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Stoke Up The RFS Pressure

Susan Winsor Ethanol plant

One positive about the government shutdown is that, at least for a few days, many of the regulatory vultures at the Environmental Protection Agency are forced to roost. 

On the other side of the coin, the shutdown also means all manner of needed conversations must wait, including the one about possible revision to the Renewable Fuels Standard (RFS).

Folks can yammer all they want to about how corn-based ethanol is positive for agriculture, right after they convince me of, among other things, that:

  • An industry propped up by government subsidies and double-taxation represents a market of any kind.
  • National security is stronger with the nation's agriculture and energy policies wrapped together.
  • Paying more for less energy returned per unit of input makes the nation more energy independent.
  • The RFS hasn't played a major role in driving corn prices higher than they would be otherwise.

“ … In the seven years since the policy was enacted, the RFS has failed to meet its goals of protecting the environment and reducing dependence on foreign oil. It has and is forcing Americans to pay more for fuel, and it has raised food prices around the world. And yet, ethanol lobbying groups continue to argue on behalf of the policy, armed with an array of invalid claims.”

That's from “Myths and Facts About the Renewable Fuels Standard,” published last January by Yaneer Bar-Yam and D.K. Albino of the New England Complex Systems Institute (NECSI). According to that organization's website, NECSI is an independent academic research and educational institution that focuses on development of complex systems science and its applications.

“NECSI research advances fundamental science and its applications to real world problems, including social policy matters,” reads the site description. “NECSI researchers study networks, agent-based modeling, multi-scale analysis and complexity, chaos and predictability, evolution, ecology, biodiversity, altruism, systems biology, cellular response, health care, systems engineering, negotiation, military conflict, ethnic violence, and international development.”

All of that is to say, I know nothing about the organization, other than what I read, and that I agree with many of the views expressed in the aforementioned paper.

Among the myths and facts shared:

“RFS costs nothing to taxpayers.”

Fact: “Taxpayers directly paid over $30 billion for the ethanol tax credit that expired in December 2011, and legislation passed earlier this year secured another $2.2 billion in tax credits for renewable fuels producers.

“And the costs go far beyond direct tax subsidies.

“Perhaps the most noticeable impact of the RFS is the rise in food prices. Diverting corn to ethanol has resulted in food price increases that affect all consumers as well as taxpayers who support government food assistance programs. Since the amendment and expansion of the RFS in 2007, food prices in the U.S. have risen 28% faster than inflation, according to data from the Bureau of Labor Statistics and FarmEcon, LLC.”

“Blending ethanol into the fuel supply lowers the cost of gasoline.”

Fact: “It's true that blending ethanol into gasoline lowers the price per gallon, but it also lowers the gas mileage, and it lowers the gas mileage more than the price. Ethanol contains just two-thirds of the energy of gasoline, so adding ethanol waters down the gasoline and consumers pay more money to drive the same distance. Mixing ethanol into gasoline means that every consumer pays more for fuel than they otherwise would.”

“RFS is decreasing the overall negative impacts of oil dependence on our economy.”

Fact: “Renewable fuels account for only 1% of U.S. energy consumption, which does not create a major impact on U.S. energy needs. Moreover, the production of ethanol from corn requires almost as much fossil fuel energy as the energy eventually returned by burning the ethanol. This means the energy gains from ethanol amount to much less than 1% of energy consumption. On the other hand, ethanol production consumes 4% of total global grain production, which is enough food to feed over half a billion people, significantly impacting world hunger.”


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With corn prices finally trending lower in spite of the RFS, it’s going to be easy for the talking heads to ignore the issue and for the pro-ethanol crowd to start caterwauling about the dire straits of the corn industry. 

Don’t let them.

You can find the complete NECSI paper here.


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