EXECUTIVE SUMMARY
Last year’s headlines were all about high corn prices, brought on by the country’s worst drought in 50 years. This year, the story of US biofuels can be boiled down to the collision of policies – with each other, and with reality.
● Policies that govern the use of US corn-based ethanol – one which calls for a minimum amount of consumption, and another which limits how much can go into automobile tanks – are set to collide in 2013. Another policy, which stipulated a minimum amount of ‘cellulosic’ biofuel production, has already had to be relaxed this year, as policymakers recognised that the original targets are simply unrealistic.
● The relaxation of the cellulosic biofuels target was only the first of several critical choices that policymakers and industry players are facing this year. Blenders may choose to comply with a biofuels mandate by making use of ‘credits’ in lieu of actual physical ethanol; farmers have to choose whether to plant corn or soybeans; and policymakers may choose to renegotiate the Renewable Fuels Standard, currently the most important policy for the industry.
● These conclusions are based on eight inter-related subplots presented throughout this report, which aims to encapsulate the dynamics in the US biofuels market. These involve new mandates, cellulosic biofuels outlook, Brazil, the ‘blend wall’, banked RINs, blending economics, US farmers, and politics.
ABOUT THIS REPORT
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This report assumes some level of familiarity with the market, particularly with the rules prescribed by the Renewable Fuels Standard (RFS2), administered by the US Environmental Protection Agency (EPA) – but an appendix at the end of the report provides a ‘re-introduction’ to this important policy. This report is available for public download. Other reports produced by Bloomberg New Energy Finance’s Bioenergy Insight analysts require a subscription to this service.