Alternative Fuels and Advanced Technology Vehicles: Issues in Congress

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Alternative fuels and advanced technology vehicles are seen by proponents as integral to improving urban air quality, decreasing dependence on foreign oil, and reducing emissions of greenhouse gases. However, major barriers—especially economics—currently prevent the widespread use of these fuels and technologies. Because of these barriers, and the potential benefits, there is continued congressional interest in providing incentives and other support for their development and commercialization. 

Alternative fuels and advanced technology vehicles have were addressed early in the 111th Congress, as both the House and Senate versions of the American Recovery and Reinvestment Act of 2009 (H.R. 1) contained provisions supporting their development and deployment. While some of these provisions were removed in conference, the final version contains provisions for tax incentives, federal grants and loans, and other federal support for alternative fuels and advanced vehicles. 

On February 3, 2010, the Environmental Protection Agency (EPA) finalized new rules for the renewable fuel standard (RFS) that was expanded by the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140). In 2010, the RFS will require the use of 12.95 billion gallons of ethanol and other biofuels in transportation fuel. Within that mandate, the RFS will require the use of 0.95 billion gallons of advanced biofuels, including 6.5 million gallons of cellulosic biofuels. EISA also requires that advanced biofuels (as well as conventional biofuels from newly built refineries) meet certain lifecycle greenhouse gas reduction requirements. EPA's methodology and conclusions on various biofuels' lifecycle emissions have been controversial. 

The 111th Congress is likely to further discuss alternative fuels and advanced technology vehicles as it addresses other key topics. These include their role in any federal policy to address climate change, and their role in federal energy policy. The 111th Congress may also play an oversight role in the development of major regulations: the Environmental Protection Agency's implementation of the RFS; the Department of Transportation's implementation of new fuel economy standards enacted in 2007; and the Department of Agriculture's implementation of a new Farm Bill enacted in 2008. Further, some key tax incentives for biofuels expired at the end of 2009, and may be extended in the second session of the 111th Congress.


Date of Report: February 4, 2010
Number of Pages: 21
Order Number: R40168
Price: $29.95

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Biofuels Incentives: A Summary of Federal Programs

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

With recent high energy prices, the passage of major energy legislation in 2005 (P.L. 109-58) and 2007 (P.L. 110-140), and the passage of a new Farm Bill in 2008 (P.L. 110-246) there is ongoing congressional interest in promoting alternatives to petroleum fuels. Biofuels—transportation fuels produced from plants and other organic materials—are of particular interest. 

Ethanol and biodiesel, the two most widely used biofuels, receive significant government support under federal law in the form of mandated fuel use, tax incentives, loan and grant programs, and certain regulatory requirements. The 22 programs and provisions listed in this report have been established over the past three decades, and are administered by five separate agencies and departments: Environmental Protection Agency, U.S. Department of Agriculture, Department of Energy, Internal Revenue Service, and Customs and Border Protection. These programs target a variety of beneficiaries, including farmers and rural small businesses, biofuel producers, petroleum suppliers, and fuel marketers. Arguably, the most significant federal programs for biofuels have been tax credits for the production or sale of ethanol and biodiesel. However, with the establishment of the renewable fuel standard (RFS) under P.L. 109-58, Congress has mandated biofuels use; P.L. 110-140 significantly expanded that mandate. In the long term, the mandate may prove even more significant than tax incentives in promoting the use of these fuels. 

The 2008 Farm Bill—The Food, Conservation, and Energy Act of 2008—amended or established various biofuels incentives, including lowering the value of the ethanol excise tax credit, establishing a tax credit for cellulosic biofuel production, extending import duties on fuel ethanol, and establishing several new grant and loan programs. 

Some key biofuels incentives have expired or are set to expire (e.g., tax credits for biodiesel and renewable diesel), and there is congressional interest in extending these credits. 

This report outlines federal programs that provide direct or indirect incentives for biofuels. For each program described, the report provides details including administering agency, authorizing statute(s), annual funding, and expiration date. The Appendix provides summary information in a table format.


