November 3, 2010

Renewable Fuels Program

Proposed Rule
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Additional details
Agency
Environmental Protection Agency
Regulatory Identification Number
2060-A081
Agency Name
Environmental Protection Agency
Rule Publication Date
07/07/2009
Comment Closing Date
09/25/2009

RULE SUMMARY

With this proposed rule, the Environmental Protection Agency is enacting the requirements of the Energy Independence and Security Act of 2007 (EISA). The statutory requirements implement changes to the Renewable Fuel Standard (RFS) program, specifying the volumes of cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuel that must be used in transportation each year, with the volumes increasing over time. The revised statutory requirements also include new definitions and criteria for both renewable fuels and the feed stocks used to produce them.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
2060-AO81 can be found on regulations.gov using the RIN and using a keyword search. To find the RIA on regulations.gov, narrow the search by typing in "Regulatory Impact Analysis". It is difficult to find because you have to sort through a list, but eventually the analysis will come up. On the EPA website, the proposed regulation and the RIA can be found by clicking on Laws and Regulations.
5/5
2. How verifiable are the data used in the analysis?
There are 970 endnotes to the numerous data sets and articles used in the RIA. They are not linked and some are communications and draft manuscripts, which makes it difficult to verify much of the data is used.
2/5
3. How verifiable are the models and assumptions used in the analysis?
In many cases the models are large, complex econometric models that are difficult to verify. The RIA also relies on several complex environmental modeling tools (FASOM, etc.), however these models are incredibly complex and the process behind them is not readily available in the RIA. There are links to other documents, however, that list these analyses.
3/5
4. Was the analysis comprehensible to an informed layperson?
Little attempt was made to make the complex analysis, which drew from many different scientific disciplines, understandable to the layperson. The RIA is incredibly technical and would not be readily understood, even to an educated reader. The sheer volume of pages makes it difficult for any reader to navigate, and there are no clickable links or other aids. In many cases, the RIA goes into unnecessary minutia of the production of renewable fuels.
1/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
"The notice does not identify how the rule, which mandates that 36 billion gallons of renewable fuels be produced annually by 2022, affects citizens' quality of life. It states: "The primary purpose of the RFS program is to require a minimum volume of renewable fuel to be used each year in the transportation sector.""
1/5
Does the analysis identify how these outcomes are to be measured?
It discusses possible impacts such as effects on air quality, oil imports, water quality, GHG emissions, land use, and food consumption but doesn't really explain how or in which direction these impacts might affect the quality of life. It states that much of the needed analysis will be done before the final rules is issued.
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
This depends on the desired outcome. Assuming it is not simply to increase world renewable fuels production, there is no coherent testable theory presented.
2/5
Does the analysis present credible empirical support for the theory?
Once again, no clear outcome measurements are given. There is ample citation and empirical support for the channels discussed above, however.
2/5
Does the analysis adequately assess uncertainty about the outcomes?
While there is no discussion of outcomes, the RIA does conduct a number of sensitivity analyses and explicitly discusses the uncertain nature of estimating climate costs and benefits. Within this broader discussion of uncertainty, however, there is no comprehensive analysis of how uncertainty could affect the outcomes.
2/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
1/5
Does the analysis identify a market failure or other systemic problem?
No, it simply states that the regulation is needed to implement the EISA.
0/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
No real problem statement is presented other than what can be inferred from the goals set forth by the EISA to assure that a minimum amount of renewable fuels (of four different types) is used in transportation by 2022.
0/5
Does the analysis present credible empirical support for the theory?
If the premise is that we should import less oil in 2022 than we would without the regulation then some evidence is presented that since the US is such a large buyer of oil and thus a monopsonist, it could lower the price by importing less and possibly reduce macroeconomic impacts on the US economy caused by supplier interruptions.
1/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
Assuming that the problem is excessive oil imports in 2022, the uncertainty of this problem is expressed by a wide range of impacts and promises of more analysis to come by the final rule stage.
2/5
7. How well does the analysis assess the effectiveness of alternative approaches?
1/5
Does the analysis enumerate other alternatives to address the problem?
Very limited discussion of alternative options discussed in the Regulatory Flexibility Analysis at the end of the RIA. This discussion does not seriously consider any alternatives, but talks about the role of potential alternatives in the development of the rulemaking.
1/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
There is no serious discussion of alternatives.
0/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
See above.
0/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
Baseline modeling is used for some of the impacts such as oil imports, agricultural production and imports, and some of the GHG and air pollution impacts. However some important impacts, such as the affect of lower world oil prices on the rest of the world oil consumption, are not estimated.
2/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Only partial costs of some of the impacts of the proposal relative to the baseline is presented. No other alternatives are considered.
2/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The proposal does a good job of analyzing most of the expenditures likely to arise using complex modeling.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Econometric modeling is used to estimate many of the price impacts, including on world food, land and fuel prices.
4/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The proposal does a good job of analyzing most of the behavioral changes that are likely to occur with the exception of the foreign consumer and political reaction. However, more work in this area is promised for the final.
3/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Ranges are presented and sensitivity analysis was performed in some of the studies that are cited as inputs. However, the various impacts and costs are not presented in summary or complete form.
3/5
Does the analysis identify the alternative that maximizes net benefits?
No alternatives are analyzed nor is a net benefits analysis performed on the proposal.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No, see above.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
The proposal does do a good job by using economic models develop for the agricultural and energy sectors which provide the cost impacts, but it is not clear that the infrastructure capital costs are taken into account. There are no summary tables.
3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The analysis identifies many parties who would benefit in the US, such as agricultural land owners and petroleum consumers, but it is not clear that these are social benefits rather than transfers. Again there is no summary aggregate benefit table.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
There is no evidence that the economic analysis was used. The rule implemented the EISA with no real alternatives presented. The RIA does exist, however.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
The agency didn't calculate net benefits, but it could be possible to do so.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The agency did not discuss how it might measure impacts, although the use of renewable fuels shouldn't be difficult to measure and track.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
There was no discussion of this topic. The agency does have access to potential data to assess the regulation's performance, however, there is no discussion as to how and whether this will be used and whether it will be done.
1/5
 
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