London, 15 February 2010

EIA data released at the end of January show another new monthly record for the US ethanol industry in November 2009, with over 990 million gallons produced - equivalent to 786,000 barrels/day. This striking performance is primarily due to highly supportive economic conditions according to SG CIB: Ethanol has been very competitive against gasoline since early March 2009, and moves in the relative prices of corn and ethanol have improved the industry's profitability, which was particularly strong in November 2009.

"In this context, the latest change in the US biofuel regulatory framework is particularly interesting. On 3 February 2010, the US Environmental Protection Agency ( EPA) finalised the regulations for implementing the Renewable Fuel Standard (RFS2), which was signed into law in 2007," say SG.

"Overall, the new regulations contain no big surprises. However, they do provide relief, as corn-based ethanol has been deemed to meet the requirement of a 20% decrease in greenhouse gas emissions despite the ongoing controversy over Indirect Land Use Changes (ILUC). The EPA had indeed to take into account the effect of ILUC in its calculation of GHG reduction, and it had previously raised concerns that corn-based ethanol would fail to pass the 20% threshold in this context.

"All in all, these regulations confirm the US government's friendly treatment of the US biofuel industry in general, and of its mainstream, corn-based component in particular."

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