MEMORANDUM

Subject: Statutory basis of the RFS program and development of the regulatory program

From: Madison Le, U.S. EPA, Office of Transportation and Air Quality

To: EPA Air Docket EPA-HQ-OAR-2015-0111

Congress established the RFS program in the Energy Policy Act (EPAct) of 2005 and 

significantly expanded it in 2007 with passage of the Energy Independence and Security Act 

(EISA). Congress’ primary objectives for the expanded program were to increase U.S. energy 

security and decrease GHG emissions from transportation fuel by (1) increasing the volumes of 

renewable fuel used in transportation fuel and (2) requiring an increasing percentage of those 

renewable fuels to result in significantly lower lifecycle GHG emissions than 2005 baseline 

petroleum fuels.1

Congress prescribed many aspects of the RFS program in EPAct. Specifically, Congress 

established a program requiring increasing use of renewable fuel2as transportation fuel in the 

contiguous 48 states, with an opportunity for opt-in to the program by noncontiguous States and 

Territories. Congress established a schedule for adding more renewable fuel each year until a 

total of 7.5 billion gallons was achieved in 2012. It also required EPA to set standards for future 

years based on factors including the impact of the use of renewable fuels on the environment, air 

quality, energy security, job creation, rural economic development and the expected annual rate 

of future production of renewable fuels, including cellulosic ethanol, and allowed EPA to waive 

the statutory volume targets in specified circumstances. 

Congress directed EPA to establish a regulatory system that holds refiners, importers and 

blenders, “as appropriate,” responsible for adding the requisite amount of renewable fuel to the 

transportation fuel supply. Congress also required that EPA each year issue the renewable fuel 

requirements for the following year and express those requirements as a percentage calculated by 

dividing the renewable fuel volume requirement for the year by the amount of gasoline that the 

Energy Information Agency (EIA) projects will be sold that year. 

Congress prescribed that EPA’s regulations include several mechanisms for providing 

compliance flexibility to obligated parties (as EPA’s implementing regulations refer to the 

parties responsible for meeting volume requirements). Among them is a credit program that 

allows any party to earn credits for exceeding their renewable volume obligations. Those credits 

can be used for compliance in a subsequent year or traded or sold to others who may need them 

for compliance purposes. EPA has implemented the statutory credit program through a system of 

renewable identification numbers (or RINs) that are assigned to every gallon of produced or 

imported renewable fuel, and which are used by obligated parties to show compliance with the 

RFS percentage standards. RINs may be traded and an obligated party may carry over an amount 

 

1See EISA, Pub. L. No. 110-140, 121 Stat. 1492 (20067).

2 Renewable fuel is defined as fuel produced from renewable biomass and used to replace or reduce the amount of 

fossil fuel in transportation fuel. CAA section 211(o)(1)(F).
equal to 20% of the next year’s volume requirements for use in the next compliance year. As a 

general matter, the RIN system allows obligated parties to find the lowest cost means of 

compliance. More specifically, it allows obligated parties who do not have the ability to blend 

renewable fuels into their product, and do not wish to develop that ability, to comply with RFS 

requirements through the acquisition of RINs to the extent RINs are made available by other 

obligated parties or market participants. The RIN system is compatible with the biofuel 

production and distribution system as it existed prior to the RFS program (and exists today), with 

the renewable fuel industry generally producing and distributing renewable fuel, and refiners, 

importers or independent blenders generally adding the renewable fuel to petroleum products. 

The RINs that initially accompany the renewable fuel ultimately are used by obligated parties to 

demonstrate compliance with their RFS obligations.3 

Congress provided further compliance flexibility by allowing an obligated party to carry 

forward a compliance deficit for one year as long as it pays back the balance the following year 

and meets the applicable standards for that year. Congress also addressed the possibility that 

more systemic issues may warrant reducing the statutory volume targets themselves. For that 

purpose, Congress authorized EPA to waive the statutory volumes in whole or in part in response 

to petitions by one or more States if EPA found, after public notice and opportunity for 

comment, that implementation of the requirement would “severely harm the economy or 

environment of a State, a region, or the United States” or “there is an inadequate domestic 

supply.” 

Two years after EPAct’s enactment, Congress passed EISA, which expanded the RFS 

program by significantly increasing the amounts and types of renewable fuels to be added not 

only to gasoline but to other types of transportation fuel, including on-road diesel and non-road 

gasoline and diesel fuels. It also allowed renewable fuel added to or used as heating oil and jet 

fuel to count towards RFS compliance.

EISA established four categories of renewable fuels, each with a specified required 

reduction in lifecycle GHG emissions as compared with a 2005 baseline from petroleum-based 

fuels. Those categories are (1) cellulosic biofuel with at least 60% lower GHG emissions, (2) 

biomass-based diesel with at least 50% lower GHG emissions, (3) other advanced biofuel with at 

least 50% lower GHG emissions, and (4) a general category of renewable fuel (referred to as 

“total renewable fuel” in EPA’s regulations) that has a minimum 20% lower GHG emissions 

unless exempted under the grandfathering provision of the statute. The four categories are nested 

so that meeting volume requirements for fuels with larger specified GHG reduction requirements 

generally count toward meeting volume requirements for fuels with lower specified lifecycle 

GHG reduction requirements. For example, a gallon of cellulosic biofuel counts toward meeting 

the requirements for cellulosic biofuel, advanced biofuel and total renewable fuel. Other than the 

biomass-based diesel category, the categories for renewable fuels are fuel-neutral in that they can 

be met by any renewable fuel so long as the fuel meets the applicable GHG reduction 

requirement. Even within the biomass-based diesel category, a variety of fuels may be used for 

compliance.

