While corn ethanol was once promised to be a “bridge” to advanced and cellulosic biofuels, it has failed to spur meaningful production of non-corn-based biofuels that significantly reduce GHG emissions. This is despite several decades of generous subsidies and government mandates. Mandates and subsidies for corn ethanol and other food-based biofuels have also spurred numerous unintended consequences and costs for both consumers and taxpayers. And since the U.S. has hit the “blend wall,” or the maximum amount of ethanol that can safely be blended into the current vehicle fleet (without harming older vehicles or small engines), corn ethanol is also crowding out the development of next-generation cellulosic biofuels.

Just a few of the numerous direct and indirect costs of the RFS for consumers and taxpayers include the following:

• Higher food and feed costs, particularly for the poor in the U.S. and developing countries, since most RFS biofuel gallons are derived from food and feed crops such as corn, soybeans, and sugar.[ii]
• Higher fuel costs:  EPA estimated that RFS mandates just for calendar years 2014-16 would result in higher fuel costs totaling $1.6-$3.5 billion.[iii] CBO also estimated that if RFS biofuels production volumes continued on auto-pilot (except for cellulosic ethanol since production levels are so low), the price of 10 percent ethanol – the primary gasoline blend in the U.S. – would increase 13-26 cents per gallon, and the price of diesel would jump 30-51 cents per gallon.[iv]
• Higher – instead of lower – GHG emissions since the mandate has primarily been filled with corn ethanol, a biofuel that was largely exempt from RFS requirements to reduce GHG emissions through a grandfathering provision.[v] Converting trees into biofuels or bioenergy may also result in more GHG emissions than gasoline, depending on the production method.
• Higher costs to replace small engines and older vehicles that cannot run on higher ethanol blends.[vi]
• Environmental, social and public health costs as sensitive land – highly erodible acres, wetlands, and grasslands – are unlawfully converted into corn and soybean production.[vii] In particular, corn uses more inputs (such as nitrogen fertilizer and pesticides) than other crops, which contributes to water pollution when they run off into nearby waterways.
• By promoting food and crop-based biofuels, the RFS undermines other federal policies aimed at reducing environmental liabilities associated with climate change and water pollution, just to name a few. As an example, mandates promoting corn ethanol encourage more corn plantings on sensitive land while U.S. Department of Agriculture (USDA) conservation programs pay farmers to retire this same land. These types of programs work at odds with one another, wasting taxpayer dollars in the process.

Current Status and Future of the RFS2

With cellulosic biofuel consumption falling greatly below Congressional targets, in recent years, EPA has backfilled gaps in advanced biofuels mandates with other food-based biofuels such as sugarcane ethanol and palm- and soybean-based biodiesel. This problem will only worsen as RFS cellulosic and advanced biofuel mandates grow in the future without sufficient cellulosic biofuel production to fulfill them. To make matters worse, EPA has recently approved other corn-based biofuels to help achieve the advanced biofuels mandate (and cellulosic mandate which is nested underneath it). These include corn oil biodiesel and corn butanol (for one facility in MN in particular) as advanced biofuels and corn kernel fiber ethanol as a cellulosic biofuel.[viii] These corn-based biofuels have made their way into the RFS advanced biofuels bucket despite Congress’s intent to reserve these mandates for next-generation, non-food-based biofuels (through a prohibition on corn ethanol qualifying as an advanced biofuel). The corn ethanol industry has lobbied for years to allow corn ethanol and other corn-based biofuels to qualify for the advanced biofuel mandate in order to increase their market share beyond the 15 BG conventional (corn ethanol) mandate.[ix] Already 40 percent of the corn supply is sent to ethanol facilities each year, which would only grow if these other corn-based biofuels were produced in significant quantities.[x] Allowing corn-based biofuels into the advanced biofuels mandate couldn’t be further from the initial goals of the RFS.

With corn-based biofuels increasing their market share, production of non-food-based biofuels has fallen significantly below Congressional RFS mandates. However, while cellulosic and advanced biofuels were intended to improve the environment, some experts question the environmental and consumer benefits of these biofuels, particularly if the RFS spurred large production levels of perennial grass-based biofuels, for instance. Since they may be planted on former cropland, current food and feed production may be displaced as production ramps up, resulting in conversion of other sensitive land to cropland to make up for food and feed losses, resulting in more GHG emissions, soil degradation, etc. Lessons should be learned from decades of subsidies for corn ethanol and soy biodiesel: when government mandates push biofuel production beyond what the market would otherwise demand, taxpayers and consumers lose. In addition, soil health may also be harmed if significant amounts of agricultural residues like corn stalks, cobs, and leaves are removed from farmland after crop harvests to produce cellulosic ethanol. While current production of corn stover-based cellulosic ethanol is small compared to corn ethanol, several companies are working to scale it up in the future. These are just a few of the unintended consequences that could arise in the future if RFS mandates are greatly scaled up.

Recommendations

In summary, the RFS mandate has failed to achieve its objectives and has instead created long-term liabilities that cause more harm than good. The RFS has increased food and fuel costs for consumers, caused environmental damage, and failed to significantly reduce GHG emissions. Federal subsidies, tax credits, loan guarantees, and other supports for biofuels have wasted taxpayer dollars on the mature corn ethanol and soy biodiesel industries. Instead of picking winners and losers through mandates, the tax code, and other federal programs, the government should allow the biofuels industry to compete on a level playing field without market distortions. Taxpayers deserve energy and agricultural policies that limit long-term liabilities, stand up to special interests, and prevent unintended consequences instead of promoting biofuels that waste taxpayer dollars and increase consumer costs.

For more information, contact Taxpayers for Common Sense at 202-546-8500.

http://www.fas.org/sgp/crs/misc/R40155.pdf

[ii] https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2014-2015-and-2016-and-biomass-based

[iii] https://www.epa.gov/renewable-fuel-standard-program/renewable-fuel-annual-standards

[iv] https://www.epa.gov/renewable-fuel-standard-program/renewable-fuel-annual-standards

[v] https://www.epa.gov/renewable-fuel-standard-program/renewable-fuel-annual-standards

[vi] https://www.gpo.gov/fdsys/pkg/FR-2013-08-15/pdf/2013-19557.pdf

[vii] https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2014-2015-and-2016-and-biomass-based

[viii] https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2014-2015-and-2016-and-biomass-based

[ix] https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2014-2015-and-2016-and-biomass-based

[x] https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2017-and-biomass-based-diesel-volume

[xi] https://www.epa.gov/renewable-fuel-standard-program/final-renewable-fuel-standards-2017-and-biomass-based-diesel-volume