Home » homepage » CRS Report Shows Ethanol Tax Will Cost New England Economy $20 Billion

CRS Report Shows Ethanol Tax Will Cost New England Economy $20 Billion

11/10/2015

A High Price to Pay, New England, 11.09.15_Page_01

Link to Report

Washington, D.C., – A federal mandate is on track to cost the New England economy nearly $20 billion between 2005 to 2024, according to a new report by the Center for Regulatory Solutions, a project of the Small Business and Entrepreneurship Council (SBE Council). The report also finds that this mandate, known as the Renewable Fuel Standard (RFS), reduces labor income by $7.3 billion and labor demand by 141,000 job-years from 2005 to 2024. That’s the equivalent of 7,050 lost jobs per year, each and every year over a 20-year time period.

The CRS report is the second in a series of reports set to be released this month on the economic and environmental impacts of the RFS since it was passed into law in 2005. The first report examined the economic and environmental cost of the mandate on the state of Ohio.  It found that the RFS produced an additional 1.92 million metric tons of CO2 emissions in the state since 2005 — the emissions equivalent of adding nearly 400,000 cars to the road in a single year — while adding $440 million in additional transportation fuel costs for Ohioans in 2014. This new report on the costs of the RFS on New England explains how corn ethanol mandates have cost New England consumers anywhere from $200 million to over $2.5 billion in higher fuel costs, depending on which state they reside. The 10-year cost across all six states totaled more than $5.6 billion.

“Washington’s decade old corn ethanol mandate has been a series of broken promises that have taken its toll on our economy and our environment,” said Karen Kerrigan, President of CRS and SBE Council. “As our report outlines, these broken promises will cost the New England economy nearly $20 billion dollars if EPA moves forward with congressionally mandated levels and thousands of good paying jobs a year. Small businesses across New England are wondering when the federal government will finally put an end to this disaster of a policy. There is no justification for it.

“The broad bipartisan opposition to this Washington mandate from New England is overwhelming. Just last week Rep. Welch (D-VT) led a bipartisan letter of 183 members of Congress to the EPA requesting that the fuel requirements be lowered. Efforts to expose the RFS by individuals and organizations such as Bill McKibben, Al Gore, and the Boston Globe have been loud and clear: no matter your politics, this is a flawed policy any way you slice it.

“Given the overwhelming consensus against the corn ethanol mandate on both environmental and economic grounds, it’s hard to believe that Secretary of State Kerry and President Obama can travel to Paris to negotiate a new climate agreement while the administration continues to back this nonsensical mandate. EPA’s announcement this month will be a clear indication of whether the administration lives up to its climate rhetoric or is beholden to political interests.”

The CRS reports are part of a larger effort to expose the real economic and environmental impacts of the RFS on New Englanders and the nation. CRS plans to rollout additional reports in the coming weeks, and the American Council for Capital Formation is currently running ads across New England, putting the spotlight directly on the environmental impacts of the RFS on the United States.

Background

In July 2005, Congress passed and President George Bush signed the bipartisan Energy Policy Act, which established the Renewable Fuels Standard (RFS). The RFS created a set of mandates – known as Renewable Volume Obligations (RVOs) – that require ever-increasing volumes of ethanol to be added to the nation’s fuel supply. In May 2015, EPA again announced new proposed volumes to increase the amount of ethanol used in vehicles, creating new concern amongst a wide variety of bipartisan stakeholders.

Supporters of the ethanol mandate promised a cleaner environment, enhanced energy security, and greater economic support for domestic farmers and rural communities across the country. However, the targets set by Congress, which included a mandate for consumption of cellulosic ethanol, have proved elusive because converting cellulosic feedstock into usable energy is much more challenging than starch-based crops, like corn. Despite this setback, EPA administrator Gina McCarthy – whose agency is responsible for implementing the RFS – is pledging to get the RFS mandate “back on track” and eventually align its targets with congressional mandates.

The CRS report spotlights research from the scientific community which has warned about the environmental impacts of corn ethanol since the mandate’s inception. In fact, these findings led the EPA’s Inspector General to announce on Oct. 15 that it would conduct an investigation into EPA’s calculation of the lifecycle environmental impacts of the RFS. The investigation follows years of media scrutiny of the RFS, which raised serious concerns about the impact of corn-ethanol mandates. In 2013, the Associated Press reported that the rush to plant corn “wiped out millions of acres of conservation land, destroyed habitat and polluted water supplies.” In 2008, TIME magazine concluded that ethanol “increases global warming, destroys forests and inflates food prices.” As the Boston Globe Editorial team described it this May, “the federal mandate for ethanol, known as the Renewable Fuel Standard, has very little to recommend it.”

Key Findings of the Report

About CRS

The Center for Regulatory Solutions is a project of the Small Business and Entrepreneurship Council, a 501c(4) advocacy, research, education and networking organization dedicated to protecting small business and promoting entrepreneurship. For twenty-three years, SBE Council has worked to educate elected officials, policymakers, business leaders and the public about policies that enable business start-up and growth.