Thursday, November 05, 2015
The free market debate over the Renewable Fuel Standard
At the end of this month, the U.S. Environmental Protection Agency will finalize a decision regarding one of the most controversial mandates on Capitol Hill — the Renewable Fuel Standard.
Judging by a congressional hearing on Tuesday morning, whatever EPA decides will further fire up debate between those who think the RFS is a giveaway to corn-producing states and others who say it’s a valuable tool in reducing greenhouse gas emissions and reliance on oil.
“What we need to drive ‘competition in the marketplace’ is access to the marketplace that we are not going to get unless we have either the RFS or we break up the oil companies, which I don’t think is very politically popular,” said Brooke Coleman, executive director of the Advanced Biofuels Business Council, which wants to keep the standard in place.
“I just can’t believe what I just heard in this hearing room,” said one of the harshest critics of the RFS, Charlie Drevna, distinguished senior fellow at the Institute for Energy Research. “Mr. Coleman keeps on talking about this grand conspiracy [of] big oil trying to stop penetration into the market. The reality of the situation is … [oil producers regardless of size] do not control anything to do with the market.”
The back and forth highlighted a two-hour hearing of the subcommittees on oversight and environment in the House Committee on Science, Space and Technology that looked at a 10-year review of the costs and benefits of the RFS.
First instituted in 2005 and then bolstered by legislation in 2007, the RFS requires that ethanol gets blended into the nation’s gasoline supply.
The vast majority of the ethanol getting blended is corn-based.
An increasing amount of ethanol was supposed to come from other sources, such as cellulosic biofuels — which come from organic and nonfood material such as switchgrass, wood chips and corn stalks— and biomass, but those markets have been slow to expand.
In the meantime, the energy landscape has changed since 2005.
Thanks in large part to the domestic boom in crude oil through developments in hydraulic fracturing and horizontal drilling techniques, the nation is consuming less foreign oil. More gas-efficient cars have led to drivers consuming less gas than expected when the RFS was created.
Earlier this year, the Obama administration and EPA proposed reducing the amount of ethanol that’s mandated from 22.25 billion gallons in 2016 to 17.4 billion gallons.
The proposal is expected to be finalized Nov. 30.
A likely reduction has upset the biofuels industry, but it has also not silenced critics of the RFS, who say Congress should get rid of the standard altogether.