By Dennis Clark, Kentucky Soybean Board representative to the National Biodiesel Board
A new analysis by the National Biodiesel Board (NBB) and the World Agricultural Economic and Environmental Services (WAEES) found that capping the price of conventional biofuels’ Renewable Identification Numbers (RINs) will significantly harm the production of biodiesel and related industries. Although some believe that limiting the price of RINs for the conventional biofuels market won’t harm biomass-based diesel volumes, including biodiesel made from soybean oil, the analysis made it clear that a price cap on conventional ethanol RINs would result in lower volumes of biomass-based diesel produced and used in the United States.
“Capping the price of conventional ethanol RINs would devastate the biodiesel industry—swiftly and significantly—reducing the amount of volumes produced and people employed. Satisfying the whims of fewer than five refiners isn’t worth the resulting harm to millions of workers in U.S. agriculture and livestock production, as well as American consumers. President Trump can sniff out a good deal from a bogus one, and we are hopeful that he will stick with his campaign promise and reject a cap on RIN prices,” said Kurt Kovarik, NBB’s vice president of federal affairs.
The analysis found that capping the price of conventional ethanol RINs would lead to:
A reduction of up to 300 million gallons in biomass-based diesel volumes each year—in part, because these volumes would no longer be utilized for compliance with the conventional biofuels requirements;
$185 million more in feed costs for livestock producers—likely leading to an increase in food costs for consumers; and
$.16 less per bushel for soybeans.
Important to understand results of the analysis, the model made conservative assumptions, including an assumption that the biodiesel tax credit would be reinstated. If the credit isn’t reinstated, biodiesel proponents should expect to see even greater harm and lower volumes produced domestically.
The analysis showed that soybean producers would receive approximately 16 cents less per bushel in 2020 due to reduced demand for their products. On the flip side, the price of soybean meal—i.e., the protein, not the oil for biodiesel production—will increase more than $5 per short ton. As a result, livestock producers are expected to pay roughly $185 million more in feed costs due to a cap on RINs. These increased costs may negatively impact consumer food costs.
“This analysis clearly demonstrates the severe harm to the biodiesel market caused by capping conventional ethanol RIN prices,” said Dennis Clark, a soybean farmer from Sedalia who represents Kentucky on the National Biodiesel Board. “The impacts of a RIN cap also extend far beyond energy markets—harming livestock and soybean producers, and raising the cost of food for consumers.”
The Renewable Fuel Standard—a bipartisan policy passed in 2005 and signed into law by President George W. Bush—requires certain volumes of renewable fuels to be used in transportation fuel, heating oil or jet fuel. Expanded in 2007, the law requires increasing volumes of advanced biofuels, such as biomass-based diesel, with each year. Advanced biofuels are fuels designated by the U.S. Environmental Protection Agency for meeting the threshold of reducing greenhouse gas emissions by at least 50 percent, as compared to petroleum. (Biodiesel has significant lifecycle greenhouse gas emissions reductions compared to petroleum diesel—anywhere from 57 to 122 percent.)
Biomass-based diesel and cellulosic biofuels are fuels nested within the advanced biofuels category, and can qualify both as their nested fuel type and as an advanced biofuel. Advanced biofuels can qualify for RINs for their advanced biofuel category, as well as conventional biofuels (which has a lower threshold of greenhouse gas emissions reductions). The interconnected nature of the program and how RINs can qualify for multiple categories is one reason that capping one type of RINs impacts other fuels.
Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil and animal fats, biodiesel is a renewable, clean-burning diesel replacement that can be used in existing diesel engines without modification. It is the nation’s first domestically produced, commercially available advanced biofuel. Biodiesel supports roughly 64,000 jobs across the United States and has increased the price that soybean farmers receive for their crop at the grain elevator.
Kentucky Soybean Association farmer-leaders will be on Capitol Hill in Washington, D.C. March 13 and 14 to discuss this and other issues important to Kentucky’s soybean growers.
For more information on soybean farming in Kentucky, visit www.kysoy.org.