Facts: How a renewed US biofuels program could help electric car makers
Dec 1 (Reuters) – The Biden administration on Thursday proposed an overhaul of the nation’s biofuels policy that would allow electric car makers to tap into the lucrative renewable fuel credit market for the first time.
The proposal, presented by the U.S. Environmental Protection Agency, reflects President Joe Biden’s broader agenda to decarbonize the economy to combat climate change and could provide a major new revenue stream for clean cars and trucks.
Here are some basic details:
HOW WILL IT WORK?
Currently, the U.S. Renewable Fuel Standard requires refiners to blend billions of gallons of biofuels, such as corn-based ethanol, into their own fuel each year or buy credits, known as RINs, from other companies that do the blending for them.
The idea is that by adding cleaner biofuels to the mix, the program simultaneously cuts greenhouse gas emissions and helps farmers.
Under the new proposal, the RFS would still require refiners to blend huge volumes of biofuels and/or buy RINs, but it would add a twist aimed at encouraging more electric vehicle production.
Essentially, electric vehicle manufacturers will be able to generate RINs and sell them to refiners if they can prove that the cars and trucks they make run on electricity from plants that burn biofuels, such as methane from covered landfills or manure farms lagoons.
Currently, a very small but growing share of energy in the country is produced from “biogas”.
HOW DO THEY PROVE IT?
It is impossible to trace the energy back to its source because the electrons in the grid are indistinguishable from each other.
Therefore, the EPA is proposing that electric vehicle manufacturers contract with renewable biofuel generators instead. The contracts establish the vehicle manufacturer’s exclusive right to generate RINs for a certain amount of renewable energy.
Electric vehicle manufacturers are expected to enter into enough contracts with power generators to cover the full electricity use of their fleet each year.
To avoid double counting of e-RINs, generators will only be able to have contracts with one vehicle manufacturer at a time.
The EPA will conduct regular audits to ensure that electricity generators and producers of the biogas they burn meet basic standards.
WHAT IS THE E-RIN COST?
The proposal could bring hundreds of millions, not billions, of dollars to carmakers.
The EPA expects the industry to generate 600 million e-RINs in 2024 and double that by 2025, assuming they can produce enough vehicles and find enough biogas-based energy.
Under the proposal, each e-RIN would represent 6.5 kilowatt-hours of biofuel-derived energy.
The value of RINs is unpredictable, but they are currently trading at over $1.50 a piece.
Because refiners must collect billions of these credits each year — either by blending them or by buying them from others — automakers can rely on a relatively reliable pool of willing buyers.
Reporting by Stephanie Kelly and Jarrett Renshaw; Essay by Richard Valdmanis; Edited by Lisa Shumaker
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