is incurred. For example, to meet the 

2012 RFS, each gallon of gasoline and each gallon of diesel fuel produced or imported incurred a 9.23 

percent RIN obligation.34 Diesel fuel can only be blended with biomass-based diesel to meet the RFS, 

but the RFS biomass-based diesel requirement was only 0.91 percent or roughly 10 percent of the 9.23 

percent overall requirement, leaving a deficit of 8.32 percent.

35

This diesel deficit requires diesel manufacturers to purchase excess ethanol RINs. When the renewable 

mandate was less than the blendwall, excess ethanol RINs were available from gasoline blending of 

ethanol, but as the mandate approaches and exceeds the blendwall, the RINs surplus shrinks. With 

surplus RINs disappearing and RINs prices increasing rapidly, that compliance option is becoming costly

and increasingly infeasible, which results in a significant incentive to reduce diesel fuel supplied to the 

 

prospect of not being able to meet ethanol blending mandates with physical blending and prospects for a rapid 

decline in the stock or RIN credits in the very near future has substantially increased the value of D6 RINs.”).

31 42 U.S.C. § 7545(o)(5).

32 See 42 U.S.C. § 7545(o)(2)(A)(ii).

33 NERA STUDY, supra note 4, at 3.

34 77 Fed. Reg. 1320, 1341 Table III.B.3-3 (Jan. 9, 2012).

35 A similar situation is required for 2013. The 2013 total renewable obligation is 9.74 percent, whereas the 

biomass-based diesel requirement is only 1.13 percent, leaving diesel refiners and importers with a deficit of 8.61

percent. See EPA, 2060-AR43, REGULATION OF FUELS AND FUEL ADDITIVES: 2013 RENEWABLE FUEL STANDARDS, prepublication copy at 88 (Aug. 6, 2013)(hereinafter 2013 RFS Final Rule) (to be codified at 40 CFR § 80.1405(a)(4)). 
10

U.S. market below the level that the market currently demands.36 This diesel deficit is another example 

of inadequate domestic supply that would support EPA’s granting of this Petition request. In this case, 

there is an inadequate supply of biomass-based diesel needed to generate a sufficient quantity of RINs 

to support the sale of diesel fuel in quantities demanded by consumers. To address this problem, EPA 

must waive the total RFS requirement, as described herein.

II. Unless Waived, the RFS Will Cause Severe Economic Harm.

As discussed above, RINs effectively function as a permit to supply gasoline and diesel in the United 

States. If a refiner cannot secure enough RINs to meet its RVOs, then the refiner is limited in the 

amount of gasoline and diesel it may supply for U.S. consumption. Consequently, the inadequate supply 

of RINs leads to an inadequate domestic supply of gasoline and diesel fuel for U.S. consumption and 

presages severe economic consequences stemming from the RFS. 

A. The Blendwall Will Force Obligated Parties To Supply Less Fuel for U.S. Consumption, 

Setting Off a Chain of Events That Causes a Massive Decline in GDP.

The fuels market already is experiencing the economic effects of the impending blendwall. Starting 

early this year, prices for ethanol D6 RINs skyrocketed, rising from an average of below 4 cents per RIN 

in years prior to 2013 to over a $1.40 per RIN in July 2013. A significant price spike occurred in 

conjunction with EPA’s announcement of the proposed renewable fuel volumes for 2013. The current 

ethanol RIN price is now many multiples of the average ethanol RIN price experienced in the five years 

since the volume requirements for renewable fuels contained in section 211(o)(2)(B) were increased to 

their current level.

While the near term economic effects of higher RIN prices are troublesome enough, the arrival of the 

blendwall in 2013 and depletion of banked RINs in 2014 likely will force obligated parties to take drastic 

measures to comply with the law. NERA Economic Consulting has projected the economic impacts that 

the blendwall will impose on consumers and the U.S. economy through 2015.37 NERA’s model projects a 

$1,300 decline in average household consumption and an aggregate GDP loss of $270 billion in 2014.

38

 

If these effects are not somehow avoided by changes to the current implementation of the RFS, NERA 

concluded that the aggregate economic impacts by 2015 will be a loss of a staggering $770 billion in 

GDP.39 

The decrease in GDP, projected by NERA, results from a combination of (1) structural problems within 

the RFS itself and (2) technical constraints that prevent the development and deployment of higher 

ethanol blends that could forestall the blendwall.40 With regard to the structural problems, the RFS 

requires each obligated party to meet an annual RVO, which is calculated as a percent of their total 

annual volume of gasoline and diesel produced or imported for sale in the United States by that 

obligated party during the year.41 Thus, the final RVO in a given year for an obligated party will fluctuate 

based on its own fuel production and imports. As the RFS-mandated volumes increase in the face of 

 

36 NERA STUDY, supra note 4, at 31.

37 Id. at 38-39.

38 Id. at 38-39 and Table 14.

39 Id. at 8, 38-39.

40 Id. at 4.

41 40 C.F.R. § 80.1407.
11

declining gasoline demand and infrastructure and vehicle incompatibility constraints—and the blendwall 

is hit—obligated parties will need more RINs than they can get from E10. That is to say, the volumes of 

RINs associated with corn-based and sugarcane-based ethanol that the obligated parties need to comply 

with the RFS will exceed RINs they purchase from downstream entities that blend 10-percent ethanol in 

gasoline. Thus, obligated parties will need to draw down previously banked RINs; there will be no 

“excess” RINs generated for compliance. Existing and available RINs now are likely being held or used 

for compliance, rather than being sold in the marketplace, and obligated parties needing to buy RINs to 

comply in 2014 will face a lack of feasible options to sustain their level of gasoline or diesel production 

and imports.42 Because RINs effectively operate as a permit to sell specific quantities of gasoline and 

diesel, when obligated parties cannot acquire RINs, they must reduce the amount of gasoline and/or 

diesel they sell in the United States to remain in compliance with RFS.

With regard to the technical constraints, the U.S. fuel market lacks the physical infrastructure, 

compatible vehicles, and consumer demand to support enough sales volumes of ethanol-blended fuels 

other than E10 to meet the growing mandate. While it is legally permissible to blend ethanol in gasoline 

to produce E85 or E15 blends, simply because EPA has removed one legal impediment to the production 

of these blends does not mean that local regulations allow the use of these fuels, or that the market and 

consumers can or will accommodate their use. 

Without an adequate supply of RINs, obligated parties will turn to the other compliance options 

available to them: (1) a decrease in fuel production; (2) a decrease in transportation fuel imports;

and/or (3) an increase in gasoline/diesel exports.43 These alternatives reduce the number of RINS an 

obligated party needs to demonstrate compliance with the RFS. A decrease in transportation fuel 

supplied to the domestic economy over and above the current and projected decrease in demand for 

transportation fuels will likely result in higher fuel costs and will have effects throughout the U.S. 

economy as manufacturers, distributors, and suppliers adjust to higher fuel costs.44 The market’s 

response to obligated parties’ attempt to meet their RVOs and comply with the RFS ultimately will force 

individual households to decrease consumption at the pump and elsewhere.

45

As detailed in the NERA Study, the overall effect of hitting the blendwall without viable compliance 

alternatives beyond reducing supply will be a contraction of multiple sectors of the U.S. economy that 

will ultimately result in a massive decrease in GDP, totaling $770 billion in 2015. This severe adverse 

economic impact would be extraordinarily harmful to tens of millions of Americans and far exceeds any 

level necessary to constitute “severe economic harm” under CAA section 211(o)(7). 

Importantly, in the context of considering the harms that will result in 2014 and 2015, nothing in the 

Clean Air Act requires that the severe economic harm occur in the same year that EPA issues the 

waiver.46 EPA itself recognized that it has discretion when determining what time period to examine 

with respect to a severe economic harm analysis in its denial of North Carolina’s and Arkansas’s waiver 

petitions.

47

 While EPA previously declined to examine impacts beyond the current calendar year due to 

 

42 NERA STUDY,supra note 4, at 30.

43 Id. at 27.

44 Id. at 7.

45 Id.

46 See 42 U.S.C. § 7545(o)(7)(A).

47 See 77 Fed. Reg. 70,752, 70,757 (Nov. 27, 2012).
12

an inability to properly assess the relevant variables, such a limitation is data-driven, not a function of 

the requirements of section 211(o)(7).48

The NERA Study fully accounts for fluctuations in fuel prices and availability, and it provides sufficient 

certainty to conclude severe economic harm will result from reaching the blendwall in the years 

following 2013.49 Existing infrastructure cannot support the higher-ethanol blend fuels required to avoid 

the blendwall. Thus, the NERA Study forms a more than sufficient basis for EPA to waive the 

requirements of section 211(o)(2) in 2014 and subsequent years.

B. The Harms Detailed in the NERA Study Are Unprecedented.

The E10 blendwall has arrived, making 2014 unlike any other year that EPA previously examined. As 

explained in the NERA Study, infrastructure, technological, and market limitations will restrict the ability 

of obligated parties to market ethanol blends higher than E10 for use in conventional vehicles.50 As a 

result, the only practical compliance strategy for obligated parties will be to reduce the amount of fuel 

produced for the U.S. market, causing sharp declines in fuel availability and associated increases in fuel 

prices.51 In 2014, the ultimate result will be a decrease in average household consumption of $1,300

and a net GDP loss of $270 billion. The severe economic harm becomes worse in 2015 with a decrease 

in average household consumption of $2,700 and a net GDP loss of $770 billion.52 EPA’s issuance of a 

waiver here will help ameliorate these effects of the blendwall because it would remove the existing, 

rather than theoretical, limitation of the supply of gasoline and diesel—thus, this situation differs from 

earlier waiver situations, where the waiver’s impact was not as clear.

The harms calculated in the NERA Study as the result of the blendwall are immediate and 

unprecedented. In denying the RFS waiver request of several States and other parties in 2012, EPA 

relied upon Iowa State University’s model to evaluate the impact of a potential waiver on corn prices, 

food prices, feed prices, and fuel prices.53 EPA’s denial of the 2012 waiver request expressed the result 

of the Iowa State model in terms of avoided costs and concluded that the waiver would have decreased 

annual household expenditures on fuel just $1.98-$17.40.54 In EPA’s denial of Texas’s 2008 waiver 

petition, EPA relied on the same Iowa State model and concluded implementation of the RFS would 

increase annual household expenditures only $3.43-$34.29.55 Unlike those years, the country has run 

out of practical options because vehicle and refueling infrastructure compatibility is at the blendwall. In 

 

48 Id.

49 See id. at 70,758 (noting that a waiver petition based on the blendwall itself could provide a proper analysis of all 

the relevant factors required to grant a petition based on severe economic harm occurring in a year different than 

the year of the petition’s filing).

50 The issues associated with E15 and E85 compliance options are discussed in detail in Sections III.B and III.C, infra.

51 NERA STUDY,supra note 4, at 2.

52 Id. at 8 Table 3.

53 77 Fed. Reg. at 70,761. Petitioners do not suggest that the projected levels of harm in the 2008 and 2012 waiver 

requests, in addition to other information submitted for EPA’s consideration, were insufficient to justify the 

Administrator’s exertion of RFS waiver authority, only that the economic harms detailed in the NERA Study present 

adverse economic impacts of another magnitude altogether than the effects EPA projected in the 2008 and 2012 

waiver decisions.

54 Id. at 70,765.

55 73 Fed. Reg. 47,168, 47,179 (Aug. 13, 2008).
13

contrast to these rather small, previously projected effects, the NERA Study finds that the blendwall will 

significantly increase costs for both fuel and finished goods in 2014.

56

In stark contrast with prior waiver petitions to the EPA, the economic harms that will occur here (absent 

waiver) not only are “certainly impending,” they are immediate, unprecedented, widespread, and 

severe. Indeed, as detailed by NERA, the adverse economic impacts will be felt by virtually every 

American household and by most of the U.S. economy. Petitioners respectfully submit that the ultimate 

cost—a massive decrease in GDP totaling $770 billion in 2015—far exceeds any level necessary to 

constitute “severe economic harm” under CAA 211(o)(7).

III. Severe Harms Flowing From the RFS Can Be Avoided Only Through A Waiver.

Having established that the blendwall will result in an inadequate supply of RINs and thereby lead to 

severe economic harm, we now turn our attention to potential alternative mechanisms to delay or avoid 

the arrival of the blendwall, and explain why they are in fact unavailing and do not defeat this Petition. 

The only solution to the blendwall problem that will avoid inadequate domestic supplies and severe 

economic harm is the issuance of a waiver. Unlike previous waiver request situations, in this case, 

issuance of a waiver will provide relief from the binding nature of the RFS and avoid the harms of the 

blendwall because it will remove the limitation on the supply of gasoline and diesel fuel that currently 

exists.

A study titled “Renewable Fuel Standards and the Ethanol Blendwall” was recently conducted by 

MathPro and is attached in its entirety in Attachment 2 of this waiver petition.57 MathPro developed a 

spreadsheet-based model (“Software Tool”) to assess specified compliance approaches for various 

schedules of annual renewable fuel volumes that EPA might establish.58 The spreadsheet used EIA’s 

2013 Annual Energy Outlook of transportation energy demand (AEO 2013).

59 MathPro then assessed

hypothetical scenarios involving assumed schedules of annual renewable fuel volumes and various 

compliance approaches using this tool.

60

Scenario 1 represents the most aggressive case, and assumes that EPA leaves the total renewable fuel 

and advanced biofuel standards unchanged from the EISA volume schedule.61

 Scenario 1A: EISA volume standards, unrestricted expansion of FAME, no expansion of E85, AEO 

cellulosic biofuel volumes.

 Scenario 1B: EISA volume standards, expansion of E85, no expansion of FAME, AEO cellulosic 

biofuel volumes.

 Scenario 1C: EISA volume standards, expansion of E85, expansion of FAME to 5 percent, AEO 

cellulosic biofuel volumes.

 

56 NERA STUDY, supra note 4, at 8.

57 MATHPRO, RENEWABLE FUEL STANDARDS AND THE ETHANOL BLENDWALL (Aug. 13, 2013) (hereinafter MATHPRO STUDY) 

(Attachment 2).

58 Id. at 2.

59 Id.

60 Id.

61 Id. at 10.
14

Scenario 2 assumes that EPA modifies the annual total renewable fuel and advanced biofuel volume 

standards to account for cellulosic biofuel being available in volumes significantly lower than 

contemplated in EISA.62 Annual cellulosic biofuel volume standards (and the split between ethanol and 

diesel) are set at the volumes forecast in the AEO 2013 Reference Case.63 

 Scenario 2A: Adjusted EISA volume standards, unrestricted expansion of FAME, no expansion of 

E85, AEO cellulosic biofuel volumes.

 Scenario 2B: Adjusted EISA volume standards, expansion of E85, no expansion of FAME, AEO 

cellulosic biofuel volumes.

 Scenario 2C: Adjusted EISA volume standards, expansion of E85, expansion of FAME to 5

percent, AEO cellulosic biofuel volumes.

Scenario 3 assumes a RFS schedule that maximizes ethanol use without exceeding the E10 blendwall.64

 Scenario 3A: Maximum ethanol without exceeding the E10 blendwall, no FAME expansion, no 

cellulosic biofuel volumes.

 Scenario 3B: Maximum ethanol without exceeding the E10 blendwall, no FAME expansion, and 

AEO cellulosic biofuel volumes.

The key conclusions from the MathPro study are summarized below:65

 Use of carryover RINs alone can delay some of the consequences of the ethanol blendwall to 

2014, but not beyond.

 Subsequently, steep and likely unattainable increases in either E85 use or biomass-based diesel 

(“FAME”) use would be required to meet the RFS volume standards.

 Expanded use of FAME, to generate excess D4 RINs, could delay reaching the ethanol blendwall 

after carryover RINs are exhausted. But the likelihood and extent of the delay depends on the 

annual volume standards established by EPA and the extent to which FAME production and use 

can be increased. 

 With FAME use limited to 5 percent of the distillate pool, ethanol blendwall would be reached in 

2015.

 When the ethanol blendwall is reached (with limited FAME expansion), the volume of E85 

necessary to generate sufficient RINs for compliance with the renewable fuel volume standards 

would require rapid, large expansion in the availability of E85 and in the number of FFVs using 

E85. In most of the cases studied, the necessary expansions would be beyond what might be 

considered feasible.

 Annual volume standards can be set that maximize ethanol use subject to the practical 

constraints imposed by the E10 blendwall. Such volume standards would facilitate compliance 

with RFS requirements. 

The Exhibits below from the MathPro study summarize the scenario results.66 In the case of FAME, note 

that the required volumes far exceed the nameplate capacity of 2.2 billion gallons per EIA. In the case of 

 

62 Id. at 13.

63 Id.

64 Id. at 14.

65 Id. at 16.

66 Id. at Exhibits 4 and 5.
15

E85, note that the required volumes far exceed the current use of 0.1 billion gallons per EIA (too small of 

a number to appear on the graph). 

A. Carryover RINs Will Not Prevent the Market Imbalance Caused by the Blendwall. 

EPA itself noted the imminence of the RFS blendwall in the preamble to its proposed RFS volumes for 

2013. In its proposed rule, EPA stated its belief that the economic effects from the blendwall would 
16

likely be averted in 2013 because there are sufficient carryover RINs that can be used for compliance.67 

EPA expressed doubts, however, that such a surplus will be available to forestall the blendwall in 2014.68 

Moreover, concerns related to RIN market volatility should call into question EPA’s belief that sufficient 

quantity of RINs exist for the entire regulated community to avoid the blendwall. According to many 

experts, the scarcity of valid RINs has led to a rapid rise in the price of RINs due to increasing demand in 

the face of inability to increase surplus RINs.

69

 Based on these concerns, EPA must reassess its 

projections that sufficient carryover RINs will be available to supplement the 2013 market to ensure 

compliance with the RFS mandates, and EPA also must further evaluate the projected shortfall of RINs in 

2014.

The blendwall effects may be avoided in 2013 only if obligated parties have sufficient carryover RINs to 

meet their requirements under the RFS—a questionable conclusion given the current volatility of the 

RIN trading market.70 Several economists have stated that the RIN carryover will be reduced 

significantly by the end of 2013 and will be insufficient to meet the 2014 RFS mandates.

71 Charles River 

Associates completed a study in 2011 that concluded that the market would encounter the E10 

blendwall by 2013.

72

 The study concluded that efforts to increase E85 or E15 and to decrease the 

presence of E0 (neat gasoline) in the domestic market could not be implemented economically or 

quickly enough to forestall the blendwall.73 Additionally, EPA’s original estimates of when the market 

would reach the blendwall were based on fuel consumption estimates found in the AEO 2009,74 while 

the Charles River Study’s fuel consumption estimates come from the AEO 2011.75 The difference in the 

projection of when the blendwall will be reached can be explained in part by an examination of the 

Annual Energy Outlook reports, which show declining estimates of transportation fuel consumption in 

successive years.76 Lower fuel consumption requires that a higher percentage of ethanol be blended 

into gasoline in order to meet the renewable volume targets and accelerates the arrival of the 

 

67 78 Fed. Reg. 9282, 9301 (Feb. 7, 2013).

68 Id. See also USDA ECONOMIC RESEARCH SERVICE, FDS-13d-SA, HIGH RIN PRICES SIGNAL CONSTRAINTS TO U.S. ETHANOL 

EXPANSION 1, 3 (Apr. 12, 2013) (stating that “This shortfall in meeting the conventional ethanol RFS will soon 

transmit to a shortfall in the availability of conventional RINs relative to the demand for RINs for RFS compliance, 

likely to occur in 2014 once carryover RINs are no longer sufficient to fill the gap.”).

69 Since January 7, 2013, RIN prices rose from 7.1 cents per credit to over $1.00 per credit, representing an increase 

of over 2700 percent in the price of RINs. See Robert Wagner, Ethanol RIN Prices Up 2740% Year To Date, Seeking 

Alpha (July 19, 2013), http://seekingalpha.com/article/1558892-ethanol-rin-prices-up-2740-year-todate?source=bloomberg. 

70 Most refiners do not blend ethanol and are dependent upon purchasing RINs for compliance. Some refiners do 

not have a supply of “banked RINs” and now may be unable to acquire sufficient RINs at reasonable prices. See 

e.g., Frank Pici, Monroe Energy Letter to EPA, Docket ID No. EPA-HQ-OAR-2012-0546-0110 (Apr. 7, 2013). 

71 See, e.g., University of Illinois, Exploding Ethanol RINs Prices: What’s the Story? Table 1

http://farmdocdaily.illinois.edu/2013/03/exploding-ethanol-rins-prices.html (Mar. 8, 2013).

72 See HARRY FOSTER, ROBERT BARON, AND PAUL BERNSTEIN, IMPACT OF THE BLENDWALL CONSTRAINT IN COMPLYING WITH THE 

RENEWABLE FUEL STANDARD, CHARLES RIVER ASSOCIATES 5 (Nov. 2, 2011) [hereinafter CHARLES RIVER STUDY].

73 Id.

74 EPA, RENEWABLE FUEL STANDARD PROGRAM (RFS2) REGULATORY IMPACT ANALYSIS 238 (2010) [hereinafter RFS2 RIA]; see

U.S. ENERGY INFORMATION ADMINISTRATION, DOE/EIA-0383(2009), ANNUAL ENERGY OUTLOOK 2009 (“AEO 2009”).

75 CHARLES RIVER STUDY, supra note 63, at 15.

76 See, e.g. U.S. ENERGY INFORMATION ADMINISTRATION, ANNUAL ENERGY OUTLOOK 2012 EARLY RELEASE OVERVIEW 5 (Jan. 23, 

2012); compare with U.S. ENERGY INFORMATION ADMINISTRATION, ANNUAL ENERGY OUTLOOK 2013EARLY RELEASE OVERVIEW 1, 

6 (Dec. 5, 2012).
17

blendwall.77 Regardless of these differences, both studies support the undeniable fact that the 

blendwall will be reached in 2013.

Unlike the earlier work, the MathPro study takes into account the RIN carryover and uses the most upto-date energy demand from AEO 2013. 

B. E15 Is Not a Viable Solution to the Blendwall.

EPA has approved the sale of E15 for sale for use in model year 2001 and later vehicles. That approval 

was based exclusively on a Department of Energy study indicating that E15 would not adversely affect

emissions control systems in a select group of on-road vehicles.

78

 Petitioners question, but do not 

attempt to challenge, the E15 waiver decision in this Petition. The DOE study looked at other electronic 

and mechanical systems (e.g., engines, fuel systems) essential for vehicle functionality, but this was a 

cursory, last-minute, approach that was inappropriate for extrapolation.

79

The fact that only two vehicle manufacturers have approved of E15, and have only done so for vehicles 

produced in the most recent two model years, demonstrates just how radically the widespread use of 

E15 would impact the existing fleet. EPA’s approval was based on their limited analysis of emissions 

control systems. E15 creates numerous concerns for consumers, refiners, ethanol producers, fuel 

retailers, and auto manufacturers. E15 is not a viable mechanism for the transportation sector to 

absorb more ethanol-blended fuels (and thereby also generate additional RINs), nor does it do anything 

to prevent—or even delay—the blendwall. Instead, E15 merely provides one limited, problematic 

avenue for additional RFS compliance that is insufficient to surmount the issues that the blendwall 

creates. 

1. E15 Is Incompatible With the Existing Vehicle Fleet.

For automobiles built before 2011, automobile manufacturers are unanimous. They have stated that

the use of E15 may damage vehicle engines and will void warranties.80 In the face of these public 

pronouncements, the sale of E15 creates concerns over not only consumer dissatisfaction and brand 

reputational harm, but also potential liabilities for obligated parties, fuel distributors, ethanol producers, 

and engine manufacturers.81 The Coordinating Research Council (“CRC”) conducted extensive studies

 

77 See CHARLES RIVER STUDY, supra note 63, at 15-16.

78 See 75 Fed. Reg. 68,094 (Nov. 4, 2010) (providing E15 waiver for vehicles model year 2007 and after for light 

duty motor vehicles); 76 Fed. Reg. 4662 (Jan. 26, 2011) (providing E15 for vehicles model year 2001-2006 for light 

duty motor vehicles).

79 EPA should have used tests specifically designed by automotive engineers to evaluate those effects—the 

approach that the Coordinating Research Council took.

80 See Letter from Representative James Sensenbrenner to Lisa Jackson, Administrator, Envtl. Protection Agency 

(July 5, 2011), available at http://sensenbrenner.house.gov/uploadedfiles/e15_auto_responses.pdf (summarizing 

comments from automakers on the use of E15 and expressing concern for the effects of E15 on vehicles); see also

Gary Strauss, AAA Warns E15 Gasoline Could Cause Car Damage, USA TODAY, Nov. 30, 2012, available at 

http://www.usatoday.com/story/news/nation/2012/11/30/aaa-e15-gas-harm-cars/1735793/ (noting statements 

by BMW, Chrysler, Nissan, Toyota, and Volkswagen that their warranties will not cover fuel-related claims caused 

by E15, and statements from Ford, Honda, Kia, Mercedes-Benz, and Volvo that E15 use will void warranties).

81 See Overview of the Renewable Fuel Standard: Stakeholder Perspectives: Hearing Before the Subcomm. on 

Energy and Power of the H. Comm. on Energy and Commerce, 133th Cong. 5 (2013) (statement Shane Karr, Vice 

President for Federal Government Affairs, Alliance of Automobile Manufacturers) [hereinafter Alliance Testimony].
18

examining the potential effects of E20 and E15 use on motor vehicle engines and fuel system 

components across a sample set of commonly-used post-2001 model year light duty vehicles.82 The 

studies found that some vehicles—ones that EPA approved for use with E15 after reviewing effects on 

emissions—experienced fuel pump system failures or other mechanical damage from operating on 

intermediate-level ethanol blends.83 Moreover, the fuel pump systems that failed or exhibited other 

effects during testing on E15 are used in a substantial number of the 29 million 2001-2007 model year 

vehicles represented in the studies.

84 The engine durability study showed that two popular gasoline 

engines used in light-duty automotive applications of 2001-2009 model year vehicles failed with 

mechanical damage when operated on E15 and E20.85 The damage that E15 will inflict on a significant 

number of vehicles translates to a significant potential liability for multiple entities throughout the fuel 

supply chain. 

Furthermore, consumer organizations including AAA fear that the public’s unfamiliarity with E15 will 

lead to misuse and vehicle damage.86 In a recent survey, AAA found that “[a]n overwhelming 95 percent 

of consumers surveyed have not heard of E15, a newly approved gasoline blend that contains up to 15 

percent ethanol.”87 Based on this finding and the fact that less than 5 percent of the vehicles on the 

road are approved by their manufacturers to use E15, AAA urged EPA to halt the sale of E15.88 Even 

Public Citizen has come out in opposition to E15. In a recent amicus brief filed in the U.S. Supreme 

Court, Public Citizen identified the harm to consumers that will result from E15: (1) incompatibility with 

vehicles, and the likely damage to many vehicles for which E15 has been approved; (2) the potential for 

misfueling; (3) reductions in gas mileage; and (4) greater fueling and food costs.89

The fuel segregation and labeling requirements attendant to the marketing of E15 depend on market 

and consumer acceptance. In fact, EPA itself recognized the potential dangers resulting from the 

improper use of E15 when it approved the E15 waivers.90 EPA determined that the use of product 

transfer documents to track the distribution of E15 and “attention” labels on fueling stations were 

necessary to minimize the risk of vehicle damage caused by misfueling.91 Thus, E15 is far from a “drop 

 

82 See COORDINATING RESEARCH COUNCIL, INTERMEDIATE-LEVEL ETHANOL BLENDS ENGINE DURABILITY STUDY (Apr. 2012), 

available at

http://www.crcao.org/reports/recentstudies2012/CM-136-09-1B%20Engine%20Durability/CRC%20CM-136-09-

1B%20Final%20Report.pdf;see also COORDINATING RESEARCH COUNCIL, DURABILITY OF FUEL PUMPS AND FUEL LEVEL SENDERS 

IN NEAT AND AGGRESSIVE E15 (Jan. 2013), available at

http://www.crcao.org/reports/recentstudies2013/CRC%20664%20[AVFL15a]/AVFL%2015a%20[CRC%20664]%20Final%20Report%20only.pdf.

83 COORDINATING RESEARCH COUNCIL, DURABILITY OF FUEL PUMPS AND FUEL LEVEL SENDERS IN NEAT AND AGGRESSIVE E15 1-3 (Jan. 

2013), available at http://www.crcao.org/reports/recentstudies2013/CRC%20664%20[AVFL15a]/AVFL%2015a%20[CRC%20664]%20Final%20Report%20only.pdf.

84 Id. at 3.

85 COORDINATING RESEARCH COUNCIL, INTERMEDIATE-LEVEL ETHANOL BLENDS ENGINE DURABILITY STUDY,supra note 73, at 15.

86 Press Release, AAA, New E15 Gasoline May Damage Vehicles and Cause Consumer Confusion (Nov. 30, 2012), 

available at http://newsroom.aaa.com/2012/11/new-e15-gasoline-may-damage-vehicles-and-cause-consumerconfusion/; see also Brief of Amicus Curiae Public Citizen, Inc., in Support of Petitioners, Alliance of Automobile 

Manufacturers v. U.S. Envtl. Protection Agency, 133 S. Ct. 2880 (2013) (No. 12-1167).

87 Press Release, AAA, supra note 77.

88 Id.

89 See Brief of Amicus Curiae Public Citizen, supra note 77.

90 See 75 Fed. Reg. at 68,049-50 (noting the difficulties of ensuring the proper labeling of E15 pumps due to the 

fact that most retail stations are independently operated).

91 Id.
19

in” solution to the blendwall. The fuel’s very use is conditioned by restrictions in state law, by 

acceptable light duty vehicle types, by labeling of the fuel, and through a continuing inability to use the 

fuel in any non-road vehicle engine or vehicle, including such ubiquitous consumer items as 

lawnmowers and hedge trimmers. EPA cannot reasonably rely on a potentially unsafe fuel source as a 

compliance option, especially when the manufacturers of those vehicles have warned their customers 

not to use E15.

2. E15 Impairs Vehicle Fuel Economy.

Relatedly, E15 also results in lower fuel economy due to the higher concentration of ethanol in the fuel. 

A Department of Energy study found that the use of E15 over E10 results in a 1.6 percent loss in fuel 

economy.92 Particularly in the current economic climate, consumers are unlikely to choose a product 

that fails to deliver long-term savings at the pump. 

3. E15 Is Incompatible With the Existing Refueling Infrastructure, the Vast Majority of 

Which Is Not Owned by Obligated Parties.

