Yesterday, the nonpartisan Congressional Budget Office (CBO) released a new report entitled “The Renewable Fuel Standard (RFS): Issues for 2014 and Beyond” confirming what TCS has said for years – that the RFS and corn ethanol are doing more harm than good. For more than a decade, biofuels were sold as a way to help achieve American energy independence, reduce greenhouse gas (GHG) emissions, and spur rural economic development. However, as this new report confirms, the biofuels industry will continue to fall short of achieving these goals while spurring numerous unintended consequences and long-term liabilities.
The CBO report concluded that if corn ethanol production increases to meet 2015 RFS targets, corn prices and food prices will increase further. Another CBO report from 2009 found that one-fifth of the increase in corn prices and ten to 15 percent of food price increases between 2007 and 2008 were due to increased corn ethanol production. Corn ethanol comprises the majority of U.S. biofuels production since next-generation cellulosic biofuels, produced from non-food feedstocks such as perennial grasses and agricultural residues, have failed to materalize; in fact, the Environmental Protection Agency (EPA) reduced the cellulosic ethanol mandate by more than 95 percent over the past several years. CBO also concluded that if RFS biofuels production volumes continue on auto-pilot until 2015 (except for cellulosic ethanol), the price of 10 percent ethanol, the primary gasoline blend in the U.S., will increase 13 to 26 cents per gallon, and the price of diesel will jump 30 to 51 cents per gallon. While corn ethanol and other biofuels were initially promised as a way to reduce GHG emissions, CBO noted some studies conclude corn ethanol actually increases GHG emissions.
Adding insult to taxpayer injury, aside from this government mandate, biofuels also enjoy an array of federal subsidies, special interest tax breaks, and a variety of other supports including USDA bioenergy subsidies. The Senate recently proposed extending numerous tax breaks in tax extenders legislation. While these won’t likely pop up again until the lame duck session of Congress, EPA has a chance this summer to reduce corn ethanol and other biofuels volumes for 2014, providing some relief to the mandate’s higher consumer costs and other unintended consequences.