The I m pact of Biofuels Mandates on Grain and Oilseed Markets Scott - - PowerPoint PPT Presentation

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the i m pact of biofuels mandates on grain and oilseed
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The I m pact of Biofuels Mandates on Grain and Oilseed Markets Scott - - PowerPoint PPT Presentation

Apr 03, 2024 256 likes •507 views

The I m pact of Biofuels Mandates on Grain and Oilseed Markets Scott I rw in sirw in@illinois.edu University of I llinois 2 0 1 2 I llinois Farm Econom ics Sum m it The Profitability of I llinois Agriculture: Managing in a Turbulent W orld W

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2 0 1 2 I llinois Farm Econom ics Sum m it

The Profitability of I llinois Agriculture: Managing in a Turbulent W orld

The I m pact of Biofuels Mandates

  • n Grain and Oilseed Markets

Scott I rw in sirw in@illinois.edu University of I llinois

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2 0 1 2 I llinois Farm Econom ics Sum m it

W hat is the RFS?

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2 0 1 2 I llinois Farm Econom ics Sum m it 5 10 15 20 25 30 35 40 Gallons (billion) Year

U.S. Renewable Fuels Standards, 2008-2022

Advanced Renewable

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2 0 1 2 I llinois Farm Econom ics Sum m it 5 10 15 20 25 30 35 40 Gallons (billion) Year

U.S. Renewable Fuels Standards, 2008-2022

Advanced Renewable

20% GHG Reduction 50% GHG Reduction

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SLIDE 5

2 0 1 2 I llinois Farm Econom ics Sum m it 9 10.5 12 12.613.213.814.4 15 15 15 15 15 15 15 15 5 10 15 20 25 30 35 40 Gallons (billion) Year

U.S. Renewable Fuels Standards, 2008-2022

Advanced Renewable

20% GHG Reduction 50% GHG Reduction

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2 0 1 2 I llinois Farm Econom ics Sum m it 0.0 0.6 1.0 1.4 2.0 2.8 3.8 5.5 7.3 9 11 13 15 18 21 9 10.5 12 12.613.213.814.4 15 15 15 15 15 15 15 15 5 10 15 20 25 30 35 40 Gallons (billion) Year

U.S. Renewable Fuels Standards, 2008-2022

Advanced Renewable

20% GHG Reduction 50% GHG Reduction

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2 0 1 2 I llinois Farm Econom ics Sum m it 5 10 15 20 25 30 35 40 Gallons (billion) Year

U.S. Renewable Fuels Standards, 2008-2022

Cellulosic Biodiesel Undifferentiated Renewable

20% GHG Reduction 50% GHG Reduction

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2 0 1 2 I llinois Farm Econom ics Sum m it

How is the RFS Enforced?

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2 0 1 2 I llinois Farm Econom ics Sum m it

Renew able Fuel Standard Form ulas for 2 0 1 2

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2 0 1 2 I llinois Farm Econom ics Sum m it

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2 0 1 2 I llinois Farm Econom ics Sum m it

Renew able I dentification Num bers ( RI NS)

  • RFS is actually enforced using RINS, a tradable credit system

administered by the U.S. EPA

  • A RIN is a 38-digit number assigned to each gallon or batch of

renewable fuel produced or imported into the U.S.

  • Each RIN travels with the biofuel as it moves through the supply chain
  • RINs are actively traded in a secondary market
  • RINs allow obligated parties to meet their individual mandates by

applying RINs representing biofuels which they have physically purchased and blended, or those which were purchased from another party through RIN trading

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2 0 1 2 I llinois Farm Econom ics Sum m it 0.00 0.25 0.50 0.75 1.00 1.25 1.50 RINS Price ($/cwt.) Date Daily Price of Current Year RINS in the Secondary Market, April 1, 2008 - October 25, 2012 Biodiesel/1.5 Advanced Ethanol

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2 0 1 2 I llinois Farm Econom ics Sum m it

W hat is the Ethanol Blend W all?

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2 0 1 2 I llinois Farm Econom ics Sum m it

Ethanol-Gasoline Blending

  • The most common blend of ethanol and gasoline is known as E10
  • A mixture of 10% anhydrous ethanol and 90% gasoline
  • Can be used in the engines of most cars and light duty trucks without

modification of the engine or fuel system

  • Uncertainty whether higher blends of ethanol will damage engines

without modification

  • If E10 is the maximum blend, then the blend wall equals 10% of total

motor gasoline supply

  • Puts an upper limit on the size of ethanol production and use of corn for

fuel ethanol

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2 0 1 2 I llinois Farm Econom ics Sum m it 50 100 150 200 250 300 350 Barrels per Month (thousands) U.S. Refinery and Blender Monthly Net Production of Finished Motor Gasoline, January 2005 - August 2012

Reformulated with Ethanol Conventional with Ethanol Conventional w/out Ethanol Reformulated w/out Ethanol

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2 0 1 2 I llinois Farm Econom ics Sum m it 13.8 14.4 15.0 13.4 13.4 13.4 8 9 10 11 12 13 14 15 16 2009 2010 2011 2012 2013 2014 2015 Ethanol (bil. gal.) Marketing Year RFS Mandate for Renewable Fuel (Corn Based Ethanol) and E10 Blend Wall, 2009 - 2015 Mandate Blend Wall

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2 0 1 2 I llinois Farm Econom ics Sum m it

I s E1 5 the W ay Around the Blend W all?

