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August 31, 2017

RE: International Council on Clean Transportation comments on “Renewable Fuel Standard

Program: Standards for 2018 and Biomass-Based Diesel Volume for 2019” Notice of Proposed
Rulemaking (EPA–HQ–OAR–2017-0091; FRL–9964–86– OAR)

These comments are submitted by the International Council on Clean Transportation (ICCT).
The ICCT is an independent nonprofit organization founded to provide unbiased research and
technical analysis to environmental regulators. Our mission is to improve the environmental
performance and energy efficiency of road, marine, and air transportation, in order to benefit
public health and mitigate climate change. We promote best practices and comprehensive
solutions to increase vehicle efficiency, increase the sustainability of alternative fuels, reduce
pollution from the in-use fleet, and curtail emissions of local air pollutants and greenhouse
gases (GHG) from international goods movement.

The ICCT welcomes the opportunity to provide comments on the U.S. EPA Renewable Fuel
Standard (RFS) program. We commend the agency for its continuing efforts to promote a
cleaner, lower-carbon transportation sector that uses less petroleum-based fuels. As we have
commented before, the RFS program has set strong standards with thorough, comprehensive
scientific analyses and rigorous life-cycle emission accounting. This proposed rule builds upon
the impressive steps EPA has undertaken to promote low-carbon biofuels. The comments
below offer a number of technical observations and recommendations for EPA to consider in its
continued efforts to strengthen the program and maximize the program’s benefits in mitigating
the risks of climate change and reducing petroleum use.

We would be glad to clarify or elaborate on any points made in the below comments. If there are
any questions, EPA staff can feel free to contact Dr. Stephanie Searle (stephanie@theicct.org).

Fanta Kamakaté

Chief Program Officer


International Council on Clean Transportation

 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

Summary of comments
In its proposal for 2018 volume standards for renewable fuel, advanced biofuel, and cellulosic
biofuel and the 2019 volume standard for BBD, EPA has proposed maintaining volumes at a
similar level to those set in its last volume rulemaking. ICCT believes EPA is justified in reducing
volumes of renewable fuel and advanced biofuel by the same amount as the reduction in
cellulosic biofuel compared to the statutory volumes. Higher blends of ethanol are still
consumed at very low rates, and so advanced biofuel and renewable fuel volume requirements
above the amount of ethanol that can be consumed are met predominantly with increased use
of biodiesel and renewable diesel (biomass-based diesel; BBD). The rise in BBD consumption
in recent years has outpaced the growth in domestic feedstock availability and increasingly
driven higher imports of both fuel and feedstock. This increases U.S. reliance on foreign
renewable energy sources and contributes to high CO2 emissions and environmental damage
caused by palm oil expansion.
EPA has requested comment on whether the agency should use the general waiver authority to
reduce volumes of renewable fuel and advanced biofuel. ICCT believes EPA would be justified
in doing so due to the environmental harm that is caused by high volumes of these fuels.
Reducing these volumes would also increase the energy independence benefits of the RFS
program by reducing BBD imports. EPA has also requested comment on whether the 2019 BBD
standard should be reduced below the 2018 standard. ICCT believes EPA would be justified in
making this reduction to increase the energy independence benefits of the RFS program,
reduce feedstock diversion from other uses and GHG emissions associated with palm oil
expansion, reduce the costs of BBD use to obligated parties and consumers, and encourage
greater competition and innovation within the advanced biofuel category.

Concerns with biomass-based diesel (BBD)

As EPA notes, BBD is expected to be used to comply with not just the BBD volume, but also the
required volumes of non-BBD advanced biofuel and non-advanced renewable fuel. This is
because the gasoline pool is saturated at 10% ethanol and only small amounts of higher ethanol
blends are consumed. Any increase in the advanced biofuel and renewable fuel volumes are
thus likely to be met with increased use of BBD.1 The concerns with BBD discussed in this
section thus apply to each of the BBD, advanced biofuel, and renewable fuel volumes.
In its proposal, EPA cites concerns about cost, GHG impacts, and energy independence
relating to volumes of BBD that will be used to meet volumes for each of the BBD, advanced
biofuel, and renewable fuel categories in 2018 and 2019. ICCT believes that EPA is considering
these factors appropriately, and that there is abundant evidence to justify these concerns.
The use of BBD levies a significant cost on U.S. consumers. As EPA notes in its illustrative cost
assessment in the proposal, soybean biodiesel costs approximately $1.36-$1.85 more per
diesel-equivalent gallon compared to petroleum-derived diesel. In many cases, renewable
diesel and BBD produced from other feedstocks is likely to be even more expensive. BBD does
not serve any functional purpose as a blendstock to diesel, unlike corn ethanol, which replaces
other octane enhancers, and so does not provide a value directly to consumers in return for its

