The Renewable Fuel Standard Belongs On The Naughty List

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Philip Rossetti Director of energy policy at the American Action Forum
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It’s that time of year again: holiday music, festive beverages, and the EPA’s release of its latest requirements for blending biofuels with gasoline to meet the Renewable Fuel Standard (RFS). Sadly, the latter is not the wondrous gift we’d been promised: It didn’t make us safer, it didn’t benefit the environment, it didn’t drive down fuel prices—but it did drive up global food prices for everything from corn flakes to dog food. Now, as the United States is the most energy secure it has been since the 1990s, it is time to end this ill-designed and costly policy.

The RFS is a decade-old government requirement that biofuels (mostly from corn-based ethanol) be blended into gasoline. The idea behind the mandate was straightforward: It was a few years after the Sept. 11 attacks, and the U.S. feared that its purchase of foreign oil was an important revenue stream for the very forces America was combating. With oil prices also on the rise, the idea of being able to replace a portion of oil consumption with home-grown—and ostensibly environmentally friendlier—biofuels was very attractive. Since its inception, however, the program has had a litany of failures and unintended consequences.

In 2007, Congress set requirements for how much biofuel would be blended with gasoline through 2022, and those requirements are still the law of the land today. Unfortunately, when those targets were set it was assumed that production of all biofuels, including corn-based but especially cellulosic fuels (from inedible plant matter) and “advanced” fuels (from waste sources), would take off. But the hoped-for production growth of biofuels, especially advanced ones, never happened—they’re just not cost competitive with gasoline.

When there is not enough biofuel to meet Congress’ targets, EPA has the authority to set a reduced requirement. The recently released blend requirements for 2018 put cellulosic and advanced biofuels at less than a third of what Congress required. Even including corn-based ethanol, the EPA requirements fell more than 25 percent (or seven billion gallons) short of Congress’ expectation. An inadequate supply, and a government policy that inflates demand, has put an upward pressure on biofuel prices, and the high costs are passed on to consumers at the pump.

Blending ethanol into gasoline also raises costs for drivers by decreasing fuel efficiency. Exactly how much more Americans pay at the pump because of the RFS is somewhat disguised by the fact that it takes 1.5 gallons of ethanol to match the energy in a gallon of gasoline. Back-of-the-envelope math suggests that, at current prices, Americans will pay $4 billion more at the pump next year than they would without the RFS.

Moreover, the RFS has had an enormous impact on food prices, since it inflates the demand for corn. Resources for the Future estimates that by 2022, food prices will be 17 percent higher because of the U.S. and E.U. RFS policies.

RFS proponents who had hoped for environmental benefits only get more disappointed with each study. Analyses that fully account for lifecycle pollution from agriculture and biofuel production show that it is not much cleaner than gasoline. One analysis even found that ethanol fuel causes 80 percent more pollution than gasoline.

The RFS has also failed as a national security policy. True, gasoline prices and foreign oil imports are relatively low—but that has little to do with the RFS. Fracking has allowed U.S. oil production to increase by nearly 5 million barrels per day. To put that in perspective, at current refinery yields, that is about 36 billion gallons annually of gasoline. It would take an RFS requirement of 54 billion gallons of ethanol to match that energy production – more than double what Congress even hoped for. If anything, the RFS has delayed the realization of those benefits, as it creates a government preference for domestic biofuels over other methods of cutting foreign energy dependence.

Unfortunately, this Christmas carol does not seem headed for a happy ending. The warnings from the Ghost of Christmas Past seem to have fallen on deaf ears, as the Trump Administration has avowed continued support for the RFS and EPA Administrator Scott Pruitt has promised minimal changes to the program. The RFS has offered little benefit to Americans while imposing enormous costs everywhere from the gas pump to the grocery aisle.

It is time for the Renewable Fuel Standard to be held to the same level of accountability and scrutiny as any other failed regulation. It needs to be significantly reformed or ended.

Philip Rossetti is the director of energy policy at the American Action Forum.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.