Under the 2007 Renewable Fuel Standard (RFS), the U.S. Environmental Protection Agency stipulates that gasoline and diesel refiners must blend a certain amount of “renewable fuel” into their products or face penalties.
The vast majority of the biofuel being produced now is corn-derived ethanol, on which the RFS places a cap of 15 billion gallons by 2015. So to satisfy the federal mandate that 36 billion gallons of biofuel be blended into the overall supply by 2022, the U.S. biofuels industry will have to produce a substantial amount of other types of biofuels—especially cellulosic ethanol, which can be made from wood chips and grasses.
But in 2007, Congress vastly overestimated the government’s ability to create a market for cellulosic biofuels, which remain much more expensive to produce than corn ethanol. There was no commercial production of cellulosic fuel in 2010 or 2011—even though the 2007 law originally called for 100 million and 250 million gallons, respectively, for those years (the requirements were subsequently scaled back to around 6.5 million gallons for each year). The chart above shows the actual biofuel production, so far, compared to future mandates.