  • US EPA approved E15 blends for 2001 and newer vehicle models in

January 2011

  • Implementation, has been delayed by a number of factors
  • Lack of clarification of liability issues associated with dispensing E15
  • Cost of installing blender pumps at retail stations
  • Engine warranties using E15
  • E85 has been approved for “flex fuel” vehicles for some time
  • 10 million flex fuel vehicles on the road
  • E85 only offered by a very small number of retailers at the present time
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2 0 1 2 I llinois Farm Econom ics Sum m it

I s E1 5 the W ay Around the Blend W all?

  • US EPA approved E15 blends for 2001 and newer vehicle models in

January 2011

  • Implementation, has been delayed by a number of factors
  • Lack of clarification of liability issues associated with dispensing E15
  • Cost of installing blender pumps at retail stations
  • Engine warranties using E15
  • E85 has been approved for “flex fuel” vehicles for some time
  • 10 million flex fuel vehicles on the road
  • E85 only offered by a very small number of retailers at the present time

Bottom -line: US is likely to be stuck at the E1 0 blend w all for at least the next several years

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2 0 1 2 I llinois Farm Econom ics Sum m it

How W ill the RFS be I m plem ented in the Next Several Years Given the Blend W all?

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2 0 1 2 I llinois Farm Econom ics Sum m it

Calendar Year Total Cellulosic Biodiesel(a) Undifferentiated Total Renewable 2012 15.20 0.50 1.00 0.50 2.00 13.20 2013 16.55 1.00 1.28 0.47 2.75 13.80 2014 18.15 1.75 * 2.00 3.75 14.40 2015 20.50 3.00 * 2.50 5.50 15.00 (a) each gallon of biodiesel receives 1.5 gallons credit towards RFS * minimum of 1.0 billion gallons U.S. Renewable Fuels Standard for 2012-2015--Billion Gallons Advanced

http://en.wikipedia.org/wiki/File:Ethanol_plant.jpg

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2 0 1 2 I llinois Farm Econom ics Sum m it

Calendar Year Total Cellulosic Biodiesel(a) Undifferentiated Total Renewable 2012 15.20 0.00 1.00 0.50 2.00 13.20 2013 16.55 1.00 1.28 0.47 2.75 13.80 2014 18.15 1.75 * 2.00 3.75 14.40 2015 20.50 3.00 * 2.50 5.50 15.00 (a) each gallon of biodiesel receives 1.5 gallons credit towards RFS * minimum of 1.0 billion gallons U.S. Renewable Fuels Standard for 2012-2015--Billion Gallons Advanced

http://en.wikipedia.org/wiki/File:Ethanol_plant.jpg

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2 0 1 2 I llinois Farm Econom ics Sum m it

Calendar Year Total Cellulosic Biodiesel(a) Undifferentiated Total Renewable 2012 15.20 0.00 1.00 0.50 2.00 13.20 2013 16.55 0.00 1.28 0.83 2.75 13.80 2014 18.15 0.00 1.28 1.83 3.75 14.40 2015 20.50 0.00 1.28 3.58 5.50 15.00 (a) each gallon of biodiesel receives 1.5 gallons credit towards RFS * minimum of 1.0 billion gallons Advanced U.S. Renewable Fuels Standard for 2012-2015--Billion Gallons

http://en.wikipedia.org/wiki/File:Ethanol_plant.jpg

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2 0 1 2 I llinois Farm Econom ics Sum m it

Calendar Year RFS Consumption Imports Exports Production 2012 13.2 13.1 0.50 0.74 13.34 2013 13.8 13.3 0.83 0.50 12.97 2014 14.4 13.4 1.00 0.50 12.90 2015 15.0 13.5 1.00 0.50 13.00 Ethanol U.S. Ethanol Balance Sheet and Implied Corn Consumption for 2012-2015---Billion Gallons except Corn Note: Assumes zero stock change each year.

http://en.wikipedia.org/wiki/File:Ethanol_plant.jpg

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2 0 1 2 I llinois Farm Econom ics Sum m it

Calendar Undifferentiated Renewable Feedstock Year Mandate Biodiesel Gap Gap Total Requirement (bil. lbs.) 2012 1.00 0.00 0.00 1.00 7.5 2013 1.28 0.00 0.00 1.28 9.6 2014 1.28 0.55 0.95 2.79 20.9 2015 1.28 1.72 1.67 4.67 35.0 U.S. Biodiesel Production for 2012 and Assumed for 2013-2015--Billion Gallons except Feedstock

http://static.ddmcdn.com/gif/biodiesel3.jpg