The Renewable Fuel Standard (RFS) is a federal law requiring transportation fuel sold in the U.S. to contain a minimum volume of fuel that is “renewable.” In practice, that has included mixing agricultural products to be burned with the fuel, like the corn in “ethanol.”
The law was first enacted in 2005, and has been troubled from the start. The law required 4 billion gallons of “biofuel” to be blended into gasoline and diesel in the very next year, increasing steadily to 7.5 billion by 2012. Yet, the market was not producing anywhere near these volumes those years.
For the subcategory of cellulosic biofuels, the federal mandate required 6.6 million gallons to be blended into gasoline by 2011, when there was still not any production of cellulosic biofuel. Yet, the mandate marched on to require 3 billion gallons of cellulosic by 2015, when only 142 million gallons were actually produced. Even by the end of 2014, only one plant in the U.S. was producing cellulosic ethanol.
Fuel producers are nevertheless penalized for not blending in the mandated amounts of renewable fuels that are not even being produced. Refineries and distributors are granted Renewable Identification Numbers (RINs) for each gallon of renewables they blend in. For every mandated gallon they do not blend in, they must buy RINs on the open market.
The bigger the shortfall from the mandate, the more expensive the available RINs are. Fuel producers must meet the mandate to even be allowed to sell in the market. The mandate today has grown to 15 billion gallons a year, now slated for an increase to over 19 billion in 2018.
The renewable fuel standard was originally begun with two purposes. One reduce dependence on foreign fuels, two create energy industry jobs at home.
But due to the shale oil revolution, produced by modern “fracking” and horizontal drilling, the markets have raced ahead and achieved both of these goals without the RFS. Oil production in the U.S. has soared by more than 50%, making America the world’s number one oil producer again, and achieving American energy independence. Oil imports have declined by more than 50% as a result.
America is also now the world’s number one producer of natural gas, and easily has the resources to be the world’s number one producer of coal. World leadership in this energy triumvirate is already sharply increasing U.S. energy jobs, with Trump moving the federal government out of the way.
But the RFS today is having the opposite effect. Refiners and distributors today are now buying foreign renewables to meet the RFS mandates, which is increasing dependence on foreign energy sources.
That effect of the RFS can be repaired by granting RINs to renewable energy producers who sell their production overseas, and not just in the U.S. domestic market. That would restore the original purpose of the RFS in reducing foreign energy dependence, which today the RFS itself is ironically increasing.
It would also expand markets for U.S. renewables, empowering them to be sold internationally. The resulting increased demand would shore up prices for farmers growing crops for ethanol, and the increased ethanol production for foreign markets would increase employment for that production.
Renewable energy would then join traditional energy in world leading American production and soaring exports. Because RINs for renewable production sold abroad would create new decisive incentives for increasing renewable production.
Trump’s EPA looked into this in fact. But when the market price for RINs declined (due to the increased supply that would result), the interests profiting from the sale of RINs hired lobbyists to squelch it.
Both farmers and ethanol producers would gain from freeing ethanol production for international trade. As would workers in the expanded ethanol business. But farmers and even ethanol producers no longer seem to be the main concern of the ethanol lobby, which seems to be dominated now by the major oil refiners who profit the most from the RIN business.
That is because only they have the capability of blending ethanol into gasoline and diesel fuel, producing RINs in-house. This gives them an advantage over their smaller competitors, who don’t have the facilities or volume to do blending themselves, producing RINs, which seems to have become the most profitable segment of the ethanol business.
Trump should stick with his original populist nationalism that won the election, and side with workers and farmers. That and better serving the original purposes of the RFS would result from liberating U.S. ethanol production to international trade.
But we have to ask whether the American energy revolution, with world leading oil, natural gas, and increasingly restored coal production, leaves any reason to be burning food for fuel. Traditional energy is now suddenly abundant in America, despite all the foolishness we have had to read in recent decades about “peak oil.”
When are we going to stop listening to those who have been so wrong for so long about energy, especially regarding so-called “climate change”? What is actually staring at us on the horizon is not global warming, but global cooling.
Compare the history of the well-established record of sunspots and global temperatures with the latest sunspot trends. Think “Little Ice Age.”
You haven’t heard of that? Maybe you need to expand your media exposure beyond the so-called “mainstream media.” (889 words).