Federal biofuels mandate has limited impact, analysis shows

by Talk Business & Politics staff (staff2@talkbusiness.net) 242 views 

The Renewable Fuel Standard, a federal program that requires the use of biofuels in gasoline supplies, has not lowered gasoline prices at the pump or significantly reduced greenhouse gas emissions, according to the General Accountability Office (GAO). Nonprofit research organization Institute for Energy Research (IER) recently completed an analysis of the GAO’s report on the federal program.

Congress approved the program as part of the Energy Policy Act of 2005 and expanded it in the Energy Independence and Security Act of 2007. The latter expanded the amount of biofuels to be blended into gasoline to 36 billion gallons in 2022, from 9 billion gallons in 2008. Gasoline and diesel sold in the United States are required to contain biofuels, and the most common biofuel produced in the United States is corn-based ethanol, which is distilled from the sugars in corn.

Gasoline prices outside the Midwest, where most corn is grown, likely rose by a few pennies per gallon as a result of the federal program, while the prices fell in areas with ethanol plants, IER’s analysis shows. These changes in price likely diminished over time as refiners installed equipment to meet the fuel-blending requirement of the program, leading to reduced refining costs for gasoline.

The federal program also included requirements for a portion of what’s blended into gasoline to be advanced biofuels, which emit less greenhouse gas emissions than corn-based biofuels. The original targets in the program for advanced biofuels, including biodiesel and cellulosic ethanol, were not met because of the high production costs. The U.S. Environmental Protection Agency revised the targets as a result.

The GAO couldn’t measure the nationwide impact of the federal program because of the effects on the price of gasoline at the pump related to reduced demand for transportation fuels and the global price volatility of crude oil, according to IER’s analysis. This led to the impact of the program to be measured at the state level, and GAO found the program contributed to fuel price increases outside the Midwest. The higher prices were related to increased transportation and storage infrastructure costs. With regard to greenhouse gas emissions, experts have said the federal program is unlikely to meet emissions goals through 2022 and that it’s had a limited effect on them.