Rationale for biofuel doesn’t add up – Pacific Research Institute

Rationale for biofuel doesn’t add up

The Environmental Protection Agency recently issued new rules dictating that 18 billion gallons of biofuels must be blended into America’s 2016 transportation fuel supply. This mandate, referred to as the Renewable Fuel Standard (RFS), has been a disaster for the country. The only sensible minimum renewable fuel mandate is zero.

The RFS was created in 2005. Its primary goal is to curtail U.S. greenhouse gas emissions by reducing the use of traditional fossil fuels. However, the RFS is not defensible based on its impact on greenhouse gas emissions.

Research has demonstrated that once the life cycle of ethanol is considered (ethanol is the prominent biofuel used to meet the RFS), ethanol does not reduce greenhouse gas emissions on net. The process of producing this corn-based biofuel actually results in more greenhouse gas emissions than those resulting from fossil fuels.

How much more? A 2013 analysis of EPA data by the Clean Air Task Force found that “corn ethanol’s net emissions over 30 years are approximately 28 percent higher than the emissions that would result from the use of gasoline over that same period.”

An important reason ethanol raises overall greenhouse gas emissions is the need to convert forests, wetlands, and grasslands (across the globe) to new cropland. A recent report by the Environmental Working Group concluded that 8 million acres of wetland and grassland were converted to grow corn between 2008 and 2011.

These forests, wetlands and grasslands are important carbon sinks that naturally remove greenhouse gasses from the atmosphere. The destruction of these lands in order to supply the ethanol mandates has enabled the released of as much as 236 million metric tons of carbon dioxide into the atmosphere.

Ethanol’s drawbacks do not end with an increase in overall greenhouse gas emissions. There are also unintended consequences that impose economic hardships on families, particularly lower-income families, both in the United States and across the globe.

The RFS creates an artificial demand for biofuels that diverts land, water, and food resources. Although the greatest value of these resources is ensuring the availability of plentiful and low-priced food, the RFS diktats are arbitrarily diverting these resources toward transportation uses.

As every student in an introductory economics course is taught, when growth in the demand for a good exceed the growth in its supply, its price will rise. Such has been the case for food due to the RFS. For instance, 37 percent of the U.S. corn harvest and 13 percent of the total global corn harvest was diverted away from the food supply toward ethanol production in 2014. This, in turn, raised food prices on the least well-off, both here in the United States and around the world.

According to the international aid agency ActionAid, the growth in U.S. ethanol production raised corn prices by $11.6 billion for importing nations between 2006 and 2011. Of that additional cost, $6.6 billion was shouldered by the developing world.

By any measure, the RFP has failed to achieve its objectives. Worse, by creating an artificial market for ethanol, the EPA’s policy is doing imposing economic harm without creating any good for the planet.

Market evolutions and innovations (such as innovative drilling techniques) are creating a revolution in the natural gas market. Natural gas generates far less greenhouse gas emissions than other fossil fuels as well as ethanol. America’s increased use of natural gas is a chief reason why U.S. energy-related greenhouse gas emissions hit a 20-year low in 2012.

The only reasonable reform to the RFS is a full repeal that wipes the policy off the books for good. Short of that, the continuation of minimum biofuel mandates, at any level, is simply more bad news that will harm consumers, the environment, and the world’s least well-off.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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