1
Discussed in http://farmdocdaily.illinois.edu/2017/08/epa-interpretation-inadequate-domestic-supply-
waiver-renewable-fuels.html
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

higher price. The U.S. tax credits for biodiesel and renewable diesel are currently expired and
so BBD is now less cost competitive with other fuel types compared to previous years. However,
it is important to note that if these tax credits are reinstated, the economic cost to U.S. residents
will not be dimished because the tax credits are paid for by U.S. taxpayers.
Higher volumes of BBD would not improve the energy independence of the U.S., which was a
major goal in the creation of the RFS2 program in the Energy Independence and Security Act
(EISA) of 2007.2 This is because the growth in BBD supply to the U.S. is increasingly coming
from higher BBD imports. Figure 1 shows domestically-produced vs. imported BBD used for
RFS compliance over the period 2011-2016, using data from EPA’s proposal. The share of total
BBD used in the RFS that is imported, shown in the orange line, has risen rapidly and now
approaches 30%. While domestic production of BBD increased by 28% in 2016 compared to the
period 2013-2015, BBD imports grew by 262% in 2016 compared to the average level in 2013-
2015.

2010.5 2011.5 2012.5 2013.5 2014.5 2015.5 2016.5

3000 35%

30%
Million gallons per yaer

2500
25%
2000
20%
1500
15%
1000
10%
500 5%

0 0%
2011 2012 2013 2014 2015 2016

Domestic BBD Net imports BBD Imports as share of total BBD

Figure 1: Use of domestically-produced vs. imported BBD in RFS compliance in recent

years
The growth in imports has come largely from increases in Argentinian biodiesel, and to a lesser
extent from biodiesel from Indonesia and Canada. Figure 2 shows monthly BBD imports from all
countries exporting significant BBD volumes to the U.S., using data from EIA.3 The rapid
increase in BBD imports from Argentina starting in 2015 may be related to EPA’s approval of a
record-keeping plan by a consortium of Argentinian biofuel producers in January of that year.4 In
any case, there is no reason to believe that the high level of 2016 BBD imports was transitory.
USDA’s Foreign Agricultural Service expects Argentinian biodiesel exports to the U.S. to remain

2
https://www.gpo.gov/fdsys/pkg/PLAW-110publ140/pdf/PLAW-110publ140.pdf
3
Downloaded from
https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_m.htm
4
https://www.epa.gov/sites/production/files/2015-08/documents/carbio-decision-document-2015-01-
27_1.pdf
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

at similar levels to 2016 in 2018, even if the U.S. biodiesel tax credits are not reinstated.5 There
is reason to expect that higher RFS volumes and/or reinstatement of the biodiesel tax credits
would result in growth in BBD imports from Argentina and other countries. Total expected
production of biodiesel in Argentina in 2018 is expected to approach 1 billion gallons and
domestic demand in that country has stalled as the Argentinian biodiesel mandate has
remained constant.6

90

80

70
Million gallons per month

60

50

40

30

20

10

0
2009 2010 2011 2012 2013 2014 2015 2016 2017

Argentina Canada Germany Indonesia Korea Finland Singapore

Figure 2: Monthly imports of BBD from top countries from 2009 to May 2017
While Argentinian biodiesel is likely largely or entirely produced from soy oil, imports of BBD
from palm oil have likely increased over recent years as well. Palm is not an eligible feedstock
for the BBD category in the RFS, but biofuel facilities that were in production prior to the
enactment of EISA in 2007 are grandfathered into the program and may produce renewable fuel
(D6) Renewable Identification Numbers (RINs); this includes foreign biofuel facilities. There are
two palm biodiesel facilities in Indonesia that are grandfathered into the RFS.7 In addition, Neste
has grandfathered renewable diesel facilities in Finland and Singapore that likely produce fuel
largely from palm oil. Neither EPA nor EIA collects data on feedstock for imported BBD, and so
here we show our estimation of total imports of palm BBD based on the available data. Figure 3
shows a range of volumes of BBD imports that are likely produced from palm oil and used for
RFS compliance over the period 2013-2016, using import data from EIA.8 The lower end of this
range shows BBD imports only from Indonesia. EIA’s company-level import data9 shows that
imports from Indonesia are entirely from either Wilmar, a major Indonesian palm oil company, or

