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More Voices in the RFS Debate

Mark Green

Mark Green
Posted March 26, 2013

The biofuels/ethanol debate has moved over to National Journal’s Energy Experts Blog, with this week’s posts addressing whether the Renewable Fuel Standard (RFS) that mandates biofuel use should be left alone, amended or repealed. Some of what others are saying:

Bernard Weinstein – associate director of SMU’s Maguire Energy Institute:

“The biofuels mandate has done little or nothing to enhance America’s energy independence or security. Oil imports have dropped dramatically over the past five years, from 60 percent of consumption to around 35 percent; but the credit goes to the shale revolution that has greatly boosted domestic production. What’s more, the potential contribution of ethanol to the energy mix has been oversold. Processing the entire U.S. corn crop into ethanol would yield energy equal to just 12 percent of gasoline consumption. … But the most pressing reason for repealing the ethanol mandate is that refiners must blend a larger quantity every year. … Consequently, refiners are up against a “blend wall” as the mandate forces them to purchase more ethanol than they can safely put into gasoline.”

William O’Keefe – CEO of the George C. Marshall Institute:

“Over the past four decades, Administrations and Congresses have continued to travel the road of industrial policy and technology, forcing mandates along the way. It is not that Washington does not see that these mandates don’t work or that they simply waste resources, but that Washington misses the fact that these mandates make it harder for the private sector to do what it does best - respond efficiently to consumer needs.”

Susan Dudley – director of the George Washington University Regulatory Studies Center:

“EPA predicts that its recent biodiesel mandate will increase both U.S. and world commodity prices for soy products. The increased fuel prices – between $253 million and $381 million in 2013 alone, or between $0.90 and $1.36 per additional gallon of biodiesel required by the standard – are only a fraction of the total consumer cost. … Advocates try to justify subsidies and mandates by citing the need to nurture an infant industry so that it can grow to participate in a competitive market place without support. But biofuels are no infant industry. The first vehicles, including Henry Ford’s Model T, were built to run on ethanol. After a century, the success of biofuels as a competitive fuel source should not depend on legislated mandates or costly subsidies. Rather than encouraging healthy competition, which provides incentives for innovation and efficiency, the mandates encourage political rent-seeking, and harm the environment, consumers and taxpayers in the process.”

The ineffectiveness of biofuels/ethanol mandates in advancing America’s energy security, the market-distorting aspects of top-down mandates and associated costs – all argue for scrapping the RFS. As the above comments suggest, flaws in the RFS are too great for mere tinkering. The consequences of continuing with the standard and its mandates could be severe, according to a new study by NERA Economic Consulting:

  • By 2015, a $770 billion decrease in U.S. GDP.
  • A $580 billion decrease in worker take-home pay by 2015.
  • Potentially, a 300 percent increase in the cost of diesel by 2015, and a 30 percent increase in the cost of gasoline.

All stem from the “blend wall” – the point where refiners can no longer meet ethanol blending mandates under the RFS without elevating the ethanol content in gasoline to higher than 10 percent. According to NERA’s study, refiners trying to satisfy the RFS’ mandates may be forced to decrease the amount of diesel and gasoline supplied to the domestic market by producing less of each or by exporting more if each to overseas markets – possibly resulting in transportation cost increases that would impact the entire U.S. economy.

The answer isn’t producing more E15 (up to 15 percent ethanol) fuel or E85 (up to 85 percent ethanol). Research has shownE15 could damage engines and/or fuel systems in millions of U.S. vehicles on the road today. Car manufacturers have said vehicle warranties won’t cover damage linked to fuels for which those vehicles weren’t designed. E85 demand in the marketplace is weak and projected to stay that way by the government – mirroring weak consumer demand for vehicles that use E85.

No, the solution with respect to the RFS is to scrap it – recognizing it is fatally flawed and counterproductive for the economy and America’s energy security.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.