Recent intelligence indicates that the Environmental Protection Agency (EPA) is likely to propose the Renewable Fuel Standard (RFS) blending mandates/renewable volume obligations (RVOs) for 2021 and 2022 within the next several weeks.
Indications are that EPA will set the 2021 RVOs at "actual production," while the 2022 RVOs will be set at more ambitious levels designed to incentivize increased production and consumption of biofuels.
This is what NATSO has been advising members is the most likely outcome for most of this year.
When this information began leaking out RIN prices dropped quite precipitously. Similar volatility is expected with future developments, for example, when EPA formally submits the proposed rule to the Office of Management and Budget, when the proposed rule is published in the Federal Register, etc.
The macro trajectory of the RFS (2021 RVOs at production, 2022 at a higher level) remains steady for the time being.
There are several "unknowns" with respect to the forthcoming proposal: Will EPA give any indication as to how it will handle small refinery exemptions? Does EPA plan to "reallocate" waived gallons to other obligated parties in accordance with a deal that the Trump EPA reached with midwestern Republican senators? How will the Agency address the fact that, absent an act of Congress, starting in 2022 it will be unlawful to sell E15 in many parts of the country during the summer driving season?
These issues remain unclear for the time being.
The EPA and Department of Transportation recently issued separate but related proposed rules related to vehicle fuel economy and tailpipe emissions requirements.
Collectively, these rules are designed to unwind the Trump Administration's relaxing of vehicle efficiency requirements and revert back to the stricter approach established during the Obama Administration.
Specifically, the DOT proposal would increase the fuel economy stringency for both passenger cars and light trucks by 8 percent per year over model-years 2024-2026. EPA's proposal would increase the stringency by 10 percent in model-year 2023 and approximately 5 percent annually from MYs 2024-2026.
Collectively, the Administration estimates that the rules will reduce gasoline consumption by approximately 10 percent by 2030.
At a high level, the proposed rules represent an unambiguous attempt by the Biden Administration to encourage automakers to produce more electric vehicles.
For example, the rule treats electric vehicles as though they have absolutely no emissions consequences simply because there are no tailpipe emissions, in essence disregarding the source of the electricity that fuels the vehicles and the vehicle battery that stores the electricity. This is despite the fact that "a growing body of research points to the likelihood that widespread replacement of conventional cars with EVs would likely have a relatively small impact on global emissions. And it's even possible that the outcome would increase emissions" due to the "embodied emissions arising from the labyrinthine supply chains to obtain and process all the materials needed to fabricate batteries."
The rule also permits OEMs to get extra compliance credits for selling electric vehicles. NATSO will be submitting comments to the agencies on these and other issues in the coming weeks.
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