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Christopher R Knittel - One of the best experts on this subject based on the ideXlab platform.
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The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard
Journal of the Association of Environmental and Resource Economists, 2017Co-Authors: Christopher R Knittel, Ben S. Meiselman, James H. StockAbstract:AbstractThe US Renewable Fuel Standard (RFS) requires blending increasing quantities of bioFuels into the surface vehicle Fuel supply. The RFS requirements are met through a system of tradable permits called Renewable (Fuel) Identification Numbers, or RINs. We exploit the large fluctuations in RIN prices during 2013–15 to estimate the pass-through of RIN prices to US wholesale and retail Fuel prices. We control for common factors by examining spreads of physically similar Fuels with different RIN obligations. Pooling six different wholesale petroleum Fuel spreads, we estimate a pooled long-run or equilibrium pass-through coefficient of 1.00 with a standard error of 0.11. This pass-through occurs within two business days. The only Fuel for which we find economically and statistically significant failure of pass-through is retail E85, which contains up to 83% ethanol; the pass-through of RIN prices to the retail E85–E10 spread is precisely estimated to be close to zero.
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some inconvenient truths about climate change policy the distributional impacts of transportation policies
The Review of Economics and Statistics, 2015Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan ParkerAbstract:Abstract Climate policy has favored costly measures that implicitly or explicitly subsidize lowcarbon Fuels.We simulate four transportation sector policies: cap and trade (CAT), ethanol subsidies, a Renewable Fuel standard (RFS), and a lowcarbon Fuel standard. Our simulations confirm that alternatives to CAT are 2.5 to 4 times more costly but are amenable to adoption due to right-skewed distributions of gains. We analyze voting on the Waxman-Markey (WM) CAT bill. Conditional on a district’s CAT gains, a district’s RFS gains are negatively correlated with the likelihood of voting for WM. Our analysis supports campaign contributions as a partial mechanism.
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Unintended Consequences of Carbon Policies: Transportation Fuels, Land-Use, Emissions, and Innovation
The Energy Journal, 2015Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan ParkerAbstract:Renewable Fuel standards, low carbon Fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land-use costs from erosion and habitat loss are between $277 and $693 million. A low carbon Fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to Fuels and can over or under-incentivize innovation. These results highlight the potential negative effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy.
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the pass through of rin prices to wholesale and retail Fuels under the Renewable Fuel standard
Research Papers in Economics, 2015Co-Authors: Christopher R Knittel, Ben S. Meiselman, James H. StockAbstract:The U.S. Renewable Fuel Standard (RFS) requires blending increasing quantities of bioFuels into the U.S. surface vehicle Fuel supply. In 2013, the fraction of ethanol in the gasoline pool effectively reached 10%, the ethanol capacity of the dominant U.S. gasoline blend (the “E10 blend wall”). During 2013-2015, the price of RINs—tradeable electronic certificates for complying with the RFS—fluctuated through a wide range, largely because of changes in actual and expected policy combined with learning about the implications of the E10 blend wall. RINs are sold by bioFuels producers and purchased by obligated parties (refiners and importers), who must retire RINs in proportion to the petroleum they sell for surface transportation. As a result, RINs in effect serve as a charge on obligated Fuels and a corrective subsidy for lower-carbon Renewable Fuels, and are neutral for Fuels outside the RFS. In theory, RIN prices provide incentives to consumers to use Fuels with a high Renewable content and to bioFuels producers to produce those Fuels, and as such are a key mechanism of the RFS. This paper examines the extent to which RIN prices are passed through to the price of obligated Fuels, and provides econometric results that complement the graphical analysis in Burkholder (2015). We analyze daily data on RINs and Fuel prices from January 1, 2013 through March 10, 2015. When we examine wholesale prices on comparable obligated and non-obligated Fuels, for example the spread between diesel and jet Fuel in the U.S. Gulf, we find that that roughly one-half to three-fourths of a change in RIN prices is passed through to obligated Fuels in the same day as the RIN price movement, and this fraction rises over the subsequent few business days. Using six different wholesale spreads between obligated and non-obligated Fuels, we estimate a pooled long-run pass-through coefficient of 1.01 with a standard error of 0.12. We also examine the transmission of RIN prices to retail Fuel prices. The net RIN obligation on E10 is essentially zero over this period, and indeed we find no statistical evidence linking changes in RIN prices to changes in E10 prices. We also examine the price of E85 which, with an estimated average of 74% ethanol, generates more RINs than it obligates and thus in principle receives a large RIN subsidy. In contrast to the foregoing results, which are consistent with theory, the pass-through of RIN prices to the E85-E10 spread is precisely estimated to be zero if one adjusts for seasonality (as we argue should be done), or if not, is at most 30%. Over this period, on average high RIN prices did not translate into discounted prices for E85.
