Draft--Preliminary work product

Biodiesel Contribution to US 

CO2 Goals

Update Analysis of Carbon Reduction Impacts

September 15, 2015

David DeRamus, Ph.D. and Collin Cain

Bates White Economic Consulting

On behalf of the National Biodiesel Board
Draft--Preliminary work product

Summary of conclusions

2

• Biodiesel RFS is a critical policy tool to reduce CO2 emissions in transportation sector 

to support US commitment to reduce CO2 emissions by 26% by 2025 

 The transportation sector has furthest to go in reducing CO2 emissions

 Increasing biodiesel production by 350 million gal per year would provide CO2 reduction in 2025 

of 56 million metric tons

 56 million metric tons represents 18% of total US reduction commitment in 2025 – equivalent to 

removing 11.5 million cars from US highways

• RFS is a simple and effective policy tool

 No infrastructure or vehicle modifications required

 Minimal or no cost borne by retail customers

 No implementation or jurisdictional complexities

• Biodiesel reduces CO2 emissions by 81% relative to diesel – at declining cost

 Technology changes have allowed greater use of lower-cost, lower-carbon feedstocks

 Feedstock and processing costs have fallen even as biodiesel production has increased

 Biodiesel production capacity and feedstocks are available to support increased output with 

minimal cost/price impacts

• Cost of carbon reduction via biodiesel is low: $34 per metric ton of CO2 in 2014

 Recent fall in crude and petroleum diesel prices has increased the biodiesel cost of CO2 

reduction – independent of biodiesel production cost

 Analysis excludes significant biodiesel benefits for health, employment, and energy security

September 15, 2015
Draft--Preliminary work product

The transportation sector has a long way to go to meet US 

commitments to achieve a 26% reduction in CO2 emissions by 2025

3

Commercial, 83 

Residential, 99 

Agriculture, 169 

Electricity 

generation, 269 

Industry, 310 

Transportation, 

313 

Reduction need by sector, 

million metric tons CO2e 

(annual)

CO2 emission 

reduction from 

increased biodiesel

Remaining 

reduction need for 

petroleum diesel 

and gasoline 

emissions.

Biodiesel could contribute 

18% of transportation 

reduction need...

2025

Biodiesel

Petroleum

diesel

...by displacing less than 

9% of petroleum diesel 

by 2025

RFS2 can help US achieve CO2 targets with modest increases in biodiesel volumes
Draft--Preliminary work product 4

Electricity 

generation, 

31%

Transport

ation, 27%

Industry, 21%

Agriculture, 9%

Commercial, 

6%

Residential, 6%

Source: 2013 CO2e emissions, EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2013 (April 2015)

Sector shares of 2013 

US CO2 emissions Transportation 

current CO2e 

share

Transportation will have to play a significant role in meeting US CO2 

reduction commitments

Million 

metric tons

2005 US CO2e emissions 

7,350 

Emissions in 2013 

6,673 

Emissions in 2025 with 26% 

reduction from 2005 5,439 

Additional reduction needed 1,234 

US total needed CO2e reduction 

2013-2025

US commitment to Framework Convention on Climate Change: reduce CO2e emissions by 26% 

by 2025, relative to 2005 levels

27%

September 15, 2015
Draft--Preliminary work product 5

Source: 2013 CO2e emissions, EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2013 

(April 2015)

Proportional share of US CO2 commitment will require substantial 

emissions reductions from transportation sector

313 

- 

500 

1,000 

1,500 

2,000 

2,500 

2005 2013 2025

Million metric tons CO2e

Transportation CO2e Reduction needed from 2013 levels

Transportation’s share of 2025 CO2 reduction = 313 million MT

26% CO2

reduction 

from 2005

September 15, 2015
Draft--Preliminary work product

Increased biodiesel volumes would provide substantial CO2 reduction 

benefits

• Increasing biodiesel volumes by 350 million gallons per year would 

reduce CO2 emissions in 2025 by 56 million metric tons

 Total diesel use in 2025 projected at 65.4 billion gallons, with associated CO2e 

emissions of 804 million metric tons

 Biodiesel could displace 5.6 billion gallons of petroleum diesel in 2025, with 

81% relative CO2 reduction

6

• 2025 net CO2e reduction equivalent to removing 11.5 million vehicles

• Cumulative CO2 reduction from biodiesel for 2015-25 would total 422 

million metric tons

18% of the transportation share of the reduction need (56 / 313) = 

 5% of the economy-wide reduction need (56 / 1,234) 

