WORKING PAPER 2016-15 Projected availability of fats, oils, and greases in the U.S. Authors: Brett Nelson and Stephanie Searle Date: 7 July 2016 Keywords: Renewable Fuel Standard (RFS), biofuel, biodiesel, renewable diesel, feedstock availability Summary (3) increasing consumption of fats collection from households is unlikely and oils in food, corresponding with without specific programs in place. Environmental Protection Agency’s population growth, (4) increasing (EPA) latest proposed volume consumption of biobased lubricants Based on this assessment, the United mandates for the Renewable Fuel and oils, and (5) constant production States can support an average Standard (RFS) would require an of yellow grease. Soybean, canola, annual increase of about 31.5 million increase in biomass-based diesel and edible corn oil production are biodiesel-equivalent gallons of (BBD, including biodiesel and all projected to increase, largely as BBD per year through 2022. At the renewable diesel) production in a result of yield improvements. We current proposed BBD volume for 2018 of at least 100 million gallons expect inedible corn oil production to 2018 (2.1 billion gallons), a deficit over 2017 depending on how the remain roughly constant as demand of 574 million gallons is expected advanced biofuel mandate is set. for corn ethanol under the RFS is in the amount of BBD that can be In setting annual volume require- unlikely to grow significantly after produced from domestically available ments, the EPA is required by statute 2016, and improvements in corn resources. An even greater deficit to consider factors including the oil extraction have leveled off. A will be triggered if the advanced impact of the RFS on the price and projected increase in livestock will and renewable volumes are set at supply of agricultural commodities affect both the supply and demand a level that requires additional BBD and food prices. Thus, the volume of animal fats; livestock produce fats consumption. The amounts of BBD requirements set by the EPA should such as tallow, but also consume expected in the proposed 2017 and take into account demand for biofuel some oils and fats in feed. Overall, 2018 volumes are compared to avail- feedstocks from other sectors and an increase in livestock production ability and 2015 production and determine an amount that will be results in a net increase in FOG imports in Figure 2. In the proposal available without disrupting other availability. The trend of increased for 2017, additional demand from the industries or increasing price volatility advanced and renewable categories of feedstocks. demand for biodegradable products in the lubricants and oils industry will results in a total expectation for 2.7 In this study, we assessed trends reduce the availability of tallow. We billion gallons BBD (EPA, 2016a). The in the production of potential BBD expect FOG consumption in food EPA expects that 700 million gallons feedstocks in the United States and to increase with population growth, (in addition to the 2 billion gallons the consumption of these commodi- following a long-term historical trend required for the BBD category) will ties in all sectors. We used projec- of increasing consumption. Overall, be needed to meet the advanced tions made by the United States these trends will result in increased and renewable volume proposals. Department of Agriculture (USDA), availability of animal fats for Compared to domestic feedstock supplemented by projections based biofuels as the increased production availability of 1.526 billion biodiesel- on linear historical trends when outweighs increased demand from equivalent gallons, this proposed others were not available. There are non-fuel sectors. The production of mandate would require a doubling five key trends affecting the avail- yellow grease is projected to remain of BBD imports over 2015 volumes, ability of fats, oils, and greases (FOG) constant. Yellow grease production and would likely lead to increased for BBD: (1) increasing domestic historically has remained flat, and prices for these BBD feedstocks and production of vegetable oils, (2) collection from restaurants and hotels pressure on other sectors that use increasing livestock production, is already a mature industry, while these resources. © INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION, 2016 WWW.THEICCT.ORG PROJECTED AVAILABILITY OF FATS, OILS, AND GREASES IN THE U.S. 3 Introduction t) Each year, the EPA sets required ivalen 2.5 volumes for each of the four NOT YET PROPOSED qu categories of biofuel in the RFS: -e 2 renewable fuel, advanced biofuel, BBD, and cellulosic biofuel. These 1.5 categories are nested: BBD and biodiesel cellulosic biofuel are both subsets s ( 1 of advanced biofuel, and advanced biofuel is a subset of renewable gallon 0.5 fuel.1 Recently the EPA released its 2017 proposed requirements for illion B 0 renewable fuel, advanced biofuel, 2015 actual 2017 2018 2017 2018 and cellulosic biofuel, as well as the PROPOSED VOLUMESDOMESTIC AVAILABILITY 2018 requirement for BBD (EPA, BBD