The E15 infrastructure is not under the control of the parties obligated to comply with RFS, given that 

more than 95 percent of gasoline stations are independently owned. While refiners and importers are 

obligated to comply with the mandates, they own less than 5 percent of the gasoline stations in the 

United States, and thus cannot completely control what fuel will be offered or not offered to consumers

at the retail level. With limited exceptions, obligated parties cannot themselves decide to install 

infrastructure or carry a new type of fuel. Individual retail outlets will largely decide when to offer E15—

or not. They will decide (1) whether to assume the risk of damaging their customers’ gasoline engines 

and (2) whether and how to upgrade their facilities to replace tanks, dispensers, and related equipment 

to carry E15.93 And their decisions are made more difficult by the fact that no one knows if consumers 

will actually purchase the product. For those obligated parties that operate retail facilities, the cost of 

retrofitting those facilities to store and dispense E15 is prohibitive. Retail fuel sales have been a low 

margin, highly competitive business that generally cannot afford the costs associated with hardening 

their fuel storage and dispensing systems to handle E15.

A study conducted by the National Renewable Energy Laboratory in 2010 evaluating retail fuel 

dispensing equipment types already approved for E10 found that the use of higher ethanol-blended 

fuels in both new and older equipment resulted in a reduced levels of safety and performance.94 To 

ensure that the dispensing equipment is safe, federal regulations require only approved or “listed” 

devices may be used for dispensing motor fuel at fueling stations, which requires station operators who 

wish to offer ethanol blends higher than E10 to retrofit or to install new, specially designed pumps that 

are listed as compatible with higher blends of ethanol by a nationally recognized testing laboratory 

 

92 ALTERNATIVE FUELS DATA CENTER, U.S. DEP’T OF ENERGY, E15 Approved for Use in 2001 and Newer Vehicles(Feb. 11, 

2011), http://www.afdc.energy.gov/technology_bulletin_1210.html (last visited Mar. 12, 2013).

93 See Overview of the Renewable Fuel Standard: Stakeholder Perspectives, Hearing Before the Subcomm. on 

Energy and Power of the H. Comm. on Energy and Commerce, 113th Cong. (July 23, 2013) (statement of Joseph 

Petrowski on behalf of the Society of Independent Gasoline Marketers of America and the National Association of 

Convenience Stores, available at http://docs.house.gov/meetings/IF/IF03/20130723/101184/HHRG-113-IF03-

Wstate-PetrowskiJ-20130723.pdf [hereinafter SIGMA/NACS Testimony].

94 See Kenneth Boyce & Thomas Chapman, NATIONAL RENEWABLE ENERGY LABORATORY, Dispensing Equipment Testing 

With Mid-Level Ethanol/Gasoline Test Fluid 16 (2010), available at http://www.nrel.gov/docs/fy11osti/49187.pdf. 
20

(NRTL).

95

 Prior to 2010, Underwriters Laboratories (the primary NRTL) had not listed a single dispenser 

as compatible with any ethanol concentration greater than 10 percent.96 EPA states “[b]ecause it is 

common for tank owners to use their tanks for 30 years or more, most UST systems currently in use are 

likely to contain components not designed to store ethanol blends greater than 10 percent.”97 Selling 

E15 safely will require expensive investments in retail fueling equipment—which are beyond the control 

of obligated parties that own less than 5 percent of gasoline stations—and which may not be made 

unless sufficient demand for higher blend fuels exists to justify such expenditures. 

The Society of Independent Gasoline Marketers of America (“SIGMA”) and the National Association of 

Convenience Stores (“NACS”) recently testified to Congress that potential liabilities associated with 

selling E15 prevent E15 from being a viable solution to the blendwall:

Without regard to these unanticipated market realities, the required RFS volume targets 

continue to increase year after year. As a practical matter, these targets can only be met if more 

ethanol is blended into gasoline. The market is not able to do this at the present time, largely 

because (as discussed below) retailers fear that selling gasoline blends greater than 10 percent 

ethanol (so-called “E10”) will increase their liability exposure.

* * * *

As you are likely aware, EPA recently authorized the use of E15 in certain vehicles. However, this 

has so far done very little to expand the use of renewable fuels, due largely to a lack of 

consumer demand, as well as retailers’ liability and compatibility concerns and state and local 

restrictions on selling E15. Indeed, EPA’s decision to approve the sale of E15 serves to highlight 

the limitations that directly affect retailers and impede the implementation of the RFS.98

The costs associated with E15 dispenser and storage systems compatibility can be formidable.99

Purchasing new E-15 compatible dispensers costs approximately $20,000 per dispenser, while 

retrofitting a dispenser, if even possible, can be done for $2,000-$4,000 per dispenser. Even if a retail 

establishment were willing to expend the capital to ensure E15 compatible dispensers, many stations 

will find it impossible to determine the compatibility of their underground storage systems and “[w]hen 

a retailer proceeds to crack open concrete to address underground equipment issues, costs can quickly 

exceed $100,000 per location.”

100

A recent survey by NACS found similar limitations for mid-level ethanol blends: “recent consumer input 

indicates that the market is not ready to accommodate sufficient volumes of these alternative fuel 

blends to satisfy the requirements of the RFS. Inadequate infrastructure and limited consumer demand 

 

95 29 C.F.R. 1910.106(g). 

96 SIGMA/NACS Testimony, supra note 84 at 5.

97 EPA, Notice of Final Guidance, Compatibility of Underground Storage Tank Systems with Biofuel Blends, 76 Fed. 

Reg. 39,095, 39,096 (July 5, 2011),

98 SIGMA/NACS Testimony, supra note 84, at 4-5. See also NACS “Challenges Remain Before E15 Usage is 

Widespread, http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2013/Pages/Challenges-RemainBefore-E15-Usage-Is-Widespread.aspx (last visited August 8, 2013).

99 SIGMA/NACS Testimony, supra note 84, at 5-6, 

100 Id. at 6.
21

puts the future of the RFS in peril unless adjustments are made.”

101 Moreover, “[r]etailers recognize this 

limitation in demand, with more than three-quarters (79%) of the NACS members surveyed citing lack of 

demand as the reason that they don’t sell the fuel.”

102

 The NACS Survey also confirms the retail station 

operators’ concerns over the potential legal risks of selling E15:

Demand isn’t the only issue limiting availability. Retailers also expressed concerns about 

the costs associated with upgrading or replacing equipment to legally store and sell 

these new fuels: 46% said that the costs to upgrade to sell E15 were a concern, and 44% 

said that the costs to upgrade for E85 were a concern. Failure to use certified equipment 

can expose retailers to potential liability. Retailers also expressed concerns over 

potential liability from misfueling: 46% and 44% cited liability concerns over E15 and 

E85, respectively.103

For these reasons, NACS believes that “the statutory increases in renewable fuel volumes sold each year 

must be revised to reflect the declining size of the overall gasoline market.”104 

State regulatory approvals stand as an additional obstacle to the introduction of E15 . DOE has noted 

that 90 state laws and regulations in more than 30 states limit the sale of E15, and it is not known when 

they will be revised or amended.105 A Congressional Research Service report includes an overview of the 

various concerns: 

A key non-vehicle issue is whether existing infrastructure can support ethanol blends 

above E10. Like automobiles, while some existing gasoline tanks and pumps were 

designed and/or certified to handle up to E10, none to date have been designed or 

certified to handle higher ethanol blends. Even if the fuel is approved by EPA for use 

in motor vehicles, presumably fuel suppliers and/or retailers would be unwilling to 

sell the fuel unless they are confident that it will not damage their existing systems or 

lead to liability issues in the future. Otherwise, it seems doubtful that fuel suppliers 

and retailers would voluntarily upgrade their systems to handle the new fuel. 

Further, loan covenants and insurance policies would need to be modified to reflect 

the use of the higher ethanol blend.106

 

101 See NACS Survey: Evolve the Renewable Fuels Standard, Natl. Assoc. of Convenience Stores (June 11, 2013), 

http://www.nacsonline.com/News/Daily/Pages/ND0611131.aspx#.UeNKrZXLZUQ. “Only 26% of fuel consumers 

said that they are familiar with E15, and this lack of awareness significantly diminishes potential demand. After E15 

was described to surveyed consumers, only 59% of them said that they would consider purchasing E15 if it were 

the same price per gallon as gasoline.” Id.

102 Id.

103 Id.

104 Id.

105 See U.S. DEP’T OF ENERGY, E15, Alternative Fuels Data Center, 

http://www.afdc.energy.gov/fuels/ethanol_e15.html (stating that “[t]here are more than 90 state laws and 

regulations currently limiting sales of E15 in more than 30 states. Some state restrictions in conflict include a 10 

percent ethanol blend cap, state biofuels mandates, technical fuel specification standards, and waivers. It is 

unknown when the update of laws and regulations to allow E15 sales will be completed”).

106 BRENT D. YACOBUCCI, CONG. RESEARCH SERV., R40445, INTERMEDIATE-LEVEL BLENDS OF ETHANOL IN GASOLINE, AND THE 

ETHANOL “BLEND WALL” 11-12 (2010) (footnote omitted).
22

Blendstock for E15 blending differs from blendstock for E10 blending, and would present its own 

infrastructure/storage issues at refineries/terminals. For instance, while E10-BOB benefits from a 

summertime 1 psi RVP waiver, E15-BOB does not. This would require that E10-BOB be segregated from 

E15-BOB during the volatility control season from the refinery all the way through the distribution 

system to retail. Further, producers of E15-BOB must have an EPA-approved E15 misfueling mitigation 

plan (“MMP”) in place before its blendstock can be sold for blending E15. E10-BOB does not require an 

MMP to be in place. These differing suitability requirements will make it necessary that the two 

blendstocks be kept segregated downstream of the refinery year-round. Such segregation requirements 

make offering an additional blendstock specifically for E15 unworkable and impractical.

In its 2009 Federal Register notice, EPA acknowledged that the driving motivation behind the original 

petition for the E15 waivers was the need to find a fuel source that could delay the blendwall.107 The 

original hope was that the use of E15 would provide time for the maturation of alternative sources that 

would ensure long-term, sustained compliance with the RFS. But that clearly has not happened. A 

waiver of the RFS in 2014 provides a reasonable, rational way to proceed in the face of the confluence of 

many different circumstances preventing E15 use for the foreseeable future. 

The risks and potential liabilities presented by E15 in terms of vehicle and infrastructure incompatibility 

cannot be overstated and must not be ignored by EPA. This petition is not about the wisdom of RFS or 

ethanol particularly. It is about the simple facts and realities presented by the E10 blendwall. It is 

difficult to understand how or why the federal government would knowingly and intentionally enforce a 

rule that seeks to require the manufacture and sale of a fuel product (E15) that:

 will damage engines and other systems in millions of vehicles that have been “approved” by EPA 

for E15, but which are unapproved by the vehicle manufacturers and for which use may void the 

vehicle warranty;

 is illegal and unavailable for tens of millions of other automobiles, trucks, off-road vehicles, 

boats and small-equipment products, and which will decrease the availability of the gasoline 

required by owners of these products;

 results in fewer miles-per-gallon for most vehicles, thus reducing vehicle efficiency at a time 

when the federal government is promulgating aggressive vehicle efficiency standards;

 is incompatible with, and thus cannot legally be stored in or dispensed from, the vast majority of 

the existing gasoline retail distribution system, thus forcing thousands of small business owners 

to either incur enormous costs to upgrade their systems or run the economic and environmental 

risks posed by carrying an incompatible product; and

 requires obligated party manufacturers and importers, fuel suppliers, distributors and retailers, 

engine and vehicle manufacturers, and many others, to face potential liabilities and litigation all 

for complying with the federal mandate.108

 

107 74 Fed. Reg. 18,228, 18,229 (Apr. 21, 2009).

108 Unlike the different fuel nozzle sizes required for unleaded and leaded gasoline (which themselves did not 

completely stop improper usage of leaded fuel), however, there are no physical safeguards to prevent consumer 

misuse of E15. 
23

Accordingly, it is unreasonable to expect fuel suppliers to introduce E15 and assume these risks.

C. E85 Is Not a Viable Solution to the Blendwall. 

Many of the factors that have prevented E15 from expanding in the domestic fuel market and slowing 

the arrival of the blendwall also prohibit E85 from serving as a solution to the blendwall problem. 

Moreover, there are simply not enough flex-fuel vehicles (“FFVs”) to use enough ethanol to delay the 

blendwall. Under any reasonable assumptions relating to the growth of the market for FFVs, there will 

still not be enough FFVs to avoid the blendwall in the foreseeable future.

In the United States, there is a very limited market for E85—an ethanol/gasoline blend that in practice 

ranges from 51 percent to 83 percent denatured ethanol—which can be sold for use in FFVs. Even with 

very optimistic projections of the growth in E85 sales, the NERA Study concludes that E85 is an 

ineffective solution to prevent the blendwall from continuing into 2014.109 E85 fails to provide a viable 

solution because of the significant market limitations and infrastructure constraints identified below.

The MathPro study shows that E85 is not a viable solution to the blendwall (see E85 graph on page 15).

In the scenario assuming no reduction in total renewable and advanced biofuel volumes in proportion to 

cellulosic biofuel reduction, the data in the MathPro study show that E85 fuel demand would need to 

grow from 0.02 billion gallons in 2013 to ~1.9 billion gallons in 2014 (over 9000 percent increase), to 

~7.9 billion gallons in 2015, and to 22.4 billion gallons in 2020.110 Such growth would be unprecedented 

for any industry. Furthermore, “[t]he ability of the prospective FFV fleet’s [sic] to absorb E85 volumes 

would be exceeded by 2017 (even under the optimistic assumptions that FFV owners using E85 would 

use it exclusively). . . . This result implies that FFV sales would have to expand considerably beyond 

those projected in AEO 2013.”111

In the scenario assuming a reduction in total renewable and advanced biofuel volumes in proportion to 

cellulosic biofuel reduction, the data in the MathPro study shows that E85 fuel demand would need to 

grow from 0.02 billion gallons in 2013 to ~3.5 billion gallons in 2015 (over 17,000 percent increase), to 

~7.3 billion gallons in 2020. Similar to the previous case, such growth would be unprecedented. Also 

use of E85 fuel in FFVs would need to increase to over 50 percent of the time, when, according to EIA,

consumers in the marketplace use E85 less than 5 percent of the time.112 

1. The E85 Refueling Infrastructure Is Inadequate.

The over 2,300 E85 fueling stations currently in existence in the United States113 represent only 

approximately 2 percent of domestic fueling stations. High investment costs prevent the rapid 

construction of new stations or the conversion of existing stations. New fueling tanks for E85 cost up to 

$200,000, a substantial investment for a product that lacks demonstrated demand in the 

 

109 NERA STUDY, supra note 4, at 32.

110 MATHPRO STUDY, supra note 57, at 11.

111 Id. at 12.

112 Id. at 13.

113 U.S. DEP’T OF ENERGY, ETHANOL FUELING STATION LOCATIONS,

http://www.afdc.energy.gov/fuels/ethanol_locations.html (last visited 8/11/2013).
24

marketplace.114 Moreover, most fueling stations contain two tanks one for regular gasoline and the 

other for premium gasoline, with mid-grade being produced by blending the two.115 Retrofitting or 

converting an existing tank would result in a retailer losing an existing proven revenue stream in 

exchange for a product with speculative demand.116 Given these impediments, it is not surprising that 

only 200 to 500 E85 dispensers are installed each year, representing a miniscule portion of the fueling 

station market.117 This number pales in comparison to the over 156,000 gas stations 118in the United 

States.119 The costs associated with E85 infrastructure are important because, even though many gas 

stations sell “branded” fuel, obligated parties do not own the vast majority of retail gas stations across 

the country. In fact, more than 95 percent of all gas stations are owned by smaller businesses (nonobligated parties).

120

 EPA cannot expect independently-owned businesses that operate on thin margins 

to risk installing expensive E85 dispensing equipment in the absence of strong consumer demand. Even 

if the number of stations continues to grow at a rate of 500 per year, E85 stations would still likely 

represent a mere 3 percent of the fueling station market by the end of 2013.

121 Because they are not 

obligated parties under the RFS, these small business owners also lack the regulatory incentive to make 

the costly investments in E85 infrastructure. We also note that distribution of E85 is concentrated in the 

Midwest and FFV access to E85 is even more limited than these numbers imply. 

As the NERA Study points out, even an overly optimistic growth scenario still fails to produce enough 

E85 fueling stations to create a viable alternative to E10.122 Although the number of FFVs in the market 

may continue to grow, sufficient infrastructure does not exist to encourage consumers to use E85 in 

these vehicles. Even if there were a significant expansion in E85 sales in the next two years—as 

assumed in the NERA Study—the study clearly demonstrates that E85 consumption would still be 

insufficient to avoid the adverse consequences of the blendwall in 2014.123 Quite optimistically in 

comparison to the AEO 2011 forecast, NERA modeled the sale of over 1.6 billion additional gallons of 

 

114 COMM. ON ECON. AND ENVTL. IMPACTS OF INCREASING BIOFUELS PROD., RENEWABLE FUEL STANDARD: POTENTIAL ECONOMIC AND 

ENVIRONMENTAL EFFECTS OF U.S. BIOFUEL POLICY 385 (The National Academies Press, 2011). EPA has previously made 

the following cost estimates: (1) the total cost of installing a two-nozzle E85 dispenser is $23,000; (2) the cost of 

automatic tank-level gauging equipment is $6,500; (3) the cost of installing a canopy addition to provide cover for 

an extra dispenser is $15,000; and (4) the cost of installing a new 15,000-gallon underground E85 storage tank is 

$102,000. Based on these figures, EPA estimated that an E85 installation with one dispenser would cost $131,000, 

an E85 installation with two dispensers would cost $154,000, an E85 installation with three dispensers would cost 

$177,000, and upgrading an existing E85 facility from one E85 dispenser to three E85 dispensers would costs 

$130,000. RFS2 RIA, supra note 65, at 781-82.

115 NACS ONLINE, Challenges Remain Before E15 Usage Is Widespread, 

http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2013/Pages/Challenges-Remain-Before-E15-

Usage-Is-Widespread.aspx.

116 Id.

117 CHARLES RIVER STUDY, supra note 63, at 12-13.

118 Third consecutive year station count drops, NPN MAG., Oct. 2012, at 17 (counting 156,065 stations in 2012).

119 U.S. DEP’T OF ENERGY, ETHANOL FUELING STATION LOCATIONS,

http://www.afdc.energy.gov/fuels/ethanol_locations.html (last visited 8/11/2013).; see also John Mayes & Tom 

Hogan, Market, Production Conditions will Prevent Meeting RFS, OIL & GAS J. (Oct. 12, 2012), available at

http://www.ogj.com/articles/print/vol-110/issue-10/processing/market-production-conditions-willprevent.html.http://factfinder2.

120 Robert Bradley, It’s Time to Repeal the Renewable Fuel Standard, FORBES, Apr. 17, 2013, 

http://www.forbes.com/sites/robertbradley/2013/04/17/its-time-to-repeal-the-renewable-fuel-standard/.

121 CHARLES RIVER STUDY, supra note 63, at 13.

122 NERA STUDY,supra note 4, at 22.

123 Id. at 26-38.
25

E85 in 2014.124 The model’s only constraint on the sale of E85 is the ability to build E85 fueling 

stations.125 To determine station growth, the NERA Study examined the number of E85 stations built 

from 2005 to 2011—an average of 340 new stations a year—and then assumed a construction growth 

rate increase of 25percent per year.126 Further contributing to the aggressiveness of NERA’s modeling

assumptions regarding E85 growth, the demand projections used in NERA’s model assume that the 

volume of E85 sales per station will increase 2.5 times between 2012 and 2015—an assumption that 

predicts much stronger demand than the market constraints detailed above would indicate. 127 Yet even 

with these optimistic modeling assumptions about E85 station growth and consumption, NERA’s analysis 

still projects a significant RIN shortfall in 2014.128 

2. There Is Inadequate Consumer Acceptance of E85.

Of equal importance, consumers have rejected E85 even where the infrastructure exists. For example, 

Minnesota has the most extensive network of E85 stations in the United States.129 A review of monthly 

E85 sales compared to the number of stations reveals that despite a growing number of E85 retail 

outlets in Minnesota, annualized average monthly sales of E85 declined by 1.5 percent between 2012 

and 2013.130 In fact, total volume sales of E85 in Minnesota have dropped from a peak of 22 million 

gallons in 2008 to 15 million gallons in 2012.131 Further, adding to the challenge of entering the E85 

market, the average monthly throughput since 2008 is consistently less than 5,000 gallons per month,132

which is roughly 4 percent of the average gasoline station’s throughput of 128,000 gallons per month.133 

The Minnesota market highlights weak consumer demand for E85 and suggests that building additional 

E85 stations on a national scale would fail to result in an appreciable (if any) increase in the use of E85.

EPA understands that E85 refueling rates are low, estimating that the current E85 refueling frequency 

rate is only 4 percent for FFVs with reasonable access to E85. EPA projects that this rate will need to 

increase to 58 percent to ameliorate the impact of the E10 blendwall.

134

 The current low refueling rate 

highlights consumer reluctance to use E85 as a fuel even when it is an option, likely due to the fuel 

economy penalty.135 To date, the drivers of FFVs have overwhelmingly refueled with gasoline and rarely 

chosen E85. The fuel for a FFV is a consumer choice. A potential requirement for the production of 

more FFVs will not necessarily result in a large increase in sales of E85 because drivers of FFVs have the 

option to select E10. 

 

124 Id. at 23.

125 Id.at 22.

126 Id.

127 Id.

128 Id. at 26-38.

129 CHARLES RIVER STUDY, supra note 64, at 22.

130 MINN. DEPT. OF COMMERCE, 2013 Minnesota E85 + Mid-Blends Station Report, available at 

http://mn.gov/commerce/energy/images/E-85-Fuel-Use-Data.pdf. The 2013 available data through June was 

doubled to create an annual figure.

131 Id.

132 Id.

133 NACS ONLINE, 2013 NACS Retail Fuels Report: The U.S. Petroleum Industry: Statistics, Definitions, 

http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2013/Pages/Statistics-and-Definitions.aspx

(last visited Aug. 10, 2013).

134 75 Fed. Reg. 14,670, 14,762 (Mar. 26, 2010). 

135 See Alliance Testimony, supra note 72, at 7 (stating that the “primary factors affecting the lack of E85 usage are 

pricing, availability, total full-tank range, and consumers’ willingness to use the fuel”).
26

EPA shares this perspective: 

Similarly, EPA believes it is not appropriate to assume that ethanol FFVs will primarily 

use E85, as there is no extra vehicle cost to purchase an FFV (typically a consumer 

does not choose between an FFV and a non-FFV of the same vehicle model), E85 fuel 

is no cheaper and in fact usually more expensive per mile, and use of E85 reduces 

overall vehicle range since there is only one fuel tank (as opposed to PHEVs and dual 

fuel CNG vehicles which have two fuel storage devices and therefore the use of the 

alternative fuel raises overall vehicle range). Further, even with approximately 10 

million ethanol FFVs in the U.S. car and light truck fleet, fuel use data demonstrate 

that ethanol FFVs only use E85 less than one percent of the time.136

EPA acknowledged the uncertainty that surrounds E85 in the Agency’s recent draft guidance for 

calculating compliance credits issued to auto manufacturers under the GHG tailpipe emission 

standards.137 The GHG tailpipe emission standards provide auto manufacturers with a credit for certain 

vehicles, such as FFVs, calculated through the use of a weighting factor (the “F value”). Currently, EPA 

has set the F value for FFVs at 0.50, meaning that the agency assumes a FFV uses E85 fifty percent of the 

time. In the draft guidance, EPA noted that the limited usage of E85 in FFVs suggests a more 

appropriate F value closer to zero.138 FFVs and E85 cannot represent a viable solution to forestalling the 

blendwall when EPA itself concludes that FFV-owners rarely fuel their vehicles with E85. The limitations 

of E85 as an RFS compliance option and a lack of viable compliance alternatives will only hasten the 

arrival of the blendwall. Moreover, low E85 sales translate to an inadequate supply of RINs, which does 

nothing to forestall the problems caused by the E10 blendwall.

Based on the limited use of E85, EPA reduced the F value from 0.50 to 0.20 for FFVs model years 2016-

2019.139 This drastic change in the F value creates a major disincentive for automakers to build FFVs. 

The draft guidance points out that there is a historic relationship between an incentive for FFV 

production, such as the compliance credit, and the production of FFVs, and yet EPA fails to explain how 

the reduced F value will not adversely affect FFV production.140 EPA’s actions in this arena highlight the 

inconsistencies that result from the interaction of the GHG tailpipe emission standards and the RFS. The 

RFS calls for refiners to blend ever-increasing amounts of ethanol with gasoline and now EPA proposes 

to remove the biggest incentive for auto manufacturers to build a vehicle fleet that can safely run on 

high-ethanol blends. The GHG tailpipe emission standards do not act in a vacuum and EPA’s draft 

guidance will only serve to frustrate future compliance with the RFS.

 

136 EPA , EPA-420-R-12-017, 2017 AND LATER MODEL YEAR LIGHT-DUTY VEHICLE GREENHOUSE GAS EMISSIONS AND CORPORATE 

FUEL ECONOMY STANDARDS: RESPONSE TO COMMENTS 6-134 (Aug. 2012), available at 

http://www.epa.gov/otaq/climate/documents/420r12017.pdf. 

137 See EPA, DRAFT GUIDANCE LETTER: E85 FLEXIBLE FUEL VEHICLE WEIGHTING FACTOR FOR MODEL YEAR 2016-2019 6 (Mar. 22, 

2013), available at http://www.epa.gov/otaq/regs/ld-hwy/greenhouse/documents/draft-ffv-guidance-letter.pdf 

[hereinafter DRAFT GUIDANCE LETTER]. 

138 Id.

139 Id. at 1. Given the historical E85 usage, a 20 percent F value represents an arbitrarily high estimate for E85 

refueling rates.

140 Id. at 11.
27

The chart below shows EIA’s projections in 2012 and 2013 of E85 fuel use as a percentage of 

transportation energy in the U.S. Note the sharp decrease in the projections – E85 fuel is expected to be 

less than 1 percent of transportation energy demand in the most recent AEO.

As if the foregoing were not sufficient to demonstrate the limitations on E85, automobile manufacturers 

caution drivers against repeatedly switching back and forth between E85 and gasoline due to concerns 

that constant shifts in the ethanol content of the fuel can damage car engines.141 States with their own 

renewable fuel requirements also warn against fuel switching unless the vehicle requires half a tank or 

more of fuel, and not without first burning off the remaining original fuel in the tank.142 Ultimately, this 

combination of market constraints and concerns related to long-term vehicle maintenance limit the 

ability of E85 to prevent the blendwall.

D. Biomass-Based Diesel Is Not a Viable Solution To Prevent the Blendwall.

Another purported alternative, biomass-based diesel, also fails to provide a viable solution to prevent 

the blendwall. There are two principal challenges to the increased use of biomass-based diesel. First, as 

explained above, there is a practical constraint in biomass-based diesel marketability that makes the 

introduction of blends above B5—a blend of 5 percent biodiesel and 95 percent conventional diesel—for 

most diesel-powered vehicles impossible; this constraint causes diesel production to incur an 

unavoidable RIN deficit.143 Further, the use of biomass-based diesel is also limited by the lack of 

sufficient biomass-based diesel feedstocks to saturate the diesel pool at B5.144 Indeed, biomass-based 

diesel feedstock constraints likely will continue for the foreseeable future, which sets up a diesel deficit 

as explained in Section I.B, supra.

The RFS regulations identify three separate categories of biomass-based diesel: biodiesel, renewable 

diesel that is not co-processed with petroleum, and cellulosic diesel.145 Under the regulations, any 

 

141 See Tech Tips – E85 Fuel, GENERAL MOTORS, 

http://www.gmfleet.com/content/dam/gmfleet/global/master/nscwebsite/en/Home/Shared_Resources/PDFs/G

MC1-12-03142-262%20E85%20Ethanol%20Fluid.pdf (last visited Mar. 15, 2013).

142 ILL. DEP’T OF TRANSPORTATION, Frequently Asked E85 Questions, 

http://www2.illinois.gov/gov/green/Documents/FAQ's%20E85%20ver3.pdf (last visited Aug. 12, 2013).

143 CHARLES RIVER STUDY,supra note 63, at 35-36.

144 University of Illinois, The Ethanol Blend Wall, Biodiesel Production Capacity, and the RFS...Something Has to 

Give, (Feb. 13, 2013), http://farmdocdaily.illinois.edu/2013/02/ethanol-blend-wall-biodiesel-RFS.html (“the 

increase in biodiesel feedstock requirements would simply overwhelm feedstock markets”).

145 See 40 C.F.R. § 80.1401 (defining “Biomass-based diesel” and “Cellulosic diesel”).
28

combination of these fuels can be used to meet the biomass-based diesel, total advanced, and total 

renewable fuel mandates.146 Because biomass-based diesel has an ethanol-equivalence value greater 

than 1.0,

147 each of these fuels also has the ability to generate additional RINs and could help forestall 

the blendwall.148 This potential is offset, however, by significant limitations in the availability of the 

necessary feedstocks.

The most common type of biodiesel is “FAME” biodiesel, which is produced through the transesterification of plant and animal fats.149

 The resultant fuel is composed of fatty acid methyl esters 

(“FAME”), which are chemically distinct from petroleum fuels and possess different physical 

properties.150 Because its production technology is mature and it requires a lower capital investment 

than other types of biomass-based diesel production, FAME biodiesel is likely to remain the primary 

biodiesel stock for the foreseeable future.151 The availability of affordable feedstocks to produce FAME 

biodiesel, however, is limited.152 While biodiesel can be made from a number of different plant and 

animal fats, soybean oil is the most common feedstock.153 Because soybean oil and other feedstocks are 

commercially valuable commodities with numerous other uses, feedstock price and availability will be 

affected not only by soybean yield but also by market competition for feedstocks.154 

In addition to feedstock limitations, there are a number of practical constraints to the widespread use of 

FAME biodiesel. For instance, FAME biodiesel is typified by significant variations in quality, which in turn 

leads to inconsistent performance, particularly at low temperatures. This leads to a seasonal pattern of 

acceptance. Further, FAME biodiesel presents its own logistic challenges. In particular, the potential for 

trailback into jet fuel precludes movements of blends containing FAME biodiesel on many common 

carrier pipelines. Finally, the vast majority of existing terminals do not currently have the infrastructure 

to receive, store, and blend FAME biodiesel. Even assuming the necessary infrastructure eventually can 

be developed, these facilities cannot realistically be constructed in the short term.

In contrast to FAME biodiesel, renewable diesel and cellulosic diesel are pure hydrocarbon fuels.

