Renewable Fuel Policy Ups Corn Ethanol Targets

Nov 23, 2016

The U.S. Environmental Protection Agency plans to boost the amount of ethanol blended into the nation’s fuel supply under new rules issued Wednesday.

The EPA finalized the rules governing ethanol production, the Renewable Fuel Standard (RFS), for 2017, adding about 1.2 billion gallons in total renewable fuel. That’s an increase of about 6 percent year-over-year.

The RFS sets the amount of biofuels -- mostly coming from corn ethanol -- that oil refiners must blend into their fuels.  The 2017 numbers add about 200 million gallons of ethanol made from corn to the final tally.

University of Illinois agriculture economist Scott Irwin says the EPA’s decision to up the renewable fuel mandate is good news for corn producers. Maintaining demand for ethanol buoys corn prices.

Raising the requirements for advanced biofuels, Irwin says, could help soybean prices.

“The advanced component of the RFS standards is growing rapidly right now,” Irwin says. “Whereas the conventional ethanol is capped out.”

Ethanol policy is a hot-button issue in farm states, as it is both a major element of the corn economy and a favorite target of environmental groups. With prices for corn and soybeans near recent low points, increasing targets for corn-based ethanol amounts to a win for corn groups. Oil industry groups,which have long objected to the mandate, remain disappointed.

Developing low-carbon fuels like cellulosic ethanol, which is produced from grasses and other inedible parts of plants, has been one of the long-standing goals of renewable fuel policy, but has remained elusive. The 2017 renewable fuel mandates call for 311 million gallons of cellulosic ethanol, less than 2 percent of the total amount of renewable fuels.