The Center for Regulatory Solutions (CRS) has produced a series of reports on the deleterious effects of the corn ethanol mandate, also known as the Renewable Fuel Standard (RFS), on state economies and environments. The latest report, released in late November, focuses on RFS’s impact on Illinois.
CRS reports RFS led to $5 billion in unnecessarily high fuel costs for Illinois residents through 2014. If the mandate is unchanged, RFS projects it will cost Illinois residents another $17 billion through 2024. CRS notes these higher fuel costs will depress labor income by roughly $7 billion by 2024, spiking more than 7,000 potential new jobs per year and causing more than $12.1 billion in lost gross domestic product (GDP).
RFS has increased demand for corn for ethanol production. Diverting corn to ethanol production means Illinois livestock farmers have had to spend more on feed for their livestock. In 2012 alone, Illinois livestock farmers spent $164 million more on feed than they would have without RFS in place. As CRS President Karen Kerrigan stated in a press release accompanying the November report, “While a small segment of Illinois’ farmers have benefitted from the RFS, it has come at a great cost to livestock farmers and the rest of the state’s economy.”
A part of the Energy Policy Act of 2005, expanded through 2007’s Energy Independence and Security Act and administered by the Environmental Protection Agency (EPA), RFS requires 36 billion gallons of renewable fuel sources such as ethanol be blended into gasoline and diesel fuel by 2022. Proponents of RFS said its implementation would reduce carbon dioxide emissions and reduce American dependence on foreign oil.
The latter reason for RFS has been negated by the boom in oil and natural gas production caused by hydraulic fracturing and horizontal drilling, and the former was never reasonable to begin with. Biofuel production requires a great deal of land, disrupting the carbon-storing potential of the soil and at least partly offsetting emissions reductions that may have been achieved by substituting ethanol for regular gasoline. Since implementation of RFS in 2005, Illinois has seen more than 22,000 tons of soil erosion as a direct result of increased corn production.
On the last day of November, the Obama administration and EPA released a reduction in volume mandates for 2016, lowering them from 22.25 billion gallons to 18.11 billion gallons. This is well below what RFS required in 2005 and is a welcome first step in the right direction, but RFS should be completely repealed. As The Heartland Institute has noted before, “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 following documents provide additional information about ethanol and the renewable fuel standard.
Ten Principles of Energy Policy
https://heartland.org/publications-resources/publications/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
https://heartland.org/publications-resources/publications/the-ethanol-mandate-dont-mend-it-end-it?source=policybot
The Heritage Foundation’s Nicolas Loris argues the only true reform of the Renewable Fuel Standard is to eliminate it. Loris urges Congress to repeal the costly and unnecessary mandate.
Biofuel’s Carbon Balance: Doubts, Certainties and Implications
https://heartland.org/publications-resources/publications/research–commentary-renewable-fuel-standard-update
In this September 2013 paper published in the peer-reviewed scientific journal Climatic Change, John DeCicco questions the carbon dioxide balance of biofuel use. He finds using plants to make biofuels emits just as much CO2 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
https://heartland.org/news-opinion/news/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 repair the damage is to repeal the mandate.
Ethanol
http://www.fueleconomy.gov/feg/ethanol.shtml
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
http://www.nap.edu/openbook.php?record_id=13105&page=4
In a report evaluating the economic and environmental effects of the renewable fuel standard, the National Academy of Sciences finds 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)
http://www.epa.gov/otaq/fuels/renewablefuels/
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
https://heartland.org/news-opinion/news/mit-study-ethanol-doesnt-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. They conclude ethanol has no such effect. Moreover, 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
http://www.gao.gov/products/GAO-11-513
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?
https://heartland.org/publications-resources/publications/could-biofuel-policies-increase-death-and-disease-in-developing-countries?source=policybot
This 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
http://www.cato.org/publications/commentary/federal-governments-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
https://heartland.org/publications-resources/publications/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.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Environment & Climate News website at https://heartland.org/Center-Climate-Environment/index.html, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact John Nothdurft, Heartland’s Director of government relations, at[email protected] or 312/377-4000.
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
