The Energy Policy Act of 2005 created a Renewable Fuel Standard (RFS1) in the U.S. that required 2.78 percent of gasoline consumed in the U.S. in 2006 to be renewable fuel. The EPA finalized this requirement for RFS1  in April of 2007.
Congress expanded U.S. renewable fuel usage with the Energy Independence and Security Act (EISA) of 2007. The Act included a provision for a new Renewable Fuel Standard (RFS2), which increased the required volumes of renewable fuel to 36 billion gallons by 2022 or about 7 percent of expected annual gasoline and diesel consumption above a business-as-usual scenario. The Act gave the EPA the authority to revise and implement regulations related to RFS2.
Figure 1: Renewable Fuel Standard requirements through 2022
The EPA issued a notice of the proposed rulemaking  for RFS2 in May of 2009 and the final rule  in March of 2010. Table 1defines the four categories of renewable fuel according to the EPA. In order to be classified under one of these categories, a fuel must meet the percentage reduction in life-cycle greenhouse gas emissions shown in the table. The EPA’s rule defined the renewable fuel volume requirements from 2008 through 2022. From Figure 1, one can see the RFS2 slowly ramps up advanced biofuels (cellulosic, biomass-based diesel, and non-cellulosic advanced) until they overtake conventional biofuels in consumption levels by 2022.
Table 1: Renewable fuel types in RFS2
from displaced gasoline/diesel
Fuel produced from renewable biomass and that is used to replace or reduce the quantity of fossil fuel present in a transportation fuel.**
Renewable fuel other than ethanol derived from corn starch.
Includes both biodiesel (mono-alkyl esters) and non-ester renewable diesel (including cellulosic diesel). It includes any diesel fuel made from biomass feedstocks. However, EISA included three restrictions. EISA requires that such fuel be made from renewable biomass. The statutory definition of “biomass-based diesel” excludes renewable fuel derived from co-processing biomass with a petroleum feedstock.
Renewable fuel derived from any cellulose, hemicelluloses, or lignin each of which must originate from renewable biomass.
* EPA could have exercised the 10 percent adjustment allowance provided for in EISA for the advanced biofuels threshold to as low as 40% but did not do so. ** Transportation fuel includes gasoline, diesel, heating fuel, and jet fuel. It can also include electricity, natural gas, and propane if it can be determined that the source of the fuel is renewable and the fuel is used for transportation. Source: Federal Register. (2010, March 26). Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program: Final Rule. 74(99). Washington: National Archives and Records Administration.
Figure 2: Fuel Pathways from EPA in 2022
Source: Federal Register. (2010, March 26). Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program: Final Rule. 74(99). Washington: National Archives and Records Administration.
Table 2: RFS Ethanol-Equivalent Volume Requirements, 2011 – 2013 (billion gallons unless noted)
Total Renewable fuel (Including Ethanol)
Note: Volumes are ethanol-equivalent, except for biodiesel, which is actual volume, Source: EPA, Renewable Fuel: Standards and Regulations, http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm 
Refiners that produce gasoline or diesel as well as importers of gasoline or diesel in the lower 48 states and Hawaii are the obligated parties for RFS2. Parties that add renewable fuel to gasoline or diesel (blenders), the state of Alaska (which can opt in), small refiners (whose exemption could expire on December 31, 2010), and gasoline exporters are exempt from RFS2.
Each year, the EPA must determine how much renewable fuel an obligated party must sell in order to meet RFS2. The EPA does this by determining the percentage of each of the four types of renewable fuel (see Table 1) that must be in the entire market in order to achieve the volume required by the standard for that year. It then requires each obligated party to own RINs (see box below) representing the same percentage of each of the four types of renewable fuel (known as renewable volume obligations or RVOs). See Appendix A for a description of the formulas the EPA uses to calculate obligation requirements. A provider may acquire these RINs either through producing the biofuel or through purchasing RINs on the open market. Most obligated parties are not biofuel producers so they would be expected to meet their obligation through the purchase of RINs. Thus, RFS2 establishes a credit trading system to attain the lowest possible cost of compliance.
|In order to track renewable fuel sold into the market, the EPA requires renewable fuel producers and importers to assign unique Renewable Identification Numbers (RINs) for each batch of renewable fuel sold where a batch is any amount less than 100 million gallons per month, unless the producer or importer processes less than 10,000 gallons per year.|
If an obligated party is out of compliance, the EPA may impose fines up to $32,500 as specified under sections 205 and 211(d) of the Clean Air Act for every day the entity is in violation and the amount of economic benefit or savings resulting from each violation.
EPA. 2010. EPA Finalizes 2011 Renewable Fuel Standards. November. Accessed December 6, 2010. http://www.epa.gov/otaq/fuels/renewablefuels/420f10056.htm .
Federal Register. 2010. "Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program: Final Rule." Vol. 74. no. 99. Washington: National Archives and Records Administration, March 26.
Greene, David, and Steven Plotkin. 2011. Reducing Greenhouse Gas Emissions from U.S. Transportation. Arlington, Virginia: Pew Center on Global Climate Change.