What is it – Renewable Volume Obligations (RVOs)

With the global push for a cleaner and more sustainable environment, countries are adopting various policies and standards to facilitate the transition to renewable energy sources. One of these measures is the Renewable Fuel Standard (RFS), a program aimed at reducing greenhouse gas emissions and promoting energy independence. In today’s What Is It Wednesday, we’ll delve into the RFS 2023 and explore the key concept of Renewable Volume Obligations (RVOs).

 What is the Renewable Fuel Standard (RFS)?

The Renewable Fuel Standard is a U.S. federal program that was first established by the Energy Policy Act of 2005 and later expanded under the Energy Independence and Security Act of 2007. The RFS mandates that transportation fuels in the United States must contain a certain volume of renewable fuels, such as ethanol, biodiesel, and other cleaner fuels. The program’s primary goal is to lessen the country’s reliance on foreign oil, lower greenhouse gas emissions, and foster the growth of the domestic biofuels industry.

What are RVOs?

At the heart of the RFS are the Renewable Volume Obligations (RVOs), which dictate the amount of renewable fuel that obligated parties, such as gasoline and diesel refiners and importers, must blend into the transportation fuel supply in a given year. The Environmental Protection Agency (EPA) sets annual RVO targets based on a percentage of the total volume of transportation fuel in the U.S. RVOs are further divided into four categories, each representing a different type of renewable fuel. Each of the categories has its own specific RVO, which together make up the total renewable fuel obligation. For 2023, the EPA has established the following RVOs for the categories:

1. Conventional biofuel: 15 billion gallons
2. Advanced biofuel: 5.82 billion gallons
3. Cellulosic biofuel: 0.63 billion gallons
4. Biomass-based diesel: 2.82 billion gallons

These RVOs represent an overall increase compared to previous years, signaling the EPA’s commitment to bolster the renewable fuels sector.

Compliance with RVOs

Obligated parties are required to demonstrate compliance with RVOs by acquiring and submitting Renewable Identification Numbers (RINs), which are generated for each gallon of renewable fuel produced or imported. RINs can be traded between parties, allowing those who exceed their obligations to sell excess RINs to those who fall short. This market-based system creates a flexible mechanism for meeting RVO targets.

The RVOs are assigned to each obligated party based on their actual supply of gasoline and diesel fuel, which determines their specific renewable fuel obligation for that calendar year. Obligated parties are required to fulfill their RVOs by submitting RINs within 60 days following the conclusion of each calendar year.