5.6 bg / 65.4 bg = 8.6% of petroleum diesel displaced in 2025

8.6% x 804 mm MT = 69 mm MT gross CO2e from petr. diesel displaced

69 mm MT x 81% = 56 mm MT net CO2e emissions displaced in 2025

September 15, 2015
Draft--Preliminary work product

Biodiesel RFS can ensure CO2 reductions from increasing diesel share of 

transportation fuel

7

0

30

60

90

120

150

20122013201420152016201720182019202020212022202320242025

Billions of gallons

US Fuel Consumption

Motor Gasoline Diesel

 EIA projects 11% decrease in gasoline use by 2025 

 7% increase in diesel 

Source: Total US distillate and motor gasoline consmption from EIA, Annual Energy Outlook 2014 (April 2015) reference case

Mileage standards set in 2012 for cars and light trucks: 54.5 mpg by 2025 model year – impact 

largely on gasoline consumption

September 15, 2015
Draft--Preliminary work product

Additional biodiesel volumes are less than 9% of projected diesel 

consumption

8

Source: Total US distillate consumption from EIA, Annual Energy Outlook 2014 (April 2015) reference case; biodiesel

volumes assuming +350 million gallons per year increase from 2014.

-

15 

30 

45 

60 

75 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billion gallons

Petroleum diesel Biodiesel

In 2025, biodiesel volume of 5.6 billion gallons would represent 8.6% of 

projected US distillate consumption

September 15, 2015
Draft--Preliminary work product

RFS is a simple and effective policy tool

• The Clean Power Plan aims for substantial CO2 emissions 

reductions from the electric power sector

 Projected CO2 reductions are significant, but implementation and 

jurisdictional issues are complex

• Impact of mpg standards may be muted by increased travel miles 

induced by lower fuel prices

 Ethanol blend wall limits scope for CO2 reductions for gasoline-fueled 

engines

• RFS is an existing, effective mechanism to ensure CO2 emissions 

reductions in the transportation sector

 No infrastructure or vehicle modifications required

 Minimal or no cost borne by retail customers

9

September 15, 2015
Draft--Preliminary work product

Analysis of biodiesel CO2 reduction 

and cost

Updated analysis through 2014

10

September 15, 2015
Draft--Preliminary work product

Biodiesel has a significantly lower carbon footprint than petroleum diesel

0

5

10

15

20

25

30

regular 

diesel

canola soy used 

cooking oil

other 

recycled 

grease

animal fat distillers 

corn oil

lb CO2e/125,000 Btu

Lifecycle carbon emissions, by feedstock

11

On average, biodiesel emits 81% less CO2 than petroleum diesel with current feedstocks

Source: USEPA 2010, USDA/Idaho 2012

Carbon content compares favorably to cellulosic ethanol

September 15, 2015
Draft--Preliminary work product

Biodiesel exploits a diverse range of feedstocks

12

42%

9%

15%

15%

17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014

Feedstock shares for biodiesel (including renewable diesel)

Other

Recycled 

oils/greases

Animal fats

Distillers corn oil

Canola Oil

Soybean oil

Source: EPA EMTS production data; feedstock data for biodiesel from EIA Monthly Biodiesel Production Report; assumed equal renewable 

diesel feedstock shares from DCO, animal fats, recycled oils

September 15, 2015
Draft--Preliminary work product

Share of biodiesel production from lower carbon footprint feedstocks has 

increased, even with rising biofuel production

-

440 

880 

1,320 

1,760 

0%

10%

20%

30%

40%

50%

2011 2012 2013 2014

Biodiesel Gallons (Millions)

Lowest Carbon Feedstock %

Biodiesel use of lowest carbon feedstocks

Biodiesel production Distillers corn oil, animal fats, recycled oils/greases

13

Source: EIA Monthly Biodiesel Production Report (February 2015); EPA EMTS data for D4 production volumes.. 

