Renewable Fuel Standard: A broken and costly disaster
The Renewable Fuel Standard (RFS), which requires fuel suppliers to blend biofuels, mainly corn ethanol, into the nation’s gas supply is one of the most misguided mandates ever enacted by the Environmental Protection Agency (EPA), or any federal agency. With the goal of reducing the nation’s dependence on foreign oil, Congress created the RFS in 2005, and later expanded it at the behest of George W. Bush in 2007 under the Energy Independence and Security Act. What has been the result? Greater reliance on imports of foreign sources of energy, mandates of next to non-existent fuel, and higher food prices.
Many would be surprised to learn that much of the advanced ethanol mandated for domestic consumption is imported from Brazil. This is because Congress mandated cellulosic ethanol, made from wood and other non-food sources. However, this form of ethanol didn’t exist at the time of the mandate’s creation and it is barely in existence now. In fact, about .00008 percent of the original 1.85 billion gallons mandated in 2007 is being produced.
Beyond increasing our reliance on foreign energy, the mandate has forced more and more fuel be made out of food, which increases the price of both gas and food, thus hurting Americans at the pump and at the grocery store. The ethanol mandate has raised the price of corn, grain, and other feed stocks, negatively impacting livestock and several other food-related industries. By providing handouts to the corn industry, the federal government has once again created a volatile market by directly favoring one industry over others.
Despite the fact that the mandate sets goals that are largely unattainable, oil and gas refiners who are unable to blend the required amount of ethanol are being forced to buy “credits” called Renewable Identification Numbers (RINs) or face extreme fines. The result of this is massive profit loss, which also gets passed onto the consumer. And while countless members of Congress and the EPA have acknowledged that the current biofuel mandates are unworkable, little effort has been made to truly correct the problem.
Therefore, the RFS is opposed by a number of diverse organizations including oil and gas refiners, the restaurant industry, livestock and poultry groups, taxpayer/free market groups, and anti-hunger advocates. The mandate is also opposed by environmentalists, who have discovered that the RFS could actually lead to higher greenhouse gas emissions. So despite the government shutdown, the RFS is still a big concern among members of Congress and the wide range of industries that are feeling its impact.
In fact, the National Journal held a panel yesterday featuring Reps. Steve King (R-Iowa) and Peter Welch (D-Vt.), as well as industry representatives from the American Council on Renewable Energy, Butamax Advanced Biofuels, the National Council of Chain Restaurants, the Natural Resources Defense Council, the National Turkey Federation, and the Outdoor Power Equipment Institute to debate whether the mandate should be revised, eliminated, or remain.
Although a number of bills have recently been introduced in an effort to reform the mandate, the truth is that anything short of full repeal would just make a bad program even worse and more costly to consumers. For example, the Domestic Alternative Fuels Act H.R. 1959, has proposed adding natural gas to the fuel standard. While this bill was introduced with good intentions, it would only expand the broken mandate and its ill effects.
The natural gas market in the U.S. is strong and doesn’t need a government subsidy. The mandate would only increase the price of natural gas, hurting all those who depend on it, while benefitting those who make it. Consumers should be allowed to choose what fuel they want to use.
The bottom line is that the Renewable Fuel Standard can’t be fixed; it is broken, and it must be repealed. Reforms would only hand more power and authority to the EPA, expanding special subsidy handouts at the expense of taxpayers, consumers and workers that would manifest in the form of higher food and fuel prices, increased costs and job losses.
David Williams is the President of the Taxpayers Protection Alliance (TPA), a non-profit, non-partisan organization dedicated to educating the public through the research, analysis and dissemination of information on the government’s effects on the economy.