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the pass through of rin prices to wholesale and retail Fuels under the Renewable Fuel standard
Social Science Research Network, 2015Co-Authors: Christopher R Knittel, Ben S. Meiselman, James H. StockAbstract:The U.S. Renewable Fuel Standard (RFS) requires blending increasing quantities of bioFuels into the U.S. surface vehicle Fuel supply. In 2013, the fraction of ethanol in the gasoline pool effectively reached 10%, the ethanol capacity of the dominant U.S. gasoline blend (the “E10 blend wall”). During 2013-2015, the price of RINs—tradeable electronic certificates for complying with the RFS—fluctuated through a wide range, largely because of changes in actual and expected policy combined with learning about the implications of the E10 blend wall. RINs are sold by bioFuels producers and purchased by obligated parties (refiners and importers), who must retire RINs in proportion to the petroleum they sell for surface transportation. As a result, RINs in effect serve as a charge on obligated Fuels and a corrective subsidy for lower-carbon Renewable Fuels, and are neutral for Fuels outside the RFS. In theory, RIN prices provide incentives to consumers to use Fuels with a high Renewable content and to bioFuels producers to produce those Fuels, and as such are a key mechanism of the RFS.This paper examines the extent to which RIN prices are passed through to the price of obligated Fuels, and provides econometric results that complement the graphical analysis in Burkholder (2015). We analyze daily data on RINs and Fuel prices from January 1, 2013 through March 10, 2015. When we examine wholesale prices on comparable obligated and non-obligated Fuels, for example the spread between diesel and jet Fuel in the U.S. Gulf, we find that that roughly one-half to three-fourths of a change in RIN prices is passed through to obligated Fuels in the same day as the RIN price movement, and this fraction rises over the subsequent few business days. Using six different wholesale spreads between obligated and non-obligated Fuels, we estimate a pooled long-run pass-through coefficient of 1.01 with a standard error of 0.12. We also examine the transmission of RIN prices to retail Fuel prices. The net RIN obligation on E10 is essentially zero over this period, and indeed we find no statistical evidence linking changes in RIN prices to changes in E10 prices. We also examine the price of E85 which, with an estimated average of 74% ethanol, generates more RINs than it obligates and thus in principle receives a large RIN subsidy. In contrast to the foregoing results, which are consistent with theory, the pass-through of RIN prices to the E85-E10 spread is precisely estimated to be zero if one adjusts for seasonality (as we argue should be done), or if not, is at most 30%. Over this period, on average high RIN prices did not translate into discounted prices for E85.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
James H. Stock - One of the best experts on this subject based on the ideXlab platform.
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The Pass-Through of RIN Prices to Wholesale and Retail Fuels under the Renewable Fuel Standard
Journal of the Association of Environmental and Resource Economists, 2017Co-Authors: Christopher R Knittel, Ben S. Meiselman, James H. StockAbstract:AbstractThe US Renewable Fuel Standard (RFS) requires blending increasing quantities of bioFuels into the surface vehicle Fuel supply. The RFS requirements are met through a system of tradable permits called Renewable (Fuel) Identification Numbers, or RINs. We exploit the large fluctuations in RIN prices during 2013–15 to estimate the pass-through of RIN prices to US wholesale and retail Fuel prices. We control for common factors by examining spreads of physically similar Fuels with different RIN obligations. Pooling six different wholesale petroleum Fuel spreads, we estimate a pooled long-run or equilibrium pass-through coefficient of 1.00 with a standard error of 0.11. This pass-through occurs within two business days. The only Fuel for which we find economically and statistically significant failure of pass-through is retail E85, which contains up to 83% ethanol; the pass-through of RIN prices to the retail E85–E10 spread is precisely estimated to be close to zero.