5
https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_Buenos%20Aires_Arge
ntina_7-17-2017.pdf
6
Ibid.
7
https://www.dtnpf.com/agriculture/web/ag/news/article/2017/04/17/us-producers-claim-injury-biodiesel-2
8
Downloaded from
https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_EPOORDB_im0_mbbl_m.htm
9
https://www.eia.gov/petroleum/imports/companylevel/
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

from Biosphere, a company that sources biofuel from Wilmar.10 The upper end of the range in
Figure 3 includes half of all imports from Finland and Singapore (except for 2013, in which the
total number of D6 RINs generated from BBD was lower than this estimate; for 2013 the total
number of D6 RINs generated from BBD is shown, using data from EPA’s EMTS.)11 In 2016,
11% of all BBD imports were from Indonesia, and up to 24% were derived from palm oil,
according to our estimation.

250

200
Million gallons per year

150

100

50

0
2013 2014 2015 2016

Palm BBD (min) Palm BBD (max)

Figure 3: Range of potential volumes of palm BBD imports

Palm BBD is particularly concerning from a climate perspective because palm oil production is
associated with very high GHG emissions from land use change. One-third of all new palm
plantations in Indonesia and Malaysia, countries that produce nearly all of the global supply of
palm oil, occur on drained peat soils.12 The draining of peat soils for palm cultivation results in
very high GHG emissions: 95 tonnes CO2e per hectare per year when amortized over 30
years.13 By EPA’s analysis, palm biodiesel does not meet the 20% GHG reduction threshold
required for renewable fuel,14 and economic modeling performed for the purposes of EU
regulation indicates that palm BBD has more than double the GHG intensity of fossil
petroleum.15 Moreover, deforestation resulting from oil palm expansion is associated with high

10
http://portexaminer.com/trade-data/pt-wilmar-bioenergi-indonesia-biosphere-fuels-
llc/tkmalep1601pebvc/
11
https://www.epa.gov/fuels-registration-reporting-and-compliance-help/public-data-renewable-fuel-
standard
12
http://www.theicct.org/sites/default/files/publications/ICCT_palm-expansion_Feb2012.pdf
13
http://www.theicct.org/sites/default/files/publications/ICCT_Peat-Emissions_Sept2011.pdf
14
https://www.gpo.gov/fdsys/pkg/FR-2012-01-27/pdf/2012-1784.pdf
15
https://ec.europa.eu/energy/sites/ener/files/documents/Final%20Report_GLOBIOM_publication.pdf
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

biodiversity loss, health impacts from air pollution generated by forest fires, water pollution, and
negative impacts on indigenous populations.16
It is notable that Indonesia did not export any BBD to the U.S. prior to 2013, and imports of likely
palm BBD from other countries was also low pre-2013. Facilities in these countries were eligible
to produce RINs before this time. The likely reason exports rose starting in 2013 was that this
was the first year it became profitable to do so. Prior to 2013, D6 RIN prices had been
consistently less than 10 cents. As the U.S. gasoline supply approached the 10% ethanol
blendwall in 2013, D6 RIN prices increased rapidly to over 60 cents, providing a much greater
incentive for all eligible renewable fuels.17 As of early August, 2017, the D6 RIN price was nearly
$1 (translating to $1.50 per gallon biodiesel and $1.70 per gallon renewable diesel).18 This level
of price support is highly likely to incentivize continued imports of BBD from Indonesia and other
countries.
While the use of palm BBD in the U.S. directly contributes to oil palm expansion on peatland in
Southeast Asia, the use of domestically produced feedstocks is linked to palm oil as well. When
soy oil use is diverted from existing uses, such as food, livestock feed, and oleochemicals, it is
replaced by other vegetable oils. As palm oil is generally the least expensive vegetable oil
available, it likely substitutes for soy oil in non-fuel uses. An econometric analysis commissioned
by the ICCT demonstrates that an increase in the price of U.S. soy oil leads to an increase in
U.S. palm oil imports.19 Figure 4 shows that U.S. palm oil imports have increased over the same
period as the ramp up in soy oil use in biodiesel. For perspective, the increase in the amount of
palm oil imports to the U.S. over this period is roughly equivalent to 400 million gallons of palm
biodiesel.20 Besides worsening climate impacts, increasing imports of palm oil to the U.S. does
not fulfill the energy independence goals of the RFS program as we are increasingly dependent
on foreign sources of food, feed, and chemical feedstocks.

