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Op-ed Placement

Renewable Fuel Standards Are a Pain In the Gas

Originally Published in RealClearMarkets on 7/11/14.

Washington has a long-standing fascination with the nation's energy markets that generates an endless stream of legislation and regulation in pursuit of a wide range of policy objectives, from energy independence to climate change. For almost a decade, the government has been struggling to implement renewable fuel standards with the aim of increasing the role of ethanol and other biofuels. New mandates have been established, but it is becoming increasingly obvious that the law has created more questions than solutions. Problems first began to emerge when the economy collapsed, and with it, demand for fuel. What seemed like easily attainable targets in a rosy economy were now out of reach. Recently, the Congressional Budget Office released a study highlighting the ongoing problems with the renewable fuel standard program, raising serious concerns about the viability of the program.

The Energy Policy Act of 2005 created the first renewable fuel standard, a mandate that required 7.5 billion gallons of renewable fuel be blended into gasoline by 2012. Practically, this meant increasing the quantity of ethanol used in gasoline. The Energy Independence and Security Act of 2007 revised the standard with a 15-year plan, requiring an increase in ethanol use to 9 billion gallons in 2008, with the ultimate goal of 36 billion gallons of ethanol in the gasoline supply by 2022. Not content with simply expanding the use of biofuel, the new law also created mandates for specific types of biofuels: conventional, advanced, cellulosic and biodiesel.