In 2005, then-President George W. Bush signed the Renewable Fuel Standard (RFS) program into law that mandates transportation fuel sold in the U.S. be integrated with a specific amount of biofuel, mostly corn-based ethanol. The idea behind it was that it would curb greenhouse gas emissions and make the nation energy independent, but it quickly metastasized into an expensive subsidy that would lose Republicans and Democrats votes if they dared eliminate the exorbitant handout.
The RFS is back in the news again after President Donald Trump recently held a series of meetings to discuss ethanol mandates and the overall contentious program. With the RFS set to expire in 2020, some GOP lawmakers are itching to repeal it beforehand. But, as many conservative organizations have pointed out, some of the Republican proposals may be even worse.
According to the American Action Forum (AAF), Republicans have pitched a European idea to replace the RFS: install the high-octane fuel standard (HOFS), which is a directive to sell more fuel-efficient gasoline that has higher octane levels.
Like the RFS has done over the last decade, HOFS would simply raise prices and impact automobile engines, warns Philip Rossetti, director of energy policy at the AAF.
A transition to a high-octane ethanol mixture of at least 25% would need more corn, applying pressure on corn prices. Moreover, motorists would require high-performance engines to take advantage of high-octane fuels – they would either need to upgrade their engines or purchase new vehicles altogether.
Today, Europe forces gasoline to be 91-octane or higher, increasing the cost of fuel. In the U.S., drivers pay 50 cents per gallon more for premium grades with higher octane levels than regular gasoline, which contains 87-octane.
Automakers support the European model; General Motors executive Dan Nicholson told an auto industry summit last month that the “America deserves at least as good a fuel as Europe has.”
It is true that it might slash costs for manufacturers and curtail compliance costs for refiners, but it is also true that consumers will bear the biggest brunt.
“Corn producers and refiners win due to the increased demand for ethanol and premium fuels. Vehicle manufacturers win because they can comply with fuel-economy standards more easily, and the regulation encourages people to retire their older vehicles and buy new ones.
The losers, in contrast, are consumers, who incur high upfront costs to realize marginal long-term benefits and are forced to purchase different (and likely more expensive) fuel types by government fiat.”
Overall, the ethanol industry is against swapping RFS with HOFS because they fear it would decrease demand for biofuels. However, they might be in favor if the Republican proposal boosts the biofuel industry like the RFS did.
Why Did the RFS Fail?
To most observers, it is evident that the RFS has failed. Since its inception, the federal initiative cost $76 billion without accomplishing its outlined objectives. But if it’s too expensive and it didn’t succeed, then why is it still around? That’s easy: it’s all about the subsidies.
During the 2016 Republican primaries, presidential candidates championed the free enterprise system, the market, and small government. However, once they stepped foot inside Iowa, many of them encouraged enforcement of the RFS or to keep it as the law. President Trump even told an enthusiastic crowd, “I love it. I’m for it.” But why? Because Iowa is the primary recipient of this egregious subsidy.
Ethanol mandates, subsidies, and the RFS have been maintained for all these years to benefit corn growers and crony agriculture juggernauts. These parties are given tax dollars to produce a product that the average consumer is coerced into buying, not what the market is demanding.
As they are deluged with your money, fuel and food prices spike, the economy is distorted, wealth is destroyed, and the environment, which was the intended target, is ignored.
Should you dare question the RFS, then the industry’s main lobbying arm, the Renewable Fuels Association, will release several statistics to show just how important the sector is to the nation.
There are three popular facts they typically cite: 400,000 jobs, 15 billion gallons, and $50 billion.
The first fact is the number of workers employed directly or indirectly by renewable fuel, but it doesn’t take into account that these same individuals would have worked in alternative industries that would have produced goods or services demanded by the market, not the government. The second fact ignores the waste of scarce resources that would have been used for something more valuable. The third fact is bogus because since ethanol production was a waste to consumers, it didn’t add anything to the gross domestic product (GDP) – plus, this is a sham of an economic indicator anyway.
Repeal and Don’t Replace
As seen with the Affordable Care Act, the Republicans feel like important policies they repeal need to be replaced with something. Like nearly everything Washington institutes, these laws should just be repealed, abolished, and dumped into the trash cans of history. The RFS is no exception. It may have benefited a special few, but everyone else has endured the wrath of this failed environmental pursuit. President Trump might lose votes in The Hawkeye State come 2020, but the MAGA aim can be better realized without the government behaving as an agent of theft and waste.
Do you support or oppose the Renewable Fuel Standard? Let us know in the comments section!
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