16
Reviewed in http://www.theicct.org/sites/default/files/publications/Indonesia-palm-oil-
expansion_ICCT_july2016.pdf
17
http://www.theicct.org/blogs/staff/does-biodiesel-really-need-tax-credit
18
http://www.progressivefuelslimited.com/web_data/PFL_RIN_Recap.pdf
19
http://www.theicct.org/sites/default/files/publications/Cross-price-elasticities-for-oils-fats-US-
EU_ICCT_consultant-report_06032017.pdf
20
Assuming 7.5 lbs vegetable oil per gallon biodiesel
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

Figure 4: Soy oil used in biodiesel in the U.S. compared with U.S. palm oil imports21
Other biodiesel and renewable diesel feedstocks often considered “wastes,” such as tallow,
inedible corn oil, and palm fatty acid distillates, are also linked to palm. New research performed
by and commissioned by ICCT finds that the diversion of these materials to biofuel production
likely results in increased use of palm oil and other vegetable oils.22 For example, in the
absence of biofuel policy, inedible corn oil would be used in livestock feed. When corn oil is
used in biofuel, it is likely replaced largely by palm oil, as the least expensive vegetable oil
available.23
Any growth in BBD volumes above expected growth in feedstock availability will inevitably lead
to a combination of increased BBD imports and feedstock switching, which will in turn lead to
increased feedstock imports. In 2016, ICCT assessed BBD feedstock availability and expected
growth in availability through 2022 and concluded that such growth will be limited.24 EPA
recognizes this in the proposal: “We expect a decreasing rate of growth in the availability of
feedstocks used to produce [advanced biodiesel and renewable diesel]. To the extent that
higher advanced biofuel requirements cannot be satisfied through growth in the production of
advanced biofuel feedstocks, they would instead be satisfied through a re-direction of advanced
feedstocks from competing uses, leading to lower overall GHG emission benefits.” ICCT’s
research concurs with this statement. Increasing BBD volumes will lead to increased BBD
imports, increased feedstock switching and feedstock imports, and lower overall GHG emission

21
http://theicct.org/sites/default/files/publications/Oil-palm-expansion_ICCT-Briefing_27072017_vF.pdf
22
http://www.theicct.org/sites/default/files/publications/RED-II-Analysis_ICCT_Working-
Paper_05052017_vF.pdf and http://www.theicct.org/sites/default/files/publications/Waste-not-want-
not_Cerulogy-Consultant-Report_August2017_vF.pdf
23
Ibid.
24
http://www.theicct.org/sites/default/files/publications/Biodiesel%20Availability_ICCT_20160707.pdf
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

benefits. At the same time, BBD required in the RFS program has a substantial cost for
obligated parties and consumers.

EPA’s proposed volumes for 2017

EPA has proposed to reduce the statutory amount of renewable fuel and advanced biofuel by
the same amount as the reduction in cellulosic biofuel, not allowing advanced biofuel and
renewable fuel to backfill the shortfall in cellulosic biofuel. EPA argues that “the substantial
growth in advanced biofuel volumes after 2015 that was anticipated by Congress, and reflected
in the statutory tables, was to be driven primarily by increases in cellulosic biofuel as opposed to
non-cellulosic advanced biofuels.” ICCT agrees with this assessment. Advanced biofuel and
renewable fuel do not provide the same level of GHG and other environmental benefits
associated with cellulosic biofuel. ICCT thus believes that EPA is justified in applying the
cellulosic waiver fully to the advanced biofuel and renewable fuel volumes.
EPA has not proposed to use the general waiver authority but requests comments on whether
the agency should use this authority to reduce the renewable fuel volume “in an effort to
increase the energy independence impacts of the RFS program. EPA invites comment and data
on these issues, including data and analysis that would support different use of the waiver
authorities than we are proposing in today’s action, such as use of the general waiver authority
to achieve greater reductions than proposed.”
ICCT believes EPA would be justified in invoking the general waiver authority to reduce
environmental harm caused by high volumes of BBD and corn ethanol in the RFS program.
Paragraph (7)(A) of section 211(o) of the Clean Air Act (42 U.S.C. 7545(o)(7)(A)) states the
general waiver authority may be used if “implementation of the requirement would severely
harm the economy or environment of a State, a region, or the United States.” Satellite evidence
shows that cultivated corn area in the U.S. expanded significantly from 2008 to 2012, converting
natural grasslands and wetlands.25 These areas play an important ecological role in storing
carbon, filtering pollutants from waterways, and fostering biodiversity. Renewable fuel volumes
in the RFS have increased since 2012, and thus it is likely that further environmental harm has
occurred in the U.S. and in other countries. EPA’s proposal for 2018 maintains the renewable
fuel volume at approximately the same level as the required volume in 2017, and would thus
maintain pressure on U.S. farmland. Reducing the renewable fuel and advanced biofuel
volumes would likely reduce the environmental harm caused by the RFS program by allowing
some farmland to return to its natural land use and by reducing the extent to which total
cropland expansion would occur in response to other market demands.
Furthermore, using the general waiver authority to reduce advanced biofuel and renewable fuel
volumes compared to the proposal would increase the energy independence impacts of the
RFS program. The data we present above demonstrates that the increasing volumes in the RFS
program have led to increasing imports of both fuel and feedstock. Reducing volumes would
likely reduce RIN prices, making imports less profitable and reducing the degree to which the
U.S. is dependent on foreign renewable energy sources. Reducing the renewable and
advanced biofuel volumes would also reduce the negative GHG and other environmental
impacts associated with imported fuel and feedstock.

