Regulation of Fuels and Fuel Additives: Renewable Fuel Standard ...

We investigated several other issues related to emissions and air quality that could
affect our estimates of the impacts of increased use of renewable fuels. These are
discussed in section VIII and in greater detail in the draft Regulatory Impact Analysis
(DRIA). For instance, our current models assume that recent model year vehicles are
insensitive to many fuel changes. However, a limited amount of new test data suggests
that newer vehicles may be just as sensitive as older model year vehicles. Our sensitivity
analysis suggests that if this is the case VOC emissions could decrease slightly while
NOx would still increase. We also evaluated the emissions from the production of both
ethanol and biodiesel fuel and determined that they will also increase with increased use
of these fuels. Nationwide, emissions related to the production and distribution of
ethanol and biodiesel fuel are expected to be of the same order of magnitude as the
emission impacts related to the use of these fuels in vehicles. Finally, a lack of emission
data and atmospheric modeling tools prevented us from making specific projections of
the impact of renewable fuels on ambient PM levels. However, ethanol use may have an
affect on ambient PM levels. Emerging science indicates that aromatic VOC emissions
react in the atmosphere to form PM. Increased ethanol use is expected to cause a
corresponding reduction in the aromatic content of gasoline, which should reduce
aromatic VOC emissions and therefore potentially also impact atmospheric PM levels.
All of these issues will be the subject of further study and analysis in the future.
3. Economic Impacts
As discussed in more detail in Section X, for the final rule we also plan to assess a
range of economic impacts that could result from the expanded use of renewable fuels.
Due to the time required to complete these analyses, we only have preliminary data for
some of these impacts available for this proposal.
In Section VII of this preamble, we estimate the cost of producing the extra
volumes of renewable fuel anticipated through 2012. For corn ethanol, we estimate the
per gallon cost of ethanol to range from $1.20 per gallon in 2012 (2004 dollars) in the
case of the 7.2 billion gallons per year case and $1.26 per gallon in the case of the 9.6
billion gallon case. These costs take into account the cost of the feedstock (corn), plant
equipment and operation and the value of any co-products (distiller’s dried grain and
solubles, for example). For biodiesel, we estimate the per gallon cost to be between
$1.89 and $2.11 per gallon if produced using soy bean oil, and less if using yellow grease
or other relatively low cost or no-cost feedstocks. All of these fuel production costs are
without accounting for tax subsidies for these renewable fuels 4 . We also note that these
costs represent the production cost of the fuel and not the market price. In recent years,
the prices of ethanol and biodiesel have tended to track the prices of gasoline and diesel,
in some cases even exceeding those prices.
4
Tax subsidies were subtracted out of the cost estimates, but consumer behavior in the absence of these
tax subsidies was not modeled.
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