July 18

July 18: New Study Says RFS is no longer an effective energy policy for U.S.

Independent energy consulting group Energy Ventures Analysis unveiled a study today on the effectiveness of the RFS.  The group was asked by the Fueling American Jobs Coalition to probe how the RFS is “performing as an energy policy in the current era of ever-increasing U.S. energy independence.”

EVA used the U.S. Energy Information Administration’s National Energy Modeling System (EVA-NEMS) to consider several scenarios that assess the impacts of continuing the RFS mandate through 2030.  Their key conclusions: “the RFS is no longer an effective energy policy for the United States” and “Energy policy should evolve as energy markets change.”

The study, outlined in a blog on EVA’s site, highlights a few key points:

  • Corn growers do not need the RFS to support current production levels: U.S. corn-based ethanol and biobutanol production would remain at nearly the same levels if the RFS were discontinued because ethanol production costs are lower than the cost of gasoline blendstocks produced by refineries.
  • The RFS is not needed to advance U.S. energy independence: Gov’t forecasts show the U.S. set to become a net exporter of petroleum and other liquids by 2025.
  • Consumers will spend $8.7 billion more in 2025 and $8.4 billion more in 2030 than they would without the RFS, if current RFS standards remain in place.
  • On the flip side, significant consumer savings would flow from an RFS focus that shifts away from conventional ethanol: Consumers would save $3.7 billion in 2025 and $5.3 billion in 2030 if the conventional biofuels mandate were removed and the biomass-based diesel mandate were kept at current levels.
  • Ethanol consumption under the existing RFS mandate is expected to decrease in the future, stemming from the expected decline in U.S. motor gasoline consumption and rise in EVs, flex fuel vehicles and related infrastructure.
  • The RFS distorts the market for refined products from merchant refineries: Merchant refineries who do not own blending facilities must purchase compliance credits on the open market, creating an extra net cost that reduces margins.