25
http://iopscience.iop.org/article/10.1088/1748-9326/10/4/044003/meta
 ICCT comments on docket no. EPA–HQ–OAR–2017-0091

Biomass-based diesel volume for 2019

EPA has proposed to set the 2019 BBD volume at the same level as the 2018 requirement and
requests comment “on decreasing the required volume of BBD for 2019 in an effort to increase
the energy independence impacts of the RFS program.” According to the statute, BBD volumes
in all years after 2012 must be at least 1 billion gallons per year. EPA may thus reduce BBD
volumes to as low an amount as 1 billion gallons without requiring the use of any waiver
authority. ICCT believes that EPA would be justified in reducing the 2019 BBD volume below
the 2018 requirement for several reasons.
Reducing the BBD volume for 2019 would increase the energy independence impacts of the
RFS program. As argued above, BBD used for RFS compliance has been increasingly sourced
from imported fuel and has led to increasing imports of feedstocks. Reducing the BBD volume in
2019 can thus be expected to reduce U.S. reliance on foreign sources of renewable energy.
According to the statute, EPA is required to consider feedstock supply in setting annual BBD
volumes. As EPA has noted, an increase in the production of BBD above the growth in
feedstock availability will lead to increased diversion of feedstocks from other uses, with
corresponding GHG emissions and negative impacts on the markets of those other feedstock
uses. The increase in BBD production in recent years has already outstripped the growth in
feedstock availability. In 2016, approximately 1.5 billion gallons of BBD was produced in the U.S.
ICCT’s research performed in 2016 showed that domestic BBD feedstock availability would be
expected to grow by only 23 million gallons from 2016 to 2017, by 65 million gallons from 2016
to 2018, and by 107 million gallons biodiesel equivalent from 2016 to 2019.26 EPA’s BBD
volumes for 2017 and 2018 that have already been finalized at 2.0 and 2.1 billion gallons,
respectively, thus require a significant increase in imports of fuel and feedstock compared to
2016. Maintaining the BBD volume at 2.1 billion gallons for 2019 thus maintains that demand for
imports. Reducing the 2019 BBD volume to 1.6 billion gallons would protect the U.S. domestic
industry while protecting feedstock supply and reducing our reliance on imports.
Reducing the 2019 BBD volume would provide GHG benefits as it would reduce the amount of
palm BBD used for RFS compliance. It would also reduce pressure on domestic soy oil markets
and likely reduce the amount of palm oil imported to the U.S. for non-fuel uses. Palm oil is
associated with very high CO2 emissions and other severe environmental harm, and reducing
demand for palm oil through a lower 2019 BBD volume would reduce these negative impacts.
Lowering the 2019 BBD requirement would also reduce the cost burden of the RFS program on
obligated parties and on consumers. The price premium for soy biodiesel of $1.36 - $1.85
according to EPA’s assessment is a very substantial increase over the current national average
retail price of diesel at $2.55 per gallon.27
Lastly, reducing the 2019 BBD standard would provide greater opportunity for non-BBD biofuels
to contribute towards the advanced biofuel volume. This could encourage the development of
novel technologies and pathways that may provide greater GHG and energy security benefits
compared to BBD. Reducing the 2019 BBD volume would foster productive competition
amongst advanced biofuel pathways.

26
http://www.theicct.org/sites/default/files/publications/Biodiesel%20Availability_ICCT_20160707.pdf
27
https://www.afdc.energy.gov/fuels/prices.html