155

 To 

date, due to economic/technological hurdles, production of renewable diesel and cellulosic diesel has 

lagged far behind the volumes required by the RFS.156 In fact, in its proposed volumes for cellulosic and 

advanced biofuels for 2013, the EPA stated that it expects the vast majority of required volume of 

biomass-based diesel for 2013 (1.28 billion gallons) to be met by FAME biodiesel—which has its own 

 

146 See id.; 40 C.F.R. § 80.1405 (setting forth Renewable Fuel Standards for “biomass-based diesel”).

147 See 40 C.F.R. § 80.1415(b) (assigning equivalence values to various renewable fuels).

148 See CHARLES RIVER STUDY, supra note 63, at 32-33 (analyzing the increased use of biodiesel as blendstock as a 

potential method to delay breach of the E10 blendwall).

149 Id. at 33.

150 Id.

151 Id. at 34. 

152 Id. at 37.

153 Id.

154 Id.

155 Id. at 34.

156 See Robert Wisner, EPA’s Proposed Biofuels Mandates for 2013 – Challenges for the Biofuels Industry, AGRIC.

MARKETING RESOURCE CENTER (Mar. 2013), 

http://www.agmrc.org/renewable_energy/biofuelsbiorefining_general/epas-proposed-biofuels-mandates-for2013---challenges-for-the-biofuels-industry/ (discussing historical and future problems associated with meeting 

the RFS’ requirements for biomass-based diesel and cellulosic diesel).
29

limitations, as noted above.157 For these reasons, biomass-based diesel production does not provide a 

viable solution to avoid the blendwall.

The MathPro study shows that biomass-based diesel is not a viable solution to the blendwall (see FAME 

graph on page 15).

In the scenario assuming no reduction in the total renewable fuel and advanced biofuel volumes in 

proportion to cellulosic biofuel reduction, the MathPro data show that 2 billion gallons of FAME would 

be required in 2014 (~40 percent increase vs. 2013), 4.7 billion gallons of FAME would be required in 

2015 (~300 percent increase vs. 2013) and by 2020 11.1 billion gallons of FAME would be required by 

2020 (~825 percent increase vs. 2013).

158

 Per MathPro, “[b]y 2015, the FAME volume would exceed (i)

the current 5 vol% limit on FAME blending in diesel fuel, and (ii) the biodiesel industry’s current 

nameplate capacity of about 2.2 B gal/yr. By 2020, FAME blending would have to account for about 16 

vol% of the distillate pool to enable compliance with the volume standards.”159

In the scenario where the total renewable fuel and advanced biofuel volumes is reduced in proportion 

to cellulosic biofuel reduction, the MathPro data show that “FAME use would begin to expand in 2015, 

by which time the gasoline pool is saturated with ethanol (2012) and carryover RINs have been 

exhausted (2014). By 2017, FAME blending would exceed the current 5% blending limit in diesel fuel, 

and FAME production would have to reach 3.6 B gal/y, over 50% higher than the reported current FAME 

nameplate capacity of about 2.2 B gal/y. By 2020, FAME would have to account for about 6.5 vol% of 

the distillate pool to enable compliance with the RFS volume standards, which exceeds the current 

blending limit of 5 vol%.”160 

E. Deficit Rollover Is Not a Solution to the Blendwall.

Some have suggested that the ability to roll a RIN deficit over in to the following year could be a solution 

to the blendwall problem. That is incorrect. In fact, when the first obligated parties opt to carry a 

deficit, it should be a signal to EPA that the RFS has become infeasible. Although it is permissible to roll 

a RIN deficit over for one year, EPA’s rules state that the entire deficit and the entire obligation must be 

met in the second year. Given that the RFS mandates escalate year by year, rolling a deficit over from 

2014 in to 2015 will not solve the problem. This is because the rapidly increasing mandated volumes will 

make it virtually impossible for a party in deficit ever to recover from the deficit. What options would 

the obligated party have in the second year to remain in compliance with the law except to severely 

curtail its obligation? 

F. When Obligated Parties Reduce Domestic Production Because of the Blendwall, 

Systemic RIN Shortages Prevent Other Companies from Using It as an Opportunity To 

Increase Their Domestic Sales Volumes and Market Share.

In the RFS 2013 final rule, EPA incorrectly dismisses the potential for reduced domestic fuel supplies, 

resulting from increased fuel exports and/or decreased fuel imports.

161

 According to EPA, domestic 

 

157 78 Fed. Reg. at 9,285.

158 MATHPRO STUDY, supra note 57, at Exhibit 1A.

159 Id. at 11.

160 Id. at 13.

161 2013 RFS Final Rule, supra note 35, at 66-67.
30

supply is unlikely to drop when certain obligated parties are unable to supply the market because other 

obligated parties would simply increase sales volumes in an effort to gain market share.

162

 This 

reasoning represents a fundamental misunderstanding of the blendwall problem and ignores the fact 

that the blendwall affects the entire industry.163 NERA explains that “the blending percentage standard 

for total renewable fuel will eventually exceed the maximum feasible level of renewable fuel that can be 

contained on average in a gallon of transportation fuel given the technological, market, and 

infrastructure constraints in the economy.”

164 As a result, RINs will become scarce for everyone.165

 A

scarcity of RINs likely will result in fewer gallons of gasoline and diesel that may be legally sold—a 

scenario that cannot be alleviated through the use of E15 or E85, as discussed elsewhere in this Petition. 

The contraction of the market is due to the fact that every batch of transportation fuel sold in the 

United States requires a specific percentage of RINs to be obtained. If surplus RINs are not available, no 

additional fuel may be sold in the domestic market.

As reported by NERA, there are limited compliance mechanisms, and they include reducing the RFS 

compliance obligation by reducing domestic fuel supplies (e.g., increasing exports, reducing production). 

NERA uses diesel as a specific example to illustrate how annual percentage standards, applied to both 

gasoline and diesel, could result in the tightening of the diesel supply initially, and then result in smaller 

gasoline and diesel supplies.166

In the RFS 2013 final rule, EPA also incorrectly asserts that high feedstock prices are a primary driver for 

RIN price increases.167 One needs only point out that RINs prices were only a few pennies for years, 

while relative ethanol and petroleum prices varied, but only just recently shot up in 2013 while the 

ethanol and petroleum prices did not change significantly from prior year’s variations. What has 

changed is the ethanol and gasoline consumption data that show we were nearing the blendwall. 

According to NERA, the cost of RINs depends on available supply, and RIN prices increase when there is 

an imbalance between supply and demand.168 While the markets are certainly related, ethanol supply 

and demand is not necessarily a factor in RIN price. As noted in this Petition, compliance with the RFS is 

becoming more difficult due to blending requirements exceeding the amount of renewable fuel that can 

be folded into U.S. transportation fuels. It would be wrong to conclude that RIN prices are increased 

due to lack of ethanol supplies, especially during a period when the United States is a net exporter of 

ethanol. If the market demands more ethanol, then market signals via ethanol prices are sufficient.

Last, EPA indicates the impact of increasing RIN prices is not to increase overall transportation fuel costs, 

but rather to reduce the price of higher renewable content fuels (e.g., E85) relative to the price of other 

fuels with a lower renewable content (e.g., E10). To use more E85, retailers must drop the price below 

 

162 Id.

163 EPA is confusing an initial competitive market dynamic as the blendwall approaches with the blendwall impact 

itself. All players do not run short of RINs at the same time. While some obligated parties are already constrained 

and exposed to the full market RIN costs, others have a RINs inventory and lower average RINs costs. Obligated 

parties with lower costs would be expected to gain market share at the expense of higher cost suppliers. But the 

supply of RINs relative to demand is shifting and will continue to tighten as the RINs inventory is drawn down and 

fewer are available for sale as the mandates increase and additional RINs must be found in the marketplace to 

demonstrate compliance. 

164 NERA STUDY, supra note 4, at 26.

165 Id. at 26-30.

166 Id. at 31-34.

167 2013 RFS Final Rule, supra note 35, at 66.

168 See NERA STUDY,supra note 4, at 29-30.
31

that of gasoline to overcome the consumers’ rejection of its efficiency loss and inconvenience. That has 

not occurred. According to the AAA, as of August 12, 2013, the national average retail price for E85 was 

selling at a 17-cent premium to regular gasoline on an energy-equivalent basis.

169

 Moreover, the 

independently-owned retail service stations do not share the compliance burden that obligated parties 

bear to meet the RFS requirements. EPA’s flawed logic assumes that obligated parties can overcome the 

blendwall merely by encouraging increased E85 consumption through dramatically reduced prices. As 

discussed in this Petition, this is not so.

IV. A Partial Waiver Can Avoid the Inadequate Domestic Supply and Avoid Severe Economic 

Harm.

A. The NERA Study Provides a Fundamentally New Analysis Than Studies Previously 

Considered by EPA.

The NERA Study differs in two fundamental respects from prior studies considered and rejected by EPA: 

(1) with respect to its assumptions about E10 production; and (2) in its economic modeling. In both 

divergences from prior studies, the NERA Study responds directly to EPA’s stated criteria for analyzing 

waiver petitions.

In its 2008 denial of Texas’s waiver petition, EPA explained that it believed the Iowa State model was the 

best available model to examine the impacts of a RFS waiver because it is a stochastic model and it 

captures the interaction between the agricultural and energy markets.170 In its final notice of action, 

EPA dismissed several studies examining the ability of refiners to decrease ethanol blending because the 

studies failed to address whether the economics of ethanol and gasoline production would lead refiners 

to reduce blending rates in the event of a waiver.171 The prior analyses assumed a departure from the 

production of E10 and decreased use of ethanol as oxygenate in the event of a waiver, which EPA 

deemed implausible under current market conditions.172 In contrast, the NERA Study assumes that all 

refiners will continue to produce as much E10 as possible and examines a situation in which production 

of E10 alone is no longer sufficient to meet the RFS.173 This reflects the actual blendwall that faces the 

United States now and is an important difference that distinguishes and validates the NERA Study, unlike 

the prior studies considered and rejected by EPA.

Further, in its prior waiver denials, EPA faulted studies for failing to model interactions between the fuel 

and agricultural sectors and for valuing ethanol on an energy equivalent, rather than a volumetric, 

 

169 http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp (last visited 

Aug. 13, 2013).

170 73 Fed. Reg. at 47,174.

171 Id.

172 Id.

173 EPA also expressed doubts about studies presented in the comment period on its denial of waiver requests in 

2012. EPA found that there are a number of business and technical reasons that may prevent refiners from 

moving away from the production of E10. See 77 Fed. Reg. at 70,767. As with the doubts EPA expressed in its 

2008 denial, these concerns have no place in the current evaluation, as the NERA Study makes no assumptions that 

refiners will shift away from the production of E10. In its prior denials of petitions for waivers under the RFS, the 

EPA declined to rely upon other studies offered by previous petitioners and other commenters, noting several 

shortcomings with the studies. The NERA report also does not suffer from these same alleged deficiencies, and its 

economy-wide analysis is sufficiently robust to serve as the basis of a determination that implementation of the 

RFS will cause severe economic harm.
32

basis.174 EPA has also rejected commenters’ submissions of studies on the impacts of the RFS on the 

livestock industry, finding that these studies “do not focus on the impacts directly related to the RFS.”175 

The NERA Study is different because it is focused on the behavior of refiners in response to the 

blendwall and the cascading effects that such behavior will have on fuel prices and ultimately on the 

economy as a whole.176 The study assumes that sufficient ethanol to meet the RFS’s volume obligations 

will remain available and that virtually the entire gasoline pool will be E10. Further, the NERA Study 

relies upon a broad economic model that examines the interaction among five energy and seven nonenergy sectors.177

 Therefore, the NERA Study is not subject to the same shortcomings that have caused 

EPA to question previous studies submitted by commenters in support of a waiver of the RFS. 

B. The Rationales Supporting Previous Waiver Decisions Do Not Preclude Waiver of the 

2014 RFS, and Immediate Action Is Necessary.

As explained above, this Petition is unlike those that have preceded it because—unlike the prior waiver 

petitions—the blendwall is now here, and a waiver is concretely necessary. Despite this key difference, 

it bears mention that EPA has at least twice considered the “standards” to be applied in evaluating 

whether a waiver petition under section 211(o)(7)(A) would relieve a severe economic harm cause by 

the RFS. In its 2008 denial of a waiver petition from the state of Texas, EPA first interpreted the 

language of section 211(o)(7)(A) and concluded that the Clean Air Act requires a “generally high degree 

of confidence that implementation of the RFS program would severely harm the economy of a State, 

region, or the United States.”178 EPA rejected the Texas’ 2008 waiver petition, finding that a waiver of 

the RFS would have no impact on ethanol demand during the period of the waiver and therefore would 

not increase the feed and fuel prices that Texas alleged were the source of severe economic harm.179 

EPA considered a second waiver petition from the Governors of several states in 2012. In considering 

the 2012 petition, EPA invited comment on its 2008 interpretation of section 211(o)(7)(A).180 EPA 

ultimately rejected the waiver petition, concluding that the evidence did not support that the RFS was 

causing severe economic harm because “the weight of the evidence shows that it is very likely that the 

RFS volume requirements will have no impact on ethanol production volumes in the relevant time 

frame, and therefore no impact on corn, food, or fuel prices.”181 In doing so, the EPA determined that 

its 2008 interpretation of the waiver provision was correct and that “EPA interprets ‘severely harm’ as 

specifying a high threshold for the nature and degree of harm.”182

While Petitioners believe that EPA has, to date, adopted an unnecessarily narrow view of its discretion 

to issue waivers under section 211(o)(7)(A), that fact is immaterial here because the impacts described 

in the NERA Study unquestionably rise to the level of severe economic harm upon which a waiver can be 

based. EPA must immediately issue a waiver to avoid the inadequate domestic supply and severe 

adverse economic impacts that will be caused by the RFS. Nothing in the Clean Air Act requires that the 

severe economic harm serving as the basis for the waiver petition must occur in the same year that EPA 

 

174 73 Fed. Reg. at 47,174.

175 Id. at 47,178.

176 NERA STUDY, supra note 4, at 7 (explaining that NERA relies upon its transportation fuel and macroeconomic 

models in evaluating the impacts of the RFS).

177 Id. at 14.

178 73 Fed. Reg. at 47,169. 

179 Id. at 47,168-69.

180 77 Fed. Reg. 52,715 (Aug. 30, 2012).

181 77 Fed. Reg. at 70,775.

182 Id. at 70,756.
33

issues the waiver.183 The statutory language governing the application of the severe economic harm test 

for a waiver provides “implementation of the requirement would severely harm the economy or 

environment of a State, a region, or the United States.”184 The use of the conditional tense rather than 

the present tense suggests that future harm is an appropriate basis for granting the waiver. 

EPA itself recognized that the agency has “discretion in determining the appropriate time period to 

analyze” with respect to a severe economic harm analysis in its denial of North Carolina’s and Arkansas’s 

waiver petitions.

185

 Indeed, EPA previously requested petitioners to file waiver petitions 6 months in 

advance to facilitate EPA’s review of the petition.186 By its own admission, EPA does not expect to wait 6 

months from the time severe harm begins before granting a waiver. 

Previously, EPA declined to examine impacts beyond the current calendar year due to an inability to 

properly assess the relevant variables.187 The NERA Study fully accounts for fluctuations in fuel prices 

and availability, and it provides sufficient certainty to conclude severe economic harm will result from 

reaching the blendwall in the years following 2013.188 Existing infrastructure cannot support the higherethanol blend fuels required to avoid the blendwall. Moreover, the fact that a waiver applies broadly to 

the entire regulated community—and not simply to an individual party—implies that the waiver 

provision is meant to serve as a tool to address structural issues that could affect the successful 

implementation of the RFS. 

C. In Contrast to Earlier Waiver Request Situations, in This Instance, Issuance of a Waiver 

Will Provide Relief and Avoid the Harms Resulting From the Blendwall.

The fundamental problem is that RINs are effectively permits to supply gasoline and diesel fuel for U.S.

consumption, and that as the mandates exceed the ability of the transportation system to consume the 

mandated levels of renewable fuel, this will result in a shortage of permits to supply gasoline and diesel 

fuel. By granting a waiver, EPA will solve this problem and avoid the potentially disastrous impacts of 

the blendwall by eliminating this limitation on gasoline and diesel fuels for U.S. consumption. EPA must 

take immediate action to avoid the severe harm that the blendwall will inflict on consumers and the 

economy. In contrast to earlier waiver requests, where EPA determined that issuance of the waiver 

would likely not have provided the relief the petitioners sought, in this case, issuance of a waiver will 

provide relief and avoid the harms that would be inflicted by the blendwall.

V. There Is an Inadequate Domestic Supply of Cellulosic and Other Advanced Biofuels.

The RFS contains mandates for total advanced biofuels and two subsets of total advanced fuels

(biomass-based diesel and cellulosic fuels). Total advanced fuel requirements are greater than the sum 

of biomass-based diesel and cellulosic fuels. That surplus over and above biomass-based diesel and 

cellulosic fuels we will refer to as other advanced fuels. We note that there is little to no concrete 

 

183 See 42 U.S.C. § 7545(o)(7)(A).

184 Id. (emphasis added).

185 See 77 Fed. Reg. at 70,757 (“In considering the time frame used for this technical analysis, EPA recognizes that 

we have discretion in determining the appropriate time period to analyze.”).

186 73 Fed. Reg. at 47,184.

187 77 Fed. Reg. at 70,757-58.

188 See id. at 70,758 (noting that a waiver petition based on the blendwall itself could provide a proper analysis of 

all the relevant factors required to grant a petition based on severe economic harm occurring in a year different 

than the year of the petition’s filing).
34

evidence that the domestic supply of either cellulosic biofuels or other advanced biofuels will reach the 

designated statutory targets.

A. Inadequate Supply of Cellulosic Biofuels.

The data in the EPA Moderated Transaction System (EMTS) indicates that no cellulosic biofuel was 

produced in 2011 and very little was produced in 2012. EMTS data show less than 49,000 gallons of 

cellulosic biofuel production in 2013 to date.189 These facts suggest that the cellulosic biofuel statutory 

mandate should be waived based on an inadequate domestic supply. A recent U.S. Court of Appeals 

decision required EPA to establish a realistic cellulosic biofuel standard pursuant to the Clean Air Act.

190

 

Even a complete waiver of this mandate, however, would not be enough to abate the crisis caused by 

the E10 blendwall. 

B. An Inadequate Domestic Supply of Advanced Biofuels.

The 2014 statutory level for advanced biofuels is 3.75 billion gallons. The obligation to blend 

“advanced” biofuels exceeds the sum of biomass-based diesel and cellulosic biofuels, and EPA expects 

the difference to be made up with sugarcane-based ethanol and extra biomass-based diesel. A 

miniscule amount of sugarcane-based ethanol is produced domestically. Most is sourced from Brazil. 

The mandate results in imports of other advanced biofuels, which is contrary to the goals of EISA to 

promote energy independence and security. Drawing from the clear language of the section 211(o) 

waiver provision, only “domestic supply” should be considered when setting the advanced biofuel and 

total renewable volumes. 

Domestic producers cannot meet the EISA’s advanced biofuels requirements. In this regard, EPA 

recently identified Brazilian sugarcane ethanol as a potential source to meet the RFS advanced biofuel 

requirements.191 EPA’s reliance on Brazilian ethanol crowds out the development of domestic advanced 

biofuels and actually fosters dependence on a foreign fuel source—in direct conflict with the 

Congressional intent of EISA. More importantly for purposes of addressing the blendwall, Brazilian 

sugarcane ethanol is simply an ethanol derived from a different feedstock and, therefore, subject to the 

same blending constraints as corn-based ethanol. The mandate to incentivize the import of Brazilian 

sugarcane ethanol merely displaces domestically produced ethanol, but does not help address the 

ethanol blendwall crisis. The RFS has caused significant quantities of sugarcane-ethanol to be imported 

from Brazil to meet the advanced biofuel mandate, while corn-based ethanol is sent to Brazil to satisfy 

consumer demand in that country. This fuel shuffling between the U.S. and Brazil is an unintended 

consequence of the RFS.

Putting aside for a moment the fact that Brazilian sugarcane-derived ethanol neither helps the ethanol 

blendwall problem nor qualifies as a domestic fuel, significant uncertainty exists with respect to Brazil’s 

ability to export increasing volumes of sugarcane ethanol. EPA’s advanced biofuel volumes for 2013 rely 

on the import of 666 million gallons of sugarcane ethanol from Brazil.192 Uncertainty exists whether 

Brazil can increase exports to actually meet this demand. Idled mills and poor harvests have led 

 

189 EPA, 2013 RFS2 DATA – RIN GENERATION AND RENEWABLE FUEL VOLUME PRODUCTION BY MONTH, 

http://www.epa.gov/otaq/fuels/rfsdata/2013emts.htm (last visited July 30, 2013).

190 API v. EPA, 706 F.3d 474 (D.C. Cir. 2013).

191 78 Fed. Reg. at 9285.

192 Id.
35

Brazilian officials to acknowledge that the country most likely cannot increase production and export in 

2013 to meet the needs created by EPA’s new target levels.193 Although production of sugarcane has 

recently increased,194 local domestic programs, such as new ethanol mandates for gasoline sold in Brazil, 

may further constrain Brazil’s supply of sugarcane ethanol made available for export. Starting June 1, 

2013, all gasoline sold in Brazil must contain 25 percent ethanol, up from 20 percent.

195

 Unlike in the 

United States, a large portion of the auto fleet is designed to run on gasoline containing more than 10 

percent ethanol.196 Reliance on imported advanced renewable fuel undermines the Energy 

Independence and Security Act’s goals of enhancing domestic energy security. 

The RFS Advanced Biofuel statutory target for 2014 is 3.75 billion gallons. It is likely that the available

amount of cellulosic biofuel would be de minimis, and may be excluded from this calculation. The 

domestic supplies of biomass-based diesel and cellulosic biofuels are limited and require EPA to waive at 

least 1.83 billion gallons from 3.75 billion gallons in 2014. 

The EPA has the statutory authority to write the advanced mandate down to at least the 

existing biodiesel production capacity if not further. This may be the only realistic path 

for implementing the RFS in the next several years.197

Even if EPA exercises its authority to reduce the cellulosic biofuel mandate to zero and the advance 

biofuel mandate to 1.92 billion (representing the amount of biomass-based diesel RINs that can be 

feasibly produced), while simultaneously lowering the total RFS mandate by an equivalent amount, the 

ethanol blendwall problem would remain. To avoid this problem, EPA must go further and waive an 

even greater amount of the total RFS mandate than is represented by the shortfall in the cellulosic and 

advanced categories. 

VI. Conclusion

As explained above, this Petition is unlike any that have come before it. The blendwall and its myriad 

attendant harms are certainly at hand as evidenced by a number of factors. The current RFS, based on 

projections of demand that have not materialized, directly threatens the economy and energy 

infrastructure of the United States, as well as the well-being of every American consumer. The EPA must 

exercise its authority under section 211(o)(7) to waive the requirements of section 211(o)(2) of the 

Clean Air Act in a manner that—at minimum—is sufficient to delay the ethanol blendwall beyond 2014. 

The economic impacts of maintaining the status quo are significant, and the harms outlined in this 

Petition are of a sufficient nature and severity to justify the waiver requested herein. In addition to the 

inadequate domestic supply of gasoline and diesel, the severe economic harm caused by the RFS 

volumes also justifies EPA’s exercise of its waiver authority. Each of these harms is severe on a regional 

 

193 Reese Ewing, Analysis: Brazil Ethanol Returns to US as Biofuel Rules Pave Way, REUTERS, Sept. 20, 2012, 

http://www.reuters.com/article/2012/09/20/us-ethanol-brazil-exports-idUSBRE88J14J20120920.

194 Isis Almeida, Brazil Sugar-Cane Use for Fuel Seen by Datagro Above Outlook, BLOOMBERG, July 5, 2013, 

http://www.bloomberg.com/news/2013-07-05/brazil-s-sugar-cane-use-for-fuel-seen-by-datagro-beatingoutlook.html.

195 Erin Voegele, Brazil to Increase Ethanol Blend Level to 25 Percent, ETHANOL PRODUCER MAG., Mar. 7, 2013, 

http://www.ethanolproducer.com/articles/9628/brazil-to-increase-ethanol-blend-level-to-25-percent.

196 See Brazilian Transportation Fleet, Sugarcane.org, http://sugarcane.org/the-brazilian-experience/braziliantransportation-fleet (last visited Aug. 12, 2013).

197 University of Illinois, The Ethanol Blend Wall, Biodiesel Production Capacity, and the RFS...Something Has to 

Give, (Feb. 13, 2013), http://farmdocdaily.illinois.edu/2013/02/ethanol-blend-wall-biodiesel-RFS.html.
36

or national scale, and each could be mitigated if EPA acts now to waive the RFS for 2014, giving farmers 

ample time to adjust their production decisions accordingly. 

To be sure, delaying the ethanol blendwall until 2015 will not solve the underlying problem of 

accelerating RFS mandates. But EPA has clear authority to grant multiple waivers. Section 211(o)(7)(C) 

provides that waivers are limited to one year, but may be “renewed” by the Administrator after interagency consultation. Given the likelihood that production, supply, and market conditions described in 

this Petition will continue past 2014 barring a statutory change to the RFS, EPA should also give clear 

indication in the context of granting a waiver that the methodology used to determine RFS volume 

waived in 2014 will be used in subsequent years. A clear statement of intent to grant additional waivers 

if current conditions persist will send a clear message to the marketplace and allow for the most 

efficient resolution of this matter. 

In sum, now is the time for EPA to act. The blendwall cannot realistically be forestalled, and its impact 

on the United States would be devastating. EPA has the authority to prevent this catastrophe. 

Petitioners urge EPA to do so by granting the requested waiver.

Petitioners thank EPA for considering this Petition and the information within and appended to it. 

Respectfully submitted,

AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS AMERICAN PETROLEUM INSTITUTE

______________________________________ ______________________________________

Richard Moskowitz Robert Greco III

General Counsel Group Director 

Downstream and Industry Operations
Attachment 1
October 2012 

Economic Impacts Resulting from 

Implementation of RFS2 Program

Prepared For: 

American Petroleum Institute

 
Project Team 

Paul Bernstein, Senior Consultant 

Bob Baron, Outside Consultant 

W. David Montgomery, Senior Vice President 

Shirley Xiong, Consultant 

Mei Yuan, Senior Consultant 

The findings contained in this report may contain predictions based on current 

data and historical trends. Any such predictions are subject to inherent risks and 

uncertainties. In particular, actual results could be impacted by future events that 

cannot be predicted or controlled, including, without limitation, changes in business 

strategies, the development of future products and services, changes in market and 

industry conditions, the outcome of contingencies, changes in management, and 

changes in law or regulations. Neither API nor NERA accept responsibility for actual 

results or future events. 

The opinions expressed herein are those of the authors and do not necessarily 

represent the views of NERA Economic Consulting or any other NERA consultant. 

NERA Economic Consulting 

1255 23rd Street NW 

Washington, DC 20037 

Tel: +1 202 466 3510 

Fax: +1 202 466 3605 

www.nera.com 
NERA Economic Consulting 

i 

Contents 

Executive Summary .........................................................................................................................1

I. Introduction ..........................................................................................................................4

A. Phase 1 .................................................................................................................................4

B. Phase II.................................................................................................................................6

II. Background ..........................................................................................................................9

A. RFS2 ....................................................................................................................................9

III. Description of the Models ..................................................................................................12

A. Transportation Fuel Model ................................................................................................12

B. NewERA Macroeconomic Model .......................................................................................14

C. Model Integration...............................................................................................................15

D. Analytical Methodology ....................................................................................................15

E. Description of Reference Case and Two Modeling Scenarios ..........................................17

F. Model Parameters ..............................................................................................................19

G. Analytical Methodology ....................................................................................................25

IV. Results ................................................................................................................................26

A. The Dilemma with RFS2 ...................................................................................................26

B. RFS2 Implementation ........................................................................................................27

C. Diesel Death Spiral ............................................................................................................31

D. The Role of Banked RINs ..................................................................................................34

E. RFS2 Program Will Eventually Fail ..................................................................................36

F. Economic Impact of RFS2 .................................................................................................38

V. Conclusions ........................................................................................................................40

Appendix A: Renewable Fuels Standard Description ..................................................................41

A. Renewable Fuel Standard (RFS2) ......................................................................................41

Appendix B: Detailed Model Description ....................................................................................45

A. Transportation Fuel Model ................................................................................................45

B. Macroeconomic Model in NewERA Modeling System ......................................................54

C. Integration of Models .........................................................................................................56
NERA Economic Consulting 

ii 

INDEX OF FIGURES AND TABLES 

Figure 1: Economic Impact of Hitting the RFS2 Blend Wall: The Death Spiral ......................... 3

Figure 2: Death Spiral Effect on the Diesel Fuel Market from the RFS2 ....................................... 6

Figure 3: Development of the NERA Reference Case ................................................................ 17

Figure 4: Characterization of Scenarios 1 and 2 .......................................................................... 18

Figure 5: RIN Obligations ............................................................................................................ 28

Figure 6: Percentage Change in Cost per Gallon of Motor Gasoline and Diesel ......................... 29

Figure 7: Change in Blended Fuels Sales (Motor Gasoline and Diesel) ...................................... 30

Figure 8: Progression of the Diesel Death Spiral.......................................................................... 31

Figure 9. Declining Diesel Demand Forecasting (2012 – 2015) ................................................. 34

Figure 10: EISA '07 Renewable Fuel Standard 2008-2022 .......................................................... 42

Figure 11: EPA’s Formulas for the RFS2 Percentage Mandates ................................................. 51

Table 1: Fuel Production and Blending Options for Meeting RFS2 Compliance .......................... 2

Table 2: Fuel Production and Blending Options for Meeting RFS2 Compliance .......................... 5

Table 3: Changes in Consumption, Labor Income, and GDP Relative to Baseline (2010$) .......... 8

Table 4: Range of Biomass Based Diesel Availability (Billions of Gallons per Year) ................ 19

Table 5: Reference Case Fuel Price Ratios for Blended Gasoline and Diesels (Ratio on a GGE 

Basis of Biofuel to Conventional Fuel) ............................................................................ 19

Table 6: Number of E85 Stations Built Annually (2005 through 2011) ..................................... 22

Table 7: Sales of E85 (Billions of Gallons) ................................................................................. 23

Table 8: Computation of Available RINs at the Beginning of 2012 (Billions) ............................ 24

Table 9: RFS2 Mandated Total Biofuels Percentage and the Maximum Percentage of Renewable 

Fuel in Finished Fuel in Diesel, E85, and E10 ................................................................. 26

Table 10: RFS2 Mandated Total Biofuels Percentage and Associated RIN Values ................... 33

Table 11: RIN Deficit or Surplus per Gallon of Fuel Sold (RIN/Gallon of Fuel) ....................... 35

Table 12: Cumulative Total of Surplus Banked RINs in Billions ................................................ 36

Table 13: RFS2 Collapse for Scenario 1...................................................................................... 37
NERA Economic Consulting 

iii 

Table 14: Changes in Consumption per Household, Consumption, Labor Income and GDP 

Relative to Baseline (2010$s) ........................................................................................... 39

Table 15: September 2011 STEO and AEO 2011 Reference Scenario – Sales of Gasoline Fuels 

(Billions of Gallons, Unless Otherwise Noted) ................................................................ 45

Table 16: NERA Reference Case Sales of Gasoline Fuels (Billions of Gallons Unless Noted 

Otherwise) ......................................................................................................................... 46

Table 17: NERA Reference Case Sales of Diesel Fuels (Billions of Gallons) ............................ 46

Table 18: NERA Reference Case Sales of Biofuels in Motor Gasoline (Billions of Gallons) .... 47

Table 19: Baseline Fuel Price Ratios for Blended Gasoline and Diesels (Ratio on a GGE Basis 

of Biofuel to Conventional Fuel) ...................................................................................... 48

Table 20: AEO 2011 Reference Case Fuel Prices ($/Gallon)...................................................... 50

Table 21: EPA’s Final Rule for RFS standards for 2012............................................................. 52

Table 22: Maximum Amount of Biomass Based Diesel That Can be Produced (Billions of 

Gallons) ............................................................................................................................. 53

Table 23: Sales of E85 (Billions of Gallons) ............................................................................... 54

 
NERA Economic Consulting 

iv 

TERMINOLOGY 

AEO 

Annual Energy Outlook. An annual publication from the EIA that offers 

projections that can be used as a basis for examination and discussion of 

energy production, consumption, technology and market trends and the 

direction they may take in the future. This study used AEO2011. 

