RFS hurts the economy

After much delay, the Environmental Protection Agency recently released a proposal to increase the Renewable Fuel Standard (RFS), which dictates how much biofuel must be blended into transportation fuels like gasoline and diesel. While EPA touts its proposal as a step in the right direction for the environment, nothing could be further from the truth.

The proposed rule would increase the mandated biofuel requirements to 17.4 billion gallons in 2016, an increase of almost 1.5 billion gallons from 2014 levels. EPA argues that this will improve the environment by reducing carbon emissions and providing more options for American consumers. Unfortunately, this isn’t true: the RFS is a bad deal for American consumers and for the environment, and it’s critical that EPA take the full costs of this policy into account before moving forward with its proposal.

{mosads}Since the inception of the RFS in 2005, the EPA regulations have mandated that increasing amounts of biofuels be blended into gasoline every year. To make this policy succeed, EPA markets biofuels as a cheaper and greener alternative to traditional gasoline. However, evidence shows that the RFS is neither cheap nor green, leaving American consumers on the hook for increased fuel prices and environmental damage.

Increases in corn-based ethanol production required by the mandates contribute to damage to ecosystems, wildlife habitat, and fisheries. Further, experts say that after taking into account land use changes and air emissions, existing biofuels production is unlikely to provide any beneficial improvement in carbon emissions over traditional gasoline. In fact, some researchers find that biofuel production could as much as double carbon emissions in comparison to gasoline.

Unfortunately, RFS is bad news for consumers, too. About 40 percent of domestic corn crops are used for ethanol production, up from 13 percent in the early 2000s. This is a huge portion of overall crop production being redirected from food to fuel. This increased demand for corn and soy increases the price of products that rely on corn and soy—including anything from eggs and soap to beef and cereal. That means your grocery dollar doesn’t go as far as it used to, thanks to the RFS.

While special interests tout the wide-reaching benefits of mandating biofuel use, these benefits are mostly enjoyed by corn and soy farmers who profit from increased commodity prices that result from the RFS. For example, the EPA estimated that its 2013 biodiesel standard raised the price of soybeans by 18 cents per bushel, yielding soybean farmers a whopping $550 million revenue increase. American consumers weren’t nearly so lucky — in fact, the EPA predicted that the same 2013 biodiesel mandate would increase domestic fuel production costs by 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.

Traditionally, environmental regulations involve a tradeoff between costs and environmental benefit — one that we, as a society, are familiar with and generally accept. However, the RFS fails as an environmental standard on both accounts by forcing Americans to pay heftier fuel and food prices for a dirtier environment. It’s all pain, and no gain.

Getting rid of the RFS would finally stall a policy that has long benefited corn and soy farmers at the expense of everyday American consumers. We deserve better than EPA’s latest rendition of the Renewable Fuel Standard.

Miller is a senior policy analyst at the George Washington University Regulatory Studies Center, and is editor of the Regulation Digest.