The Renewable Fuel Standard is a broken policy that must be abolished. Biofuel mandates under the current standard have become detrimental to consumers and our economy; Congress should end an irretrievably broken law.
The RFS is based on two key and ultimately flawed premises—a belief that the United States has a limited supply of oil, and that ethanol was a new and novel fuel that could support our economy with a government subsidy.
The United States has always been energy rich, but historically the Government has barred access to much of our vast energy resources. With new technology deployed during the last few years, such as horizontal drilling and hydraulic fracturing, we have seen the shale oil and gas boom revolutionize the industry. This revolution has unlocked huge amounts of oil and natural gas resources that were previously unavailable and now the United States is on pace to soon become the world’s largest oil producer.
Not only do we have plentiful resources today, the renewable fuel standard is based on a flawed product. Ethanol is not a new development, but a very old one. Henry Ford’s first car, the Ford Model T, ran on pure ethanol. Ethanol does not need another government subsidy; it needs a positive return on investment. Ethanol has one of the lowest Energy Return On Investments, or EROI in the industry. In general, companies, governments, societies, etc., seek to maximize EROI, since an energy source is much more useful if it can pay for both its own extraction and also the construction of houses, cars, trains, computers, etc. The EROI of corn-based ethanol is roughly 1:1, barely breaking even. Billions of dollars in subsidies and government enforcement has not changed what the market knew about ethanol in the early 1900s—ethanol may have a limited role, but it is only two-thirds as efficient and effective at powering cars and trucks as gasoline.
If it wasn’t enough that the RFS is based on flawed premises, because the RFS diverts so much corn into fuel, it increases global food prices. This has lead to corn and grain based food products being more expensive, particularly affecting people living in developing countries where corn and grain products are basic food staples.
After a century, the success of biofuels as a competitive fuel source should not depend on legislated mandates or costly subsidies. Rather than encouraging healthy competition, the mandate encourages political posturing, allowing our lawmakers to merely focus on their legacy, rather than what is right for the American people.