CARB California Air Resources Board 

CGE Computable General Equilibrium 

Biodiesel 

A type of biomass-based diesel comprised of mono-alkyl esters of long 

chain fatty acids derived from vegetable oils or animal fats, and meeting 

the requirements of ASTM D 6751. A blend of biodiesel fuel with 

petroleum-based diesel fuel designated BXX, where XX represents the 

volume percentage of biodiesel fuel in the blend. 

Biomass based 

diesel Includes biodiesel and renewable diesel 

Biofuel Producer 

or Importer 

Generator of RINs at the point of biofuel production or the port of 

importation 

Blending 

Percentage 

Standard 

Ratio of renewable fuel volumes required by RFS2 and the total gallons of 

gasoline and diesel fuel that will be sold in the upcoming year 

EIA Energy Information Administration 

EISA ‘07 Energy Independence and Security Act of 2007 

EPA United States Environmental Protection Agency 

E0 Neat gasoline; 100% petroleum gasoline, does not contain ethanol 

E10 A gasoline blend containing 10 percent ethanol by volume (E10) 

E85 

An ethanol/gasoline fuel blend containing a relatively high percentage of 

ethanol by volume and a relatively low percentage of petroleum 

hydrocarbons by volume. While its name connotes a blend of 85% ethanol 

and 15% gasoline, the ethanol content of E85 is seasonally adjusted to meet 

ASTM recommended specifications and to improve vehicle cold-start and 

warm-up performance. Following the EIA’s practice, we will analyze E85 

sales under the assumption that fuel sold as E85 consists of 74% ethanol 

and 26% gasoline by volume on a year-round average basis. 
NERA Economic Consulting 

v 

FFV Fuel Flexible Vehicles: certified to use ethanol/gasoline blends containing 

up to 85 percent volume ethanol 

NewERA NERA’s proprietary macroeconomic model 

Obligated Party Companies that produce and/or import gasoline and/or diesel fuel 

Reference Case NERA Reference Case (no RFS2 mandate) 

RFS2 Renewable Fuel Standard Per Energy Independence and Security Act of 

2007 

RINs Renewable identification numbers (Credits for compliance with RFS2) 

Scenario 1 NERA scenario with implementation of RFS2 and AEO Reference Case 

biodiesel supplies 

Scenario 2 NERA scenario with implementation of RFS2 and AEO High Fuel Price 

case biodiesel supplies 
1 

Executive Summary 

The American Petroleum Institute (API) commissioned NERA Economic Consulting 

(NERA) to conduct a study of the economics and compliance issues related to the 

implementation of the Renewable Fuel Standard (RFS2) per the Energy Independence and 

Security Act of 2007. NERA relied upon publically available information and NERA’s 

proprietary economic modeling to develop the analysis. The study found that RFS2, in its 

current form, will likely become infeasible within the next three or four years, which would 

result in significant harm to the U.S. economy. 

The RFS2 requires transportation fuel producers and importers (obligated parties) to 

incorporate specified volumes and categories of biofuels into their products annually. These 

mandates increase yearly, and collectively, require the use of 36 billion gallons of renewable 

fuels in 2022. Each year the annual total renewable fuel volume mandate is calculated as a 

percentage of the nation’s total projected fuel consumption for the upcoming year. The 

renewable fuel volume obligation (RVO) for each obligated party is calculated by applying that 

percentage to the total annual volume of gasoline and diesel produced or imported by each 

obligated party during that year. Compliance with the RFS2 each year is demonstrated through 

“Renewable Identification Numbers” (RINs) which are unique identifiers attached to every 

gallon of renewable fuel produced or imported. Obligated parties submit RINs as evidence of 

meeting the annual RVO. 

Table 1 lists the four primary mechanisms that obligated parties can use for compliance 

with the RFS2. In the early years of the RFS2 program, these mechanisms offered a workable 

means for compliance. However, as the RFS2 volume requirements increase, combined with 

higher vehicle fuel efficiencies, these mechanisms become less effective until the RFS2 reaches 

the point of infeasibility. 
2 

Table 1: Fuel Production and Blending Options for Meeting RFS2 Compliance 

Compliance Mechanism Limitation 

Minimize production of E0 Demand for E0 will not completely disappear due to 

customer demand and limits on ethanol distribution 

Increase production of E85 Demand for E85 will remain low due to limited E85 

infrastructure, E85’s low fuel economy, and consumer 

preference for conventional fuels 

Increase use of biodiesel The available volume of biodiesel is relatively small 

compared to the overall RFS2 requirement 

Produce and market E15 Market penetration of E15 will be limited by vehicle 

warranty, retail infrastructure, misfueling, and general 

liability issues 

As these mechanisms approach their limit, obligated parties will reach the point when 

biofuels cannot be incorporated into fuel products at the volumes necessary to meet the RIN 

obligation because of technological, infrastructure or market constraints. 

This study finds that the RFS2 volume requirements will exceed the transportation fuel 

market’s ability to absorb the biofuel volumes mandated within three to four years. At that point 

in time obligated parties will not be able to meet market demand for transportation fuel and still 

remain in compliance with the RFS2. Therefore, after exhausting all other available options for 

compliance, individual obligated parties, each acting independently, could be forced to reduce 

their RIN obligation by decreasing the volume of transportation fuel supplied to the domestic 

market – either by reducing production or exporting. 

As domestic fuel supplies decrease, large increases in transportation fuel costs would 

ripple through the economy imposing significant costs on society. More specifically, as the 

RFS2 mandate is ratcheted up every year, the fuels market will be pushed into a death spiral 

shown in Figure 1. The death spiral depicts the economic harm that occurs as individual 

obligated parties act to remain in compliance with the program. Once the blend wall has been 

reached, the annual increase in the RVO results in decreased fuel availability and increased fuel 

costs to society. These increased fuel costs have a broad impact across the economy. 
3 

Figure 1: Economic Impact of Hitting the RFS2 Blend Wall: The Death Spiral 

This process repeats itself yearly. As domestic supply continues to decline, the blending 

percentage obligation becomes increasingly untenable. Obligated parties rely on RINs acquired 

and carried forward from earlier years to meet compliance obligations. However, the findings 

and analysis of this report indicate that by 2015-2016 compliance with the RFS2 in its current 

form will likely be infeasible, which would result in significant damage to the economy. 

The death spiral impact is seen most acutely in the diesel fuel market. The tightening of 

the diesel supply (up to 15% decline in 2015) causes large fuel cost increases to ripple through 

the economy, adversely affecting employment, income, consumption, and GDP. By 2015, the 

adverse macroeconomic impacts include a $770 billion decline in GDP and a corresponding 

reduction in consumption per household of $2,700. 

 
4 

I. Introduction 

The American Petroleum Institute (API) commissioned a two-phase study of the 

economics and compliance issues resulting from the implementation of the Renewable Fuel 

Standard (RFS2) per the Energy Independence and Security Act of 2007. The RFS2 requires 

transportation fuel produces and importers (obligated parties) to incorporate specified volumes 

and categories of biofuels into their products annually. These mandates increase each year, and 

collectively, require the use of 36 billion gallons of renewable fuels in 2022. Each year the 

annual total renewable fuel volume mandate is calculated as a percentage of the nation’s total 

projected fuel consumption for the upcoming year. The renewable fuel volume obligation (RVO) 

for each obligated party is calculated by applying that percentage to the total annual volume of 

gasoline and diesel produced or imported by each obligated party during that year. Compliance 

with the RFS2 each year is demonstrated through “Renewable Identification Numbers” (RINs) 

which are unique identifiers attached to every gallon of renewable fuel produced or imported. 

Obligated parties submit RINs as evidence of their compliance with the RVO. 

A. Phase 1 

API retained Charles River Associates (CRA) to conduct Phase I of the study.1 The work 

concluded that the increasing volumes mandated by the RFS2 will eventually exceed the 

market’s ability to absorb ethanol into petroleum fuel. That is, the RVO will eventually exceed 

the maximum feasible level of renewable fuel that can be contained on average in a gallon of 

petroleum transportation fuel given technological, behavioral, and infrastructure constraints. 

Using EIA’s Annual Energy Outlook AEO 2011, the study estimated that the so-called blend 

wall (maximum concentration of ethanol of 10% that can be blended in gasoline and used by 

conventional gasoline-powered motor vehicles) will be reached by 2013. 

To comply with the RFS2 mandates, obligated parties have increased production of E10 

and E85 while minimizing production of E0 (pure gasoline). To the extent that biodiesel is 

available, obligated parties have blended biodiesel to produce B5. As the RFS2 mandated 

volumes for renewable fuels increase, however, these mechanisms reach their limit. 

 

1

 Phase I study report: “Impact of the Blend Wall Constraint in Complying with the Renewable Fuel Standard,” 

Charles River Associates, November 2, 2011. 
5 

Table 2: Fuel Production and Blending Options for Meeting RFS2 Compliance 

Compliance Mechanism Limitation 

Minimize production of E0 Demand for E0 will not completely disappear due to 

customer demand and limits on ethanol distribution 

Increase production of E85 Demand for E85 will remain low due to limited E85 

infrastructure, E85’s low fuel economy, and consumer 

preference for conventional fuels 

Increase use of biodiesel The available volume of biodiesel is relatively small 

compared to the overall RFS2 requirement 

Produce and market E15 Market penetration of E15 will be limited by vehicle 

warranty, retail infrastructure, misfueling, and general 

liability issues 

The Phase 1 study concluded that as obligated parties exhaust these methods of 

compliance, they will eventually be forced to either decrease the production volumes or export 

product in order to reduce their individual biofuel obligation and meet RFS2 volume percentage 

requirements. These market shifts will initially result in a tightening of the diesel fuel supply 

followed by subsequent years of reductions in both the gasoline and diesel fuel supply. The 

shrinking domestic petroleum fuel supply coupled with expanding RFS2 requirements would 

result in making compliance increasingly more difficult and lead to significant economic 

impacts. 

In Figure 2 this effect is depicted as a death spiral of the diesel fuel market. Each year 

obligated parties must absorb increasing volumes of biofuels into declining volumes of 

petroleum fuel without exceeding the approved percent blending limits. In each of the years 

under review in this study, the previous year’s reduced forecast for diesel fuel demand 

exacerbates compliance hurdles for the following year, resulting in economic harm to trucking 

and commerce first and eventually impacting the U.S. economy as a whole. 
6 

Figure 2: Death Spiral Effect on the Diesel Fuel Market from the RFS2 

This process repeats itself yearly. As domestic supply continues to decline, the blending 

percentage obligation becomes increasingly unattainable. Obligated parties rely on RINs 

acquired and carried forward from earlier years to meet compliance obligations. However, the 

findings and analysis of this report indicate that by 2015-16 compliance with the RFS2 would 

become infeasible and result in significant damage to the economy. 

Phase II of the study builds on the findings of Phase I and quantifies the economic 

impacts of complying with the RFS2 requirements. 

B. Phase II 

For Phase II of the study, API retained NERA Economic Consulting (NERA) to analyze 

the potential impacts on the transportation fuels market and the U.S. economy resulting from 

complying with the RFS2. NERA relied upon publically available information and NERA’s 

proprietary economic modeling to develop the analysis. 

Diesel/biofuel

blending results in 

RIN deficit

Obligated 

Parties must 

purchase 

surplus RINs or 

reduce diesel 

production

Diesel cost increases

EPA determines the Final 

Percentage Standards 

for renewable fuel 

blending

2012 RFS2 Volume Target (RVO)

AEO2012 Forecast Gasoline + Diesel

Diesel sales 

decline

2013 RVO

AEO2013 Forecast 

Gasoline + Diesel

2014 Cycle

2015 Cycle
7 

NERA used two proprietary models: NERA’s transportation fuel model and the NewERA 

macroeconomic model. These models were run2 to quantify the economic impacts from 

implementation of the RFS2. Specifically, the transportation fuel model estimates the amount of 

fuel produced for and consumed by the transportation sector, and explicitly estimates the demand 

for E0, E10, E85, B0, and B5. The NewERA macroeconomic model3 simulates all economic 

interactions in the U.S. economy, including those among industry, households, and the 

government. 

The macroeconomic impacts of the RFS2 mandate on the U.S. economy were estimated 

through the year 2015. These results show large increases in transportation fuel costs and 

disruptions to the transportation fuel supply that will ripple adversely through the economy. 

From 2012 to 2014, the higher transportation diesel fuel costs will have the biggest and most 

immediate impact on the economy. The cost to move raw materials and finished goods about the 

country will increase. This increased cost will be passed through to consumers in the form of 

higher costs on finished goods and services and, as a result, consumption per household will 

drop. Although labor earnings initially rise, such an increase is modest compared to the loss in 

consumption, as labor earnings are unable to offset the higher costs for goods. In the near term, 

investment and production is temporarily accelerated in anticipation of rising prices and GDP 

increases, but this shift is unsustainable and by 2014, GDP declines by more than $250 billion. 

In 2015, the economic impacts worsen. In addition to the negative impact of higher costs 

for finished goods and services caused by rising diesel fuel costs, gasoline costs increase as a 

result of RSF2. Consumers are left with fewer dollars to spend on other goods and services, 

resulting in lower consumption. Lower levels of consumption lead to declining production of 

goods and services that consumers would have otherwise purchased. In 2015, the consumption 

per household declines by about $2,700 per year from baseline levels, with total U.S. 

consumption declining by about $340 billion. Since there is lower demand for finished goods 

 

2

The macroeconomic model was connected to the transportation fuel model through a one-way link in which the 

macroeconomic model incorporated the fuel cost increases of the transportation model. 

3 The NewERA macroeconomic model uses the resulting scenario fuel prices from the transportation fuel model. 

Then the NewERA macroeconomic model is run to assess the economy wide impacts of the changes in fuel 

prices. Since the transportation model becomes infeasible in 2015 under Scenario 1, we could not run the 

NewERA macroeconomic model over the 2012 to 2015 time horizon. Therefore, the following impacts are 

reflective of Scenario 2, but these should be considered as a lower bound of what might occur. 
8 

and services, the need for workers to provide those goods and services drops. As a result of the 

smaller size of the economy, workers would earn $580 billion less (Table 3). These negative 

impacts are also reflected by the loss in GDP of $770 billion dollars. 

Table 3: Changes in Consumption, Labor Income, and GDP Relative to Baseline (2010$) 

2012 2013 2014 2015 

Change in Average 

Consumption per Household -$1,200 -$1,200 -$1,300 -$2,700 

Change in Consumption 

(Billions) -$150 -$140 -$160 -$340 

Change in Labor Income 

(Billions) $24 $42 $27 -$580 

Change in GDP (Billions) $43 $50 -$270 -$770 

 Source: NERA NewERA model results. 

The remainder of this report provides details on the models used, the reference cases, and 

the detailed results of the modeling analysis. The appendices provide descriptions of the RFS2 

program and model details. 

 
9 

II. Background 

A. RFS2 

Congress first established a Renewable Fuel Standard (RFS) in 2005 with the enactment 

of the Energy Policy Act of 2005 (EPACT). Two years later, Congress passed the Energy 

Independence and Security Act of 2007 (EISA ‘07) which superseded and greatly expanded the 

biofuels blending mandate. This expanded RFS is referred to as RFS2, which applies to all 

transportation fuel used in the United States—including diesel fuel intended for use in highway 

motor vehicles, non-road, locomotive, and marine diesel.4 RFS2 introduces four new major 

distinctions from RFS: 

1. RFS2 increases the mandated usage volumes and extends the time frame over which the 

volumes ramp up to 2022; 

2. RFS2 subdivides the total renewable fuel requirement into four separate but nested 

categories—total renewable fuels, advanced biofuels, biomass-based diesel, and 

cellulosic biofuel—each with its own volume requirement or standard; 

3. Biofuels qualifying under each nested category must achieve certain minimum thresholds 

of lifecycle greenhouse gas (GHG) emission performance, with certain exceptions 

applicable to existing facilities; and 

4. All renewable fuel must be made from feedstocks that meet the new definition of 

renewable biomass, including certain land use restrictions. 

1. Nested Mandates 

Because of the nested nature of the biofuel categories, any renewable fuel that meets the 

requirement for cellulosic biofuels or biomass-based diesel is also valid for meeting the overall 

advanced biofuels requirement. Thus, any combination of cellulosic biofuels or biomass-based 

biodiesel would count toward the advanced biofuels mandate, thereby reducing the potential 

need for imported sugarcane ethanol to meet the “other” advanced biofuels mandate. Similarly, 

any renewable fuel that meets the requirement for advanced biofuels is also valid for meeting the 

total renewable fuels requirement. As a result, any combination of cellulosic biofuels, biomass-

 

4

 Heating oil, jet fuel, and fuels for ocean-going vessels are excluded from RFS2’s national transportation fuel 

supply; however, renewable fuels used for these purposes may count towards the RFS2 mandates. 
10 

based biodiesel, or imported sugarcane ethanol that exceeds the advanced biofuel mandate would 

reduce the potential need for corn-starch ethanol to meet the overall mandate. 

2. Waivers 

The EPA Administrator has the authority to waive the RFS requirements, in whole or in 

part, if, in his/her determination, there is inadequate domestic supply to meet the mandate, or if 

“implementation of the requirement would severely harm the economy or environment of a 

State, a region, or the United States.”5 Further, under certain conditions, the EPA Administrator 

may waive (in whole or in part) the specific carve-outs for cellulosic biofuel and biomass-based 

diesel fuel.6 Furthermore, EISA ‘07 requires that EPA evaluate and make an appropriate market 

determination for setting the cellulosic standard each year. 

3. Implementation 

Under EISA ‘07, the U.S. Environmental Protection Agency (EPA) is responsible for 

implementing regulations to ensure that transportation fuels sold in the United States contain a 

minimum volume of renewable fuels in accordance with the four nested volume mandates of the 

RFS2. Compliance with the RFS2 is demonstrated by the use of RINs.7

 

A RIN is generated by a biofuel producer or importer at the point of biofuel production or 

the port of importation. Each gallon of ethanol generates one RIN. Biodiesel generates 1.5 RINs 

per gallon. RIN generators must register with the EPA. After a RIN is created by a biofuel 

producer or importer, it must be reported to the EPA. RINs are transferable. 

Congress determines the total renewable fuel volume that must be incorporated into the 

nation’s fuel supply each year—referred to as a RVO. The EPA translates the RVO into 

blending percentage standards that are used by obligated parties to determine their individual 

 

5

 Clean Air Act section 211(o)(7)(A)(i). 

6

 For example, in February 2010 EPA waived most of the 2010 cellulosic biofuel carve-out—EISA ‘07 had set the 

mandate at 100 million gallons but EPA lowered the requirement to 6.5 million gallons, more than 90% less than 

scheduled by EISA ‘07. Then, in July 2010, EPA lowered the 2011 RFS for cellulosic biofuels to a range of 5 to 

17.1 million gallons. EPA cited a lack of current and expected production capacity, driven largely by a lack of 

investment in commercial-scale refineries. In 2011, EPA waived more than 98% of the cellulosic biofuel 

volume EISA “07 required for 2012. 

7

 For tracking purposes, each RIN has a unique 38-character number that is issued (in accordance with EPA 

guidelines). Each RIN identifies which of the four RFS categories—total, advanced, cellulosic, or biodiesel—

the biofuel satisfies. In addition, a biodiesel RIN has an equivalence value of 1.5 when being used as an 

advanced biofuel.
11 

RVO.8 This percentage standard represents the ratio of renewable fuel volumes required by 

RFS2 to the projected total gallons of gasoline and diesel fuel that will be sold in the upcoming 

year. The EPA relies on projections from the Department of Energy’s Energy Information 

Administration (EIA) for the information to estimate the expected total gallons sold. 

Companies that refine or import gasoline or diesel transportation fuel for the retail market 

are obligated to include a quantity of biofuels equal to the percentage of their total annual fuel 

sales. At the end of the year, each obligated party must have enough RINs to show that it has 

met its share of each of the four mandated standards. 

If an obligated party has met its mandated share and has acquired surplus RINs, it can sell 

the extra RINs to another party or it can hold onto the RINs for future use (to be used the 

following year, but the previous year’s RINs can comprise only up to 20% of the current year’s 

obligation).9 

 

8

 The blending percentage standard is computed as the total amount of renewable fuels mandated under RFS2 to 

be used in a given year expressed as a percentage of expected total U.S. transportation fuel use. This ratio is 

adjusted to account for the small refinery exemptions. A separate ratio is calculated for each of the four biofuel 

categories. 

9

 A RIN would not be viable for any year’s RVO beyond the immediately successive year; thus giving it 

essentially a two-year lifespan. For any individual company, up to 20% of the current year’s RVO may be met 

by RINs from the previous calendar year. 
12 

III. Description of the Models 

This study used NERA’s proprietary transportation fuel model and its NewERA 

macroeconomic model. These models were run interactively10 to quantify the economic impacts 

from RFS2 that are reported in this study. This section describes both models. A more detailed 

description of the models, including a model formulation is provided in Appendix B. 

A. Transportation Fuel Model 

The transportation fuel model is a partial-equilibrium model designed to estimate the 

amount of fuel produced for and consumed by the transportation sector. The model maximizes 

the discounted present value of household consumption (a measure of household value) subject 

to meeting the RFS2 program fuel requirements and satisfying the transportation sector’s 

demand for fuel while not violating any transportation sector infrastructure constraints. 

The model is calibrated in the near term to the EIA’s Short-Term Energy Outlook 

(STEO) for September 2011 and in the long term to the AEO 2011 forecast, with a few minor 

adjustments to ensure that the E10 blend wall is not violated. 

1. The Transportation Fuel Model is designed to Model RFS2 Program 

Characteristics 

The transportation fuel model was customized to simulate the impacts resulting from the 

RFS2 program. The model solves in one-year time steps, and has a flexible time horizon. For 

purposes of this analysis, the first endogenous year is 2012 and the last year is 2015. The model 

solves for the demand of the following finished fuels: E0 (100% petroleum gasoline), E10 

(gasoline containing at most 10% ethanol by volume), E85 (assumed to contain 74% ethanol by 

volume), and diesel fuel may contain up to 5% biomass based diesel or B5. The model also 

solves for the following fuel components used in the production of the above finished fuels: 

petroleum gasoline, corn ethanol, sugar ethanol, cellulosic ethanol, petroleum diesel, and 

biodiesel. 

The model combines the six fuel components into the four finished fuels, which can be 

consumed by motor vehicles subject to the following constraints: 

 

10

 The macroeconomic model was connected to the transportation fuel model through a one-way link.
13 

 Minimum E0 use held to 5% of total transportation fuel consumption to represent 

incomplete market conversion to E10 and preference of some consumers for E0; 

 Conventional vehicles can consume either E0 or E10;

 Flexible fuel vehicles (FFVs) can use E0, E10 or E85; and 

 Commercial trucks/buses, ships, and trains are allowed to use up to a 5% blend of 

biodiesel. 

2. RFS/RIN Constraints: 

The model accounts for the minimum annual volume of biofuel sales required under the 

RFS2 program by including constraints on three types of biofuels: 

 Biomass-based diesel; 

 Advanced biofuel (includes cellulosic biofuels, biomass-based diesel, and sugar ethanol); 

and 

 Renewable fuel (includes advanced biofuel and corn ethanol). 

For this analysis, we assume that cellulosic biomass will continue to be commercially 

available only in very limited quantities, and as a result, EPA would continue to grant a waiver. 

This assumption avoids the debate about the economic and technical feasibility of producing 

cellulosic fuel11 because this analysis assumes ample supplies of corn and sugar ethanol to meet 

the RFS2 mandates. As a result, there is no need for cellulosic ethanol to meet the non-cellulosic 

RFS2 targets. 

As discussed in detail in Appendix B, the fuel supply curves capture all pertinent 

technological issues (penetration rate, availability, and cost) for the different fuels. Similarly, the 

fuel demand curves capture the loss in utility from having to reduce travel and also the loss in 

welfare from fuel scarcity. Different scenarios were modeled, as discussed in section E. The 

change in economic activity between the scenarios and the baseline provides the economic 

impacts of the RFS2 policy. 

 

11

 There is a secondary effect of assuming no measurable supplies of cellulosic biomass. Assuming no significant 

amount of cellulosic biomass production necessitates the production of additional amounts of biodiesel and 

sugar-based ethanol to meet the advanced biofuel requirement, and this affects costs.
14 

The model also incorporates constraints on the availability of various finished fuels to 

account for both consumer acceptance and infrastructure issues. The sales of E85 are limited 

based on these issues. Biodiesel sales are limited by supply of biodiesel feedstocks. 

B. NewERA Macroeconomic Model 

The NewERA macroeconomic model is a forward-looking dynamic computable general 

equilibrium model of the United States. The model simulates all economic interactions in the 

U.S. economy, including those among industry, households, and the government. The 

macroeconomic and energy forecasts that are used to project the benchmark year going forward 

are calibrated to AEO 2011 produced by the EIA. Because the model is calibrated to an 

internally-consistent energy forecast, the use of the model is particularly well suited to analyze 

economic and energy policies and environmental regulations. 

For this study, the NewERA model runs from 2012 to 2015 in one-year increments. The 

model includes five energy and seven non-energy sectors: energy sectors include crude oil, oil 

refining, natural gas extraction and distribution, coal, and electricity; the non-energy sectors 

include agriculture, commercial transportation (excluding trucking), energy intensive sectors, 

manufacturing, motor vehicle production, services, and trucking. 

The macroeconomic model incorporates all production sectors and final demands of the 

economy and is linked through terms of trade. The effects of policies are transmitted throughout 

the economy as all sectors and agents in the economy respond until the economy reaches 

equilibrium. The ability of the model to track these effects and substitution possibilities across 

sectors makes it a unique tool for analyzing policies such as those involving energy and 

environmental regulations. These general equilibrium substitution effects, however, are not fully 

captured in a partial-equilibrium framework or within an input-output modeling framework. The 

smooth production and consumption functions employed in this general-equilibrium model 

enable gradual substitution of inputs in response to relative price changes thus avoiding “all-ornothing” solutions. 

Business investment decisions are informed by future policies and outlook. The forwardlooking characteristic of the model enables businesses and consumers to determine the optimal 

savings and investment while anticipating future policies with perfect foresight. The alternative 

approach on savings and investment decisions is to assume agents in the model are myopic, and 
15 

thus have no expectations for the future. Though both approaches have their limitations, the 

latter approach can lead the model to produce inconsistent or incorrect impacts from an 

announced future policy. 

C. Model Integration 

The economic impacts of the RFS2 program were determined using the following 

methodology: 

1. Using the transportation fuel model, the baseline and scenarios were run to determine the 

effect on fuel prices resulting from the RFS2 requirements for increased use of biofuels. 

The imposition of the RFS2 program leads to changes in fuel prices from the EIA 

baseline. 

2. Using the NewERA macroeconomic model, the resulting changes in fuel prices were 

translated into taxes (or subsidies) on gasoline and diesel that yield the same fuel price 

changes as seen in the transportation fuel model. 

D. Analytical Methodology 

All cases were run using NERA’s transportation fuel model, which allowed us to 

simulate the dynamics of RFS2 compliance and the use of surplus RIN carryovers, and the 

methodology that EPA uses each year to determine the minimum percentages of the different 

categories of biofuels delineated in the RFS2 standard that fuel suppliers must use. 

The transportation fuel model determined the impact of the RFS2 mandate on the 

quantities of finished gasoline (E0, E10, and E85) and diesel consumed in the transportation 

sector. In addition, the model calculated volumes of individual biofuels blended in the finished 

gasoline (corn ethanol, sugar ethanol, and cellulosic ethanol) and diesel. The NewERA 

macroeconomic model then determined the impact on the U.S. economy of meeting the RFS2 

mandate. The results were expressed in terms of well-known economic parameters: changes in 

consumer purchasing power, GDP, and labor earnings. 

Implementation of the RFS2 may create a dynamic that can be characterized as a “death 

spiral,” in which higher costs in the current year lead to lower demand, which in turn lead to 

higher costs in the next year and so on. NERA’s transportation fuel model represents this 

process by solving in a recursive dynamic fashion. That is, the model minimizes the cost of 
16 

compliance for the current year, through the use and value of surplus RINs that were carried 

forward. Therefore, the years are linked through the RINs. For example, the available surplus 

RINs at the beginning of 2012 represents 1.69 billion gallons of renewable fuel, which is the 

estimated amount of surplus RINs at the end of 2011 based on AEO 2011 fuel consumption data. 

After defining the RINs available at the beginning of 2012 and calibrating the model’s supply 

and demand curves to the AEO’s forecasted 2012 values, the model was solved with the RFS2 

constraints and other infrastructure constraints for the year 2012. 