 

3Further explanation of the RIN system can be found in the preamble of the RFS1 proposed rule (72 FR 23904, May 

1, 2007).
While in EPAct Congress called for 7.5 billion gallons of renewable fuel by 2012, in 

EISA it specified that the total volume of renewable fuel reach 36 billion gallons by 2022 and 

that the advanced biofuel category (which includes renewable fuels providing at least 50% 

lifecycle GHG reduction) grow as a share of the total from about 13% in 2006 to close to 21% in 

2014 and nearly 60% by 2022. In particular, Congress sought a rapid and significant expansion 

of cellulosic biofuel from 0.1 billion gallons in 2010 to 16.0 billion gallons in 2022. It also 

specified a ramp-up of biomass-based diesel to 1.0 billion gallons in 2012. As in EPAct, 

Congress called on EPA to establish standards for years in which volumes were not specified in 

the statute. For that purpose, Congress expanded on the list of factors in EPAct (noted above) to 

also include a review of the program’s implementation to date; more specific environmental 

impacts; and other impacts, including on the infrastructure of the U.S., the cost to consumers of 

transportation fuel, the cost to transport goods, the price and supply of agricultural commodities, 

and food prices. 

With the addition of new, more ambitious volume requirements, Congress provided EPA 

with additional authority for waiving the statutory volume requirements. Perhaps in recognition 

that significant advances were still needed in the development and production of cellulosic 

biofuels at commercial scale, Congress added a specific cellulosic biofuel waiver provision that 

requires EPA to project cellulosic biofuel production for the coming year and, if that projection 

is lower than the applicable volume in the statute, to use the projected volume as the cellulosic 

biofuel requirement for that year. For any year that EPA reduces the cellulosic biofuel volume 

requirement, the provision also authorizes EPA to reduce the applicable volume of total 

renewable fuel and advanced biofuels by the same or a lesser volume and grants EPA broad 

discretion in deciding whether to make an adjustment.4 Moreover, when EPA reduces the 

cellulosic biofuel requirement below the volume specified in the statute, the Act requires EPA to 

make available for sale cellulosic biofuel waiver credits at a price specified by the statute that 

may be used by obligated parties in lieu of acquiring cellulosic biofuel RINs.5

Congress also provided specific waiver authority for the statutory biomass-based diesel 

volume requirements if EPA determines that there is a significant renewable feedstock disruption 

or other market circumstances that would significantly increase the price of that fuel. Like its 

cellulosic biofuel counterpart, the biomass-based diesel waiver provision allows EPA, in the 

event it reduces the statutory volume requirement for that fuel, to reduce the applicable volume 

of total renewable fuel and advanced biofuels by the same or a lesser amount. For all categories 

of renewable fuel, Congress amended the “general” waiver authority established by EPAct for 

addressing “severe economic or environmental harm” or “inadequate domestic supply” to allow 

waivers to be sought by obligated parties or EPA on its own motion, in addition to States. 

All told, with EPAct and then EISA, Congress created an ambitious but flexible program 

calling for substantial use of conventional biofuels (generally satisfied by corn starch-based 

ethanol to date), significant use of biomass-based diesel, and rapid development and deployment 

 

4 See Monroe Energy v. EPA, No. 13-1265, 2014 750 F.3d 909 (D.C. Cir. May 6, 2014).

5 Whenever the Administrator reduces the minimum cellulosic biofuel volume under this subparagraph, the 

Administrator shall make available for sale cellulosic biofuel credits at the higher of $0.25 per gallon or the amount 

by which $3.00 per gallon exceeds the average wholesale price of a gallon of gasoline in the United States. Such 

amounts shall be adjusted for inflation by the Administrator for years after 2008. CAA section 211(o)(7)(D)(ii). 
of a new generation of biofuels having much lower lifecycle GHG emissions than 2005 

petroleum-based fuel. The program is designed to help improve the nation’s energy security by 

reducing its reliance on petroleum products. Moreover, since the transportation sector has 

historically contributed about one-third of the total U.S. inventory of GHGs, the program has the 

potential to make a significant contribution to reducing that inventory in tandem with the GHG 

and fuel economy standards issued by EPA and NHTSA for on-road vehicles. 

At the same time, the statutory design of the RFS program also reflects two important 

realities - that the transportation fuel market has many different participants that contribute to 

and control different aspects of supply, and that the statutory volumes, particularly for cellulosic 

biofuel, necessitate scientific, technological, and infrastructure developments to bring renewable 

fuels that consumers can use to the market. Congress required a credit program that, as 

implemented through the RIN provisions, allows other participants in the fuel market to continue 

to play a vital role in bringing renewable fuels to consumers. Congress also prescribed other 

means of facilitating compliance (e.g., deficit carryover) to help obligated parties address 

challenges, including those beyond their direct control. While Congress set very ambitious 

volume requirements for obligated parties to meet, it provided mechanisms in the form of waiver 

authorities in case EPA reduced volume requirements for cellulosic biofuel, in instances where 

compliance with the statutory volumes would severely harm the economy or environment or 

there is an inadequate domestic supply, or, in the case of biomass-based diesel, where a 

feedstock or other market disruption causes a significant increase in fuel price.