- The stage is set for a new era in American ethanol production. Gone is the tax incentive that helped build the industry and then was allowed to expire after it had served its purpose. Also gone is the tariff on imported ethanol.
- Still in place, however, are the Renewable Fuel Standard (RFS) and a marketplace that is now comprised of 10 percent ethanol and growing.
As we noted before Christmas, 2011 was an exciting year for American ethanol production. Evolutions in the marketplace, advancements in technology, and progress in policy have all set the stage for a new era in American ethanol production. Gone is the tax incentive that helped build the industry and then was allowed to expire after it had served its purpose. Also gone is the tariff on imported ethanol. Still in place, however, are the Renewable Fuel Standard (RFS) and a marketplace that is now comprised of 10 percent ethanol and growing. With this backdrop, here are five stories to watch for in 2012, in the humble opinion of the RFA:
1. First commercial availability of E15 blends for MY2001 and newer vehicles. The RFA is working very hard to finalize federal requirements to certify E15 blends. Once completed, getting E15 blends into the marketplace becomes a state-by-state march, with some states like Iowa and Illinois ready to go as soon as the federal requirements are completed. When E15 gallons are first legally available is still up in the air, but we are betting it happens in the first half of 2012.
2. Free and fair trade of ethanol. In addition to being the world’s largest producer, consumer, and exporter of ethanol, American ethanol producers are also the lowest cost producer. With this emergence, new challenges from ethanol interests in other nations have arisen. Whether it is the European Union anti-dumping investigation or the vacillating ethanol policies in Brazil, a fair resolution to trade challenges will be important to the continued growth and evolution of domestic ethanol production.
3. “You want the truth? You can’t handle the truth!” The upcoming year promises to see a great deal of legal activity surrounding American ethanol use. The recent ruling by a federal judge that California’s Low Carbon Fuel Standard (LCFS) is unconstitutional will be appealed. And, arguments in the oil/food processing/environmental lobbying industry lawsuit against EPA’s approval of E15 have yet to be heard. All of this, as well as international litigation, promises to keep legal beagles busy in the year and years to come.
4. Wave on wave of RFS challenges. The conventional wisdom is Congress will accomplish even less in 2012 than it did last year – with it being an election year and all. While this may prove to be true, it will not stop those who oppose American renewable fuels from seeking to dismantle the RFS. We expect the barrage of unsubstantiated attacks on the RFS to continue and even intensify as the tax credit that long served as the boogeyman for anti-ethanol interests has expired.
5. Answering cellulosic ethanol challengers. Construction is slated to begin on commercial scale cellulosic ethanol biorefineries with production to follow in early 2013. These facilities would be the first commercial-scale project of their kind in the world. In order to assure these efforts are successful, Congress must renew key tax provisions for cellulosic ethanol producers before they expire at year’s end. The RFA, and its partner organization, the Advanced Ethanol Council, will make extending these policies a top legislative priority. Obviously, there are a host of issues with regard to America’s ethanol and energy sector that will deserve our attention. Eliminating unnecessary subsidies for the petroleum industry and accurately accounting for carbon emissions from transportation fuels are good examples. But we believe these five storylines will have the most lasting impact on ethanol production in the U.S.