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CRS Comments on Obama’s RFS Announcement

11/30/2015

“The Obama administration should be forced to explain how they can continue to support a mandate so universally opposed, especially on the environmental front.”

Washington D.C., – Following the Obama administration’s announcement on the Renewable Fuel Standard (RFS), Karen Kerrigan, President of the Center for Regulatory Solutions (CRS), a project of the Small Business and Entrepreneurship Council, released the following statement:

“President Obama’s decision to increase the amount of corn ethanol in our nation’s fuel supply flies in the face of reason and he knows it,” said Karen Kerrigan. “In fact, leading academics, environmental groups, small businesses and consumer groups are united in opposition to the policy. Who exactly is the President listening to? Cleary it is not the American public.

“Oddly, today’s announcement comes while President Obama is in Paris speaking on the importance of providing leadership on climate change. Environmental groups including the Environmental Working Group and the Sierra Club have long warned that corn ethanol actually increases greenhouse gases (GHGs). Bill McKibben and Al Gore have called the policy a ‘mistake.’ Even EPA’s own Inspector General has launched an investigation into EPA’s method for counting GHG reductions. The Obama administration should be forced to explain how they can continue to support a mandate so universally opposed.

“In truth, the decade-old corn ethanol mandate has fallen deeply and irreversibly out of favor leaving only a handful of special interests and politicians in support of it. It’s only a matter of time before the corn ethanol mandate is ended.”

 

Background

Today, the Environmental Protection Agency (EPA) announced the ethanol volumes mandated under the RFS for 2014, 2015, and 2016. Despite promises that corn ethanol would serve as a bridge to more advanced biofuels, the RFS has been a bridge to nowhere, with federal support for corn ethanol crowding out cellulosic and other advanced biofuels. Increasing ethanol volume mandates have outstripped demand for fuel, causing gasoline producers to hit the “blend wall,” or the maximum amount of ethanol that can safely be included in the nation’s fuel supply without damaging engines.

Further, EPA’s Inspector General announced on October 15 that it has launched an investigation into EPA’s calculation of the lifecycle environmental impacts of the RFS, citing a National Academy of Sciences study that found the increase in corn production as a result of the RFS has adverse environmental impacts on surface- and groundwater, including creating toxic algal blooms that stretch for hundreds of miles.

Over the past month, CRS has examined the RFS’s harsh economic and environmental impacts in great detail in states from coast to coast, including California, the six New England states, and the corn-producing Midwestern states of Ohio, Indiana, and most recently Illinois. CRS’s analysis has found, for example, that the RFS acts as an “ethanol tax,” transferring wealth out of states like California, Connecticut, and Maine and funneling it into a handful of corn-producing Midwestern states. But this hefty tax forced onto consumers does not broadly benefit Midwesterners. Instead, the transferred wealth is hoarded by a very small but vocal segment of their economy – big corn farmers and ethanol producers.

In fact, CRS found that the corn ethanol mandate actually hurts most farmers by increasing the price of corn, which is a major component of the feed for their livestock. Indeed, farmers are increasingly speaking out against the RFS, with the Indiana State Poultry Association telling CRS it “strongly believes that it is time for Congress to reexamine the corn-based ethanol mandate of the [RFS].”

In California, the corn ethanol mandate has already imposed $13.1 billion in higher consumer fuel costs alone since 2005, and CRS’s analysis projected another $28.8 billion to come over the next 10 years, totaling roughly $42 billion. These higher fuel costs have a ripple effect across California’s economy, depressing labor income by almost $18 billion over 20 years and decreasing labor demand by more than 17,000 jobs every year. Overall, CRS estimates the RFS will result in $31.6 billion in lost GDP growth in the Golden State by 2024.

In addition to conducting an economic analysis for the 10 states cited above, CRS also polled voters in Ohio, Vermont, Indiana, Northern California, and Illinois to gauge their opinion of the RFS. The public opinion research found that Vermont voters overwhelmingly oppose the RFS program, with only 27 percent having a favorable opinion of the program and 67 percent outright opposing the RFS. Even in Ohio, the country’s 8th largest corn-producing state, a plurality of voters (45%) rejected the RFS, and 62 percent were less likely to support the program after learning more about it. Indeed, after learning of the findings of several recent government and academic studies on ethanol’s environmental impact, voters in all five states abandoned their support of the policy, in some cases rejecting ethanol mandates by a margin of nine to one.