At the margin, increased biodiesel production has used distillers corn oil or waste grease as feedstocks

September 15, 2015
Draft--Preliminary work product

Lowest carbon feedstocks have fallen in price, while biodiesel production 

and the share of low-carbon feedstocks have increased

-

440 

880 

1,320 

1,760 

$0.00

$0.70

$1.40

$2.10

$2.80

$3.50

2011 2012 2013 2014

Biodiesel Gallons (Millions)

$/gal of biodiesel

Cost of lowest carbon feedstocks

Biodiesel production Distillers corn oil, animal fats, recycled oils/greases

14

Source: EIA Monthly Biodiesel Production Report (February 2015); feedstock prices from Jacobsen, translated to $/gal assuming 7.5 lb/gal

September 15, 2015
Draft--Preliminary work product

Biodiesel’s cost of carbon reduction was approximately $34 per 

metric ton of CO2 in 2014

$158 

$121 

$71 

$34 

$-

$20 

$40 

$60 

$80 

$100 

$120 

$140 

$160 

$180 

2011 2012 2013 2014

$/metric ton

Biodiesel cost of carbon reduction

15

Changes in production costs and feedstocks lowered biodiesel’s cost of carbon reduction by 78% from 2011 to 2014

September 15, 2015
Draft--Preliminary work product

Estimates of 2014 production costs were accurate and correctly indicated 

that continued production at 2013 levels would not increase costs

2013 2014 Forecast 

(Jan 2014) 2014 Actual

Production, billion gallons 1.74 1.70 1.76

Weighted feedstock cost, $/gal $3.20 $2.70 $2.67

Avg processing cost, $/gal $0.50 $0.50 $0.50

Total Production Cost, $/gal $3.70 $3.20 $3.17

Wholesale Diesel Price, $/gal $3.01 $2.92 $2.82

Biodiesel cost differential, $/gal $0.69 $0.28 $0.34

Cost of 1 metric ton CO2 reduction $71 $29 $34

16

Sources: 2013 production cost analysis with industry processing cost estimate; 2014 cost forecast from World Agricultural Economic and 

Environmental Services (WAEES) model. 2014 production cost analysis with industry processing cost estimate. EIA price data for CA ULSD.

September 15, 2015
Draft--Preliminary work product

Cost of carbon reduction for biodiesel is based on displaced 

petroleum diesel, and depends on diesel price

2014 2015 2016 2017

Total Biodiesel Production Cost 

(2014), $/gal $3.17 $3.17 $3.17 $3.17

Wholesale Diesel Price, $/gal $2.82 $1.88 $2.29 $2.58

Biodiesel cost differential, $/gal $0.34 $1.29 $0.88 $0.59

Cost of 1 metric ton CO2 reduction $34 $129 $88 $59

17

Sources: 2014 production cost analysis with industry processing cost estimate; 2016 wholesale diesel price from EIA Short-term Energy 

Outlook (STEO), diesel – refiners price for resale; 2017 wholesale diesel price derived from EIA Annual Energy Outlook WTI crude forecast 

and STEO WTI/crude relationship.

Recovery of diesel prices returns biodiesel cost of carbon reduction to near 2014 level.

• Calculated cost of CO2 abatement jumps in 2015 because of 

continued low petroleum diesel price – despite expectation that 

biodiesel production cost will remain low

September 15, 2015
Draft--Preliminary work product

Further increased biodiesel production is not constrained by 

available feedstocks

18

Source: LMC International, “Current and Future Supply of RFS2 Qualifying and Non-qualifying Oils and Fats for Biofuels,” July 2013.

Biodiesel feedstock production forecast

September 15, 2015
Draft--Preliminary work product

Biodiesel production increases are not constrained by available 

biodiesel capacity

2.4 bill gal

0.4 bill gal

0.8 bill gal

Biodiesel Production Capacity

3.6 billion gallons

Registered facilities 

producing biodiesel

Facilities registered, but not 

currently producing 

biodiesel

Production facilities not yet 

registered under RFS

19

Source: Biodiesel plant list 2-6-13 from Docket EPA-HQ-OAR-2013-0479; numbers are from a combination of NBB, EIA, and EPA 

databases.

September 15, 2015
Draft--Preliminary work product

Contacts

20

September 15, 2015

David DeRamus, Ph.D.

Partner

202.216.1154

Collin Cain, M.Sc.

Principal

202.216.1156

Bates White Economic Consulting

1300 Eye St., NW

Washington, DC 20005