The RINs available at the end of 2012, or the number of RINs carried forward to 2013, 

equals the RINs available at the beginning of 2012 (1.69 billion gallons) plus the difference 

between the number of RINs generated and the number of RINs submitted for compliance during 

2012. The model will store RINs or use RINs in 2012 until either the value of a surplus RIN 

equals the marginal cost of complying with the RFS2 mandate or surplus RINs are depleted. 

This process is repeated for each successive year. 

If any of the RFS2 or infrastructure constraints bind, then the average fuel price may rise 

to cause a switch in fuel consumption patterns which results in an increase of the percentage of 

renewable fuel sales to the level required by the RFS2 constraint. An increase in average fuel 

prices would cause a drop in the equilibrium level of fuel consumption from the EIA’s forecast. 

The value of the elasticity of demand has a significant effect on the relationship between the 

increase in fuel price and decline in fuel demand. The more elastic the demand curve, the less 

prices need to move to induce consumers to reduce their demand and thus the easier and less 

costly it is to meet the RFS2 targets. As the absolute value of the elasticity of demand declines, 

demand becomes more inelastic and the cost of compliance increases. 

Once finished with 2012, the model then solves for 2013. However, instead of using the 

EIA’s forecast for 2013 energy consumption, the values to which the model calibrates its energy 

consumption are adjusted based on the model’s 2012 solution values for energy consumption. 

Assuming that the RFS2 constraint binds for 2012, the forecasted fuel sales volumes will differ 

in 2012 from that of the EIA’s forecast. 

To be conservative regarding the costs of the RFS2 mandate, we allow surplus RINs to be 

exhausted over the model horizon. Retaining RINs for later years would raise program costs in 

the near term. This is because the transportation sector would need to consume higher 

percentage levels of biofuels in the near term instead of relying on the RINs generated in prior 
17 

years to assist the sector in complying with RFS2. Allowing the RINs to be consumed in the 

near term (e.g., 2014-2015 timeframe) rather than retaining RINs after 2015 allows obligated 

parties to meet the mandates with lower volumes of renewable fuels and hence reduces the 

burden of the policy. 

E. Description of Reference Case and Two Modeling Scenarios 

To analyze the economic impacts of the RFS2 mandate, it was necessary to develop a 

Reference Case in which the RFS2 was not in force and a set of scenarios in which RFS2 was 

assumed to be fully implemented. Then by comparing the scenarios to the Reference Case it is 

possible to isolate the effects of the RFS2 mandate. This section first discusses the construction 

of the Reference Case and then describes the assumptions underlying each of the two scenarios. 

1. Reference Case 

The Reference Case is based upon AEO 2011 projections of transportation fuel supply, 

demand and prices, but with some modifications (Figure 3). Unlike EIA, our Reference Case 

limits the amount of ethanol in the gasoline pool to not violate the blend wall, and reduces the 

level of E0 sales. Our Reference Case includes the AEO 2011forecast for both biodiesel (which 

is less than that required under RFS2) and E85 consumption. Although the mix of fuel in our 

Reference Case differs from that in the EIA’s AEO 2011 Reference Case, we maintain 

consistency with EIA’s forecast of total energy (or vehicle-miles traveled, VMT) consumed in 

the transportation sector. 

Figure 3: Development of the NERA Reference Case 

2. Modeling Scenarios 

Our scenarios (Figure 4) used the same assumptions as the Reference Case with the 

added constraint that in each year obligated parties must comply with the RFS2 program 

requirements while still not violating the blend wall. A gallon of biodiesel is worth 1.5 RINs. 

EIA 2011 

Reference 

Case

Adjust ethanol in gasoline sales so blend wall not exceeded

Adjust E0 and E10 sales so total energy maintained NERA 

Reference

Case
18 

Also, the volume of biodiesel sales forecast in the EIA’s Reference Case can only make up a 

percentage of biodiesel in diesel that is far below the B5 blending limit. Therefore, one way for 

obligated parties to increase the percentage of biofuels in their total fuel sales is to increase the 

amount of biodiesel they blend with conventional diesel. However, biodiesel production levels 

are quite uncertain. 

Figure 4: Characterization of Scenarios 1 and 2 

NERA developed two scenarios that differed only in their estimate of the availability of 

biodiesel supplies in the next four years (2012 through 2015). Scenario 1 limited use to no more 

than that proposed by EPA in their 2012 RFS2 NPRM. Scenario 2 limited biomass based diesel 

use to that forecast in the EIA AEO 2011 High Oil Price Scenario. These estimates are intended 

to bracket the likely range of biomass based diesel availability. The range of biomass based 

diesel availability is shown in Table 4. 

 Scenario 1 – Biomass based diesel production is capped at the limit proposed by EPA in 

their 2012 RFS2 NPRM. This level reflects the levels used in the Phase I analysis. 

 Scenario 2 - Biomass based diesel production capped at level in AEO 2011 High Oil 

Price Case. 

NERA 

Reference

Case

Apply RFS2 mandates

Biodiesel production capped at 

RFS2 mandate level

Apply RFS2 mandates

Biodiesel production capped at 

AEO High Oil Price Scenario level

Scenario 1: Mandate level of biodiesel

Scenario 2: High biodiesel level
19 

Table 4: Range of Biomass Based Diesel Availability (Billions of Gallons per Year) 

2012 2013 2014 2015

Reference Case 0.92 1.07 1.07 1.23 

Scenario 1 1.00 1.28 1.28 1.28 

Scenario 2 1.35 1.74 1.66 1.90 

Source: NERA analysis and EIA’s Annual Energy Outlook 2011.

F. Model Parameters 

1. Fuel Prices 

All fuel prices are national, annual averages over multiple grades of fuel. Our Reference 

Case prices for finished products (gasoline and diesel) are the same as those forecast in the AEO 

2011 Reference Case. The NERA Reference Case prices for individual types of biofuels were 

developed using a variety of sources and are expressed relative to petroleum gasoline or diesel 

prices. These relative prices are shown in Table 5, and the logic and sources upon which these 

relative prices are based are described below.12

 

Table 5: Reference Case Fuel Price Ratios for Blended Gasoline and Diesels (Ratio on a 

GGE13 Basis of Biofuel to Conventional Fuel)14

2010 2011 2012 2013 2014 2015 

Gasoline 1.00 1.00 1.00 1.00 1.00 1.00 

Corn Ethanol 1.86 1.78 1.72 1.61 1.58 1.49 

Sugarcane Ethanol 2.08 2.00 1.92 1.81 1.77 1.67 

Cellulosic Ethanol 2.62 2.48 2.41 2.23 2.13 2.01 

Diesel 1.00 1.00 1.00 1.00 1.00 1.00 

Soy-Based 

Biodiesel 1.74 1.66 1.7 1.66 1.65 1.64 

Source: EIA’s AEO 2011, EIA, California Energy Commission, IHS Glocal Insight, American Trucking 

Association, and NERA analysis. 

 

12

 The gasoline and diesel prices are taken from the AEO 2011 forecast. 

13 Gasoline gallon equivalent basis; fuels GGE are adjusted by relative heating value to petroleum gasoline. 

14 All price ratios are national, annual averages over multiple grades of fuel. For gasoline, the grades include 

regular unleaded, 89 octane unleaded, and premium unleaded. 
20 

Corn Ethanol: 

 Ratio of corn ethanol to gasoline is from the AEO 2011 Reference Case, Table A12. We 

assumed a corn price equal to the average $/bushel price from January 1, 2008 through 

September 1, 2011 (or $5.00/bushel). We took the capital, operations, and maintenance 

costs from the EIA.15 Summing up all of these costs yielded the forecasted price for corn 

ethanol. 

 Sugar Ethanol: Ratio of sugar ethanol prices to gasoline prices taken from California 

Energy Commission statistics.16

 

 Cellulosic Ethanol: Ratio of cellulosic ethanol prices to gasoline prices based on EIA’s 

cost build up.17 To estimate this cost, we averaged two EIA forecasts – one based on the 

capital cost for cellulosic ethanol and the other based on the capital cost for biodiesel 

gasification. However, the future cost of cellulosic ethanol is uncertain.18  

 Soy-Based Biodiesel: Ratio of soy-based biodiesel to petroleum diesel prices taken as 

average of historical spot prices. We calculated the averages based upon three sources: 

IHS Global Insight, the American Trucking Association’s August 2011 comments on the 

EPA’s proposed RFS2 rule, and the average ratio of spot SME B100 to spot ultra-low 

sulfur petroleum diesel from 2009 through 2011.19

2. Supply Elasticities 

In addition, supply elasticities were derived by using fuel price and fuel supply 

information from EIA’s AEO 2011 Reference and High Oil Price Cases. These two cases 

provided time series for the prices and quantities of the different fuels. The price elasticity of 

 

15 Statton, Mac, “Development of Production Costs as a Driver for the National Energy Modeling System,” Energy 

Information Administration, Presentation at International Fuel Ethanol Workshop, June 29, 2011.

16

 California Energy Commission, “2011 Integrated Energy Policy Report,” February 2012. 

17

 Statton, Mac, “Development of Production Costs as a Driver for the National Energy Modeling System,” Energy 

Information Administration, Presentation at International Fuel Ethanol Workshop, June 29, 2011.

18

 Because we assume the RFS mandate for cellulosic ethanol will be waived, cellulosic ethanol is likely to be 

irrelevant in our analysis as long as its price is sufficiently greater than that of sugar ethanol, for sugar ethanol 

will be the ethanol of choice to meet the advanced biofuels mandate, and corn and sugar ethanol will be used in 

the production of E10 and E85 to help meet the overall biofuel requirement. 

19

 Kruse, John, “Biodiesel Production Prospects for the Next Decade,” IHS Global Insight’s Agriculture Group, 

March 2011; Moskowitz, Richard, “American Trucking Associations’ comment on the EPA’s proposed 

Regulation of Fuels and Fuel Additives: 2012 Renewable Fuel Standards,” August 2011; and Chicago spot 

prices for ultra-low sulfur diesel and B100. 
21 

supply for each fuel is derived by dividing the percentage change in quantity of fuel demanded 

by the percentage change in fuel price. The percentage change in quantity and price are 

computed by comparing the difference between the fuel consumed and the price of fuel, 

respectively, in the AEO High Oil Price and Reference Cases. The elasticity of supply varies 

slightly from year to year, but on average, the elasticity of supply is about 0.4 for corn ethanol 

and 1.2 for sugar ethanol and soy-based biodiesel. The elasticity for petroleum fuels is 0.8.20

3. Demand Elasticities 

The model has a demand curve for each finished fuel – E0, E10, E85, and diesel. The 

functional form of these curves is identical to that of the fuel supply curves. For the demand 

curves, the elasticity is the fuel’s own-price elasticity of demand. Because this analysis concerns 

itself only with the next few years, the demand curves’ elasticity equaled that of Dahl’s estimate 

for short-term elasticity of -0.1.21

 

4. E85 

Our characterization of the potential for E85 sales in the Phase II research is built upon 

the initial research on E85 performed as part of the Phase I study. The Phase I study evaluated 

the different factors affecting E85 demand. The Phase I research concluded that future demand 

for E85 is not limited by the number of FFVs, but instead factors such as consumer reluctance to 

purchase a new fuel and lack of infrastructure. Consumer reluctance stems from the lower fuel 

economy and limited range of E85. Economic theory suggests and the EPA acknowledges, E85 

would have to be priced at a discount to gasoline to induce cost conscious FFV owners to buy 

E85 instead of gasoline. Progress in overcoming the lack of retail infrastructure is likely to be 

slowed by the relatively high investment costs and uncertain returns facing the parties that will 

be required to install the necessary infrastructure, particularly in the case of the numerous small 

and independent business people that own individual retail fuel stations. 

 

20 Paltsev, Sergey, John M. Reilly, Henry D. Jacoby, Rishard S. Eckaus, James McFarland, Marcus Sarofim, 

Malcolm Asadoorian, and Mustafa Babiker, “The MIT Emissions and Prediction and Policy Analysis (EPPA).

Model Version 4,” August 2005. 

21

 Dahl, C.A., “A survey of energy demand elasticities for the developing world,” Journal of Energy and 

Development 18(I), 1—48, 1994.
22 

For the Phase II analysis, our estimate of potential E85 availability is constructed based 

upon an optimistic set of assumptions about the issues affecting E85 sales. We assumed that 

there were no consumer acceptance issues. We assumed that new E85 retail stations would be 

strategically located in areas proximate to where FFV vehicles operated so that there was no 

distance penalty for FFVs to travel to an E85 station. 

We based our estimates of potentially available E85 solely upon how quickly new E85 

retail stations could be built. The Phase I research identified historical data on the level of new 

station construction. Table 6 shows the number of new stations built by year for the period from 

2005 through 2011. During this period on average, there were about 340 stations built annually 

and the growth rate for new stations declined. For the period from 2012 through 2015 we 

optimistically assumed that new E85 station construction would grow at a rate of 25% per year. 

We also assumed that the volume of E85 sales per station would grow about 2.5 times during the 

period from 2012 to 2015. Table 7 presents our projection for maximum E85 sales as compared 

with the EIA’s forecast of expected E85 sales. 

Table 6: Number of E85 Stations Built Annually (2005 through 2011) 

# of E85 Stations

Total Annual Change 

2005 436 

2006 762 326 

2007 1,208 446 

2008 1,644 436 

2009 1,928 284 

2010 2,142 214 

2011 2,442 300 

Source: United States Department of Energy, Alternative Fuels Data Center, 

http://www.afdc.energy.gov/afdc/data/docs/alt_fueling_stations_fuel.xls. 
23 

Table 7: Sales of E85 (Billions of Gallons) 

 2012 2013 2014 2015 

AEO 2011 Forecast 0.06 0.07 0.08 0.09 

Maximum Potential E85 Sales 0.54 0.99 1.7 2.6 

Source: EIA’s AEO 2011, NERA NewERA model results. 

5. RIN Banking 

RIN banking in this report represents how surplus RINs can be carried from one 

compliance period to the next by an obligated party. Based upon EIA’s AEO 2011 Table 11, we 

estimated that as of the beginning of January 2012, there were collectively 1.69 billion surplus 

RINs available. We refer to these RINs as the initial inventory of RINs available for compliance. 

To arrive at this estimate, we first analyzed how many RINs were available at the end of 

2010, which was the first year the policy was in effect and then assessed how many RINs were 

carried forward from 2010 to 2011 and then from 2011 to 2012. 

The AEO 2011 shows that for 2010 13.64 billion RINs were generated in the U.S.22 The 

mandate requires 12.95 billion RINs for 2010; hence there was a surplus of 0.69 billion RINs. 

Since 0.69 billion RINs represents less than 20% of the target renewable fuel volume, all surplus 

RINs could be banked or carried forward for use in the following year. Therefore, we assume 

that at the beginning of 2011, there were 0.69 billion RINs available to be used. In 2011, the 

EIA estimates that 14.95 billion RINs were generated in the U.S., while only 13.95 billion RINs 

were needed to comply with the regulation. Therefore, there would have been a surplus of 

1billion RINs for 2013 (again this is less than 20% of the target so the full quantity could be 

banked). Adding this to the beginning of the year bank yields a 2011 end-of-year bank of 1.69 

billion RINs. This figure becomes the number of RINs in the bank at the beginning of 2012 

(Table 8). 

 

22 AEO 2011, Table 11. Ethanol production is equivalent to 13.18 billion physical gallons (13.18 billion RIN 

gallons) and biodiesel production is equivalent to 0.31 billion physical gallons (0.465 billion RIN gallons). 
24 

Table 8: Computation of Available RINs at the Beginning of 2012 (Billions) 

2010 2011 2012 

RINs Available at the Beginning of the Year 0.00 0.69 1.69 

RFS2 Total Renewable Fuel required 12.95 13.95 15.20 

RINs Generated 13.64 14.95 

Surplus RINs at End of Year 0.69 1.00 

20% Max RIN Carryover Allowed into Next Year 2.79 3.04 

RINs Available at the End of the Year 0.69 1.69 

Source: EIA’s AEO 2011 and NERA analysis.

6. Cellulosic Biofuel 

As discussed earlier, EPA can waive the RFS2 requirement, in whole or in part, if there is 

an inadequate supply to meet the mandate. With respect to the cellulosic biofuels mandate, there 

is an established track record by EPA of substantially reducing the cellulosic biofuel requirement 

because of the lack of commercially-available production. In 2010 and 2011, there were no 

cellulosic biofuel RINs generated. For 2012, EPA has reduced the requirement for cellulosic 

biofuels to less than 10 million gallons from the 500 million gallons required under RFS2. 

As a result of the lack of progress in developing commercially-available supplies of 

cellulosic biomass and the technical and economic hurdles that remain with the production of 

cellulosic ethanol, and the time required to build and put into service biomass-to-liquids 

facilities,23 we concluded that it was unlikely that cellulosic biofuels will be used in any 

appreciable quantities during our forecast horizon. 

7. Other Fuel Constraints and Assumptions 

The Reference Case imposed both the gasoline blend wall (no more than 10% ethanol) as 

well as the biodiesel blend limit (no more than 5% biodiesel). We allowed petroleum gasoline 

either to be blended with ethanol to make E10 or E85, or to be sold as neat gasoline (E0). A 

review of EIA data from May 2008 through April 2012 showed that E0 reached a low of about 

5% in April 2012. The more gasoline that is used to produce E0 means that there is less to be 

 

23

 Phase I report, p. 16.
25 

blended with ethanol, and hence the more difficult it would be to comply with RFS2. To be 

conservative in our assessment of the compliance costs of RFS2, we assume that in the 

Reference Case, the share of gasoline used to produce E0 can drop to as little as 5%. This is 

consistent with April 2012 data generated by EIA.24

G. Analytical Methodology 

The two scenarios were analyzed using NERA’s transportation fuel model, which 

allowed us to simulate the dynamics of the RIN banking and the methodology that EPA uses 

each year to determine the minimum percentage of the different categories of biofuels delineated 

in the RFS2 standard that fuel suppliers must use. The transportation fuel model determined the 

impact of the RFS2 mandate on the transportation sector using the quantities of finished gasoline 

(E0, E10, and E85) and diesel consumed. In addition, the model calculated volumes of 

individual biofuels blended in the finished gasoline (corn ethanol, sugar ethanol, and cellulosic 

ethanol) and diesel (biodiesel). The NewERA macroeconomic model then determined the impact 

on the U.S. economy of meeting the RFS2 mandate. The results are expressed in terms of 

common economic parameters: changes in GDP, labor earnings, and consumer purchasing 

power. 

 

24 EIA Weekly Refiner and Blender Net Production data available at: 

http://www.eia.gov/dnav/pet/pet_pnp_wprodrb_dcu_nus_w.htm. Access date: May 31, 2012. 
26 

IV. Results 

A. The Dilemma with RFS2 

There is a fundamental problem with the RFS2 mandate: the blending percentage standard 

for total renewable fuel will eventually exceed the maximum feasible level of renewable fuel that 

can be contained on average in a gallon of transportation fuel given the technological, market, 

and infrastructure constraints in the economy. 

In 2015, the total renewable fuels volume mandate requires that renewable fuels make up 

11% of the total gallons of transportation fuel sold (see Table 9). This exceeds the volume that 

can be blended in E10 and diesel, which comprise more than 95% of the fuel market.25 The only 

transportation fuel with a renewable fuel blending percentage above 11% is E85, but as was 

discussed earlier, it is unlikely that more than 2.6 billion gallons could be sold in 2015 when the 

total transportation fuel demand is estimated to be approximately 180 billion gallons. 

Table 9: RFS2 Mandated Total Biofuels Percentage and the Maximum Percentage of 

Renewable Fuel in Finished Fuel in Diesel, E85, and E10 

 

2012 2013 2014 2015 

RVO as Percentage of Total Finished Fuel 

Sales 8.4% 9.0% 9.8% 11.0% 

Max Diesel Biofuel % 

(Blending biodiesel at 5% is accounted as 

7.5% for compliance with total renewable 

fuel volume standard) 

5.0% 5.0% 5.0% 5.0% 

Max E85 Biofuel % 74.0% 74.0% 74.0% 74.0% 

Max E10 Biofuel % 10.0% 10.0% 10.0% 10.0% 

Source: NERA assumptions and analysis. 

In order to meet the RFS2 target in 2015, RINs that were banked in prior years must be used. 

However, as the banked RINs become exhausted, the value of RINs will increase as will the cost 

 

25 E10 can contain no more than 10% ethanol. E85 is assumed to contain 74% ethanol on an annual average basis. 

Diesel can contain no more than 5% biodiesel. Biodiesel, however, earns 1.5 RIN credits for each gallon, so a 

5% volumetric blend equates to 7.5% biodiesel on a RIN basis. 
27 

of gasoline and diesel. This will result in the drastic cut in sales of diesel, E10, and E0 so that 

E85 becomes a much larger share of the transportation fuel market.26 

B. RFS2 Implementation 

RFS2 requires that at the end of each year, obligated parties have enough RINs to meet 

their RVO. An obligated party can increase its number of RINs by increasing the amount of 

biofuels blended into its current fuel volumes. Additionally, an obligated party can acquire RINs 

by purchasing either biofuel from a biofuel producer or RINs from another obligated party. The 

lack of surplus RIN supply results in high RIN value and reduced total fuel demand so that the 

ratio of RINs to physical gallons increases. Conversely, if additional RINs are not available for 

purchase, an obligated party may have no option other than to reduce its total volume of fuel 

produced so that its current stock of RINs is sufficient to meet its RVO. It is likely that over 

time an obligated party would be forced to do some combination of both acquiring surplus RINs 

and reducing the volume of fuel produced to meet its RVO. 

Each obligated party will choose its optimal compliance path based upon the cost of 

RINs, the market response to changes in fuel cost, technology limitations on blending biofuels 

with petroleum, and infrastructure and consumer acceptance issues surrounding increasing E85 

sales. An obligated party may first try to blend more biofuels into its transportation fuels in 

order to acquire RINs. For the motor gasoline fuels, this increase is accomplished by increasing 

the share of ethanol in motor gasoline by blending more ethanol into conventional gasoline 

(limited by the blend wall), increasing production of E10 in the early years, or increasing 

production of E85. For diesel, increasing the content of biofuels means adding more biodiesel 

into the finished diesel fuel (limited by a 5% blending maximum). The ability of obligated 

parties to increase the blending percentage of biofuels is limited by the availability of biodiesel, 

blending and infrastructure constraints, and the size of the E85 market. 

Producing E85 gives obligated parties the greatest surplus RINs per gallon of fuel sold. 

E10 gallons generate a small amount of surplus RINs through 2014. On the other hand, diesel 

 

26

 In our analysis the ethanol blend wall is reached in 2012-2013. However, the severe economic impacts do not 

occur until 2015-2016. The reason is that in 2012 – 2014 obligated parties acquire as many RINs as is feasible 

in anticipation of being unable to meet the RFS2 requirements in later years. The result is that the excess RINs 

postpone the severe economic impacts that result when obligated parties can no longer acquire the number of 

RINS required to comply with RFS2 mandated volumes and thus are forced to limit supplies of gasoline and 

diesel.
28 

always generates a deficit in RINs. Obligated parties that sell diesel in the U.S. must always 

acquire additional RINs beyond those generated through biodiesel blending because the 

percentage of biodiesel in diesel is below the total renewable fuels blending percentage 

obligation. Increasing the biodiesel content in finished diesel reduces the number of RINs that 

need to be purchased to offset the deficit. Hence all available biodiesel supplies are purchased 

by obligated parties, but biodiesel supplies are limited. 

Figure 5: RIN Obligations 

Source: NERA analysis. 

As a result, diesel can be thought of as incurring a RIN deficit and gasoline, for the first 

few years at least, as creating a surplus of RINs. The value of RINs that must be purchased 

separately is reflected in the cost of the finished gasoline or diesel.27 If a fuel requires the 

purchase of RINs, such as with diesel, the cost of the finished product will increase. If the 

 

27

 The value of a gallon of diesel equals the cost to produce diesel plus the price of additional RINs that must be 

purchased to meet the blending percentage standard. The value of gasoline (E10 or E85) equals the cost to 

produce E10 or E85 less the price of excess RINs that the fuel generates and can be sold. The RIN market 

equilibrates at the point where the marginal value of selling one more gallon of diesel equals the value of selling 

one more gallon of E10 or E85.

8.4%

9.0%

9.8%

11.0%

0%

2%

4%

6%

8%

10%

12%

2012 2013 2014 2015

Required Percentage of Biofuel(%)

RFS2 Year

Required RIN Obligation

E10

B5

E10 = 10% Ethanol E85 = 74% Ethanol B5 = 5% Biodiesel (Biodiesel earns 1.5 RINS/Gal)
29 

production of a fuel generates surplus RINs that can be sold, such as with E85 and E10 early on, 

then the cost of the finished product will decrease. 

By 2015, however, E10 is no longer generating surplus RINs. In fact, it cannot generate 

enough RINs to meet its own blending percentage obligation. As a result, the gasoline cost 

increases significantly reflecting the shortage of RINs available (see Figure 6). 

Figure 6: Percentage Change in Cost per Gallon of Motor Gasoline and Diesel 

Source: NERA NewERA model results.

As RINs become scarcer, fewer gallons of fuels that require additional RINs can be 

produced. Since the economy still demands these transportation fuels, the value of the RIN will 

increase to the point that the cost of the fuel, which includes the cost of the necessary RINs, 

results in the demand equilibrating with the supply of fuel. Consequently the cost to produce 

fuels that require the purchase of additional RINs increases (e.g., diesel), and the cost to produce 

fuels that generate surplus RINs declines (e.g., E85). 

Diesel costs increase by 45% to 80% in 2014 for Scenarios 2 and 1, respectively; and the 

cost of diesel increases by over 300% in 2015 in Scenario 2. These cost increases match up with 

a drop in sales of 2 to 3 billion gallons in 2014 for Scenarios 2 and 1, respectively; and a decline 

of 7 billion gallons in 2015 for Scenario 2, which represents a decline of over 15% from the 

Reference Case. 

On the other side, blended fuels that generate surplus RINs experience a decline in fuel 

costs, which induces greater sales. Motor gasoline sales increase by roughly 2 billion gallons 

from the Reference Case for all years between 2012 and 2014. In 2015, motor gasoline sales 

decline by at least 3 billion gallons from Reference Case levels (see Figure 7). 

Scenario 1

Scenario 2

-10%

0%

10%

20%

30%

40%

2012 2013 2014 2015

Percentage Change in Cost per Gallon of Motor 

Gasoline (Relative to Baseline)

Motor Gasoline

Scenario 1

Scenario 2

-100%

0%

100%

200%

300%

400%

2012 2013 2014 2015

Percentage Change in Cost per Gallon of Diesel

(Relative to Baseline)

Diesel
30 

Figure 7: Change in Blended Fuels Sales (Motor Gasoline and Diesel) 

Source: NERA NewERA model results.

However with time this approach of increasing E10 sales and reducing diesel sales to 

comply is not sustainable. As illustrated in Figure 5, the originally targeted blending percentage 

standard for total renewable fuel28 increases with time. From 2012 through 2014 the blending 

percentage standard is less than 10%, which is lower than the gasoline blend wall limit. But as 

the blending percentage standard increases, this contribution of E10 to producing surplus RINs 

shrinks. This shrinkage occurs at the same time that the gap increases between the total RVO and 

the total RINs collected from blending biodiesel. In other words, as fewer excess RINs are being 

generated more RINs are demanded. Thus to comply with the total biofuels mandate the 

reduction in diesel sales would become so large that it would lead to such severe rationing of 

diesel so as to cause extreme disruption in the commercial transportation sector. It is this 

growing gap between RIN supply and RIN demand that causes the approach to be unsustainable 

by 2015-16. 

 

28 Originally targeted blending percentage standard equals the total renewable fuel volume as required by EISA ‘07 

divided by EIA’s 2011 forecast for transportation fuel demand. 

Motor Gasoline Motor Gasoline

Diesel

Diesel

-8

-6

-4

-2

0

2

4

2012 2013 2014 2012 2013 2014 2015

Change in Blended Fuels (Billions of Gallons), 

Relative to Reference Case

Scenario 1 Scenario 2
31 

C. Diesel Death Spiral 

An unintended consequence of the regulatory procedures for determining compliance is 

the potentially self-destructive way in which the annual blending percentage standards are 

determined. Figure 8 schematically presents the series of steps which result from EPA setting 

greater blending percentage obligations that cause an increasingly steep decline in diesel sales 

and lead to unattainable compliance obligations and supply disruptions. 

Figure 8: Progression of the Diesel Death Spiral 

 

Diesel/biofuel

blending results in 

RIN deficit

Obligated 

Parties must 

purchase 

surplus RINs or 

reduce diesel 

production

Diesel cost increases

EPA determines the Final 

Percentage Standards 

for renewable fuel 

blending

2012 RFS2 Volume Target (RVO)

AEO2012 Forecast Gasoline + Diesel

Diesel sales 

decline

2013 RVO

AEO2013 Forecast 

Gasoline + Diesel

2014 Cycle

2015 Cycle
32 

As specified in EISA ’07, each year EPA calculates the next year’s blending percentage 

standards as the ratio of the targeted biofuel volumes to the EIA’s forecast for total transportation 

fuel sales in the next year. To comply with the blending percentage obligations, obligated parties 

have several options: 

 Sell more E85; 

 Increase the ethanol content in gasoline; 

 Sell less E0; and 

 Increase the biomass-based diesel content in diesel. 

Each of these options has limitations. As the Phase I study concluded, there is limited 

consumer acceptance of E85 and limited infrastructure from which to dispense E85. The 

blending of ethanol into gasoline is restricted by the blend wall. Higher ethanol blends such as 

E15 are unlikely to be widely sold in the near future. E0 sales are unlikely to fall below 5% of 

total gasoline sales in the next several years, and there is a limited amount of biodiesel that can 

be cost-effectively produced. 

In order to meet the blending percentage obligation, obligated parties would be forced to 

change the mix of fuels they sell to the extent that is possible in order to acquire enough RINs to 

meet the RFS2 mandates. All obligated parties would sell as much E85 and blend as much 

biodiesel into diesel as possible because of the relatively high RINs per gallon these actions 

generate: 0.74 RINs per gallon of E85 (typical), which compares to only 0.1 RINs for E10 and 

zero for E0. Biomass based diesel earns 1.5 RINs/gallon, or 0.075 RINs, when blended to make 

a gallon of B5. 