Date of Report: January 27, 2010
Number of Pages: 18
Order Number: R40110
Price: $29.95

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Selected Issues Related to an Expansion of the Renewable Fuel Standard (RFS)

Randy Schnepf 
Specialist in Agricultural Policy 

Brent D. Yacobucci
 Specialist in Energy and Environmental Policy

Biofuels have grown significantly in the past few years as a component of U.S. motor fuel supply. Current U.S. biofuels supply relies primarily on ethanol produced from Midwest corn. Today, ethanol is blended in more than half of all U.S. gasoline (at the 10% level or lower in most cases). Federal policy has played a key role in the emergence of the U.S. biofuels industry in general, and the corn ethanol industry in particular. U.S. biofuels production is supported by federal and state policies that include minimum usage requirements, blending and production tax credits, an import tariff to limit importation of foreign-produced ethanol, loans and loan guarantees to facilitate the development of biofuels production and distribution infrastructure, and research grants. 

Congress first established a Renewable Fuel Standard (RFS)—a mandatory minimum volume of biofuels to be used in the national transportation fuel supply—with the enactment of the Energy Policy Act of 2005 (EPAct, P.L. 109-58). This initial RFS mandated that a minimum of 4 billion gallons be used in 2006, and that this minimum usage volume rise to 7.5 billion gallons by 2012. Two years later, the Energy Independence and Security Act of 2007 (EISA, P.L. 110-140) superseded and greatly expanded the biofuels blending mandate. EISA required the annual use of 9 billion gallons of biofuels in 2008 and expanded the mandate to 36 billion gallons annually in 2022, of which only 15 billion gallons can be ethanol from corn starch. The remaining 21 billion gallons are to be so-called "advanced biofuels"—that is, biofuels produced from feedstocks other than corn starch, including sugarcane, oil crops, and cellulose. 

In the long term, the expanded RFS is likely to play a dominant role in the development of the U.S. biofuels sector, but with considerable uncertainty regarding potential spillover effects in other markets and on other important policy goals. Emerging resource constraints related to the rapid expansion of U.S. corn ethanol production have provoked questions about the sustainability of continued growth in biofuels production and about possible unintended consequences, including potential market and environmental effects of a major shift in U.S. agricultural land use patterns, increased energy demand to grow feedstocks and process them into liquid fuel, and nearterm barriers to developing the infrastructure needed to deliver increasing volumes of biofuels to the market. 

Questions also exist about the ability of the U.S. biofuels industry to meet the expanding mandate for biofuels from non-corn sources such as cellulosic biomass materials (e.g., grasses, trees, and agricultural and municipal wastes). Although cellulosic feedstock sources appear promising, technological barriers make them very expensive to produce relative to conventional ethanol and keep their future uncertain. Another important biofuel, biodiesel, is produced from soybeans and other oil crops, but also remains expensive to produce owing to the relatively high prices of its feedstocks. 

Key policy questions are whether a renewable fuel mandate is the most effective policy to promote the above goals, if government intervention in the industry is appropriate, and, if so, what level is appropriate. 

This report describes the nature of the RFS mandate, its implementation, and some emerging issues regarding the long-term growth of the U.S. biofuels sector. 

Date of Report: January 28, 2010
Number of Pages: 25
Order Number: R40155
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Intermediate-Level Blends of Ethanol in Gasoline, and the Ethanol “Blend Wall”

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

On March 6, 2009, Growth Energy (on behalf of 52 U.S. ethanol producers) applied to the Environmental Protection Agency (EPA) for a waiver from the current Clean Air Act limitation on ethanol content in gasoline. Currently, ethanol content in gasoline is capped at 10% (E10); the application requests an increase in the maximum concentration to 15% (E15). If granted, the waiver would allow the use of significantly more ethanol in gasoline than is currently permitted. The existing limitation leads to an upper bound of roughly 15 billion gallons of ethanol in all U.S. gasoline. This "blend wall" could limit the fuel industry's ability to meet an Energy Independence and Security Act (EISA, P.L. 110-140) requirement to blend increasing amounts of renewable fuels (including ethanol) into motor fuels—thus the interest among ethanol producers in the waiver. 

On November, 30, 2009, EPA sent a letter to Growth Energy neither granting nor denying the waiver, stating that studies necessary for the agency to make a decision have not been completed, and that some of that data may be available in May or June of 2010. To meet the high volumes of renewable fuels mandated by EISA, EPA recognized that "it is clear that ethanol will need to be blended into gasoline at levels greater than the current limit of 10 percent." 

Under EISA, the EPA Administrator must grant or deny the waiver request within 270 days of receipt (December 1, 2009). The Clean Air Act is silent on the consequences if EPA does not grant or deny the waiver within the 270-day window, as is the case in the Growth Energy petition. 

