Renewable Fuel Standards
A renewable fuel standard (RFS) is a policy mechanism that focuses on building a market for renewable fuels in the transportation sector. A RFS requires that a certain percentage of transportation fuel provided in a given geographic area is replaced by renewable fuels. Such requirements can be applied to a variety of locations along the supply chain, including refiners, blenders, importers, distributers, and/or retail sellers.
A typical RFS requires a certain percentage of transportation fuel in a geographic area to be replaced by renewable fuels. Policies can be based on volume of total fuel sales and can target either gasoline sales or diesel sales. Policy mechanisms can be directed at several points along the supply chain. The market approach generally calls for a minimum volume of renewable fuels to be incorporated at these different levels each year. Depending on how the policy is structured, the regulated entity may have the option to purchase credits from other producers or distributors to meet the target.
States should include a large stakeholder group early on to incorporate the needs of a wide variety of interested parties and establish broad acceptance of the policy. Identifying the specific market players is critical to the successful development and implementation of this cross-sector policy.
States' experiences with the RFS will be very different depending on geography, resources, and the set goals. For example, different levels of incentives for production and distribution will be necessary in different states due to cost differentials, transportation distances, and other variables. Although an RFS can be implemented anywhere in the United States, there are certain conditions that make an RFS a good policy choice. These conditions include:
- Ample feedstock (e.g., corn, crop residues, forest residues, primary and secondary mill residues, and urban wood waste)
- A commitment to biofuels production in the state
- Public awareness of biofuels and strong market penetration of flexible-fuel vehicles and advanced fuel vehicles
- State-level or auto industry commitment to encourage adoption of such vehicles
- The existence of a reformulated gasoline (RFG) requirement. RFG is gasoline blended with oxygenates to burn cleaner and reduce smog-forming and toxic pollutants. Ethanol has replaced MTBE (methyl tertiary butyl ether) as the oxygenate of choice for meeting Clean Air Act requirements.
Design Best Practices
An RFS policy is considered successful when it encourages development of least-cost solutions and spurs innovation in renewable fuels production and use. The development of renewable fuels production and use leads to immediate impacts on energy security—the state policy driver most affected by this policy type.
The following design features can contribute to RFS effectiveness:
- Imposing stringency to require use of higher blends of ethanol or alternative fuels.
- Adopting an implementation plan that can ease measurement and verification burdens and help ensure the target is met
- Avoiding trigger mechanisms because it is unlikely that they would reduce risk for investors
- Ensuring flexibility in fuel requirements language to allow for adaptation and innovation that can lead to lowest-cost solutions and best practices
- Implementing measurement and verification of environmental, economic, and fuel diversity benefits of the policy and ensuring it achieves the stated goals.
The information for this summary about RFSs comes from an NREL technical report, State Clean Energy Practices: Renewable Fuel Standards.
For more information on RFSs, see the NREL technical report, Understanding and Informing the Policy Environment: State-level Renewable Fuels Standards.
The following databases provide information about policy implementation and the status of legislation in the states:
- Database of State Incentives for Renewable and Efficiency
- National Conference of State Legislatures' Energy and Environment Legislation Tracking Database