The demand for biofuels has been driven by environmental regulations and the need to reduce greenhouse gasses. Refiners need to adjust their processes and operations to ensure compliancy and meet their regional biofuel targets in the relevant sectors.  In this article we will discuss the regulatory updates impacting refiners across different regions and identify some interesting projects taking place globally.

REGULATORTY UPDATES ON THE GLOBAL BIOFUELS MARKET

The United States Environmental Protection Agency (EPA)

The U.S. has implemented a biofuel blending program known as the Renewable Fuel Standard (RFS). The RFS requires renewable fuel to be blended into transportation fuel in increasing amounts each year escalating to 36 billion gallons by 2022. The EPA proposed a 15-billion-gallon biofuel blending mandate for 2022. However, this January, the EPA announced it would be extending the deadline for US refineries to comply with its blending fuel mandates and was accepting public comment on its updates till February of this year.

Whilst US refineries welcomed the deadline extension members of the biofuels trade group, The Renewable Fuels Association, expressed their disappointment at the latest EPA announcement. “With this final rule, the EPA just gave itself the power to perpetually delay implementation of yearly RFS blending requirements and continually kick the can down the road on compliance deadlines,” RFA President Geoff Cooper said in a statement.

Members of the US refining industry have argued that the shrinking ethanol market can no longer support the proposed blending targets. COVID-19 has impacted on demand, causing a drop in production which has resulted in the closure of Ethanol plants. Furthermore, the increased regulatory costs associated with the production of biofuel mandates have refiners hinting at the possibility of shutting down or downsizing. In addition, in the US biodiesel prices are less competitive when compared to fossil fuels. The lowered amount of energy contained in the feedstock for biofuels (for example soybeans) and the price of raw materials, make biofuels more expensive when producing heat. It makes the product less efficient to create when compared to standard fossil fuels. The added complication is that the energy market now competes with the food market for access to vegetable oil, among other organic sources, which increases the costs of food prices, causing volatility and exacerbating existing food insecurity issues. In a Reuters article earlier this year Mike Burnside, Policy Analyst at the American Fuel & Petrochemical Manufacturers, a leading refining trade group commented that, “EIA (the Energy Information Administration) projects that gasoline consumption in 2022 will be below 2019 demand, so it is unreasonable to propose 15 billion gallons for conventional biofuel in 2022 as if the pandemic never happened and we are back to normal,”

In the US biofuel demand amounted to 1.09 million barrels per day in 2019 and accounted for 7.3% of total motor gasoline, distillate, and jet fuel consumption. The IEA (International Energy Agency) also contradicted the proposed EPA biofeuls mandate in an article this past January. The IEA stated that biofuel demand had recovered in 2021 from Covid lows, to near 2019 levels. However, in 2022 they expected higher prices for oil and biofuels and lower GDP expectations. Therefore they projected that there would be a  20% slower demand growth compared to their previous forecast. Thereby validating Mr. Burnsides assertions of an unrealistic EPA biofuels target.

The European Union’s Renewable Energy Directive

The 2009 EU Energy and Climate Change Package set out a 10 percent minimum target for renewable energy consumed by the transport sector to be achieved by all EU member states by in 2020. The Renewable Energy Directive (RED) laid down detailed provisions on the goals and conditions in the transport sector for the period 2010-2020. In 2018, the European Union adopted the Renewable Energy Directive II (REDII) covering the period 2021-2030. It set a new overall renewable energy target of 32 percent by 2030 and a 14 percent target for the transport sector. Furthermore, the RED also introduced a sustainability criteria and, since 2011, only biofuels which comply with this criteria count towards the share. The sustainability criteria included limiting biofuels from being obtained from highly biodiverse land. Furthermore, it included a focus on green hydrogen and other renewable fuels from non-biological sources and is set to include new rules around certification and traceability. Additional sustainability criteria adjustments include member states being obliged to issue Guarantee of Origin to both supported and unsupported renewable generators and companies will need to indicate the percentage of renewable energy used in the raw material acquisition and pre-processing of industrial products.

How is the EU fairing in hitting their renewable fuel targets in the transport sector?

Energy from renewable sources used in transport increased from under 2% in 2005 to almost 9% in 2019. Data from the European Environment Agency indicates that in 2020, this increased to a reach 10.1%. These statistics would lead you to believe that collectively all the EU countries had reached their target, however, upon closer inspection it is apparent that this goal was achieved as a result of the efforts of less than half of the EU’s member states. In short, there is a need for the EU to promote sustainable fuel use in order to disrupt the sector's dependency on fossil fuels.

A report from the International Renewable Energy Agency found that some of the challenges to biofuel adoption include the high commodity prices, as well as the fact that while biofuel demand is growing it is not consistent with the rate needed to achieve net-zero  (around 100 exajoules (EJ) globally). There needs to be a greater commitment from respective governments to enforce sustainability policy to avoid a culture of non-compliance.

LATEST BIOFUEL PROJECTS TAKING PLACE AROUND THE GLOBE