Research & Commentary: Renewable Fuel Standard Update
The U.S. Environmental Protection Agency’s Renewable Fuel Standard (RFS), created by the Energy Policy Act of 2005 and expanded in 2007 through the Energy Independence and Security Act, requires 36 billion gallons of renewable fuel be blended into gasoline and diesel fuel by 2022. In 2014, EPA determined the total amount of renewable fuel blending was 15.93 billion gallons.
In early June, EPA announced it would increase the renewable fuel mandate volumes over the next three years to 16.30 billion gallons in 2015 and 17.40 billion gallons in 2016. These increases are four billion gallons per year lower than what the 2007 legislation calls for. EPA acknowledged the new standards are below the original numbers and attributed this difference to the so-called “blend wall,” the inability of most vehicles to use fuel with a blend of more than 10 percent ethanol and the lack of infrastructure to deliver fuel with higher blend ratios.
Research organizations, small-business owners, manufacturers, and ordinary consumers all have made strong arguments against the RFS because it creates an array of unintended consequences affecting almost all sectors of the economy. In a 2013 coalition letter opposing the RFS, a group of 21 public policy organizations argued, “The RFS imposes higher costs on consumers and small businesses, kills jobs, and harms both the economy and the environment. We should repeal the RFS entirely. Let consumers and the marketplace determine how much ethanol should be blended with fuel.”
The RFS was mandated on the pretext of reducing carbon dioxide emissions and U.S. dependence on foreign oil. Ethanol industry representatives even claim the blends lower gas prices. That is contradicted by a recent study from the Massachusetts Institute of Technology that concluded ethanol does not reduce the cost of gasoline because ethanol possesses only two-thirds the energy density of gasoline and thus has lower gas mileage than non-blended fuel. Ethanol delivers 25 percent fewer miles per gallon than gasoline while damaging engines due to its corrosive properties.
During the production phases, biofuels require by far the greatest amount of land compared to other energy sources. According to the National Academy of Sciences, this heavy land use disrupts soil’s future potential to store carbon, to the point that it can fully offset the carbon reductions accrued from displacing the use of petroleum-based fuels for transportation.
The RFS also places an unnecessary burden on small businesses. Many gasoline stations are independently owned and operated. Upgrading to the new systems required to sell new ethanol blends is expensive, a cost many business owners may not be able to absorb because the margins on gasoline sales are so narrow.
RFS proponents overlook the fact that because gasoline prices are primarily dependent on crude oil costs and crude oil is used for myriad other products besides gasoline, many of which have significantly greater demand growth than gasoline (where demand is always flat), the RFS has practically zero capacity to reduce oil use or oil imports.
With the current boom in domestic oil and natural gas production due to hydraulic fracturing and horizontal drilling technologies, which have tremendous carbon reduction capacity of their own, renewable fuel mandates have become a solution in search of a problem.
The following documents provide additional information about ethanol and the renewable fuel standard.
Ten Principles of Energy Policy
Heartland Institute President Joseph Bast outlines the ten most important principles for policymakers confronting energy issues, providing guidance to deal with ongoing changes in markets, technology, and policies adopted in other states, supported by a thorough bibliography.
The Ethanol Mandate: Don’t Mend It, End It
The Heritage Foundation’s Nicolas Loris argues the only true reform to the Renewable Fuel Standard is to eliminate it, urging Congress to repeal the costly and unnecessary mandate.
Biofuel’s Carbon Balance: Doubts, Certainties and Implications
In this September 2013 paper published in the peer-reviewed scientific journal Climatic Change, John DeCicco questions the carbon dioxide balance of biofuel use and finds using plants to make biofuels emits just as much CO2 into the air as is saved by replacing petroleum with biofuels, undermining biofuels as a tool for effective climate policy.
Coalition Letter Calls for Repeal of Renewable Fuel Mandates
This letter to Congress from a coalition of 21 public policy organizations outlines the economic and environmental damage caused by federal renewable fuel mandates. The coalition members argue the only way to fix this damage is to repeal the mandate.
The U.S. Department of Energy defines ethanol and states what the department recognizes as the considerable advantages and disadvantages of blending it with motor fuel gasoline.
National Academy of Sciences: Renewable Fuel Standard Goals Unlikely To Be Met
In a report evaluating the economic and environmental effects of the renewable fuel standard, the National Academy of Sciences finds the RFS “may be an ineffective policy for reducing global [greenhouse gas] emissions” because land conversion for biofuel production involves vegetation removal, which disrupts future potential to store carbon in soil or biomass, thus offsetting any greenhouse gas benefits gained by displacing traditional fuels.
Renewable Fuel Standard (RFS)
The U.S. Environmental Protection Agency (EPA) explains the renewable fuel standard program, which currently requires 36 billion gallons to be blended into transportation fuel by 2022.
MIT Study: Ethanol Doesn’t Reduce Gasoline Prices
Claims from the ethanol industry that ethanol blending reduces gasoline prices are contradicted by economics professors at the Massachusetts Institute of Technology, who conclude not only does ethanol have no such effect, it contains 33 percent less energy than gasoline, so engines need more of it to power a vehicle the same distance.
Challenges to the Transportation, Sale, and Use of Intermediate Ethanol Blends
The U.S. Government Accountability Office reports a federally funded study found the effect of ethanol-blended gasoline was to “reduce a vehicle’s fuel economy (i.e., fewer miles per gallon) and may cause older automobiles to experience higher emissions of some pollutants and higher catalyst temperatures.”
Could Biofuel Policies Increase Death and Disease in Developing Countries?
A paper published in the Journal of American Physicians and Surgeons finds policies encouraging the production and use of biofuels exacerbate global poverty.
The Federal Government’s Biodiesel Mandate Ensures Higher Prices All Around
Cato Institute adjunct scholar Robert Bradley Jr. explains why the renewable fuel standard, and particularly the 2013 standard, will drive up prices at the pump and at the grocery store. He concludes the mandate should be scrapped.
Energy Regulation in the States: A Wake-up Call
The Institute for Energy Research lists state-by-state data on several energy regulations, including which states require gasoline to be mixed with renewable fuels.
For further information on this and other topics, visit the Environment & Climate News website at https://www.heartland.org/Center-Climate-Environment/index.html, The Heartland Institute’s website at http://www.heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
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