EPA Scales Back Ethanol Mandate for First Time!

For the first time in the history of the federal Renewable Fuel Standard (RFS) program, the Environmental Protection Agency today proposed to scale back the government’s overall biofuel blending target for the forthcoming year. Specifically, the EPA is proposing to cut the 2014 blending target from 18.15 billion gallons to 15.21 billion gallons.

Market realities forced the agency’s hand. Like all central planning schemes, there comes a point where even the commissar has to admit that it’s just not working.

Two factors compelled the EPA to make this adjustment. One is that the RFS requires obligated parties – refiners, blenders, and fuel importers – to sell 1.75 billion gallons of cellulosic ethanol in 2014. However, despite years of research and taxpayer support, commercial production of cellulosic biofuel was only 20,000 gallons last year.

The second factor is the blend wall — the maximum quantity of ethanol that can be sold each year given legal or practical constraints on how much can be blended into each gallon of motor fuel. The most common blend today is E10 — motor fuel with up to 10% ethanol. Although the EPA approved the sale of E15 in October 2010, potentially increasing by 50% the total amount of ethanol sold annually, lack of appropriate fueling infrastructure, warranty and liability concerns, and consumer skepticism effectively limit the standard blend to E10.

The EPA’s proposal is a welcome step in the right direction but does not go nearly far enough. Nobody likes the RFS program except the special interest groups who directly profit from it. Even as environmental policy, the RFS is a bust, as an extensive AP investigation published this week confirms.

Even if the RFS did not inflate food prices, increase pain at the pump, exacerbate world hunger, expand aquatic dead zones, or contribute to habitat loss, Congress should still repeal it, because the RFS flouts the core constitutional principle of equality under law.

The biofuel mandate literally compels one industry to purchase, process, and sell other industries’ products.

Imagine the howls from RFS supporters if Congress were to compel corn farmers to sell annually-increasing quantities of wheat, soybeans, or rice. Imagine the outcry if Congress imposed on corn farmers a 15-year plan establishing volumetric targets for the purchase of certain types of seeds, fertilizers, pesticides, or harvesting machinery.

Reporters should ask ethanol lobbyists: Do you support Soviet-style production quota generally, or only when it rigs the market in favor of your industry?