The difference between the renewable fuel volumes mandated by the RFS2 program and 

the RINs generated through blending of biofuels into finished products represents the surplus or 

shortfall in RINs. If obligated parties continued to supply the same volumes of gasoline and 

diesel fuel, they would not be able to blend enough biofuel, or purchase enough surplus RINs, to 

remain in compliance with RSF2. This shortage in RINs puts upward pressure on RIN values 

(Table 10). For Scenario 1, in 2015 the program becomes infeasible, so there is no RIN value 

listed in the table. 
33 

Table 10: RFS2 Mandated Total Biofuels Percentage and Associated RIN Values 

 2012 2013 2014 2015 

Renewable Volume 

Obligation as Blending 

Percentage 

8.4% 9.0% 9.8% 11.0% 

RIN value Scenario 1 

(2010$/RIN) $10 $14 $27 Note 1 

RIN value Scenario 2 

(2010$/ RIN) $5 $10 $17 $100 

 Note 1: Model solution for Scenario 1 in the year 2015 was infeasible. 

 Source: NERA analysis and NewERA model results. 

The cost of the RINs is borne by the obligated party and leads to higher costs and lower 

sales (effectively rationing) for fuels that require additional RINs. The cost of RINs also 

depends on the supply of RINs, which depends greatly on the supply of excess RINs from 

gasoline sales. During the first few years, the result is that the cost of diesel increases because 

this fuel requires RINs and the cost of E10 and E85 declines since these fuels produce excess 

RINs. The higher cost dampens demand for diesel, which results in the EIA lowering its forecast 

for diesel sales. The lower forecast for demand, means that the next year’s blending percentage 

obligation becomes higher than it would have been, resulting in additional pressure on obligated 

parties who blend diesel to acquire even more RINs. This process repeats each year. The 

reduced diesel demand forecasting is depicted in Figure 9. The top black line represents the 

AEO diesel demand for 2011. As the cost of diesel rises, demand declines in subsequent years. 

The declining demand forecasted through NERA modeling is shown in order for 2012, 2013, 

2014 years by the blue, red, and green lines, respectively. 
34 

Figure 9. Declining Diesel Demand Forecasting (2012 – 2015) 

Source: NERA NewERA model results.

Eventually the RFS2 total renewable fuel target increases to the point that it is no longer 

possible to satisfy the mandate through the available compliance mechanisms. As a result, the 

blending percentage obligation becomes infeasible. 

D. The Role of Banked RINs 

Table 11 displays the shortfall or surplus of RINs from selling a gallon of diesel, E10, or 

E85. The shortfall for diesel depends on the scenario studied, because the amount of biodiesel 

differs by scenario. Under Scenario 2, more biodiesel is available and consequently blended 

with petroleum diesel to yield more RINs per gallon of finished diesel than in Scenario 1. Since 

the E10 blend wall is reached in both scenarios for all years, the RIN shortfall and surplus are the 

same across scenarios as is the E85 RIN surplus. The level of E10’s RIN deficit or surplus 

suggests how great demand for previously banked RINs will be. 

AEO Forecast in 

2011

Forecast in 2012

Forecast in 2013

Forecast in 2014

41

42

43

44

45

46

47

2012 2013 2014 2015

Diesel Fuel (Billions of Gallons)

Diesel

NERA 

Modeled 

Diesel 

Demand

Forecast
35 

Table 11: RIN Deficit or Surplus per Gallon of Fuel Sold (RIN/Gallon of Fuel) 

 2012 2013 2014 2015 

Diesel 

Scenario 1 -0.048 -0.045 -0.053 

Scenario 2 -0.036 -0.030 -0.040 -0.038 

E10 Both Scenarios 0.016 0.010 0.002 -0.010 

E85 Both Scenarios 0.66 0.65 0.64 0.63 

Source: NERA NewERA model results. 

One way obligated parties may lessen the problems created by the gap between 

maximum RINs generated by blending B5 diesel and the total renewable fuel blending 

percentage obligation is to purchase or use RINs that have been banked from previous years. 

Depending upon the circumstances in a given year, obligated parties may choose to either 

acquire additional RINs or use RINs that they acquired in the previous year. The availability of 

RINs reserved for later use depends critically on the surplus RINs generated through the 

production of E10. 

Table 11 shows that the surplus RINs decline dramatically to almost zero in 2014 and 

becomes negative in 2015. Therefore, in the first two years, it may be possible to increase the 

number of banked RINs, but by 2014 only sales of E85 would contribute anything meaningful to 

the surplus RIN supply. From 2014 surplus RIN inventories would be drawn down in an effort 

to make up for the shortfall in RINs created by diesel sales. 

Table 12 shows the decline of surplus RINs over time. The table illustrates that in the 

early years obligated parties will acquire more RINs than they need for compliance (i.e., they 

will add RINs to their RIN bank) and use these banked RINs in the later years: from 2013 

onward in Scenario 1 and from 2014 onward in Scenario 2. This market behavior is reflective of 

the value of RINs early on being relatively inexpensive compared to the value of RINs later 

when the RFS2 mandates become more stringent. The total of cumulative banked RINs 

increases until 2013 in Scenario 1. In Scenario 2 the total increases until 2014 because there are 

more RINs available from the blending of biodiesel into finished diesel in Scenario 2. The 

subsequent exhaustion of the RIN surplus portends an impending collapse in terms of the RFS 

mandate leading to an infeasible outcome in the fuels market. 
36 

Table 12: Cumulative Total of Surplus Banked RINs in Billions 

Scenario 

1 

Scenario 

2 

2012 

Starting RIN Surplus 1.69 1.69 

Surplus RINs 

Produced 0.16 0.67 

RINS Used 0.00 0.00 

End of Year RIN 

Surplus 1.85 2.36 

2013 

Starting RIN Surplus 1.85 2.36 

Surplus RINs 

Produced 0.00 0.29 

RINS Used 0.40 0.00 

End of Year RIN 

Surplus 1.45 2.65 

2014 

Starting RIN Surplus 1.45 2.65 

Excess RINs 

Produced 0.00 0.00 

RINS Used 1.45 0.92 

End of Year RIN 

Surplus 0.00 1.73 

2015 

Starting RIN Surplus NA 1.73 

Surplus RINs 

Produced NA 0.00 

RINS Used NA 1.73 

End of Year RIN 

Surplus NA 0.00 

Source: NERA NewERA model results.

E. RFS2 Program Will Eventually Fail 

With time the RFS2 requirements become more stringent and options for complying 

become more limited: the blend wall is encountered, E85 is sold at maximum levels, and 

biodiesel production is fully exhausted. The result is that the demand for RINs exceeds the 

supply, which causes RIN values to increase and obligated parties to draw down their bank of 

RINs. Eventually the surplus of RINs is depleted (Table 12). 
37 

With surplus RINs depleted at the end of 2014 for Scenario 1, obligated parties must 

meet the total biofuels obligation percentage of close to 11% in 2015 through the blending and 

sale of E0, E10, E85, and B5 diesel. There are no surplus RINs from previous years that can be 

used. The 11% RVO target exceeds the ethanol content in E10, which means that E85 sales 

must greatly increase to make up for the shortfall. But the market infrastructure and consumer 

acceptance limits E85 sales causing surplus RINs from E85 sales to be scarce. To remain in 

compliance, obligated parties would have to drastically curtail their sales of diesel and E10. 

Table 13 shows that if the supply of gasoline and diesel were reduced by over 50% from the 

EIA’s Reference Case, then obligated parties could comply with RFS2. Clearly, this is an 

infeasible result. In addition, this result leads to far fewer biofuel gallons (9.4 billion gallons) 

being sold compared with the 2015 RFS total renewable fuel volume mandate of 20.5 billion 

gallons. As reported in Table 10, the model solution was infeasible for 2015 for scenario 1. 

Table 13 illustrates the unrealistic changes in fuel consumption that would have to take place for 

the RFS2 policy to be achievable. 

Table 13: RFS2 Collapse for Scenario 1 

 

Renewable 

Fuel per 

Gallon 

(%) 

Fuel 

Sales 

(Billion 

Gallons) 

RINs 

(Billions) 

EIA 

Reference 

Scenario 

2015 Levels 

(Billion 

Gallons) 

% 

Reduction 

in Fuel 

Scenario 1 

vs. EIA 

Obligation % 11.0% 

E85 74% 2.6 1.9 

Diesel 7.5% 20 1.5 

E10 10% 60 6.0 

E0 0% 3.0 

Motor Gasoline 140 53% 

Diesel 46.2 57% 

Total 85.6 9.4 186.2 

Source: NERA NewERA model results.

In scenario 2, this infeasibility is delayed until 2016 because the additional biodiesel 

supplies allow about 1.7 billion RINs to be carried forward from 2014 and to be used in 2015. 
38 

Exhausting the bank of RINs in 2015 fails to prevent the escalation of diesel costs, and they 

increase by over 300% from the Reference Case. 

F. Economic Impact of RFS2 

The macroeconomic impacts of the RFS2 mandate on the U.S. economy were estimated 

through the year 2015. The estimates show that the increasing demand for and escalating cost of 

RINs causes dramatic increases in the cost of diesel and ultimately, the cost of gasoline by 2015. 

These higher costs ripple through the economy, collectively harming economic growth. 

From 2012 through 2014, the higher diesel fuel costs increase the cost to move raw 

materials and finished goods about the country. This increased cost will be passed through to 

consumers of finished goods and services. As a result, consumption of goods and services 

declines. The lower gasoline prices in this time period slightly offset the negative impacts on 

consumption from the higher diesel prices.29

 

In the 2012 to 2014 time frame, labor earnings increase, but their increase is modest 

compared to the loss in consumption, as labor earnings are unable to offset the higher costs for 

goods.30 In the near term, investment and production is temporarily accelerated in anticipation of 

rising costs, and GDP increases, but this shift is unsustainable. By 2014 GDP declines by more 

than $250 billion. 

In 2015, the economic impacts worsen. In addition to the negative impact of higher costs 

for finished goods and services caused by rising diesel fuel costs, gasoline costs increase relative 

to the baseline as a result of RSF2. Consumers are left with fewer dollars to spend on other 

goods and services resulting in lower consumption. Lower consumption translates into less need 

for the production of other goods and services that consumers would have otherwise purchased. 

The combined effect of less money consumers have available to spend with the higher 

cost for finished goods and services means that consumption declines even further. By 2015, 

consumption per household declines by about $2,700 per year and total consumption declines by 

about $340 billion. Since there is lower demand for finished goods and services, there is less 

need for workers to provide those goods and services. As a result, workers would earn $584 

 

29 Consumers are affected by higher diesel prices which are reflected through increases in the costs of goods and 

services. 

30 Increases in biofuel production lead to increases in labor demand. 
39 

billion less as a result of the smaller size of the economy resulting from the implementation of 

RFS2 (Table 14). These negative impacts are also expressed by the loss in GDP of $770 billion. 

Table 14: Changes in Consumption per Household, Consumption, Labor Income and GDP 

Relative to Baseline (2010$s) 

2012 2013 2014 2015 

Change in Average Consumption per Household 

($/Household) -$1,200 -$1,200 -$1,300 -$2,700 

Change in Consumption (Billions of $s) -$150 -$140 -$160 -$340 

Change in Labor Income (Billions of $s) $24 $42 $27 -$580 

Change in GDP (Billions of $s) $43 $50 -$270 -$770 

Source: NERA NewERA model results.
40 

V. Conclusions 

The RFS2 mandate as currently written is likely infeasible given the current 

technological, infrastructure and market constraints of the transportation sector. The fuel 

capability of the existing fleet, the infrastructure of the fuel distribution system and limited 

compliance mechanisms are some of the factors that undermine the viability of the RFS2. As 

obligated parties seek to comply with the RFS2, the mandates lead to unintended consequences 

that have dramatic and potentially long-term negative impacts on the motor fuel industry’s 

ability to meet market demand and on the economy as a whole. As it becomes increasingly 

difficult for obligated parties to generate sufficient RINs to comply with the blending percentage 

obligation targets from RFS2, very large increases in transportation fuel costs ripple through the 

economy causing negative macroeconomic impacts. Depending on biodiesel availability, this 

collapse occurs in 2015 to 2016 timeframe. By 2015, the adverse macroeconomic impacts 

include a $770 billion decline in GDP and a corresponding reduction in consumption per 

household of $2,700. 
41 

Appendix A: Renewable Fuels Standard Description 

A. Renewable Fuel Standard (RFS2) 

Congress first established a Renewable Fuel Standard (RFS1) in 2005 with the enactment 

of EPACT. Two years later, Congress passed EISA ‘07 which included RFS2 that increased the 

volume mandates of renewable fuels and expanded the transportation fuel mix beyond gasoline. 

RFS2 became effective in 2010 and applies to all transportation fuel used in the United 

States—including diesel fuel intended for use in highway motor vehicles, non-road, locomotive, 

and marine diesel. As shown in Figure 10, RFS2 consists of four nested mandates for the 

minimum volume of renewable fuels contained in the transportation fuels sold in the United 

States. These mandates increase each year, and collectively, require the use of 36 billion gallons 

of renewable fuels in 2022. 
42 

Figure 10: EISA '07 Renewable Fuel Standard 2008-2022 

Each of the four nested mandates (biofuel categories) has its own lifecycle GHG 

minimum emission reduction requirements and annual volume mandate. 

• Total renewable fuel is produced from renewable biomass and must reduce GHG 

emissions by at least 20% from the baseline value. 

• Advanced biofuel is a subcategory of renewable fuel having a lifecycle GHG emission at 

least 50% less than the baseline value. 

• Biomass-based diesel is a subcategory of advanced biofuel, and includes biodiesel or 

renewable diesel fuel having a lifecycle GHG emission at least 50% less than the baseline 

value. 

• Cellulosic biofuel – a subcategory of advanced biofuel, and includes fuel produced from 

cellulose, hemicelluloses or lignin and having a lifecycle GHG emission at least 60% less 

than the baseline value. 

Notes:

Cellulosic biofuel requirments were reduced per waiver approval by EPA for 2010-2012:

2010: 100 million gallons reduced to 6.5 million gallons

2011: 250 million gallons reduced to 6.6 million gallons

2012: 500 million gallons reduced to 8.65 million gallons

Biomass-based Diesel requirement for 2013-2022 has yet to be determined by the EPA but shall be no 

less than 1 billion gallons. This graph assumes 1 billion gallons per year in 2012-2022.
43 

Because of the nested nature of the biofuel categories, any renewable fuel that meets the 

requirement for cellulosic biofuels or biomass-based diesel is also valid for meeting the overall 

advanced biofuels requirement. Similarly, any renewable fuel that meets the advanced biofuel 

requirement is also valid for meeting the total renewable fuel mandate. 

By November 30 of each year, EPA sets for the following year the blending percentage 

standard for total renewable fuel, advanced biofuel, biomass-based diesel, and cellulosic biofuel 

by dividing the volumetric mandates for each biofuel category by the projected annual 

transportation fuel demand forecasted by EIA. 

Renewable fuel producers and importers generate credits in proportion to the amount and 

type of renewable fuel produced/imported – these credits are called RINs. 

Transportation fuel producers and importers (“obligated parties”) must acquire sufficient 

RINs to demonstrate compliance. Their compliance requirement is based on the amount of 

gasoline and diesel they refine or import. The number of required RINs, for each renewable fuel 

category, is calculated by multiplying the blending percentage standard for that year as set by 

EPA with the volume of gasoline or diesel obligated parties produce or import in that year. 

Fuels sold that contain less than the blending percentage standard incur a RIN deficit, and 

fuels that contain more than the blending percentage standard accrue surplus RINs. The overall 

annual blending percentage standard is met if the surplus RINs generated from fuels containing 

greater than the required percentage are sufficient to offset the RIN deficits from fuels containing 

less than the required percentage. An obligated party is in compliance with RFS2 if its supply of 

RINs for each of the four renewable fuel categories equals or exceeds its fuel sales times the 

EPA’s stated blending percentage standard for each renewable fuel category. 

Fuels currently sold into the U.S. market include E0 and E10 gasoline, B0 and B5 diesel 

and E85, an alternative fuel containing greater than 50% ethanol by volume. E10 is the 

predominant fuel in the market, when the ethanol volume requirement is greater than what can be 

achieved by blending E10, the E10 blend wall has been reached, and the blend wall will restrict 

the greater use of renewable fuels. 

Most biodiesel fuel is consumed in blended diesel fuels in which petroleum-based diesel 

fuel constitutes 95 percent or more of the blend by volume. The most common of such blends is 

B5 (five percent biodiesel by volume). Most diesel engine manufacturers and automakers 
44 

continue to recommend the use of blends not greater than five percent. These requirements 

effectively create a B5 blend limit that is analogous to the E10 blend wall. 

Original equipment manufacturers design and warranty engines and vehicles consistent 

with the E10 specification. Vehicle manufacturers have stated that use of fuels with higher 

ethanol content would void their warranty on existing vehicles with the exception of FFVs, 

which can accommodate ethanol gasoline blends with as much as 85% by volume ethanol. 

EPA has approved two partial waivers, that together, allow E15 in vintage 2001 on-road 

vehicles and newer. For reasons described in the report, however, volumes of E15 are not 

considered to be materially significant. For example, the EIA in its recent Short-Term Energy 

Outlook assumed zero E15 demand in 2012 and 2013.31

 

31 “This forecast assumes that E15 (gasoline blended with 15 percent ethanol by volume) does not yet reach the 

market. Consequently, U.S. ethanol production is projected to exceed the volume that can easily be used in the 

U.S. liquid fuels pool, so the Nation will continue to be a net exporter of ethanol over the next two years.” 

Energy Information Administration, Short Term Energy Outlook, p. 10, May, 2012. 
45 

Appendix B: Detailed Model Description 

This analysis used the linked system of NERA’s proprietary bottom-up transportation 

fuel model and its NewERA macroeconomic model. This section describes these two models. 

A. Transportation Fuel Model 

The transportation fuel model is a partial equilibrium model designed to estimate the 

amount of fuel produced for and consumed by the transportation sector with and without the 

RFS2 mandate in place. The model maximizes the sum of consumers’ and producers’ surplus 

subject to meeting the RFS2 program fuel requirements and satisfying the transportation sector’s 

demand for fuel while not violating any transportation sector infrastructure constraints. 

1. Input Data Assumptions for the Model Baseline 

The fuel sales forecast for the gasoline market is based upon the AEO 2011 Reference 

scenario. Table 15 reports the EIA’s forecast for petroleum gasoline and ethanol sales as well as 

E85. To be optimistic about the ability of obligated parties to meet the RFS2 mandate, we 

assume that the level of E0 sales is only five percent of the total petroleum gasoline sales. Until 

recently, this percentage has been above 10% (see Phase I report). Applying this assumption to 

the AEO’s forecast yields the following forecast for E0, E85, and petroleum and ethanol in the 

remaining motor gasoline fuel (Table 15). 

Table 15: September 2011 STEO and AEO 2011 Reference Scenario – Sales of Gasoline 

Fuels (Billions of Gallons, Unless Otherwise Noted) 

Fuel (Billions of Gallons or %) 2012 2013 2014 2015

E0 6.28 6.29 6.28 6.27 

Petroleum in E10 119.24 119.54 119.40 119.22

Ethanol in E10 15.01 15.25 15.48 15.72 

% Ethanol in E10 11.2% 11.3% 11.5% 11.7%

E85 0.06 0.07 0.08 0.09

Source: EIA’s AEO 2011 and EIA’s STEO September 2011. 
46 

The fundamental problem with the EIA’s forecast is that the percentage of ethanol in E10 

exceeds the blend wall of 10%. In 2012, the share of ethanol in E10 is forecasted to be 11.2%. 

To eliminate this infeasibility, we adjusted the sales of ethanol and petroleum in E10 so that the 

modified E10 would comply with the E10 blend wall while the overall total energy content in 

motor gasoline remained the same. That is, the forecast used in the model maintains the total 

energy demanded on an MMBtu basis for travel (Table 16). 

Table 16: NERA Reference Case Sales of Gasoline Fuels (Billions of Gallons Unless Noted 

Otherwise) 

Fuel (Billions of Gallons or %) 2012 2013 2014 2015

E0 6.28 6.29 6.28 6.27 

Petroleum in E10 120.35 120.77 120.79 120.78

Ethanol in E10 13.37 13.42 13.42 13.42 

% Ethanol in E10 10.0% 10.0% 10.0% 10.0%

E85 0.06 0.07 0.08 0.09 

Source: NERA Analysis. 

The AEO’s 2011 forecast without modifications is used for the petroleum diesel and 

biomass based diesel sales forecast (Table 17). 

Table 17: NERA Reference Case Sales of Diesel Fuels (Billions of Gallons) 

 2012 2013 2014 2015

Petroleum Diesel 41.8 43.9 44.2 45.0 

Biomass based diesel 0.92 1.07 1.07 1.23 

Effective Biodiesel % 2.2% 2.4% 2.4% 2.7%

Source: EIA’s AEO 2011 and NERA analysis. 

For the forecasts for the volume of biofuel components in motor gasoline, we 

disaggregate the ethanol production into corn, cellulosic, and sugar ethanol (see Table 18). 

Sugar ethanol consumption is based on the Food and Agricultural Policy Research Institute’s 

(FAPRI’s) 2011 Outlook. We use the EIA’s forecast for cellulosic ethanol. Corn-based ethanol 

equals the sum of ethanol used in E10 and E85 less cellulosic and sugar ethanol consumption. 
47 

This assumption is optimistic because it gives higher volumes for sugar ethanol. Ethanol use in 

E10 and E85 is inferred from Table 18. 

Table 18: NERA Reference Case Sales of Biofuels in Motor Gasoline (Billions of Gallons) 

2012 2013 2014 2015

Corn Ethanol 12.60 12.22 11.16 10.49

Sugar Ethanol 0.81 1.25 2.33 3.00 

Cellulosic Ethanol 0.01 0.01 0.01 0.01 

Sources: Food and Agricultural Policy Research Institute for sugar ethanol imports. 

Note: Corn ethanol = Ethanol in E10 + Ethanol in E85 – Sugar Ethanol – Cellulosic 

Ethanol 

The forecasts for fuel price ratios are based upon a number of data sources. The gasoline 

and diesel prices come from AEO’s 2011 Reference forecast. For corn ethanol we built up the 

prices from the EIA's work. We assumed a corn price equal to the average $/bushel price from 

January 1, 2008 to September 1, 2011 (or $5.00/bushel). We took the capital, operations, and 

maintenance costs from the EIA.32 Summing up all these costs yielded the forecasted price for 

corn based ethanol. The price of sugar ethanol is assumed to be $1.00 to $1.50 per gallon higher 

than neat gasoline based on recent actual price differentials between the two fuels.33 The cost of 

cellulosic ethanol is uncertain.34 To estimate this cost, we averaged two EIA forecasts – one 

based on the capital cost for cellulosic ethanol and the other based on the capital cost for 

biodiesel gasification.35 For biodiesel, we made use of three sources: Global Insights, the 

American Trucking Association’s comment on the EPA’s proposed rule entitled: Regulation of 

Fuels and Fuel Additives: 2012 Renewable Fuel Standards, and the average ratio of spot SME 

B100 to spot ultra-low sulfur petroleum diesel from 2009 through 2011. 

 

32 Statton, Mac, “Development of Production Costs as a Driver for the National Energy Modeling System,” Energy 

Information Administration, Presentation at International Fuel Ethanol Workshop, June 29, 2011.

33 California Energy Commission, “2011 Integrated Energy Policy Report,” February 2012. 

34 Because we assume the RFS mandate for cellulosic ethanol will be waived, cellulosic ethanol is likely to be 

irrelevant in our analysis as long as its price is sufficiently greater than that of sugar ethanol, for sugar ethanol 

will be the ethanol of choice to meet the advanced biofuels mandate, and corn and sugar ethanol will be used in 

the production of E10 and E85 to help meet the overall biofuel requirement. 

35 Statton, Mac, “Development of Production Costs as a Driver for the National Energy Modeling System,” Energy 

Information Administration, Presentation at International Fuel Ethanol Workshop, June 29, 2011.
48 

All price ratios are national, annual averages over multiple grades of fuel. For gasoline, 

the grades include regular unleaded, 89 octane unleaded, and premium unleaded (Table 19). 

Table 19: Baseline Fuel Price Ratios for Blended Gasoline and Diesels (Ratio on a GGE 

Basis of Biofuel to Conventional Fuel) 

2010 2011 2012 2013 2014 2015 

Gasoline 1.00 1.00 1.00 1.00 1.00 1.00 

Corn Ethanol 1.86 1.78 1.72 1.61 1.58 1.49 

Sugarcane Ethanol 2.08 2.00 1.92 1.81 1.77 1.67 

Cellulosic Ethanol 2.62 2.48 2.41 2.23 2.13 2.01 

Diesel 1.00 1.00 1.00 1.00 1.00 1.00 

Soy-Based 

Biodiesel 1.74 1.66 1.7 1.66 1.65 1.64 

Source: NERA assumptions.

2. Fuel Supply Curves 

To address the changes in fuel production from the baseline, we use separate supply 

curves for each fuel. The elasticity of the supply dictates how the prices of fuels change with 

changes in production. In particular, they help determine how costly it is to expand biofuel 

production above the Reference Case levels. 

Each supply curve is benchmarked to the NERA Reference Case, which is a slight 

modification of the EIA’s Reference Case. The Reference Case price and quantity are denoted 

by (Q0(t),P0(t)). Each supply curve is also defined by an elasticity that is estimated from several 

data points from the EIA’s Reference and High Oil Price scenarios. Each supply curve has the 

following functional form: 

 Q(t)/Q0(t) = (P(t)/P0(t))elasticity

Formulation of the supply curves is such that the model replicates the Reference Case if 

no RFS2 mandate is imposed. For each year, the benchmark datum point for the biodiesel 

supply curve is derived from the EIA’s reference scenario projections for fuel quantities and 

prices. The benchmark datum point for the corn ethanol supply curve comes from our adjusted 

EIA reference scenario (NERA Reference Case) for quantities and the EIA’s cost analysis. For 
49 

sugar ethanol, we used the EIA’s demand forecast and the ARB’s cost ratio of sugar ethanol to 

corn ethanol. Table 17, Table 18, and Table 19 report the prices and quantities to which the 

supply curves were calibrated.36 

The own price elasticity for each fuel is derived by dividing the percentage change in 

quantity of fuel demanded by the percentage change in fuel price. The percentage change in 

quantity and price are computed by comparing the difference between the fuel consumed and 

price of fuel, respectively, in the AEO high oil price and reference scenarios. The elasticity of 

supply varies a bit from year to year, but on average, the elasticity of supply is about 0.4 for corn 

ethanol, 1.2 for sugar ethanol and biodiesel. The elasticity for petroleum fuels was is 0.8.37

3. Demand Curves 

The model has a demand curve for each final fuel – E0, E10, E85, and diesel. The 

functional form of these curves is identical to that of the fuel supply curves. For the demand 

curves, the elasticity is the fuel’s own price elasticity of demand. Because this analysis concerns 

itself only with the next few years, the demand curves’ elasticity equaled that of Dahl’s estimate 

for short-term elasticity of -0.1.38

 

These curves are calibrated to the demand data in Table 16 and Table 17. The EIA’s 

AEO 2011 Reference Case provides the gasoline and diesel prices to which the demand curves’ 

initial prices are calibrated (Table 20). As with the supply curves, the demand curves are 

structured so that the model replicates the NERA Reference Case level of demand for each fuel 

in the absence of the RFS2 mandate. 

 

36

 The previous section provides more detail on how the forecast prices were derived.

37

 Paltsev, Sergey, John M. Reilly, Henry D. Jacoby, Rishard S. Eckaus, James McFarland, Marcus Sarofim, 

Malcolm Asadoorian, and Mustafa Babiker, “The MIT Emissions and Prediction and Policy Analysis (EPPA).

Model Version 4,” August 2005.

38

 Dahl, C.A., “A survey of energy demand elasticities for the developing world,” Journal of Energy and 

Development 18(I), 1—48, 1994.
50 

Table 20: AEO 2011 Reference Case Fuel Prices ($/Gallon) 

Fuel 2012 2013 2014 2015

Gasoline 2.82 2.97 3.05 3.13 

Diesel 2.92 2.97 3.02 3.08 

Source: EIA’s AEO 2011. 

4. Transportation Fuel Model is Designed to Model RFS2 Program Characteristics 

The transportation fuel model was customized to simulate the impacts resulting from the 

RFS2 program. The model solves in one-year time steps and has a flexible time horizon. The 

first endogenous year is 2012. The model tracks the sale of the following fuels: E0 (100% 

petroleum gasoline), E10 (gasoline containing at most 10% by volume ethanol), E85 (assumed to 

contain 74% ethanol by volume), and diesel (containing at most 5% biodiesel). The model also 

tracks the use of the following fuel components in the production of the above finished fuels: 

petroleum gasoline, corn ethanol, sugar ethanol, cellulosic ethanol, petroleum diesel, and 

biodiesel. 

The model combines the six fuel components into the four end-use fuels, which can be 

consumed by specific vehicle types: 

 Minimum E0 use held to 5% to represent incomplete market conversion to E10 and 

preference of some consumers for E0; 

 Conventional vehicles can consume either E0 or E10;

 FFVs can use E0, E10, or E85; and 

 Commercial trucks/buses, ships, and trains are allowed to use diesel, which has up to a 

five percent mix of biodiesel (B5). 

5. RFS/RIN Constraints 

The model includes three biofuel constraints to account for the minimum annual volume 

of biofuel sales required under the RFS2 program: 

 Biomass based diesel; 

 Advanced biofuel (includes cellulosic biofuels, biomass-based diesel, and sugar ethanol); 

and 

 Renewable fuel (includes advanced biofuel and corn ethanol). 
51 

For this analysis, we omit the RFS2 constraint for cellulosic ethanol under the assumption 

that the EPA would continue to grant a waiver because cellulosic biofuels will be commercially 

available only in very limited quantities. This assumption avoids the debate about the economic 

and technical feasibility of producing cellulosic biofuel39 and is likely optimistic given the 

current difficulty procuring cellulosic biofuel supplies. Since this analysis assumes ample 

supplies of corn and sugar ethanol to meet the RFS2 mandates, there is no need for cellulosic 

ethanol to meet the non-cellulosic RFS2 targets. 

Therefore, we model the following three RFS2 constraints, which are defined in the 

EPA’s Final Rule for the Regulation of Fuels and Fuel Additives. 

Figure 11: EPA’s Formulas for the RFS2 Percentage Mandates40

 

 

39

 We note that there is a second- or third-order effect of assuming no measurable cellulosic supplies. Assuming no 

significant amount of cellulosic ethanol production necessitates additional amounts of biodiesel and sugar based 

ethanol to meet the advanced biofuel requirement, and this affects costs and compliance. 

40 http://www.gpo.gov/fdsys/pkg/FR-2012-01-09/pdf/2011-33451.pdf, at p. 19.
52 

The final standards for 2012 are provided below in Table 21. 

