RFS Reform Act (H.R. 704) would repeal the mandate to blend corn based ethanol into gasoline which results in serious damage to small engines...
The Congressional Budget Office (CBO) conducted a study of the RFS and evaluated three alternative scenarios: 1) a scenario that requires compliance with total renewable fuel and advanced-fuel mandates and the corn-ethanol cap as stated in EISA; 2) a scenario that holds volume requirements at levels proposed for 2014; and 3) a scenario that repeals the law and as such has no volume requirements. The study evaluated the impacts of these 3 scenarios on ethanol production and motor fuel prices in 2017. It found that ethanol production in 2017 is likely to be the same at 13 billion gallons if mandates are held at 2014 levels or if the RFS is repealed because of the octane and carbon monoxide advantages of using ethanol and because ethanol is cheaper than gasoline if fuel-equivalency is not taken into account.[iv]
However, if the RFS levels of EISA are required to be met, in 2017, the price of gasoline blended with 10 percent ethanol would increase by $0.13 to $0.26 per gallon (4 percent to 9 percent); the price of petroleum-based diesel would increase by $0.30 to $0.51 per gallon (9 percent to 14 percent); and the price of E85 (a blend of 85 percent ethanol used in flex fuel vehicles) would increase by $0.91 to $1.27 (37 to 51 percent).
The study found that meeting EISA mandates will be challenging because cellulosic production capacity is likely to remain well below mandated levels; using other advanced fuels for cellulosic biofuels would mean large and rapid increases in their supply, which would be a difficult undertaking; and overcoming the blend wall will require capital investments in fueling stations and significant subsidies to encourage the use of E85. The study also found that the reductions in 2017 emissions under the EISA mandated volumes would be small due to the limited use of cellulosic biofuels and the continued use of corn ethanol from grandfathered facilities–those in operation or under construction by the end of 2007.
Conclusion
The problems that the RFS was designed to solve — America’s dependence on foreign oil and an increasing trend in greenhouse gas emissions —are being taken care of mostly by the nation’s oil and gas industry and a sluggish economy. When Congress first created the RFS in 2005, domestic oil and natural gas liquids production accounted for just 35 percent of total U.S. petroleum consumption. But, they now account for more than three-quarters of total U.S. petroleum consumption — nearly double the level at the time of the RFS’ 2005 creation.[v] As a consequence, America’s dependence on foreign oil has been reduced by nearly two-thirds due to the nation’s oil and gas industry’s ingenuity and use of hydraulic fracturing and directional drilling.
Further, the CBO study has found that greenhouse gas emissions will not be lower in the short term due to the RFS. However, carbon dioxide emissions have been reduced by 10 percent since 2007 when the EISA was enacted due to lower demand for energy because of the recession and sluggish economy and because of the natural gas boom that substituted gas for coal in the generation sector.[vi] Here again America’s oil and gas industry created a boom in natural gas production, lowering natural gas prices and making it more economic for electricity generation than coal, which is more carbon intensive than gas.
Clearly, the RFS is not doing what the Congress originally intended. According to the CBO, if the RFS was repealed or if its future mandates were kept at 2014 levels, corn-based ethanol would remain at 13 billion gallons, but American motorists would be free from incurring even higher gasoline prices due to the RFS.
