As seen on these pages in the past, it’s not uncommon for commentators to lump America’s thriving biofuel sector into the same category as taxpayer-funded green energy flops like Solyndra. Yet the facts show that the Renewable Fuel Standard (RFS) has been remarkably successful at enhancing America’s energy security by smoothly integrating a growing share of home-grown biofuels into the domestic energy mix, gradually reducing our need for oil imports. No other policy has so effectively undermined the international oil cartel that seeks to profit from our dependence on oil.
Today, ethanol and other biofuels meet about 10 percent of our transportation fuel needs. Without the RFS, which requires refiners to meet specific blending targets, there is simply no way that our dependence on foreign oil could have fallen by half since 2005. This has occurred not only without increasing the price of automobile fuel, but while decreasing it; a gallon of ethanol sells for about $1.70 per gallon, so ethanol blends hold down the price at the pump. Moreover, the market-based trading system that allows refiners to buy and sell biofuel credits — or RINS — has given the industry broad flexibility to meet the changing needs of the marketplace with minimal cost or inconvenience.
It’s true that the trading system opens up some opportunities for fraud, but the answer to that is not to eliminate the trading system, much less the RFS, but to prosecute the fraud. In any event, the RIN trading system is much less high risk for abuse than other private or public programs (the credit card system and Medicare come to mind) because the customers for the credits are sophisticated oil companies like Valero and ExxonMobil. If Exxon buys fake biofuel credits from a scam artist working out of his garage, that is regrettable, and the perpetrators should be and are prosecuted, but Exxon and Valero are surely in a better position to protect themselves than the typical consumer or beneficiaries of other programs.
As one of the original sponsors of the RFS, I always point out that there are no subsidies for corn ethanol, and that the tax breaks supporting conventional ethanol were phased out years ago. The RFS is no give-away program; it simply guarantees market access in a sector where one class of producers — dominated by foreign players — would otherwise have a monopoly over consumer options. It ensures that domestic biofuel producers have a spot at the pump, where consumers can select the most affordable option, which is typically an ethanol blend.
In an unrestricted marketplace, there would be no need for the RFS, but the market for transportation fuels hasn’t fallen into that category for 45 years. Ministers from Russia, Saudi Arabia, and members of the Organization of Petroleum Exporting Companies (OPEC) oil cartel meet regularly to strategize against competition and funnel more American dollars into the hands of hostile regimes. The threat is no less real today than it was when the Arab countries imposed their first embargo on the U.S. economy decades ago.
Their current strategy has been to flood the market, driving out new competition in the U.S. It’s working. Employment in the U.S. oil and gas sector fell by 142,000 between October 2014 and May 2016 — a 26 percent drop that severely limits our ability to bring production back online. But some OPEC members are already looking forward to phase two, when they pull back on global supplies and drive prices at the pump back to record levels. The American consumer is just a pawn in this game, but it is not a game that can be played against renewable fuels, because of the RFS. The price of ethanol and other renewables is set by competition, not by a cartel.
As a result, billions of dollars have been invested into the domestic biofuels industry. Home-grown options are more affordable than ever, they produce dramatically fewer emissions, and displace toxic gasoline additives linked to cancer and groundwater contamination. Moreover, the industry now supports more than 852,000 American jobs. And if the renewable fuels industry grows enough, it has the potential to break the market power of the international oil cartel.
To combat this success, some in the fossil fuel sector spread myths about the performance of biofuels in modern engines, but years of data show the truth. Just this month, research from Argonne National Laboratory, the National Renewable Energy Laboratory and Oak Ridge National Laboratory demonstrated that high-octane ethanol blends can deliver more power and greater mileage than conventional gasoline. NASCAR mechanics have known that for over a decade, which is why they rely on ethanol-blended fuels to keep their engines running.
In short, there’s a world of difference between alternative energy done right and alternative energy done wrong. The innovative approach offered by the RFS works. It’s a proven solution that strengthens our energy security, combats harmful emissions, and generates tremendous economic advantages for U.S. workers and consumers. It remains the best path to a free market — the most effective tool to take the levers of power out of the hands of a hostile international cartel and put it into the hands of domestic producers who, through innovation and competition, are lowering the price of fuel and enhancing the energy security of the United States.
Former Sen. Talent currently serves as Chairman of Americans for Energy Security and Innovation (AESI), which supports homegrown, renewable energy to reduce our dependence on foreign oil.