Looking for a biofuels compromise – mckeany-flavell electricity review worksheet answers

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The biofuels debate has intensified once again, presenting the current administration with a complex challenge as it seeks to reform the controversial Renewable Fuel Standard (RFS). Two main constituencies are butting heads: On the one hand, oil companies complain that the cost of blending ethanol with gasoline has spiked in recent years, leaving them with additional costs that greatly affect their profits. Recently the refinery Philadelphia Energy Solutions filed for bankruptcy, citing the RFS as one of the main causes. On the other hand, farmers are pushing to increase the biofuel mandate, as they deem it crucial to support jobs and commodity prices.

President Donald Trump has recently held several meetings trying to reach an agreement that satisfies both parties. The most recent proposal is to cap the price of Renewable Identification Numbers (RINs) at 10 cents and in exchange allow the sale of E15 throughout the year.

The Environmental Protection Agency (EPA) has allowed seasonal sales of gasoline blended with 15 percent gasoline since 2011. Gas stations can sell gasoline with 15 percent ethanol most of the year except for three and a half months during the summer (between June 1 and September 15). The summer ban is based on the fact that gasoline blended with ethanol is more volatile. Volatility in gasoline is measured using Reid Vapor Pressure (RVP). During the hottest months of the year, accelerated evaporation makes gasoline more volatile, theoretically increasing potential pollution via evaporative emissions. However, RVP in ethanol fuel blends is not a straight line: RVP increases until the blend rate reaches E25 and then starts to drop, with E85 reaching the same or lower RVP as E10. Proponents of E15 challenge this claim, asserting instead that RVP is about equal for E15 is equal to or lower than that for E10.

Even though EPA allows E15+ sales most of the year, only 0.4 percent of gasoline sold in the U.S. is at this higher blend rate. Farmers believe that if E15 sales are allowed year round, ethanol consumption would increase sharply. FCStone estimates that annual ethanol consumption could rise to 19 billion gallons from the 15 billion currently consumed. However, other factors may be preventing higher ethanol blend ratios, otherwise E15 consumption would already be higher. Several reasons may be preventing E15, including:

When the RFS was created, the volume of ethanol it required blended into gasoline was projected to increase year over year. However, the administration did not foresee that use of gasoline would flatten in the near future. Under Obama-era rules, cars have become more fuel efficient, while people are driving less. Commuting has decreased, as more of the work force works remotely. EPA recently decreased RFS mandates to compensate for that change.

Although the RFS requires refineries to blend a certain volume of ethanol with gasoline, refineries that do not have the infrastructure or capacity to blend can buy RINs in the market to meet that requirement. RINs are issued based on biofuel volumes, either produced domestically or imported, and allow units of biofuel to be tracked through the production/blending/sales cycle—hence “identification.” In years when biofuel utilization exceeds RFS mandated volumes, the industry produces excess RINs that can be sold to companies that have not achieved mandated volumes or that can be held in reserve (until they expire) for use in years when demand falls, reducing actual biofuel production or imports.

A complex market for RINs has evolved, and the price of RINs in recent years has appreciated sharply, resulting in refineries paying millions of dollars to meet their biofuel blending requirement. According to McKinsey, RINs have indirectly boosted the price of crude oil by $3 to $4 by raising refiners’ costs. Valero, for example, spent $850 million in RINs in 2016.

Speculators have poured money into the RIN market, contributing to its appreciation, prompting claims of fraudulent trading. Pro-petroleum policy groups advocate barring speculators from that market and capping RIN pricing. Farmers, however, strongly oppose a price cap, claiming that it would discourage biofuel production: If the price of RINs is too low, many refiners would not have an incentive to blend and instead would buy RINs to fulfill their RFS requirement.

Despite the belief that capping RINs in exchange for year-round E15 may be a practical compromise, the biofuel debate may be far too complex for such a simple solution. The Trump administration is starting to distance itself from the debate and might let Congress find its own solution: Taking a stance could alienate a core constituency, especially risky in an election year. For now, no changes have been announced, but any significant alterations to the RFS could have major implications well beyond the gas pump. Just looking at dry-mill-produced ethanol, U.S. livestock producers have made a home for distillers grains and distillers corn oil. Any commercial-scale ag product is a fundamental part of regional economic health and today likely has a global effect as well, and biofuels form an especially ornate web. Source: 123rf.com Posted by: Information Services

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