Table 21: EPA’s Final Rule for RFS standards for 201241

Fuel Percentage 

Cellulosic biofuel 0.002% to 0.01%

Biomass-based diesel 0.91% 

Advanced biofuel 1.21% 

Renewable fuel 9.21% 

Source: EPA. 

6. Model Formulation 

The following text describes the transportation fuel model – its objective function and 

constraints - at a high-level. 

Maximize: Consumer Surplus + Producer Surplus + Value of RIN Bank 

Subject to: RFS2 advanced biofuel constraint (% requirement) 

 RFS2 biodiesel constraint (% requirement) 

 RFS2 total biofuel constraint (% requirement) 

 Blend wall constraint for E10 not to exceed 10% ethanol 

 Blend wall constraint for diesel not to exceed 5% biodiesel 

 Limit on E85 sales based on Phase I findings for penetration of E85 

stations 

 Lower bound on E0 sales as a fraction of total sales (calibrated to baseline 

levels) 

 Upper bound on biodiesel production 

RIN bank(t) = RIN bank(t-1) + RIN Deposit(t) – RIN withdrawal(t) t = 2012, ..., 2015 

RIN bank cannot exceed 20% of biofuel sales... 

Consumer Surplus = the area under the demand curve for each delivered fuel (e.g., E0, 

E10, etc.) 

 

41

 EPA’s Section I on pg. 1323 of the EPA’s Final Rule for the Regulation of Fuels and Fuel Additives: 2012 

Renewable Fuel Standards. Table I.A. 3-2.
53 

Producer Surplus = the area under the supply curve for each fuel component (e.g., corn 

ethanol, biodiesel, etc.) 

RIN bank in 2012 equals the carryover of RINs from 2011. 

The supply curves capture the technological issues (penetration rate, availability, and 

cost) for the different fuels. The demand curves for fuel capture the loss in utility from having to 

reduce travel and also the loss in welfare from having to switch fuels. The RFS constraint is 

applied only in the RFS2 scenarios. The change in economic activity between the scenario and 

the baseline provides the economic impacts of the RFS policy. 

The models for the reference and high biofuel scenarios differ only in the upper bound 

for the amount of biodiesel production. Table 22 reports these levels. 

Table 22: Maximum Amount of Biomass Based Diesel That Can be Produced (Billions of 

Gallons) 

Scenario 2012 2013 2014 2015

Reference Scenario 1.00 1.28 1.28 1.28 

High Biodiesel Scenario 1.35 1.74 1.66 1.90 

Source: EIA’s AEO 2011 and NERA analysis. 

 The sales of E85 are limited by how quickly the E85 fueling infrastructure can be 

expanded. At the end of 2011, there were only about 2,400 stations that sold E85. This small 

volume resulted in E85 making up only about 1% of all potential FFV fuel purchases. By 

allowing the addition of E85 pumps in retail stations to increase at a rate far faster than that in 

recent history (1,000 stations per year versus about 400 stations per year from 2006 through 

2010), yields about 6,400 stations by 2015. Given people’s propensity to seek out E85 stations if 

they have a FFV, we assume that this level of stations translates into the following bound on E85 

sales (see Phase I report for more details). Table 23 shows that this upper limit on E85 sales is 

quite optimistic relative to the EIA’s forecasted E85 sales. 
54 

Table 23: Sales of E85 (Billions of Gallons)

2012 2013 2014 2015

AEO 2011 0.06 0.07 0.08 0.09 

Maximum 0.54 0.99 1.7 2.6 

Source: EIA’s AEO 2011 and NERA NewERA model results. 

B. Macroeconomic Model in NewERA Modeling System 

The NewERA macroeconomic model is a forward-looking dynamic computable general 

equilibrium model of the United States. The model simulates all economic interactions in the 

U.S. economy, including those among industry, households, and the government. The economic 

interactions are based on the IMPLAN 2008 database for a benchmark year, which includes 

regional detail on economic interactions among 440 different economic sectors. The 

macroeconomic and energy forecasts that are used to project the benchmark year going forward 

are calibrated to the most recent AEO produced by the EIA. Because the model is calibrated to 

an internally-consistent energy forecast, the use of the model is particularly well suited to 

analyze economic and energy policies and environmental regulations. 

For this study, the NewERA macroeconomic model was set to run from 2012 to 2015 in 

one year time steps. We aggregated all the states into one U.S. region since the RFS2 program is 

a nationwide policy. We then aggregated the 440 sectors into five energy and seven non-energy 

sectors: energy sectors include crude oil, oil refining, natural gas extraction and distribution, 

coal, and electricity; the non-energy sectors include agriculture, commercial transportation 

(excluding trucking), energy intensive sectors, manufacturing, motor vehicle production, 

services, and trucking. 

The NewERA model incorporates EIA energy quantities and energy prices into the 

IMPLAN Social Accounting Matrices. This in-house developed approach results in a balanced 

energy-economy dataset that has an internally consistent energy benchmark data as well as 

IMPLAN consistent economic values. 

The macroeconomic model incorporates all production sectors and final demands of the 

economy and is linked through terms of trade. The effects of policies are transmitted throughout 

the economy as all sectors and agents in the economy respond until the economy reaches 

equilibrium. The ability of the model to track these effects and substitution possibilities across 
55 

sectors and regions makes it a unique tool for analyzing policies such as those involving energy 

and environmental regulations. These general equilibrium substitution effects, however, are not 

fully captured in a partial equilibrium framework or within an input-output modeling framework. 

The smooth production and consumption functions employed in this general equilibrium model 

enable gradual substitution of inputs in response to relative price changes thus avoiding all or 

nothing solutions. 

Business investment decisions are informed by future policies and outlook. The forwardlooking characteristic of the model enables businesses and consumers to determine the optimal 

savings and investment while anticipating future policies with perfect foresight. The alternative 

approach on savings and investment decisions is to assume agents in the model are myopic, thus 

have no expectations for the future. Though both approaches are equally unrealistic to a certain 

extent, the latter approach can lead the model to produce inconsistent or incorrect impacts from 

an announced future policy. 

The CGE computable general equilibrium modeling tool such as the NewERA 

macroeconomic model can analyze scenarios or policies that call for large shocks outside 

historical observation. Econometric models are unsuitable for policies that impose large impacts 

because these models’ production and consumption functions remain invariant under the policy. 

In addition, econometric models assume that the future path depends on the past experience 

therefore fail to capture how the economy might respond under a different and new environment. 

For example, an econometric model cannot represent changes in fuel efficiency in response to 

increases in energy prices. However, NewERA macroeconomic model can consistently capture 

future policy changes that envisage having large effects. 

 The NewERA macroeconomic model is also a unique tool that can iterate over sequential 

policies to generate consistent equilibrium solutions starting from an internally consistent 

equilibrium baseline forecast (such as the AEO Reference Case). This ability of the model is 

particularly helpful to decompose macroeconomic effects of individual policies. For example, if 

one desires to perform economic analysis of a policy that includes multiple regulations, the 

NewERA modeling framework can be used as a tool to layer in one regulation at a time to 

determine the incremental effects of each policy. 
56 

C. Integration of Models 

To estimate the economic impacts of the RFS2 program on the overall economy, we 

established a one way linkage between the bottom-up transportation model and the top-down 

macroeconomic model. We first ran the reference and high biofuel scenarios through the 

transportation fuel model. The imposition of the RFS2 program leads to fuel price increases 

from the baseline without this program. For the top-down macroeconomic model, we translated 

the resulting higher fuel prices by applying a tax on gasoline and diesel that yields the same fuel 

price increase as seen in the bottom-up transportation fuel model.
57 

NERA Economic Consulting 

1255 23rd Street NW 

Washington, DC 20037 

Tel: +1 202 466 3510 

Fax: +1 202 466 3605 

www.nera.com 

 
Attachment 2
 FINAL REPORT 

RENEWABLE FUEL STANDARDS

AND THE ETHANOL BLENDWALL

 

 

Prepared for

AMERICAN PETROLEUM INSTITUTE

By

MathPro Inc.

August 8, 2013

MathPro Inc.

P.O. Box 34404

West Bethesda, Maryland 20827-0404

301-951-9006
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

GLOSSARY 

• AEO: Annual Energy Outlook, published by the Energy Information Administration,

 Department of Energy.

• Co-processed renewable diesel (CDR): Biodiesel produced by hydrotreating virgin vegetable oils 

or animal fats in conjunction with conventional hydrocarbons. CDR qualifies as an “advanced 

biofuel” under EISA (but not as a “biomass-based diesel”).

• E0, E10, and E10+: Gasoline containing no ethanol, gasoline containing 10 vol% ethanol, and

 gasoline containing more than 10 vol% ethanol (e.g., E15), respectively.

• E85: A vehicle fuel that is mixture of hydrocarbon blendstocks and 51% to 85 vol% ethanol 

(generally about 74 vol%).

• EIA: Energy Information Administration.

• EISA: Energy Independence and Security Act of 2007.

• Ethanol Equivalency Factors: Factors used to convert biodiesel (and bio-butanol) volumes to 

equivalent volumes of ethanol (based on relative energy content) for the purpose of calculating total 

renewable and advanced biofuel volumes required under EISA.

• Ethanol Blendwall: A constraint on the volume of ethanol that can be blended into the U.S. gasoline 

pool that is reached when essentially all U.S. gasoline is ethanol-blended at 10 vol%.

• EPA: Environmental Protection Agency.

• FAME: Fatty acid methyl ester, a biodiesel produced by processing raw vegetable oil (typically 

soybean, rapeseed, or canola oil) or animal fats through a chemical process called trans-esterification.

• FFV: Flex-fuel vehicle, a vehicle capable of using gasoline, E10+, or E85.

• MOVES: Motor Vehicle Emission Simulator, a complex, mobile source emission modeling system 

developed by EPA’s Office of Transportation and Air Quality.

• NEMS: National Energy Modeling System, an energy modeling system used by the

 Department of Energy to develop energy projections reported in each year’s AEO.

• Non-co-processed renewable diesel (NCRD): biodiesel produced by hydrotreating virgin

 vegetable oils or animal fats. NCRD qualifies as a “biomass-based diesel.”

• Vehicle Survival Rate: The percentage of vehicles of a given model year remaining in service in a 

subsequent year. For example, the estimated ten-year survival rate of cars is about 83% in MOVES 

and 75% in NEMS.

August 8, 2013 1 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

INTRODUCTION

The American Petroleum Institute (API) retained MathPro Inc. to assess, in light of the E10 

blendwall, annual renewable fuel volume standards that EPA might establish to implement the 

Renewable Fuels Standard (RFS). The study comprised two parts. 

Part 1 involved the development of a spreadsheet-based model (“Software Tool”) to assess

specified compliance approaches for various schedules of annual renewable fuel volumes that 

EPA might establish. The spreadsheet incorporates the projections of energy demand in the 

transportation sector in EIA’s Annual Energy Outlook 2013 (AEO 2013) Reference and High 

Price cases. 

Part 2 involved application of the Software Tool to assess three hypothetical scenarios involving 

assumed schedules of annual renewable fuel volumes and various compliance approaches.

This report is the final work product of the project. 

The report is in four sections.

1. Background

2. Elements of the Software Tool

3. RFS Scenarios Analyzed and Results

4. Conclusions

August 8, 2013 2 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

1. BACKGROUND

The Energy Independence and Security Act of 2007 (EISA) established a schedule of renewable 

fuel volume requirements, shown in Table 1 below. EPA implements this schedule through 

annual rulemakings (as required by Section 211(o) of the amended Clean Air Act). The annual 

volume schedule set forth in EISA reflected the assumption that there would be substantial 

increases in production of cellulosic biofuels and lesser increases in the production of other 

advanced biofuels (imported sugarcane ethanol and biomass-based diesel). The EISA volume 

schedule also implicitly limited the use of corn ethanol to 15 billion gallons per year (B gal/y).

EISA requires EPA, each year, to: 

• set renewable fuel standards for the following year; 

• set cellulosic biofuel volume standards based on evaluations of cellulosic biofuel

production capacity (if less than EISA volumes); and

• establish volume standards for biomass-based diesel for 2013 and later years considering 

various factors, including production and infrastructure capabilities. 

Table 1: EISA Schedule of Renewable Fuel Volumes

(Billion gallons/year)

Renewable Fuel 

Advanced Biofuel 

All All BiomassRenewable Advanced Cellulosic based

Year Fuel Biofuel Biofuel Diesel

2006 4.00

2007 4.70

2008 9.00

2009 11.10 0.60 0.50

2010 12.95 0.95 0.10 0.65

2011 13.95 1.35 0.25 0.80

2012 15.20 2.00 0.50 1.00

2013 16.55 2.75 1.00 >= 1

2014 18.12 3.75 1.75 >= 1

2015 20.50 5.50 3.00 >= 1

2016 22.25 7.25 4.25 >= 1

2017 24.00 9.00 5.50 >= 1

2018 26.00 11.00 7.00 >= 1

2019 28.00 13.00 8.50 >= 1

2020 30.00 15.00 10.50 >= 1

2021 33.00 18.00 13.50 >= 1

2022 36.00 21.00 16.00 >= 1

2023 (1) (1) (1) (1)

(1) To be determined by EPA in a future rulemaking

August 8, 2013 3 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

As Table 2 indicates, thus far EPA has promulgated annual volume standards for: (i) total 

renewable and advanced biofuel equal to those specified in EISA; (ii) biomass-based diesel equal 

to those specified in EISA for 2010 to 2012, with an increase for 2013; and (iii) cellulosic biofuel

substantially lower than those specified in EISA, because production capability is minimal. 

(Note that the asterisks in Table 2 denote volumes in EPA’s proposed RFS standards rule for 

2013.)

EPA’s policy has been that, if sugarcane ethanol and biomass-based diesel (primarily FAME) are 

likely to be available in sufficient quantities to support EISA’s schedule of total renewable and 

advanced biofuel volumes, those volumes should be met, for consistency with the GHG 

reduction goals of the Act.1

 That is, EPA has elected not to reflect in its total renewable and 

advanced biofuel volume standards the lack of available cellulosic biofuel.

EPA implements its volume standards by setting annual percentage standards for each of the four 

renewable biofuel categories. EPA calculates the annual percentage standard for each category 

as the ratio of that category’s volume standard to the total volume of U.S. gasoline and diesel use

projected for that year by EIA.

2

 In turn, obligated parties (primarily domestic refineries and 

1

 Regulation of Fuels and Fuel Additives: 2013 Renewable Fuel Standards; Proposed Rule, Federal Register, Vol 

78, No. 26, 02/07/13, p. 9295.

2

 Gasoline and diesel use in Alaska are excluded from the calculations, as are projected volumes of gasoline and 

diesel production by exempted small refiners (such exemptions end by 2013). Each of the Percentage Standards, 

* * *

August 8, 2013 4 

 

Table 2 : EPA Schedule of Renewable Fuel Volumes

(Billion gallons/year)

Renewable Fuel

Advanced Biofuel

All All BiomassRenewable Advanced Cellulosic based

Year Fuel Biofuel Biofuel Diesel

2010 12.95 0.95 0.065 1.151

2011 13.95 1.35 0.060 0.80

2012 15.20 2.00 0.010 1.00

20132 16.55 2.75 0.014 1.28

1 Carries over the 2009 EISA volume requirement into 2010.

2 Proposed volume standards.

Note: Volumes are in ethanol-equivalent gallons, except for

 Biomass-based Diesel, which is in physical gallons.
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

transportation fuel importers) must use the percentage standards to calculate their Renewable 

Volume Obligations (RVOs) for each category of biofuel.

Compliance by obligated parties with their RVOs (individually calculated as the percentage 

standards times their combined sales of petroleum-based gasoline and diesel fuel) is 

accomplished through the accumulation of sufficient Renewable Identification Numbers (RINs). 

RINs, of which there are five types, are generated with each gallon of biofuels used domestically. 

Table 3, below, shows the five types of RINs, the RINs generated per gallon of biofuel (the 

“ethanol equivalency” factor), and the biofuel categories to which various RIN types may be 

applied for compliance.

For example, one gallon of FAME generates 1.5 D4 RINs, and D4 RINs may be used to comply 

with an obligated party’s RVOs for biomass-based diesel, advanced biofuel, and/or total 

renewable fuel. Table 3 also shows that cellulosic biofuel waiver credits may be used to comply 

only with RVOs for cellulosic biofuel.

3

RINs may be bought and sold and held in inventory as “carry-over RINs.” In fact, due to “overcompliance,” mostly during 2010 and 2011, the combined inventory of RINs at the end of 2012 

including that for Biomass-based diesel, is calculated in terms of “ethanol-equivalency” to be compatible with the 

RIN system described in the next few paragraphs.

3

 If the cellulosic biofuel volume standard set by EPA is less than that specified in EISA, EPA must make cellulosic 

biofuel waiver credits available for purchase at a price equal to the greater of 25¢/gal or the average wholesale 

price of gasoline less $3 per gal. Such waiver credits have been used by obligated parties to meet most of their 

cellulosic biofuel RVOs from 2010 to 2012.

Table 3: RINs Generated per Physical Gallon of Biofuel --

 Ethanol Equivalency Factors

Number Biofuel Category for which RINs

of RINS May Be Used for Compliance

Type of Type Generated BiomassRenewable of per Gallon Renewable Advanced Cellulosic Based

Fuel RIN of Biofuel Biofuel Biofuel Biofuel Diesel

Corn ethanol D6 1 •

Sugarcane Ethanol D5 1 • •

Cellulosic Ethanol D3 1 • • •

Cellulosic Diesel D7 1.7 • • •

Co-processed Renewable Diesel D5 1.7 • •

Non Co-processed Renewable Diesel D4 1.7 • • •

FAME Biodiesel D4 1.5 • • •

Cellulosic Biofuel Waiver Credit 1 •

August 8, 2013 5 

 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

stood at almost 2.6 billion RIN-gallons, as shown in Table 4, below. These carry-over RINs are 

available for use in complying with RVOs for 2013 and later years.

“Over-compliance” with renewable fuel RVOs in 2010 and 2011 was possible because the 

volumes of ethanol called for by the volume standards for those years were less than the volumes

of ethanol needed to saturate the gasoline pool with 10% ethanol. Thus, with the bulk of the 

gasoline pool being E10 in 2010 and 2011, U.S. gasoline production generated excess (carryover) D6 RINs. However, that is no longer the case. In fact, physical compliance with EPA’s 

proposed volume standards for 2013 would require ethanol use in excess of 10% of the gasoline 

pool. Once the E10 blendwall is reached, any additional ethanol use mandated by EPA would 

exceed the U.S. gasoline pool’s capacity to absorb ethanol without resort to E15 or E85 blending. 

 

E15 and E85 have achieved only limited market acceptance, due in part to vehicle warranty 

issues with E15 and infrastructure limitations for both E15 and E85. In addition, when higher 

blends of ethanol are sold alongside E10, ethanol’s fuel economy deficit becomes apparent to 

consumers. Significant expansion in the use of higher ethanol blends would require the price of 

D6 RINs to increase sufficiently to reduce the effective rack price of ethanol to a level that would 

make these higher blends economically attractive to consumers.

Increasing FAME production (beyond volumes required to meet the biomass-based diesel

volume standards) may be an avenue to delay reaching the E10 blendwall, as excess D4 RINs

may be used as D6 RINs for complying with renewable fuel RVOs. Biodiesel production 

remains well below current capacity (about 50% of capacity in 2012), even after application of 

the recently-extended $1.00/gal subsidy for bio-diesel production. Congress’ willingness to 

continue that subsidy is uncertain, which in turn creates uncertainty regarding the economic 

feasibility of FAME production in the future.

Table 4: Estimated Carry-over RINs as of 2012

(million gallons)

RIN Carry-Over

Type RINs

Total 2,587

Renewable D6 2,097

Advanced Biofuel D5 175

Biomass-based Diesel D4 315

Cellulosic Ethanol D3 0.0201

Cellulosic Diesel D7 0.0017

Source: Derived from EPA's Website, as of April 12, 2013.

(http://www.epa.gov/otaq/fuels/rfsdata/2012emts.htm)

August 8, 2013 6 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

The burden of near-term compliance with renewable fuel RVOs seems to rest primarily on 

carryover RINs (coupled, possibly, with expanded FAME production). Much of the inventory of 

carryover RINs at the start of 2013 (≈ 2.6 B gal/y) is likely to be used in 2013. This means that

the introduction of additional volumes of FAME or E85 is likely to be required in 2014 and 

beyond. 

August 8, 2013 7 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

2. ELEMENTS OF THE SOFTWARE TOOL 

The Software Tool is designed to assess alternative schedules of volume standards that EPA 

might set. It consists of a number of sections, including:

• User inputs. In this section, the user can specify an annual volume scenario, along with 

other parameters such as the compliance method, the extent of FAME expansion, the use 

of E85 or E10+ to absorb excess ethanol, etc.

• Carry-over RINs. This section includes data on the inventory of RINs as of the end of 

2012 as reported by EPA.

• AEO forecasts. This section contains selected forecasts from AEO 2013 Reference and 

High Oil Price cases.

• Vehicle fleet composition. This section estimates the year-by-year distribution of vehicles 

and fuel use, by vehicle type and vintage, using reported data on vehicle sales, forecasts 

of vehicle sales from AEO 2013, and assumptions regarding vehicle survivability rates 

and VMT from MOVES and NEMS.

• Outputs. This section presents results of interest.

The Software Tool incorporates three alternative methods for compliance with the designated 

annual Volume Standards.

• Use of carry-over RINs. In this option, obligated parties use excess RINs accumulated in 

2010 to 2012 to aid in complying with the RFS volume standards for 2013 and thereafter. 

(Accumulated D4 RINs are used solely to reduce the physical use of corn or sugarcane 

ethanol and are not used to reduce current FAME production.)

The user may place upper limits on the percentage of the available RIN inventory used 

for compliance in a given year. This simulates obligated parties (that accumulated more 

RINs than needed for compliance) holding back RINs for their own subsequent use, 

rather than selling them on the open market.

• Expansion of FAME production. In this option, obligated parties, in addition to using 

carry-over RINs for compliance purposes, cause production of FAME to expand beyond 

the annual volumes needed to meet the biomass-based diesel volume standards. This 

generates “excess” D4 RINs that are used to reduce the physical use of imported 

sugarcane ethanol (which generates D5 RINs) or corn ethanol (which generates D6 RINs) 

in combined volume equal to the volume of excess D4 RINs.

The annual volume of FAME expands to the lesser of (i) the volume needed to generate 

sufficient excess D4 RINs to prevent reaching the ethanol blendwall, or (ii) the volume 

consistent with limits on the percentage of FAME that can be blended in the distillate 

August 8, 2013 8 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

pool due to product specifications or marketing constraints that limit higher FAME/diesel 

blends.

Unlike the use of carry-over RINs, which can be implemented directly by obligated 

parties, expansion of FAME production would come about indirectly from price signals 

generated in the RIN market. The Software Tool does not simulate this latter process, 

nor does it assess the implications of expanded production on the production cost or 

market price of FAME. It simply assumes that expansion of FAME occurs and estimates 

the extent of the required expansion.

• Expansion of E85 production. In this option, in addition to the use of carry-over RINs for 

compliance purposes, E85 production is allowed to expand to meet the annual renewable 

fuel volume standards. The additional E85 generates additional D6 RINs to aid in 

meeting the annual renewable fuel volumes.

The Software Tool also calculates the percentage of FFVs that must use E85. The 

Software Tool calculates the number of FFVs each year based on EIA and EPA data and 

methodologies, with the assumption that any FFV using E85 uses only E85 for the entire 

year.

The Software Tool allows the pairing of any combination of volume scenarios and compliance 

method. 

The compliance method in which FAME production expands reflects the assumption that EPA 

does not adjust annual volume standards upwards in subsequent years in response to FAME 

production in excess of that necessary to meet the current year’s biomass-based diesel volume 

standard. The effects of such reactive behavior by EPA can be assessed by using the Software 

Tool’s “user-specified RFS schedule” to iteratively expand the volume standards for total 

renewable, advanced biofuel, and biomass-based diesel in response to the previous year’s FAME 

use.

The Software Tool computes the combined volume of corn, sugarcane, and cellulosic ethanol 

needed to comply with the annual volume standards. If that combined volume exceeds the 

volume of ethanol that can be absorbed in the gasoline pool through E10 (i.e., the E10 blendwall 

is reached), the “excess” ethanol is absorbed through expansion of higher ethanol blends – E85 

or E10+, as specified by the user. The calculated volumes of E10 and E85 (or E10+) must 

satisfy two constraints: (i) the volume of ethanol in the gasoline pool (defined here as including 

E0, E10, and higher ethanol blends such as E85) equals the volume of ethanol required to meet 

the annual volume standards; and (ii) the combined energy content of the gasoline pool equals 

the combined energy content of the gasoline pool (E10 and E85) forecast in AEO 2013 for either 

the Reference or High Oil Price cases, as specified by the user. 

August 8, 2013 9 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

3. RFS SCENARIOS ANALYZED AND RESULTS 

The analysis assessed three potential annual volume scenarios and, within each scenario, various 

means of compliance with the specified annual volume standards. The scenarios span the range 

of future annual volume standards that EPA plausibly might set. All three scenarios use EIA’s 

AEO 2013 projections for cellulosic biofuel volumes, rather than the statutory volumes. 

The first scenario adopts the EISA volume standards for total renewable fuel and advanced 

biofuel, notwithstanding that future production of cellulosic biofuel likely will fall well short of 

EISA volumes.

The second scenario reduces the EISA volume standards for total renewable fuel and total

advanced biofuel for each year by an amount equivalent to the difference between the AEO 2013

projection of cellulosic biofuel volumes and the EISA volume standard for cellulosic biofuel. 

The third scenario represents total renewable fuel volumes for each year consistent with the 

projected gasoline pool volume being E10. (That is, ethanol volumes are limited to 10% of the 

projected gasoline demand, so that the gasoline pool reaches but does not exceed the E10 

blendwall).

In terms of the year in which the E10 blendwall is reached (and exceeded), the first scenario 

accelerates it, the second delays it, and the third avoids it. Thus far, EPA has issued standards 

consistent with the first scenario.

The various scenarios (and the alternative compliance approaches for each scenario) that were 

analyzed and the results of the analysis are discussed below. Detailed quantitative results of the 

analysis are shown in the exhibits following the last section of this report. 

Expansion of E15 was not assessed as a compliance approach for absorbing volumes of ethanol 

in excess of those required to reach the E10 blendwall.

3.1 Scenario 1: EISA volume schedule for total Renewable Fuel and Advanced Biofuel

In this scenario, the annual renewable fuel and advanced biofuel volume standards are set equal 

to the corresponding EISA volume standards. The annual biomass-based diesel volumes are set 

at 1.28 B gal (as proposed by EPA for 2013) and the annual cellulosic biofuel volumes (and the 

split between ethanol and biodiesel) are set at the volumes forecast in the AEO 2013 Reference 

case.

This scenario represents the most aggressive case, where EPA would leave the total renewable 

and advanced biofuel standards unchanged from the EISA volume schedule, notwithstanding that 

cellulosic biofuel is and is projected to remain available in only small volumes. 

August 8, 2013 10 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

Scenario 1A: EISA volume standards, unrestricted expansion of FAME, no expansion of 

E85, AEO 2013 cellulosic biofuel volumes

The results for Scenario 1A are shown in Exhibit 1A. The analysis assumes unrestricted 

expansion of FAME production and calculates the volumes required to avoid exceeding the E10 

blendwall. 

In this compliance approach, FAME blending begins a rapid expansion in 2014, by which time 

the gasoline pool has been saturated with ethanol (2012) and carry-over RINs have been 

exhausted (2014). To achieve compliance, about 2 B gal/y of FAME would be required in 2014; 

4.7 B gal/y in 2015; and 11.1 B gal/y in 2020. These volumes are substantially larger than 

current production levels.

By 2015, the FAME volume would exceed (i) the current 5 vol% limit on FAME blending in 

diesel fuel, and (ii) the biodiesel industry’s current nameplate capacity of about 2.2 B gal/y.

4

 By 

2020, FAME blending would have to account for about 16 vol% of the distillate pool to enable 

compliance with the volume standards.

In summary, the analysis of this scenario indicates that compliance with the EISA standards

through unrestricted expansion of FAME production would require a rapid and large expansion 

in the production and use of biomass-based diesel and would exceed existing constraints on 

biofuel content in diesel fuel. 

Scenario 1B: EISA volume standards, expansion of E85, no expansion of FAME, AEO 

cellulosic biofuel volumes

The results for Scenario 1B are shown in Exhibit 1B. The analysis represents E85 expansion as 

the compliance method and calculates E85 volumes required to meet the EISA volume standards. 

The analysis places no restrictions on E85 expansion and holds biomass-based diesel volume 

constant at the 2013 RFS standard of 1.28 billion gallons. Annual cellulosic biofuel volume 

standards (and the split between ethanol and diesel) are set at the volumes forecast in the AEO 

2013 Reference case.

In this compliance scenario, as in Scenario1A, carry-over RINs would be consumed in 2013 and 

2014 to assist in compliance. The E10 blendwall would be reached in 2014, and ethanol’s share 

of the gasoline pool would increase from about 11 vol% in 2014 to almost 20 vol% by 2020. 

E85 consumption would have to grow from 0.02 B gal/y in 2013 to ~ 1.9 B gal/y in 2014, ~ 7.9 

B gal/y in 2015, and 22.4 B gal/y in 2020. 

Furthermore, as Exhibit 1B indicates, most of the increase in ethanol volume would have to 

come from imported sugarcane ethanol. Sugarcane ethanol volumes would have to grow to 1.2 

4 Biodiesel production capacity as reported on the Energy Information Administration website; 

http://www.eia.gov/biofuels/biodiesel/production/table1.pdf

August 8, 2013 11 

 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

B gal/y in 2014, 3.1 B gal/y in 2015, and 12.3 B gal/y in 2020. By contrast, Brazil’s maximum 

annual production capacity for sugarcane ethanol is ~ 6 B gal/y, and exports to the U.S. have not 

exceeded 0.7 B gal/y. 

The results also indicate that the required volumes of E85 would be too large to be supported by 

the prospective fleet of FFVs5. The ability of the prospective FFV fleet’s to absorb E85 volumes 

would be exceeded by 2017 (even under the optimistic assumptions that FFV owners using E85 

would use it exclusively). Exhibit 1B shows that by 2017, the percentage of FFVs using E85 

fuel would have to exceed 100%. This result implies that FFV sales would have to expand 

considerably beyond those projected in AEO 2013.

Overall, the analysis indicates that compliance with the EISA through expansion of E85 

consumption would require a rapid and substantial expansion in the production and use of E85, a 

corresponding expansion in the supply of imported sugarcane ethanol, and an infeasibly high 

degree of E85 use by the projected FFV fleet. 