mandate Additional Advanced BBD Additional Renewable 2016a). The EPA has proposed BBD Domestic BBD BBD imports BBD increases of at least 100 million production gallons, although increases will likely Figure 1. BBD under proposed 2017 and 2018 RFS volumes compared to domestic be even higher depending on how feedstock availability and 2015 production the advanced biofuel mandate is set (Table 1). As a result of ethanol blend Table 1. Renewable fuel volumes requirements for 2014-2018 (M Gal) wall pressure, the amount of BBD used for RFS compliance will likely 2014 2015 2016 2017 2018 exceed the volume requirement for Cellulosic biofuel 33 123 230 312* n/a the BBD category in order to satisfy Biomass-based diesel** 1,630 1,730 1,900 2,000 2.1* the overall advanced and renewable Advanced biofuel 2,670 2,880 3,610 4,000* n/a biofuel mandates; for example, in its calculations for 2017 EPA expects Renewable fuel 16,280 16,930 18,110 18,800* n/a 150 million ethanol-equivalent Source: EPA, (2016b) gallons out of 158 million gallons * Proposed Volume Requirements of required growth over 2016 in ** Biomass-based diesel volumes are shown in biodiesel-equivalent gallons. All other volumes are “other advanced” volume (advanced given in ethanol-equivalent gallons. One gallon of biodiesel is equivalent in energy to 1.5 gallons of ethanol. biofuel that is not used to fulfill the BBD or cellulosic biofuel mandates) processes such as soap or paint non-fuel consumption of feedstocks to be filled with additional BBD production. The demand for FOG in from total production of feedstocks. (ICCT, 2016). these sectors must be considered in Consumption of FOG in livestock feed, The EPA is required by law through assessing BBD feedstock availability. edible products, soap, fatty acids, the Energy Independence and Increasing demand for FOG above paint and varnish, resins and plastics, Security Act of 2007 to consider a available levels will tend to raise prices lubricants and oils, other inedible number of factors in setting annual and have negative economic impacts products, biodiesel and changes in volumes in the RFS program, on non-fuel sectors. Furthermore, trade balance (exports—imports) including feedstock availability and setting BBD mandates conservatively were considered. We focused on the the price of commodities (USGPO, could avoid price volatility in the major feedstocks used in domestic 2007). All major feedstocks used for event of a supply shock (i.e. drought biodiesel production, the historical the production of RFS-eligible BBD conditions) due to the nature of the use of which is shown in Figure 2. We have other uses as food, livestock inelastic demand for agricultural note that we did not include palm oil feed, or as an input to industrial commodities. in our assessment, as this pathway is not eligible under the RFS at present. To determine an appropriate level 1 For an overview of the RFS program and of the 2017-2018 volumes proposal, see of BBD growth for future years This study aimed to build on a recent, http://www.theicct.org/sites/default/files/ of the RFS program, this study similar study (Brorsen, 2015). This publications/ICCTBriefing_RFS2_20140211. aimed to estimate the availabil- study provides a more detailed pdf; http://www.theicct.org/sites/default/ files/publications/ICCT_RFS-2017- ity of BBD feedstocks. Availability assessment of market trends for each volumes_policyupdate_201606.pdf was calculated by subtracting total BBD feedstock. 2 INTERNATIONAL COUNCIL ON CLEAN TRANSPORTATION WORKING PAPER 2016-15 PROJECTED AVAILABILITY OF FATS, OILS, AND GREASES IN THE U.S. 12 Methodology Soybean oil Other *Palm oil Recycled Oils 10 AVAILABILITY Corn oil Animal Fat Availability of feedstocks was Canola oil determined by subtracting the 8 projected trade balance (exports— imports) and consumption in non-fuel 6 industries from projected production. Trade balance is treated as consump- 4 tion when exports are greater than Billion Pounds imports and production when imports are greater than exports. Relatively 2 complete information on the total production and consumption of 0 feedstocks in livestock feed, edible 2010 2011 2012 2013 2014 2015 products, industrial products, trade Figure 2. U.S. inputs to biodiesel production balance, and ending balance (ending Source: (EIA, 2012, 2014, 2016a) stocks—beginning stocks) were used *Notes—Renewable diesel feedstocks are not shown. Palm oil is not currently RFS eligible. to determine if any production or con- sumption had not been considered. A vegetable oils was retrieved from the 2009, 2011) and biodiesel inputs remainder term of approximately USDA oil crops yearbook (USDA-ERS, (EIA, 2012, 2014, 2016a) were used 900 million pounds was consumed 2016a, b, c). Future production of to develop a baseline consump- that had not been assigned to soybean oil was retrieved from the tion breakdown. We then projected a specific consumption category most recent USDA ten-year projec- the use of vegetable oils in food to (this is equivalent to approximately tions (Wescott & Hansen, 2016).