Originally published by the Washington Examiner on April 2, 2020.
Plummeting demand due to reduced travel during the COVID-19 pandemic compounded the many flaws with the Renewable Fuel Standard and strained some in the petroleum industry to the breaking point. Even with light at the end of the pandemic tunnel, lawmakers should learn from the experience and replace the broken RFS with an energy strategy that is good for the economy, the environment, and consumers alike.
The RFS has not brought promised environmental benefits. A large part of the reason is that advanced biofuel development failed to meet the pace anticipated by the law’s drafters, which should come as no surprise to those who understand that politicians are not blessed with special market insight.
Instead of transitioning out of corn starch ethanol, the ever-increasing amount of biofuel that the RFS mandates be blended into the nation’s fuel supply has necessitated rapid expansion of corn production. The result is negative consequences for both consumers, in the form of higher prices for corn and corn-fed livestock, and the environment, as corn production is a significant cause of air and water pollution.
One study estimated that corn production was responsible for 4,300 premature deaths per year, or about a quarter of air pollution-related agricultural deaths. Expanded corn production has also exacerbated toxic algal blooms, decreased biodiversity, and accelerated habit loss. And rather remarkably, given the aims of the policy, life-cycle emissions for conventional corn-starch ethanol are worse than that of standard gasoline.
The damage is not just environmental but also economic in nature. Increases in the biofuel mandate from the RFS have left small U.S. refineries in a precarious position. Many are unable to blend their own biofuel and so must turn to the market to purchase credits, Renewable Identification Numbers, to satisfy the mandate. But the further detached the mandate becomes from market conditions, the higher RINs prices soar.
The government has responded by granting small refinery exemptions, though never in sufficient numbers to alleviate the burdens created by the law. And ethanal producers have gone to court and succeeded in having some of the exemptions thrown out, leaving refineries in an untenable position during a pandemic-driven demand slump.
In short, the RFS is a political mess, the direction of which has become almost entirely driven by competing parochial interests, with little consideration given to the ostensible reasons the law exists in the first place. It is policymaking at its most dysfunctional.
It is noteworthy that ethanol producers make the argument that the RFS has no impact on the production of ethanol. In a comment to the Environmental Protection Agency, the ethanol association Growth Energy claims that “demand for E10 exists entirely independent of the RFS standards,” and “most consumption of higher-blend ethanol-based fuels is dictated by non-RFS government mandates and incentives.”
It wants to deflect from the RFS any responsibility for the life-cycle environmental impact of ethanol by pretending that the mandate does not drive ethanol production. But if that is true, why does the ethanol association lobby so hard for it?
The reality is that the problems with the RFS largely flow from its overly prescriptive nature. Instead of simply setting, as one example, a limit to the amount of pollution a vehicle emits or the total life-cycle emissions for a fuel, and then allowing the market to innovate and find the best solutions to the problem, politicians thought they could predict technological development such that they could dictate to the market the best approach.
Once again, we see why humility is a political virtue, and a scarce one at that.
Another virtue in too short supply is courage. Will the Biden administration or Congress find the courage to admit that the Renewable Fuel Standard is a failed policy? Instead of leaving the mess for unelected bureaucrats at the EPA or the courts to sort out, they should scrap it and write a better law.
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Image credit: Beeki | Pixabay License.