Scenario 1C: EISA volume standards, expansion of E85, expansion of FAME to 5 vol%, 

AEO cellulosic biofuel volumes

The results for Scenario 1C are shown in Exhibit 1C. The analysis represents compliance 

through a combination of E85 fuel expansion and FAME expansion up to B5, with cellulosic 

biofuels held at levels projected in AEO 2013. 

As in Scenarios 1A and 1B, carry-over RINs would be consumed in 2013 and 2014 to assist in 

compliance. The E10 blendwall would be reached in 2015, and ethanol’s share of the gasoline 

pool would increase from about 11.5 vol% in 2015 to 18.5 vol% by 2020. 

Relative to Scenario 1B, the expansion in FAME use to 5 vol% of the diesel pool would delay 

reaching the E10 blendwall and reduce the call for E85. However, the results shown in Exhibit 

1C indicate that meeting the EISA volume standards with this approach would still require large 

volumes of E85, sugarcane ethanol imports, and FAME use. Furthermore, as in Scenario 1B, the 

required volumes of E85 could not be supported by the prospective fleet of FFVs; by 2019 the 

projected FFV fleet would not be able to use the required E85 volumes. 

3.2 Scenario 2: EISA volume schedule of total Renewable Fuel and Advanced Biofuel 

adjusted for reductions in Cellulosic Biofuel.

In this scenario, EPA would modify the annual total renewable fuel and advanced biofuel 

volume standards to account for cellulosic biofuel being available only in volumes significantly 

5

 FFVs’ prospective annual share of gasoline use (in BTUs) was calculated using estimated vehicle stocks as of 

2009, reported vehicle (and FFV) sales for 2010 to 2012, AEO forecast vehicle (and FFV) sales for 2013 and 

after, vehicle survival rates, estimates of VMT by vehicle vintage, and reported and forecast vehicle fuel 

economy.

August 8, 2013 12 

 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

lower than those contemplated in EISA. Annual cellulosic biofuel volume standards (and the 

split between ethanol and diesel) are set at the volumes forecast in the AEO 2013 Reference case. 

For example, EISA sets the cellulosic biofuel volume standard in 2016 at 4.25 billion ethanolequivalent gallons, whereas AEO 2013 projects cellulosic biofuel production for 2016 of about 

0.38 billion ethanol-equivalent gallons, yielding a delta cellulosic biofuel volume of about 3.87 

billion ethanol-equivalent gallons. Subtracting the delta cellulosic biofuel volume from the 2016 

EISA renewable fuel volume standard of 22.25 B gal/y and the advanced biofuel volume 

standard of 7.25 B gal/y yields adjusted volume standards of 18.38 B gal/y and 3.38 B gal/y, 

respectively. 

For 2014, this procedure yields total renewable fuel and advanced biofuel volume standards 

lower than those already proposed by EPA for 2013. Consequently, the volume standards 

proposed by EPA for 2013 are assumed to be imposed for 2014 (and in 2015 for advanced 

biofuel). The volume standards in later years reflect the EISA schedule with cellulosic biofuel 

backed out.

Scenario 2A. Adjusted EISA volume standards, unrestricted expansion of FAME, no 

expansion of E85, AEO cellulosic biofuel volumes

The results for Scenario 2A are shown in Exhibit 2A As in Scenario1A, the analysis represents 

unrestricted expansion of FAME production as required to avoid exceeding the E10 blendwall. 

Under this approach, FAME use would begin to expand in 2015, by which time the gasoline pool 

is saturated with ethanol (2012) and carry-over RINs have been exhausted (2014). By 2017, 

FAME blending would exceed the current 5% blending limit in diesel fuel, and FAME 

production would have to reach 3.6 B gal/y, over 50% higher than the reported current FAME 

nameplate capacity of about 2.2 B gal/y. By 2020, FAME would have to account for about 6.5

vol% of the distillate pool to enable compliance with the RFS volume standards, which exceeds 

the current blending limit of 5 vol%.

Scenario 2B: Adjusted EISA volume standards, expansion of E85, no expansion of 

FAME, AEO cellulosic biofuel volumes

The results for Scenario 2B are shown in Exhibit 2B. As in Scenario 1B, the analysis represents 

expansion of E85 use as required to avoid exceeding the E10 blendwall, with FAME use held 

constant at 1.28 B gal/y and carry-over RINs consumed by 2015. 

Under this approach, the E10 blendwall would be reached in 2015, even with the EISA volume 

standards reduced to reflect the shortfall in cellulosic biofuel supply. E85 fuel demand would 

have to grow from 0.02 B gal/y in 2013 to ~ 3.5 B gal/y in 2015 and ~ 7.3 B gal/y in 2020. 

As indicated in Exhibit 2B, over half of the fuel used by the projected FFV fleet would have to 

be E85 by 2019. Reaching this level of E85 use would call for a significant change in consumer 

behavior. Similarly, sugar cane ethanol imports would have to double by 2016 vs. 2012 and 

August 8, 2013 13 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

grow to 2.25 B gal/y in 2019. These levels far exceed historical imports of sugar cane ethanol 

from Brazil.

Scenario 2C: Adjusted EISA volume standards, expansion of E85, expansion of FAME to 

5 vol %, AEO cellulosic biofuel volumes

The results for Scenario 2C are shown in Exhibit 2C. In this scenario, carry-over RINs would be 

consumed by 2014 to assist in compliance. Expanded FAME blending – to 2.9 B gal/y in 2015 

and 3.4 B gal/y in 2017 – would delay reaching the E10 blendwall until 2017. The current 5 

vol% blending limit for FAME would be reached by 2017. Ethanol’s share of the gasoline pool 

would increase from slightly over 10 vol% in 2017 to about 11 vol% by 2020. 

The analysis of Scenarios 2A, 2B, 2C indicates that compliance with the EISA standards, even if 

they were to be adjusted to reflect the shortfall in cellulosic biofuel supply, would require rapid 

expansion in the production and use of either FAME or E85. The required expansion in FAME 

production and use would require going beyond the 5 vol% limit on FAME blending in diesel 

fuel. The required expansion in E85 use would require corresponding expansion in the supply of 

imported sugarcane ethanol, and an infeasibly high degree of E85 use by the projected FFV fleet.

3.3 Scenario 3: Derived RFS schedule that maximizes ethanol use without exceeding the 

E10 blendwall.

In this scenario, the gasoline pool is entirely E10 (with de minimis volumes of E85), and the

annual RFS volume standards are calculated to be consistent with this level of ethanol use, given 

the AEO 2013 Reference case projections of gasoline use. For this calculation, the biomassbased diesel volume standard are held at 1.28 billion physical gallons (the 2013 standard); all 

available carry-over RINs are used in 2013 and 2014 (and are incorporated in the computed 

renewable fuel volume standards for those years). In Scenario 3A, cellulosic biofuel volume 

standards are set at zero; in Scenario 3B, cellulosic volume standards are consistent with AEO 

2013 Reference case projections of cellulosic biofuel use.

Scenario 3A: Maximum ethanol use without exceeding the E10 blendwall, no FAME 

expansion, no cellulosic biofuel volumes

In this scenario, the annual cellulosic biofuel volume standards are set at zero. 

Scenario 3B: Maximum ethanol use without exceeding the E10 blendwall, no FAME 

expansion, and AEO 2013 cellulosic biofuel volumes

In this scenario, the annual cellulosic biofuel volume standards (and the split between cellulosic 

ethanol and diesel) are set at the volumes forecast in the AEO 2013 Reference case. 

The results for Scenarios 3A and 3B are shown in Exhibits 3A and 3B. As the exhibits indicate, 

the results of the two scenarios are similar. The projected total annual volumes of ethanol are the 

same in the two scenarios. The relative shares of corn, sugarcane, and cellulosic ethanol in the 

August 8, 2013 14 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

two scenarios differ only slightly (reflecting the availability of small projected volumes of 

cellulosic ethanol in Scenario 3B). Similarly, the calculated volume standards differ slightly 

between the two scenarios, reflecting the availability of small volumes of cellulosic biofuel 

(ethanol and diesel) in Scenario 3B. 

The estimated combined volume of corn, sugarcane, and cellulosic ethanol would be about 13.4 

billion gallons in 2013 and would decline thereafter to about 12.7 billion gallons in 2020 (in 

response to forecast declines in gasoline use). The calculated annual total renewable volume 

standards are higher in 2013 and 2014 than in other years because carry-over RINs are assumed 

to be used in 2013 and 2014: 60% of the inventory in 2013 and the balance in 2014. 

 * * * * * * * * * * 

Exhibits 4 and 5 (at the very end of the report) show, in graphical form, the estimated annual 

volumes of FAME and E85 required for compliance with the RFS standards in the various 

scenarios analyzed. 

Exhibit 4 shows (i) the annual profiles of FAME volumes in Scenarios 1A, 1C, 2A, and 2C and 

(ii) the current total U.S. nameplate capacity for FAME production, as reported by EIA. 

Exhibit 5 shows (i) the annual profiles of E85 volumes in Scenarios 1B, 1C, 2B, and 2C. 

August 8, 2013 15 
Renewable Fuel Standards and the Ethanol Blendwall Final Report 

 

4. CONCLUSIONS 

The primary conclusions from this analysis are:

• Use of carry-over RINs alone can delay some of the consequences of the ethanol 

blendwall to 2014, but not beyond. 

• Subsequently, steep and likely unattainable increases in either E85 use or biomass-based 

diesel (FAME) use would be required to meet the RFS volume standards. 

• Expanded use of FAME, to generate excess D4 RINs, could delay reaching the ethanol 

blendwall after carry-over RINs are exhausted. But the likelihood and extent of the delay 

depends on the annual volume standards established by EPA and the extent to which 

FAME production and use can be increased. 

• If EPA were to increase the annual volume standards in response to expanded FAME 

production, such increases would negate some or all of the compliance benefits 

associated with increased use of FAME, thereby limiting the extent to which increased 

use of FAME could avoid or delay reaching the E10 blendwall. 

• With FAME use is limited to 5 vol% of the distillate pool, EPA’s continued use of the 

EISA volume schedule for renewable fuel and advanced biofuel likely would result in 

reaching the ethanol blendwall in 2015.

• When the ethanol blendwall is reached (with limited FAME expansion), the volume of 

E85 necessary to generate sufficient RINs for compliance with the renewable fuel volume 

standards would require rapid, large expansion in the availability of E85 and in the 

number of FFVs using E85. In most of the cases studied, the necessary expansions 

would be beyond what might be considered feasible.

• Annual volume standards can be set that maximize ethanol use subject to the practical 

constraints imposed by the E10 blendwall. Such volume standards would facilitate 

compliance with RFS requirements.

August 8, 2013 16 
RFS and the Ethanol Blendwall

Exhibit 1A: EISA Volume Standards, Unrestricted Expansion of FAME, No Expansion of E85,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 16.55 18.12 20.50 22.25 24.00 26.00 28.00 30.00

Advanced Biofuel 2.00 2.75 3.75 5.50 7.25 9.00 11.00 13.00 15.00

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.010 0.014 0.281 0.313 0.381 0.401 0.426 0.457 0.494

Use of Carry-over RINs (MM EOH equiv gal) 1,036 1,550 0 0 0 0 0 0

Renewable (D6) 1036 1061000000

Advanced Biofuel (D5) 0 175 0 0 0 0 0 0

Biomass-Based Diesel (D4) 0 315 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.000 0.022 0.000 0.000 0.000 0.000 0.000 0.000

Carry-over RIN Inventory (MM EOH equiv gal) 2,587 1,550 0 0 0 0 0 0 0

Renewable (D6) 2,097 10610000000

Advanced Biofuel (D5) 175 175 0 0 0 0 0 0 0

Biomass-Based Diesel (D4) 315 315 0 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.022 0.022 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Physical Volumes of Biofuels (B gal)

Ethanol

 Corn 12.6 12.8 12.5 12.2 12.2 12.1 12.0 11.9 11.8

 Sugar Cane 0.46 0.64 0.46 0.64 0.64 0.64 0.64 0.64 0.64

 Cellulosic 0.000 0.006 0.234 0.234 0.234 0.234 0.234 0.234 0.234

Diesel

 FAME 0.0 1.2 2.0 4.7 5.8 7.0 8.3 9.7 11.1

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Volumes of Finished Fuels (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.5 8.5 8.5 8.4 8.3 8.3

 E85 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001

 Ethanol Share of Pool (Vol %) 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Distillate, including biodiesel (MM b/d) 4.0 4.1 4.2 4.3 4.3 4.3 4.4 4.4

 FAME Share (Vol %) 2.0% 3.2% 7.0% 8.6% 10.2% 12.1% 14.0% 15.9%

 FAME Share > 5% (X) X X X X X X

FFV Detail

Share of Light Duty Vehicle Sales 7.5% 8.4% 8.7% 8.5% 8.6% 8.5% 8.3% 8.1% 8.0%

Share of Light Duty Vehicle Stock 5.0% 5.4% 5.9% 6.3% 6.6% 7.0% 7.3% 7.5% 7.8%

Required Percentage of FFVs Using E85 - - - - - - - - - 

Insufficient FFVs to Absorb E85 (X)

E85 Volume (B gal/y) 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02

1 Annual biofuel volume standards set by EPA: 2012-2013 -- actual; 2014 & after -- projected. 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 1B: EISA Volume Standards, Expansion of E85, No Expansion of FAME,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached X X X X X X X

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 16.55 18.12 20.50 22.25 24.00 26.00 28.00 30.00

Advanced Biofuel 2.00 2.75 3.75 5.50 7.25 9.00 11.00 13.00 15.00

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.010 0.014 0.281 0.313 0.381 0.401 0.426 0.457 0.494

Use of Carry-over RINs (MM EOH equiv gal) 1,036 1,550 0 0 0 0 0 0

Renewable (D6) 1036 1061000000

Advanced Biofuel (D5) 0 175 0 0 0 0 0 0

Biomass-Based Diesel (D4) 0 315 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.000 0.022 0.000 0.000 0.000 0.000 0.000 0.000

Carry-over RIN Inventory (MM EOH equiv gal) 2,587 1,550 0 0 0 0 0 0 0

Renewable (D6) 2,097 10610000000

Advanced Biofuel (D5) 175 175 0 0 0 0 0 0 0

Biomass-Based Diesel (D4) 315 315 0 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.022 0.022 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Physical Volumes of Biofuels (B gal)

Ethanol

 Corn 12.6 12.8 13.0 15.0 15.0 15.0 15.0 15.0 15.0

 Sugar Cane 0.46 0.64 1.20 3.09 4.70 6.40 8.33 10.30 12.26

 Cellulosic 0.000 0.006 0.234 0.234 0.234 0.234 0.234 0.234 0.234

Diesel

 FAME 0.9 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Volumes of Finished Fuels (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.5 8.1 8.0 7.8 7.6 7.4 7.1

 E85 0.001 0.123 0.514 0.678 0.853 1.052 1.256 1.461

 Ethanol Share of Pool (Vol %) 10.0% 10.9% 13.8% 15.0% 16.3% 17.8% 19.3% 20.9%

Distillate, including biodiesel (MM b/d) 4.0 4.2 4.3 4.4 4.4 4.4 4.5 4.5

 FAME Share (Vol %) 2.0% 1.9% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7%

 FAME Share > 5% (X)

FFV Detail

Share of Light Duty Vehicle Sales 7.5% 8.4% 8.7% 8.5% 8.6% 8.5% 8.3% 8.1% 8.0%

Share of Light Duty Vehicle Stock 5.0% 5.4% 5.9% 6.3% 6.6% 7.0% 7.3% 7.5% 7.8%

Required Percentage of FFVs Using E85 - - 17.2% 68.2% 85.7% 103.7% 124.1% 144.8% 166.1%

Insufficient FFVs to Absorb E85 (X) X X X X

E85 Volume (B gal/y) 0.02 1.89 7.89 10.40 13.08 16.13 19.25 22.40

1 Annual biofuel volume standards set by EPA: 2012-2013 -- actual; 2014 & after -- projected. 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 1C: EISA Volume Standards, Expansion of E85, Expansion of FAME to 5 vol%,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached X X X X X X

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 16.55 18.12 20.50 22.25 24.00 26.00 28.00 30.00

Advanced Biofuel 2.00 2.75 3.75 5.50 7.25 9.00 11.00 13.00 15.00

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.010 0.014 0.281 0.313 0.381 0.401 0.426 0.457 0.494

Use of Carry-over RINs (MM EOH equiv gal) 1,036 1,550 0 0 0 0 0 0

Renewable (D6) 1036 1061000000

Advanced Biofuel (D5) 0 175 0 0 0 0 0 0

Biomass-Based Diesel (D4) 0 315 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.000 0.022 0.000 0.000 0.000 0.000 0.000 0.000

Carry-over RIN Inventory (MM EOH equiv gal) 2,587 1,550 0 0 0 0 0 0 0

Renewable (D6) 2,097 10610000000

Advanced Biofuel (D5) 175 175 0 0 0 0 0 0 0

Biomass-Based Diesel (D4) 315 315 0 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.022 0.022 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Physical Volumes of Biofuels (B gal)

Ethanol

 Corn 12.6 12.8 12.5 14.3 15.0 15.0 15.0 15.0 15.0

 Sugar Cane 0.46 0.64 0.46 0.64 1.47 3.13 5.01 6.94 8.88

 Cellulosic 0.000 0.006 0.234 0.234 0.234 0.234 0.234 0.234 0.234

Diesel

 FAME 0.0 1.2 2.0 3.3 3.3 3.4 3.4 3.4 3.4

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Volumes of Finished Fuels (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.4 8.2 8.1 7.8 7.6 7.4

 E85 0.001 0.001 0.203 0.360 0.531 0.725 0.925 1.128

 Ethanol Share of Pool (Vol %) 10.0% 10.0% 11.5% 12.7% 14.0% 15.4% 16.9% 18.5%

Distillate, including biodiesel (MM b/d) 4.0 4.1 4.3 4.4 4.4 4.5 4.5 4.5

 FAME Share (Vol %) 2.0% 3.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

 FAME Share > 5% (X)

FFV Detail

Share of Light Duty Vehicle Sales 7.5% 8.4% 8.7% 8.5% 8.6% 8.5% 8.3% 8.1% 8.0%

Share of Light Duty Vehicle Stock 5.0% 5.4% 5.9% 6.3% 6.6% 7.0% 7.3% 7.5% 7.8%

Required Percentage of FFVs Using E85 - - - 26.9% 45.6% 64.5% 85.5% 106.6% 128.2%

Insufficient FFVs to Absorb E85 (X) X X

E85 Volume (B gal/y) 0.02 0.02 3.11 5.52 8.14 11.11 14.17 17.28

1 Annual biofuel volume standards set by EPA: 2012-2013 -- actual; 2014 & after -- projected. 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 2A: Adjusted EISA Volume Standards, Unrestricted Expansion of FAME, No Expansion of E85,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 16.55 16.65 17.81 18.38 18.90 19.43 19.96 19.99

Advanced Biofuel 2.00 2.75 2.75 2.81 3.38 3.90 4.43 4.96 4.99

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.010 0.014 0.281 0.313 0.381 0.401 0.426 0.457 0.494

Use of Carry-over RINs (MM EOH equiv gal) 1,036 1,550 0 0 0 0 0 0

Renewable (D6) 1036 1061000000

Advanced Biofuel (D5) 0 175 0 0 0 0 0 0

Biomass-Based Diesel (D4) 0 315 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.000 0.022 0.000 0.000 0.000 0.000 0.000 0.000

Carry-over RIN Inventory (MM EOH equiv gal) 2,587 1,550 0 0 0 0 0 0 0

Renewable (D6) 2,097 10610000000

Advanced Biofuel (D5) 175 175 0 0 0 0 0 0 0

Biomass-Based Diesel (D4) 315 315 0 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.022 0.022 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Physical Volumes of Biofuels (B gal)

Ethanol

 Corn 12.6 12.8 12.5 12.2 12.2 12.1 12.0 11.9 11.8

 Sugar Cane 0.46 0.64 0.46 0.64 0.64 0.64 0.64 0.64 0.64

 Cellulosic 0.000 0.006 0.234 0.234 0.234 0.234 0.234 0.234 0.234

Diesel

 FAME 0.0 1.2 1.0 2.9 3.2 3.6 3.9 4.3 4.4

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Volumes of Finished Fuels (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.5 8.5 8.5 8.4 8.3 8.3

 E85 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001

 Ethanol Share of Pool (Vol %) 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%

Distillate, including biodiesel (MM b/d) 4.0 4.2 4.2 4.2 4.3 4.3 4.4 4.4

 FAME Share (Vol %) 2.0% 1.6% 4.3% 4.8% 5.3% 5.7% 6.3% 6.4%

 FAME Share > 5% (X) X X X X

FFV Detail

Share of Light Duty Vehicle Sales 7.5% 8.4% 8.7% 8.5% 8.6% 8.5% 8.3% 8.1% 8.0%

Share of Light Duty Vehicle Stock 5.0% 5.4% 5.9% 6.3% 6.6% 7.0% 7.3% 7.5% 7.8%

Required Percentage of FFVs Using E85 - - - - - - - - - 

Insufficient FFVs to Absorb E85 (X)

E85 Volume (B gal/y) 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02

1 Annual biofuel volume standards set by EPA: 2012-2013 -- actual; 2014 & after -- projected. 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 2B: Adjusted EISA Volume Standards, Expansion of E85, No Expansion of FAME,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached X X X X X X

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 16.55 16.65 17.81 18.38 18.90 19.43 19.96 19.99

Advanced Biofuel 2.00 2.75 2.75 2.81 3.38 3.90 4.43 4.96 4.99

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.010 0.014 0.281 0.313 0.381 0.401 0.426 0.457 0.494

Use of Carry-over RINs (MM EOH equiv gal) 1,036 1,317 233 0 0 0 0 0

Renewable (D6) 1036 1061000000

Advanced Biofuel (D5) 0 175 0 0 0 0 0 0

Biomass-Based Diesel (D4) 0 82 233 0 0 0 0 0

Cellulosic (D3 & D7) 0.000 0.022 0.000 0.000 0.000 0.000 0.000 0.000

Carry-over RIN Inventory (MM EOH equiv gal) 2,587 1,550 233 0 0 0 0 0 0

Renewable (D6) 2,097 10610000000

Advanced Biofuel (D5) 175 175 0 0 0 0 0 0 0

Biomass-Based Diesel (D4) 315 315 233 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.022 0.022 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Physical Volumes of Biofuels (B gal)

Ethanol

 Corn 12.6 12.8 12.8 14.8 15.0 15.0 15.0 15.0 15.0

 Sugar Cane 0.46 0.64 0.20 0.40 0.83 1.30 1.76 2.26 2.25

 Cellulosic 0.000 0.006 0.234 0.234 0.234 0.234 0.234 0.234 0.234

Diesel

 FAME 0.9 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Volumes of Finished Fuels (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.4 8.3 8.2 8.1 8.0 7.9

 E85 0.001 0.001 0.226 0.297 0.351 0.404 0.463 0.474

 Ethanol Share of Pool (Vol %) 10.0% 10.0% 11.7% 12.2% 12.6% 13.0% 13.5% 13.6%

Distillate, including biodiesel (MM b/d) 4.0 4.2 4.3 4.4 4.4 4.4 4.5 4.5

 FAME Share (Vol %) 2.0% 1.9% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7%

 FAME Share > 5% (X)

FFV Detail

Share of Light Duty Vehicle Sales 7.5% 8.4% 8.7% 8.5% 8.6% 8.5% 8.3% 8.1% 8.0%

Share of Light Duty Vehicle Stock 5.0% 5.4% 5.9% 6.3% 6.6% 7.0% 7.3% 7.5% 7.8%

Required Percentage of FFVs Using E85 - - - 30.0% 37.5% 42.6% 47.6% 53.4% 53.9%

Insufficient FFVs to Absorb E85 (X)

E85 Volume (B gal/y) 0.02 0.02 3.47 4.55 5.37 6.19 7.09 7.27

1 Annual biofuel volume standards set by EPA: 2012-2013 -- actual; 2014 & after -- projected. 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 2C: Adjusted EISA Volume Standards, Expansion of E85, Expansion of FAME to 5 vol%,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached X X X X

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 16.55 16.65 17.81 18.38 18.90 19.43 19.96 19.99

Advanced Biofuel 2.00 2.75 2.75 2.81 3.38 3.90 4.43 4.96 4.99

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.010 0.014 0.281 0.313 0.381 0.401 0.426 0.457 0.494

Use of Carry-over RINs (MM EOH equiv gal) 1,036 1,550 0 0 0 0 0 0

Renewable (D6) 1036 1061000000

Advanced Biofuel (D5) 0 175 0 0 0 0 0 0

Biomass-Based Diesel (D4) 0 315 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.000 0.022 0.000 0.000 0.000 0.000 0.000 0.000

Carry-over RIN Inventory (MM EOH equiv gal) 2,587 1,550 0 0 0 0 0 0 0

Renewable (D6) 2,097 10610000000

Advanced Biofuel (D5) 175 175 0 0 0 0 0 0 0

Biomass-Based Diesel (D4) 315 315 0 0 0 0 0 0 0

Cellulosic (D3 & D7) 0.022 0.022 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Physical Volumes of Biofuels (B gal)

Ethanol

 Corn 12.6 12.8 12.5 12.2 12.2 12.4 12.8 13.3 13.2

 Sugar Cane 0.46 0.64 0.46 0.64 0.64 0.64 0.64 0.64 0.64

 Cellulosic 0.000 0.006 0.234 0.234 0.234 0.234 0.234 0.234 0.234

Diesel

 FAME 0.0 1.2 1.0 2.9 3.2 3.4 3.4 3.4 3.4

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Volumes of Finished Fuels (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.5 8.5 8.4 8.4 8.2 8.2

 E85 0.001 0.001 0.001 0.001 0.028 0.077 0.131 0.141

 Ethanol Share of Pool (Vol %) 10.0% 10.0% 10.0% 10.0% 10.2% 10.6% 11.0% 11.1%

Distillate, including biodiesel (MM b/d) 4.0 4.2 4.2 4.2 4.3 4.4 4.4 4.4

 FAME Share (Vol %) 2.0% 1.6% 4.3% 4.8% 5.0% 5.0% 5.0% 5.0%

 FAME Share > 5% (X)

FFV Detail

Share of Light Duty Vehicle Sales 7.5% 8.4% 8.7% 8.5% 8.6% 8.5% 8.3% 8.1% 8.0%

Share of Light Duty Vehicle Stock 5.0% 5.4% 5.9% 6.3% 6.6% 7.0% 7.3% 7.5% 7.8%

Required Percentage of FFVs Using E85 - - - - - 3.4% 9.0% 15.2% 16.0%

Insufficient FFVs to Absorb E85 (X)

E85 Volume (B gal/y) 0.02 0.02 0.02 0.02 0.43 1.17 2.02 2.16

1 Annual biofuel volume standards set by EPA: 2012-2013 -- actual; 2014 & after -- projected. 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 3A: Maximum Ethanol Use without Exceeding the E10 Blendwall,

 No FAME Expansion, No Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 17.06 16.32 15.22 15.24 15.19 15.15 15.05 14.93

Advanced Biofuel 2.00 2.75 2.75 2.75 2.83 2.85 2.89 2.89 2.90

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Carry-over RINs (MM EOH equiv gal)

Use 1.6 1.0 0.0 0.0 0.0 0.0 0.0 0.0

Inventory 2.6 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Physical Volume of Biofuels (B gal)

Ethanol

 Corn 12.8 12.5 12.5 12.4 12.3 12.3 12.2 12.0

 Sugar Cane 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65

 Cellulosic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Diesel

 FAME 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Fuel Volumes (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.5 8.5 8.5 8.4 8.3 8.3

 E10+

 E85 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001

Distillate, including biodiesel (MM b/d) 4.0 4.2 4.3 4.4 4.4 4.4 4.5 4.5

 FAME Share (%) 2.0% 1.9% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7%

1 Annual biofuel volume standards set by EPA: 2012 -- actual; 2013 & after -- projected 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 3B: Maximum Ethanol Use without Exceeding the E10 Blendwall, No FAME Expansion,

 AEO Cellulosic Biofuel Volumes

Category 2012 2013 2014 2015 2016 2017 2018 2019 2020

E10 Blendwall Reached

RFS Volume Schedule (B EOH equiv gal)1

Renewable 15.20 17.07 16.36 15.30 15.38 15.36 15.34 15.28 15.20

Advanced Biofuel 2.00 2.75 3.02 3.05 3.19 3.24 3.31 3.34 3.38

Biomass-Based Diesel (B physical gal) 1.00 1.28 1.28 1.28 1.28 1.28 1.28 1.28 1.28

Cellulosic 0.01 0.01 0.28 0.31 0.38 0.40 0.43 0.46 0.49

Carry-over RINs (MM EOH equiv gal)

Use 1.6 1.0 0.0 0.0 0.0 0.0 0.0 0.0

Inventory 2.6 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Physical Volume of Biofuels (B gal)

Ethanol

 Corn 12.8 12.3 12.2 12.2 12.1 12.0 11.9 11.8

 Sugar Cane 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64

 Cellulosic 0.01 0.23 0.23 0.23 0.23 0.23 0.23 0.23

Diesel

 FAME 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

 Non-co-processed 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

 Co-processed 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2

 Cellulosic 0.00 0.03 0.05 0.09 0.10 0.11 0.13 0.15

Fuel Volumes (MM b/d)

Gasoline

 E0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

 E10 8.7 8.6 8.5 8.5 8.5 8.4 8.3 8.3

 E10+

 E85 0.001 0.001 0.001 0.001 0.001 0.001 0.001 0.001

Distillate, including biodiesel (MM b/d) 4.0 4.2 4.3 4.4 4.4 4.4 4.5 4.5

 FAME Share (%) 2.0% 1.9% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7%

1 Annual biofuel volume standards set by EPA: 2012 -- actual; 2013 & after -- projected 

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 4: FAME Volume, by Scenario

Note: 2013 nameplate capacity from EIA website.

0

2

4

6

8

10

12

2013 2014 2015 2016 2017 2018 2019 2020

Billion Gallons

Scenario 1A

Scenario 1C

Scenario 2A

Scenario 2C

2013 Nameplate Capacity

August 8, 2013 MathPro
RFS and the Ethanol Blendwall

Exhibit 5: E85 Volume, by Scenario

Note: E85 use in 2012 was on the order of 0.1 B gallons (AEO 2013 ).

0

5

10

15

20

25

2013 2014 2015 2016 2017 2018 2019 2020

Billion Gallons

Scenario 1B

Scenario 1C

Scenario 2B

Scenario 2C

August 8, 2013 MathPro