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the pass through of rin prices to wholesale and retail Fuels under the Renewable Fuel standard
Research Papers in Economics, 2015Co-Authors: Christopher R Knittel, Ben S. Meiselman, James H. StockAbstract:The U.S. Renewable Fuel Standard (RFS) requires blending increasing quantities of bioFuels into the U.S. surface vehicle Fuel supply. In 2013, the fraction of ethanol in the gasoline pool effectively reached 10%, the ethanol capacity of the dominant U.S. gasoline blend (the “E10 blend wall”). During 2013-2015, the price of RINs—tradeable electronic certificates for complying with the RFS—fluctuated through a wide range, largely because of changes in actual and expected policy combined with learning about the implications of the E10 blend wall. RINs are sold by bioFuels producers and purchased by obligated parties (refiners and importers), who must retire RINs in proportion to the petroleum they sell for surface transportation. As a result, RINs in effect serve as a charge on obligated Fuels and a corrective subsidy for lower-carbon Renewable Fuels, and are neutral for Fuels outside the RFS. In theory, RIN prices provide incentives to consumers to use Fuels with a high Renewable content and to bioFuels producers to produce those Fuels, and as such are a key mechanism of the RFS. This paper examines the extent to which RIN prices are passed through to the price of obligated Fuels, and provides econometric results that complement the graphical analysis in Burkholder (2015). We analyze daily data on RINs and Fuel prices from January 1, 2013 through March 10, 2015. When we examine wholesale prices on comparable obligated and non-obligated Fuels, for example the spread between diesel and jet Fuel in the U.S. Gulf, we find that that roughly one-half to three-fourths of a change in RIN prices is passed through to obligated Fuels in the same day as the RIN price movement, and this fraction rises over the subsequent few business days. Using six different wholesale spreads between obligated and non-obligated Fuels, we estimate a pooled long-run pass-through coefficient of 1.01 with a standard error of 0.12. We also examine the transmission of RIN prices to retail Fuel prices. The net RIN obligation on E10 is essentially zero over this period, and indeed we find no statistical evidence linking changes in RIN prices to changes in E10 prices. We also examine the price of E85 which, with an estimated average of 74% ethanol, generates more RINs than it obligates and thus in principle receives a large RIN subsidy. In contrast to the foregoing results, which are consistent with theory, the pass-through of RIN prices to the E85-E10 spread is precisely estimated to be zero if one adjusts for seasonality (as we argue should be done), or if not, is at most 30%. Over this period, on average high RIN prices did not translate into discounted prices for E85.
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the pass through of rin prices to wholesale and retail Fuels under the Renewable Fuel standard
Social Science Research Network, 2015Co-Authors: Christopher R Knittel, Ben S. Meiselman, James H. StockAbstract:The U.S. Renewable Fuel Standard (RFS) requires blending increasing quantities of bioFuels into the U.S. surface vehicle Fuel supply. In 2013, the fraction of ethanol in the gasoline pool effectively reached 10%, the ethanol capacity of the dominant U.S. gasoline blend (the “E10 blend wall”). During 2013-2015, the price of RINs—tradeable electronic certificates for complying with the RFS—fluctuated through a wide range, largely because of changes in actual and expected policy combined with learning about the implications of the E10 blend wall. RINs are sold by bioFuels producers and purchased by obligated parties (refiners and importers), who must retire RINs in proportion to the petroleum they sell for surface transportation. As a result, RINs in effect serve as a charge on obligated Fuels and a corrective subsidy for lower-carbon Renewable Fuels, and are neutral for Fuels outside the RFS. In theory, RIN prices provide incentives to consumers to use Fuels with a high Renewable content and to bioFuels producers to produce those Fuels, and as such are a key mechanism of the RFS.This paper examines the extent to which RIN prices are passed through to the price of obligated Fuels, and provides econometric results that complement the graphical analysis in Burkholder (2015). We analyze daily data on RINs and Fuel prices from January 1, 2013 through March 10, 2015. When we examine wholesale prices on comparable obligated and non-obligated Fuels, for example the spread between diesel and jet Fuel in the U.S. Gulf, we find that that roughly one-half to three-fourths of a change in RIN prices is passed through to obligated Fuels in the same day as the RIN price movement, and this fraction rises over the subsequent few business days. Using six different wholesale spreads between obligated and non-obligated Fuels, we estimate a pooled long-run pass-through coefficient of 1.01 with a standard error of 0.12. We also examine the transmission of RIN prices to retail Fuel prices. The net RIN obligation on E10 is essentially zero over this period, and indeed we find no statistical evidence linking changes in RIN prices to changes in E10 prices. We also examine the price of E85 which, with an estimated average of 74% ethanol, generates more RINs than it obligates and thus in principle receives a large RIN subsidy. In contrast to the foregoing results, which are consistent with theory, the pass-through of RIN prices to the E85-E10 spread is precisely estimated to be zero if one adjusts for seasonality (as we argue should be done), or if not, is at most 30%. Over this period, on average high RIN prices did not translate into discounted prices for E85.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Jay P. Kesan - One of the best experts on this subject based on the ideXlab platform.