To grant the waiver, the petitioner must establish to EPA that the increased ethanol content will not "cause or contribute to a failure of any emission control device or system" to meet emissions standards. EPA is to consider short- and long-term (full useful life) effects on evaporative and exhaust emissions from various vehicles and engines, including cars, light trucks, and non-road engines (e.g., lawnmowers). In its November 30 letter, EPA noted that long-term testing on newer vehicles has not been completed, but that the agency expects that model year 2001 and newer vehicles "will likely be able to accommodate higher ethanol blends, such as E15." In the letter the agency made no statements about older vehicles or non-road engines, but stated that EPA could "be in a position to approve E15 for 2001 and newer vehicles in the mid-year timeframe." 

In addition to the emissions control concerns, other factors affecting consideration of the blend wall include vehicle and engine warranties and the effects on infrastructure. Currently, no automaker warranties its vehicles to use gasoline with higher than 10% ethanol. Small engine manufacturers similarly limit the allowable level of ethanol. In addition, most gasoline distribution systems (e.g., gas pumps) are designed to dispense up to E10. While some of these vehicle and fuel distribution systems may be able to operate effectively on E15 or higher, their warranties/certifications would likely need to be updated. 

If EPA were to grant a waiver only for newer vehicles, a key question is how fuel pumps might be labeled to keep owners from using E15 in older vehicles and other equipment. A related question is whether fuel suppliers would even be willing to sell E15 if some of their customers may not use it. Further, it is unclear whether existing fuel distribution systems which were designed to dispense E10 can handle the higher-level ethanol blends. 


Date of Report: January 28, 2010
Number of Pages: 13
Order Number: R40445
Price: $29.95

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Calculation of Lifecycle Greenhouse Gas Emissions for the Renewable Fuel Standard (RFS)

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Kelsi Bracmort
Analyst in Agricultural Conservation and Natural Resources Policy

The Energy Independence and Security Act of 2007 (EISA; P.L. 110-140), significantly expanded the renewable fuel standard (RFS) established in the Energy Policy Act of 2005 (EPAct 2005; P.L. 109-58). The RFS requires the use of 9.0 billion gallons of renewable fuel in 2008, increasing to 36 billion gallons in 2022. Further, EISA requires an increasing amount of the mandate be met with "advanced biofuels"—biofuels produced from feedstocks other than corn starch and with 50% lower lifecycle greenhouse gas emissions than petroleum fuels. Within the advanced biofuel mandate, there are specific carve-outs for cellulosic biofuels and biomass-based diesel substitutes (e.g., biodiesel). 

To classify biofuels under the RFS, the Environmental Protection Agency (EPA) must calculate the lifecycle emissions of each fuel relative to gasoline or diesel fuel. Lifecycle emissions include emissions from all stages of fuel production and use ("well-to-wheels"), as well as both direct and indirect changes in land use from farming crops to produce biofuels. Debate is ongoing on how each factor in the biofuels lifecycle should be addressed, and the issues surrounding direct and indirect land use are particularly controversial. How EPA resolves those issues will affect the role each fuel plays in the RFS. 

EPA issued a Notice of Proposed Rulemaking on May 26, 2009, for the RFS with suggested methodology for the lifecycle emissions analysis. EPA is expected to promulgate regulations on biofuels lifecycle emissions in the next few months, although this rulemaking is already overdue under EISA. As EPA's decisions will affect the marketability of each combination of fuel type, feedstock, and production process, there is growing congressional interest in the topic. Congressional action could take the form of oversight of EPA's rulemaking process, or could result in legislation to amend the EISA RFS provisions. Further, related legislative and regulatory efforts on climate change policy and/or a low-carbon fuel standard would likely lead to interactions between those policies and the lifecycle determinations under the RFS. 

On January 12, 2009, the state of California finalized regulations for a state low carbon fuel standard (LCFS). The LCFS requires increasing reductions in the average lifecycle emissions of most transportation fuels. The rule does not require total emissions to decrease, but the emissions intensity (emissions per unit of energy delivered) must be 10% below that of gasoline and diesel fuel by 2020. California concluded that some biofuels lead to higher emissions (i.e., lower emission reductions) than what EPA has proposed. In other cases, the California estimates are more favorable to biofuels. This difference highlights the ongoing debate over lifecycle analysis methods.


Date of Report: January 29, 2010
Number of Pages: 17
Order Number: R40460
Price: $29.95

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