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US ethanol and biodiesel producers could find themselves facing an uncertain future no matter what the outcome of the US presidential election, as both sides of the US political field could prove only lukewarm supporters of conventional biofuels produced from agricultural feedstocks like corn and soybeans.
Both conventional and biofuel sectors have taken a pummelling in recent months because of weak prices and demand destruction wrought by the Covid-19 pandemic, but biofuel representatives already felt on the wrong end of some decisions emanating from the administration of Republican President Donald Trump even before the onset of pandemic.
His Democratic rival, Joe Biden, has pledged support to the country’s huge biofuels sector that is concentrated on the Midwest, and with voting well underway, he may need to win back states that voted for Trump four years ago as the party looks to stage a clean sweep across the main branches of US government.
With Senate seats like Iowa senator Joni Ernst in play, the Dems are hoping they can end the Republican stranglehold that has controlled the Senate and has held a veto on energy policy since 2014.
AgriCensus asked University of Illinois agricultural economist Scott Irwin to articulate two of the potential outcomes.
SCENARIO ONE: DEMOCRAT CLEAN SWEEP
Biden will be under pressure from a green-minded, largely youthful and activist section of US voters that are likely to vote for him in huge numbers – who along with environmentally-minded lawmakers will be determined to radically reshape the US energy and transport sector in favour of renewable energy and electric vehicles.
Maintaining control of the House of Representatives, winning a majority in the Senate and taking the White House will all be required if elements of a ‘Green New Deal’ stand any chance of becoming law.
Even then there will be major political and logistical obstacles to the phasing out of oil and combustion engine cars that have been the mainstay of the American economy for at least a century, say observers.
Some Democratic senators will be elected in Republican-leaning states where oil production and refining are a source of relatively well-paid, unionised jobs, and the sector has fought tooth and nail any concerted attempt to undermine its dominance.
For ethanol producers, their fortunes are closely tied to the long-term future of crude oil and the pace of any transition to EVs, Irwin points out.
“It’s a question of what that transition looks like, will it be faster or slower depending on the results of today’s elections?” Irwin said.
Battery
In the shorter term, US biofuels producers will be looking for signals on what the White House has in store for the Renewable Fuels Standard.
Rather than tinkering on the edges of the RFS, a Democrat-run White House and Congress may feel that a more radical approach is required, such as incorporating elements of California’s Low Carbon Fuel Standard in a nationwide successor to the existing policy.
In that scenario, electric vehicles, hydrogen, biomethane and waste-based biofuels would compete with crop-based ethanol and biodiesel to earn credits for compliance based on GHG emissions reductions.
If their party flips the Senate, Democrat lawmakers in the House may reintroduce a bill from earlier this year proposing a nationwide LCFS – proposals that received a broad welcome from biofuels lobbies who welcomed the incentives on offer.
But those same incentives – along with other legislation tailored for electric vehicle infrastructure – are likely to be a major boon for battery-operated cars and may, in the end, be the biggest consequence of a Biden victory, Irwin points out.
And the current imprint of EVs is now at a level that infrastructure is easier to access than higher ethanol blends much heralded by the biofuels sector.
“In terms of current infrastructure, even in the Midwest it’s a lot easier to charge up a electric vehicle than find E15 and E85 in a gas station,” Irwin said.
SCENARIO TWO: TRUMP ‘DOUBLES DOWN’
Opinion polls on the eve of the election suggest that Biden has a significant lead overall but that the hotly-contested electoral college races in swing states are tightening, stoking hopes among his base that Trump can pull off a surprise victory.
In that outcome, a Trump administration might pursue the favouritism it afforded the oil lobby in the past four years and grant a general waiver for refiners from the RFS – which it would justify because of Covid-19 – even though such a measure is likely to be challenged in the courts.
He is also likely to try to prevent individual states such as California mandating measures such as a ban on new sales of petrol and diesel cars from 2035 and stymie tougher CO2 emissions standards for vehicles that would ease some of the pressure on carmakers to switch their fleets to electric cars.
But again, these are measures that may not secure legal backing during a second term.
And even if Trump was to lose, he may pressure the EPA to issue a general waiver from the RFS mandate during the transition period before Biden is sworn in.
The EPA, which will miss a deadline this year to set the obligated volumes for coventional biofuels for 2021 and for biodiesel in 2022 is thought to be waiting for a possible Supreme Court ruling on waivers in response a request from refiners to strike down a January 2020 ruling by the Tenth Circuit of Appeals.
This, biofuels producers say, is heaping further uncertainty on the sector following years of turbulence related to EPA waivers, overcapacity at marginal plants, and the collapse in demand presaged by Covid-19 related curtailments.