Crunch year for US biofuels

US Ethanol and biodiesel policies are set to collide this year – with each other and with reality – Bloomberg New Energy Finance finds in new "What to Watch for" biofuels white paper.

New York, 25 February 2013 – Policies that govern the use of US corn-based ethanol – one which calls for a minimum amount of consumption, and another which limits how much can go into automobile tanks – are set to collide in 2013, market research firm Bloomberg New Energy Finance finds in a new report. Another policy, which stipulated a minimum amount of 'cellulosic', biofuel production, has already had to be relaxed this year, as policymakers recognized that the original targets are simply unrealistic.

The US biofuels industry could provide up to 13.4bn gallons of corn-based ethanol this year. This would be practically equal to the minimum amount of corn ethanol required under a mandate known as the US Renewable Fuel Standard. It is also equal to the maximum amount of ethanol that may be legally and practically blended with gasoline, a limit known in the industry as the 'blend wall.'

The clashing of these conflicting policies, and the challenge of meeting the original target for cellulosic biofuels, is one of eight US biofuels stories to follow in 2013, which are described in a white paper published by the research firm Bloomberg New Energy Finance, entitled "The US Biofuels 2013: The Stories to Watch".

The relaxation of the cellulosic biofuels target was only the first of several critical choices that policymakers and industry players are facing this year. Blenders may choose to comply with a biofuels mandate by making use of 'credits' in lieu of actual physical corn ethanol; farmers have to choose whether to plant corn or soybeans; and policymakers may choose to renegotiate the Renewable Fuels Standard, currently the most important policy for the industry.

The main story of 2012 was the worst US drought in 50 years, which lifted corn prices and put pressure on food and biofuels producers alike. This year, explains the Bloomberg New Energy Finance white paper, the US biofuels market will be defined by eight stories, touching on subjects ranging from US weather conditions to export flows of Brazilian ethanol, from US politics to the planting choices facing US farmers. The stories are explained in detail in the white paper, which can be downloaded here:

"From Iowa, to Brazil, to Washington, the biofuels sector faces difficult choices", said Alejandro Zamorano Cadavid, US analyst for biofuels at Bloomberg New Energy Finance. "Corn ethanol use has expanded rapidly in the US as an oxygenate in gasoline. But this year biofuels must – by law – play a significantly bigger role in the US transport sector and that is raising significant challenges."


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