Restricting prices of biofuels credits is one reform of U.S. government's biofuels policy that could stimulate long-awaited growth of the advanced fuels industry, Columbia University's Center on Global Energy Policy said in a report on Thursday.
Establishing a "collar" through price caps and floors for Renewable Identification Number (RIN) prices is one overhaul that would eliminate industry uncertainty over the compliance costs and subsidy levels laid out by the Renewable Fuel Standard (RFS) program, said James Stock, the report's author and a former member of the President's Council of Economic Advisers.
The credits are meant to incentivize use of the biofuel, but the market for them has been volatile, often because policy uncertainty has added to their cost. Prices soared in 2013 ahead of an announcement on the EPA volumes mandates for the following year.
Establishing price floors and caps would eliminate that "defect," said Stock.
It is one of a litany of potential changes outlined in Stock's report that considers how the RFS can be altered to boost advanced biofuels, an industry that has lagged behind the targeted production levels set by Congress in 2007 when it expanded the RFS policy.
The program was designed to require an increasing amount of transportation fuels be derived from renewable fuels that use waste products, but a lack of investment has kept volumes below those targets.
In the United States, corn-based ethanol represents the vast majority of the renewable fuel supply. The U.S. government outlined a plan in 2007 that mandated increased use of fuels made of plant waste.
Stock also said that other changes could be made by the U.S. Environmental Protection Agency (EPA), the federal agency that oversees the program, that would not require a policy overhaul.
Multi-year guidance, rather than annual targets, from the EPA could further address the uncertainty that has prevailed in the U.S. renewable fuels industry due to late mandates for the volumes of the ethanol and other biofuels that need to be blended into the transportation fuel supply, said Stock.
The EPA has yet to announce the volumes targeted for 2014, and is also late in issuing the requirements for 2015.