Oil Palm Industry Economic Journal Vol. 12 (1) March 2012 p. 14-23

The Impact of Renewable Fuel Standard (RFS2) on Palm Biodiesel’s Market Access to the United States of America

Rosidah Radzian
Received:    Accepted:    Available Online:


On 26 March 2010, the Environmental Protection Agency (EPA) published final changes to the RFS2 programme as required by the Energy Independence and Security Act (EISA) of 2007. EISA has targeted 117 million tonnes (36 billion gallons) of renewable fuel to be blended into transportation by 2022. The Act also introduced new eligibility of volume requirements for the four categories of renewable fuel. The most significant aspect of the RFS2 programme is the inclusion of life cycle analysis for greenhouse gas (GHG) emissions to qualify as a renewable fuel. The life cycle analysis of GHG emissions must be lower than the 2005 baseline average for gasoline or diesel fuel that it replaces. Four different levels of reductions are required for the four different renewable fuel standards. These include 20% for conventional renewable fuels, 50% for advanced biofuel, 50% for biomass-based diesel and 60% for cellulosic biofuels. RFS2 regulation came into effect on 1 July 2010. For 2012, the statutory volume requirement is 3.25 million tonnes (1.0 billion gallons) and a minimum of 3.25 million tonnes/year (1.0 billion gallons) of biomass-based diesel is targeted from 2013 through 2022. The proposed volume for 2013 is 4.02 million tonnes (1.238 billion gallons). Currently, feedstocks for biodiesel already approved by EPA included soyabean oil, algal oil, biogenic waste oils/fats/yellow grease, corn oil from DGS and canola oil. Palm-based biodiesel, wood pulp ethanol and grain sorghum ethanol are still under review by EPA. Notice of Data Availability (NODA) for palm oil was published on 27 January 2012. Based on EPA’s analysis, palm-based biodiesel fails to meet the minimum requirement of GHG emission saving of 20%, thus, does not qualify as renewable biofuel under RFS2; palm-based biodiesel and renewable diesel only reduce GHG emission by 17% and 11% respectively. For palm-based biodiesel to be categorised under biomass-based diesel (D4 RIN), it must comply with 50% GHG saving compared to 2005 baseline of petroleum diesel. Malaysian government and other interested parties must submit their comments during the rule-making process to influence EPA on their modeling of palm pathway. Only one pathway will be approved for palm-based biodiesel regardless of its origin in the final rule-making process. If palm NODA is approved by EPA in the final rule-making process, the future for palm-based biodiesel and renewable diesel in the US renewable energy market are non-existence. The reinstatement of USD 1/gallon tax credit for 2011 has given a boost for the biodiesel industry in the US and the production of biodiesel in 2011 exceeded 3.25 million tonnes (1.0 billion gallons). The extension of biodiesel tax credit for 2012 is being debated after it expired on 31 December 2011 and the prospect of US biodiesel industry in 2012 will be more challenging without the extension of the tax credit.

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