Ethanol’s Role in Future Fuels

Nearly three years of behind-the-scenes coalition building has paid dividends with the introduction of the “Future Fuels Act” in Minnesota, the first clean fuel standard legislation in a Midwest state.
By Brian Jennings | April 14, 2021

Nearly three years of behind-the-scenes coalition building has paid dividends with the introduction of the “Future Fuels Act” in Minnesota, the first clean fuel standard legislation in a Midwest state.

The Future Fuels Act would establish a performance standard for Minnesota’s transportation fuel, requiring annual reductions in carbon intensity (CI) below a petroleum baseline. Sellers of low-carbon fuel meeting or outperforming the standard would receive compliance credits, while sellers of carbon-intensive fuels that underperform generate deficits. To attain compliance, deficit holders would either need to blend low-carbon fuels, such as ethanol, or buy credits from low-carbon sellers.

This legislation is modeled after work by ACE and the Great Plains Institute to form the Midwest Clean Fuels Policy Initiative, a diverse coalition supporting a technology-neutral and market-based approach to decarbonize transportation fuels. Rather than having the government pick winners and losers, we support a portfolio of low-carbon fuels and a level playing field to benefit biofuel producers, consumers, agriculture and utilities. We are grateful the bipartisan Minnesota Future Fuels Act is modeled after recommendations our coalition published a year ago, A Clean Fuels Policy for the Midwest.

ACE supports clean-fuel policy like the Future Fuels Act because it can help increase the use of E15 and higher ethanol blends. In fact, according to scenario modeling commissioned by GPI and ACE, the quickest and lowest-cost way to achieve a 15% and 20% reduction in the carbon intensity (CI) of Minnesota’s transportation fuel is by increasing the use of E15, E30 and E85. Our analysis forecasts that clean-fuel legislation could increase the average blend of ethanol in Minnesota’s gasoline to 20% by 2030. Even existing clean-fuel programs that are biased against ethanol indicate demand rises. Since California enacted the Low Carbon Fuel Standard in 2011, E85 use has quadrupled, and the state is in the process of approving E15.

The Minnesota Future Fuels Act would also reward farmers for climate-smart practices to help reduce the overall CI of corn ethanol. The legislation would require the use of the most recent version of the Greenhouse Gases, Regulated Emissions and Energy Use in Technologies (GREET) model to determine the CI of transportation fuels. The credit market established under the legislation would provide a meaningful return on investment to farmers for practices that sequester carbon in the soil and ensure more efficient use of nitrogen-based fertilizer.

In addition to increasing ethanol demand and providing incentives to farmers for conservation practices, clean fuel policy will support economic development. According to an analysis commissioned by GPI and ACE, reducing the CI of transportation fuel in the states of Minnesota and Iowa by 15% from 2021 to 2030 would support 15,000 jobs and generate $10 billion total economic output, including more than $1.5 billion for farmers and biofuel producers. Consumers would also win under a clean-fuel standard. Our analysis shows that gasoline users and customers would receive a total economic benefit of $726 million over 10 years a result of savings from lower-cost fuel blends.

Finally, our behind-the-scenes work to win over allies in support of clean-fuel policy has resulted in a diverse and formidable coalition of groups and companies supporting the Future Fuels Act, including the Farmers Business Network, General Motors, Minnesota Bio-Fuels Association, The Coalition of Renewable Natural Gas, The Nature Conservancy, Union of Concerned Scientists, Tesla and Xcel Energy, just to name a few. ACE intends to help keep this coalition together as discussions ramp up about national clean-fuel policy in Congress.

Minnesota is not the only state making progress on clean fuel legislation this year. In addition to existing programs in California and Oregon, bills are progressing in New Mexico, New York and Washington. But the approach we are taking with the Future Fuels Act in Minnesota is unique because it promotes E15 and higher blends, takes a genuinely technology-neutral approach—whereas California and other programs tip the scale in favor of electric vehicles—and would benefit agriculture by applying the very latest life cycle science to reward farmers for climate-smart practices. If Congress does take up clean-fuel policy, we want a Midwest state to be the model, so farmers and biofuels are considered part of the solution.

Author: Brian Jennings CEO,
American Coalition for Ethanol