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A legal analysis of the effects of the Renewable Fuel Standard (RFS2) and Clean Air Act on the commercialization of biobutanol as a transportation Fuel in the United States
Gcb Bioenergy, 2012Co-Authors: Timothy A. Slating, Jay P. KesanAbstract:Biobutanol is currently a hot topic within discussions about second-generation bioFuels. Its advocates point to the fact that it possesses a higher energy content than traditional bioethanol and, most importantly, that it is compatible with existing Fuel distribution infrastructure. While traditional biobutanol production processes have long since suffered from an inability to produce it in an economically viable manner, several recent technological advances have spurred interest from the private sector and several companies are now actively pursuing the commercialization of biobutanol as a transportation Fuel. As such, a legal analysis of the regulatory frameworks affecting this commercialization is highly relevant. In this study, we detail and analyze the two most import regulatory frameworks affecting the successful commercialization of biobutanol as a transportation Fuel in the United States. First, we provide a thorough description of the US Renewable Fuel Standard (RFS2) and analyze its impact on biobutanol commercialization efforts. Next, we address the US Clean Air Act’s so-called ‘substantially similar’ prohibition and detail the three distinct regulatory paths it creates for biobutanol commercialization. Finally, we conclude by exploring ways in which these regulatory frameworks could be altered to mitigate unjustified regulatory burdens. While our study focuses on the commercialization of biobutanol, its regulatory descriptions and analysis are equally informative in regards to the commercialization of other alcohol-based bioFuels.
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a legal analysis of the effects of the Renewable Fuel standard rfs2 and clean air act on the commercialization of biobutanol as a transportation Fuel in the united states
Social Science Research Network, 2011Co-Authors: Timothy A. Slating, Jay P. KesanAbstract:Biobutanol is currently a hot topic within discussions about second-generation bioFuels. Its advocates point to the fact that it possesses a higher energy content than traditional bioethanol and, most importantly, that it is compatible with existing Fuel distribution infrastructure. While traditional biobutanol production processes have long since suffered from an inability to produce it in an economically viable manner, several recent technological advances have spurred interest from the private sector and several companies are now actively pursuing the commercialization of biobutanol as a transportation Fuel. As such, an analysis of the legal and regulatory frameworks affecting this commercialization is highly relevant. In this study, we detail and analyze the two most import regulatory frameworks affecting the successful commercialization of biobutanol as a transportation Fuel in the US. First, we provide a thorough description of the U.S. Renewable Fuel Standard (“RFS2”) and analyze its impact on biobutanol commercialization efforts. Next, we address the U.S. Clean Air Act’s so-called “substantially similar” prohibition and detail the three distinct regulatory paths it creates for biobutanol commercialization. Finally, we conclude by exploring ways in which these regulatory frameworks could be altered in order to mitigate unjustified regulatory burdens. While our study focuses on the commercialization of biobutanol, its regulatory descriptions and analysis are equally informative in regards to the commercialization of other alcohol-based bioFuels.
Stephen P Holland - One of the best experts on this subject based on the ideXlab platform.
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some inconvenient truths about climate change policy the distributional impacts of transportation policies
The Review of Economics and Statistics, 2015Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan ParkerAbstract:Abstract Climate policy has favored costly measures that implicitly or explicitly subsidize lowcarbon Fuels.We simulate four transportation sector policies: cap and trade (CAT), ethanol subsidies, a Renewable Fuel standard (RFS), and a lowcarbon Fuel standard. Our simulations confirm that alternatives to CAT are 2.5 to 4 times more costly but are amenable to adoption due to right-skewed distributions of gains. We analyze voting on the Waxman-Markey (WM) CAT bill. Conditional on a district’s CAT gains, a district’s RFS gains are negatively correlated with the likelihood of voting for WM. Our analysis supports campaign contributions as a partial mechanism.
