State low carbon programs could overtake US federal incentives: ASA

State-led low carbon emissions programs, which are key in rolling out increased expectations for renewable diesel and sustainable aviation fuel, could eventually overtake incentives driven by the federal government, the American Soybean Association told delegates at the Fastmarkets Biofuels and Feedstocks Americas conference on Tuesday.

The comments come as more and more states follow the lead of California in implementing clean fuel standards, with the latest to follow suit – the state of Washington – earlier this year committing to reducing the carbon intensity of transportation fuels to 20% below 2017 levels by 2038 and quite possibly by 2034.

Speaking at the event in Chicago on May 16, chief economist at the American Soybean Association (ASA) Scott Gerlt said that if more states don't individually adopt these policies, "then we are years away in terms of growth."

"I'm not looking at this in terms of months but years if ever – there's a lot of uncertainty in how much the federal program will grow," Gerlt said, adding that "without further policy changes it's going to take the government a while to reach."

"There are more questions than answers right now for the sector in the policy space," he said.

Experts have previously expressed doubts however that the growth of the California-pioneered LCFS would be translated into a nationwide, federal program applied across all US states.

Gerlt took the opportunity to promote the use of soybeans in both biodiesel and renewable diesel (RD) production, which the ASA forecasts will grow significantly over the next few years.

According to the ASA, only 14% of RD in 2022 was made using soybeans as a feedstock, with the majority based on tallow, however, the executive remained confident that there were more opportunities for soybeans in the production of the greener fuel, which it said would not threaten US food supply.

Trade flows could change if the US starts to export more soymeal versus beans, Gerlt said, if more beans are being crushed to produce soybean oil for renewable diesel – the latter of which is expected to grow capacity-wise to reach 7 billion gallons over the next few years.

This growth, Gerlt said, is "far outpacing" the renewable volume obligations set by the Environmental Protection Agency (EPA).

"The EPA's premise in setting the 200 million gallon growth over 2023-2025 was based on a flawed assumption from the USDA that there would be no change in policies encouraging soybean crush capacity growth, whereas the reality is the opposite," Gerlt told delegates.

"We have raised our concerns with the EPA as have multiple other groups – it's untenable for the [government body] to stand on this, but we will see what they do next month," he said.

The EPA is expected to publish its final rule for 2023 RVOs by June 14, which will be key in determining the outlook for biofuel demand and key feedstocks including soybeans, corn, used cooking oil (UCO), and tallow.

In December, the government body proposed to increase biofuel blending volume requirements for the next three years under the Renewable Fuel Standard, calling for an overall blending mandate (renewable volume obligations, or RVO) of 20.82 billion gallons for 2023, while for 2024 the EPA has called for blending volumes of 21.87 billion gallons and 22.68 billion gallons in 2025.

Few changes are expected to be revealed in the final rule, meanwhile.

The US is the second world biggest exporter of soybeans with the United States Department of Agriculture (USDA) expecting the country to send out 54.84 million mt during the 2022/23 market year.

By May 11 this year, a total of 48 million mt had already been exported according to the agency's data, slightly under the 48.5 million mt recorded at the same time last year.

Domestic soybean crushing meanwhile is expected to increase year-on-year to 59.98 million mt in 2021/22 MY, 60.42 million mt in 2022/23 MY, and 62.87 million mt by 2023/24 MY, as the US looks to crush more whole soybeans domestically instead of exporting them.