For the first time in the history of its program to promote biofuel as a replacement for petroleum-based fuels, the U.S. government proposed Friday to reduce the amount of ethanol that is required to be added to the nation’s gasoline supply.

The move by the world’s No. 1 producer and consumer of biofuel reflects profound changes underway in U.S. driving habits and vehicle fuel efficiency, as well as concerns that the nation’s tightly intertwined food and fuel systems are maxing out on their ability to burn more corn-based alcohol for transportation. Americans are driving less and cars on the highways are more efficient than Congress anticipated when it created the renewable fuels mandate in 2005. (Take a quiz: “What You Don’t Know About Biofuel.”)

Nearly all the gasoline sold in the United States is now “E10,” gasoline mixed with up to 10 percent ethanol. The majority of the cars on the U.S. market are not designed to run on large amounts of ethanol (even though the technology for “flex-fuel vehicles” is simple and inexpensive.)

Biofuels at a Crossroads
Learn more about the issues surrounding biofuels.

The U.S. Environmental Protection Agency (EPA) has approved 15 percent ethanol blends for cars manufactured after 2001, but that hasn’t been a solution to the so-called “blend wall” problem, since few filling stations carry the higher blend and worries about the potential for “misfueling” errors abound. In its new proposal, the EPA said it is seeking input on what steps it can take “to help overcome current market challenges” and minimize the need to reduce the ethanol mandate further in the future. But for now, the agency is proposing to set the 2014 requirement at 15 billion to 15.52 billion gallons, close to what the mandate was last year. That marks about a 6 percent reduction from this year’s mandate, and is about 15 percent below what the mandate had been scheduled to reach by 2014. (See related story: “Drought Withers U.S. Corn Crop, Heats Debate on Ethanol.”

The EPA attempted to craft a compromise amid ferocious lobbying over the so-called Renewable Fuels Standard, an onslaught that is not likely to abate. The American Fuel & Petrochemical Manufacturers, representing oil refiners, said EPA’s recognition of the blend wall problem was a “welcome step,” but signaled it would continue to urge Congress to undo the “unworkable law.” A leading group for ethanol producers, the Renewable Fuels Association, said that the costs that the program was imposing on refiners was a sign that the program was having an impact in unseating oil’s monopoly on transportation: “Now is not the time to depressurize the program,” the group said. (See related blog post: “Why the New Biofuel Feedstocks Deserve Investment, Incentives.”)

Meanwhile, even though the EPA made last-minute changes to the proposal to reduce the potential cuts to “advanced” biofuels–those not made from corn–the Biotechnology Industry Organization said the proposed ethanol reductions “could significantly chill investments in advanced biofuels projects,” and the group said it would work for further changes to the plan. (Vote and comment: “Are Biofuels Worth the Investment?“)

More stories about biofuels:

Panda Poop May Help Turn Plants Into Fuel

Beyond Ethanol: Drop-In Biofuels Squeeze Gasoline From Plants

Whisky a Go Go: Can Scotland’s Distillery Waste Boost Biofuels?