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Unintended Consequences of Carbon Policies: Transportation Fuels, Land-Use, Emissions, and Innovation
The Energy Journal, 2015Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan ParkerAbstract:Renewable Fuel standards, low carbon Fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land-use costs from erosion and habitat loss are between $277 and $693 million. A low carbon Fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to Fuels and can over or under-incentivize innovation. These results highlight the potential negative effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy.
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unintended consequences of transportation carbon policies land use emissions and innovation
Other repository, 2013Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan C ParkerAbstract:Renewable Fuel standards, low carbon Fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Landuse costs from erosion and habitat loss are between $277 and $693 million. A low carbon Fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to Fuels and can over or under-incentivize innovation. These results highlight the potential negative efficiency effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy. ∗The authors thank Soren Anderson, Severin Borenstein, Meghan Busse, Garth Heutel, Mark Jacobsen, Randall Walsh, Catherine Wolfram and seminar participants at the Heartland Environmental and Resource Economics Conference, Iowa State University, the NBER Environmental and Energy Economics spring meeting, the University of California Energy Institute, the University of North Carolina at Greensboro, the University of Texas, the Colorado School of Mines and the Massachusetts Institute of Technology for helpful comments. Knittel gratefully acknowledges support from the Institute of Transportation Studies at UC Davis. A portion of the paper was written while Knittel was a visitor at the Energy Institute at Haas. Department of Economics, University of North Carolina at Greensboro. Department of Economics, University of Colorado at Boulder. William Barton Rogers Professor of Energy Economics, Sloan School of Management, Massachusetts Institute of Technology. National Bureau of Economic Research. Institute of Transportation Studies, University of California, Davis.
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unintended consequences of transportation carbon policies land use emissions and innovation
Social Science Research Network, 2013Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan C ParkerAbstract:Renewable Fuel standards, low carbon Fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land- use costs from erosion and habitat loss are between $277 and $693 million. A low carbon Fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to Fuels and can over or under-incentivize innovation. These results highlight the potential negative efficiency effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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Unintended Consequences of Transportation Carbon Policies: Land-Use, Emissions, and Innovation
2013Co-Authors: Stephen P Holland, Jonathan E Hughes, Christopher R Knittel, Nathan ParkerAbstract:Renewable Fuel standards, low carbon Fuel standards, and ethanol subsidies are popular policies to incentivize ethanol production and reduce emissions from transportation. Compared to carbon trading, these policies lead to large shifts in agricultural activity and unexpected social costs. We simulate the 2022 Federal Renewable Fuel Standard (RFS) and find that energy crop production increases by 39 million acres. Land- use costs from erosion and habitat loss are between $277 and $693 million. A low carbon Fuel standard (LCFS) and ethanol subsidies have similar effects while costs under an equivalent cap and trade (CAT) system are essentially zero. In addition, the alternatives to CAT magnify errors in assigning emissions rates to Fuels and can over or under-incentivize innovation. These results highlight the potential negative efficiency effects of the RFS, LCFS and subsidies, effects that would be less severe under a CAT policy.
D J Reinemann - One of the best experts on this subject based on the ideXlab platform.
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applying life cycle assessment to low carbon Fuel standards how allocation choices influence carbon intensity for Renewable transportation Fuels
Energy Policy, 2010Co-Authors: Andrew S Kaufman, Paul J Meier, Julie C Sinistore, D J ReinemannAbstract:The Energy Independence and Security Act (EISA) of 2007 requires life-cycle assessment (LCA) for quantifying greenhouse gas emissions (GHGs) from expanded U.S. bioFuel production. To qualify under the Renewable Fuel Standard, cellulosic ethanol and new corn ethanol must demonstrate 60% and 20% lower emissions than petroleum Fuels, respectively. A combined corn-grain and corn-stover ethanol system could potentially satisfy a major portion of Renewable Fuel production goals. This work examines multiple LCA allocation procedures for a hypothetical system producing ethanol from both corn grain and corn stover. Allocation choice is known to strongly influence GHG emission results for corn-ethanol. Stover-derived ethanol production further complicates allocation practices because additional products result from the same corn production system. This study measures the carbon intensity of ethanol Fuels against EISA limits using multiple allocation approaches. Allocation decisions are shown to be paramount. Under varying approaches, carbon intensity for corn ethanol was 36-79% that of gasoline, while carbon intensity for stover-derived ethanol was -10% to 44% that of gasoline. Producing corn-stover ethanol dramatically reduced carbon intensity for corn-grain ethanol, because substantially more ethanol is produced with only minor increases in emissions. Regulatory considerations for applying LCA are discussed.
