Time for Congress to Reform the Renewable Fuel Standard
Created by Congress in 2005, the Renewable Fuel Standard (RFS) is a program that requires American refiners to blend renewable fuels — primarily ethanol — into the fuel that consumers across the country use to fuel their cars and trucks.
Under the law, ethanol and biodiesel producers receive a Renewable Identification Number (RIN) for each gallon of renewable fuel they produce, which is transferred to refiners who purchase and blend the renewable fuel into gasoline and diesel. These compliance costs are then passed on to drivers in the retail price of fuel.
Congress relied on several key assumptions when it expanded the program in 2007. Lawmakers also set a schedule that requires refiners to blend up to 36 billion gallons of renewable fuels into the nation’s gasoline and diesel supply by 2022. Among these assumptions: that fuel demand would significantly increase every year and that advanced biofuels — such as ethanol from food waste — would be technologically feasible.
Unfortunately, these assumptions were wrong. Today, America is using less gasoline and diesel, largely because of improved fuel economy. The country also isn’t producing nearly as much advanced biofuel product as projected. These missed assumptions have led to major problems with the implementation and management of the RFS — negatively affecting families, farmers, and the nation’s refining infrastructure.
Congress should act to fully reform this program.
There are several big problems with the RFS, including what’s called the “ethanol blend wall.” Most American cars and light trucks have been built to run on a fuel blend of 90 percent gasoline and 10 percent ethanol. Using more ethanol would void most vehicle warranties provided by all major automotive manufacturers. Similarly, most underground storage tanks and gasoline pumps used by gasoline stations across the country cannot accommodate more ethanol.
At the same time, EPA’s ethanol requirements are growing while American gasoline demand is shrinking. As a result, refiners do not have enough available gasoline to blend the required volumes of ethanol unless they blend above 10 percent ethanol and crash into “the blend wall.” This has forced EPA to set annual requirements below the totals Congress has set and driven up the prices of RINs with harmful consequences for American farmers, refiners, families, and drivers.
While both refiners and ethanol producers have asked the EPA to make regulatory changes, the agency has repeatedly said that it cannot because it is bound by the statutory framework Congress has passed. Suggest changes have included proposals to waive the obligation for refiners to meet their RIN requirements, cap the price of RINs, and allow sales of higher ethanol blends. But all those moves would face immediate legal challenges since they are not authorized by law, including the legislation that established the RFS.
In addition to multiple bills that have been introduced by ethanol champions and opponents in Congress, substantive discussions are underway in both the House and the Senate to craft compromise legislation that would provide comprehensive reforms to the RFS program.
One things is certain, Congress should act now to make meaningful changes to the RFS. It is time for comprehensive reform, not patchwork fixes. Without congressional action, farmers, transporters, refiners, and everyone who buys gasoline will continue to pay the price.
David Holt is president of Consumer Energy Alliance.