Plotting future, US biofuel industry seeks federal clean fuel program from Biden

America's biggest biofuel companies plan to ask President-elect Joe Biden to impose a nationwide standard to reduce carbon emissions from transport fuels, according to five sources familiar with the matter, and hope to preserve a role for products like ethanol amid the fight against climate change.

The planned push from the biofuel industry reflects its increasing concern about the future as Biden prepares measures to slash emissions that could upend traditional energy markets, and as the federal regulation that has underpinned growth in the biofuel market for more than a decade - the Renewable Fuel Standard - nears expiry in its current form.

Officials from biofuel companies and trade groups like POET LLC, Pacific Ethanol, and the Renewable Fuels Association teamed up with representatives from the agriculture, autos, and electricity industries to draft a letter to Biden urging a nationwide "clean fuel standard," the sources said.

It was not clear which groups had signed the final letter.

Such a rule would require reductions in the amount of greenhouse gas emissions emitted through the production, transport and combustion of fuels, but would allow for flexibility for how those goals are achieved - including through the purchase of carbon credits generated by companies like electrical vehicle producers.

"A federal clean fuels policy is crucial to provide a durable price signal for clean fuels deployment, including electricity, hydrogen, biofuels, and others, across the country," the letter, seen by Reuters, said. The group planned to send the letter soon, the sources said. Biofuel producers claim the carbon intensity of their fuels is low, mainly because they are produced from renewable crops like corn and other organic materials.

Transportation is the largest source of greenhouse gas emissions in the United States, ahead of the power industry, and will be a target for Biden as he seeks to deliver on a campaign promise to bring the country to net-zero emissions by 2050.

California already has a Low Carbon Fuel Standard, and the head of the state's environmental body overseeing the program, Mary Nichols, is on Biden's short list to run the U.S. Environmental Protection Agency.

"There is growing consensus among the biofuel community that there is a lot of promise for ethanol and other renewable fuels in a national LCFS (Low Carbon Fuel Standard) program that is truly tech- and fuel-neutral," one source familiar with the industry's deliberations said.

A NEW COURSE

The draft letter shows the industry, for the first time, charting a potentially different future than the one that has been laid out by the Renewable Fuel Standard, a George W. Bush-era law that requires refiners blend increasing amounts of biofuels into the fuel pool. While the RFS has created a multibillion-gallon annual market for ethanol and other biofuels, the regulation will reset in 2022. At that point, the authority to set new annual volume targets moves to the discretion of the EPA, raising uncertainty over future demand for biofuels. Biden's yet-to-be defined climate policy adds to that uncertainty because it could drastically reduce demand for liquid fuels if it is not flexible.

The working group that drafted the letter first began conversations more than a year ago, well before the presidential election, to find common ground between the industries. Once Biden won the election, they finalized the memo, according to one of the sources.

President Donald Trump had downplayed concerns about global warming and had been undoing environmental regulation to unfetter drillers, miners and manufacturers.

The working group has discussed whether a national low-carbon fuel program would be applied on top of the RFS after 2022, or would simply replace it, though no consensus has been reached, according to the sources.

"We have a well-established mechanism - already in statute - that gives the administration a powerful lever to shift the market toward clean, renewable energy," said Brooke Coleman of the Advanced Biofuels Business Council.-Reuters