Reports: Renewable Fuel Standard Imposes $22 Billion Ethanol Tax on Illinois, $42 Billion Tax on California

New reports by the Center for Regulatory Solutions (CRS), the research arm of the Small Business & Entrepreneurship Council (SBEC), detail the devastating impacts of the federal Renewable Fuel Standard (RFS) program on California and Illinois. The reports could not be more timely. EPA is expected next week to publish its final rule establishing biofuel quota (known as Renewable Volume Obligations or RVOs) for 2015 and 2016.

According to Fields of Deception: How the Corn Ethanol Mandate Harmed the Prairie State (released today), the RFS imposed roughly $5 billion in higher fuel costs on the people of Illinois between 2005 and 2014, with another nearly $17 billion to come through 2024. The ripple effects of those costs will depress labor income by almost $7 billion over 20 years, depress labor demand by more than 7,000 jobs annually, and impose hundreds of millions of dollars in higher feed costs on Illinois dairy and poultry farmers. Due to all those RFS impacts, Illinois will lose $12 billion in GDP growth by 2024.

“Contrary to conventional wisdom, our report shows that Illinois, an early supporter of ethanol, has lost thousands of jobs and incurred enormous economic costs as a result of the ethanol mandate,” said SBEC President Karen Kerrigan.

According to The Big Corn Sellout: How National Politics and Ethanol Mandates Are Hurting California’s Economy (released 11/17/2015), the RFS has imposed $13.1 billion in higher fuel costs on Golden State consumers since 2005, with another $28.8 billion to come over the next 10 years. The vast majority of that $42 billion “fuel tax” is a wealth transfer to out-of-state ethanol producers. The ripple effects of those costs will depress labor income by almost $18 billion over 20 years, depress labor demand by more than 17,000 jobs every year, and impose hundreds of millions of dollars in higher feed costs on California’s dairy and poultry farmers. Due to all those RFS impacts, California will lose $31.6 billion in GDP growth by 2024.

Both reports detail many other adverse economic and environmental effects of the RFS. Key findings follow.

Fields of Deception (Illinois Report): Key Findings

• The lower energy content of ethanol relative to gasoline (ethanol has roughly two-thirds of the energy content of gasoline) cost motorists roughly $4.9 billion from 2005-2014. Moving forward, if the mandate remains intact, Illinoisans will pay more than $16.9 billion through 2024 in additional fuel costs thanks to corn ethanol.
• CRS’s analysis shows these unnecessary energy expenditures could result in $12.1 billion in lost GDP opportunity, $6.9 billion in lower labor income, and the annual loss of nearly 7,100 jobs between 2005 and 2024.
• Livestock farmers have also been forced to spend more than they would have otherwise needed to feed their animals. Hog farmers have spent $128 million more than they would have absent the RFS, cattle farmers have spent $19 million more, and dairy farmers have spent $17 million more in 2012 alone.
• Corn ethanol production and consumption have added nearly 4.1 million metric tons of CO2-equivalent (CO2e) emissions in Illinois from 2005 to 2014 – equivalent to the emissions of over 855,000 automobiles in a single year, or 18 percent of all autos registered in the state.
• Corn ethanol production and consumption in Illinois have generated an additional 10,300 tons of volatile organic compounds (VOCs) and 71,000 tons of nitrogen oxides (NOx) from 2005 to 2014. Both VOCs and NOx are precursor emissions that contribute to the production of ground-level ozone.
• Increased corn production to satisfy EPA’s mandates could strain Illinois’ water supplies. The lifecycle water demands of producing corn ethanol in Illinois averaged more than 12.1 billion gallons per year from 2005 to 2014, or the equivalent of the yearly water consumption of just over 126,500 households.
• More than 22,000 tons of cumulative soil erosion have been recorded in Illinois between 2005 and 2014 as a result of mandates that encouraged additional volumes of corn to be grown.
• Illinois farmers have consumed an additional 306 million tons of fertilizer and 335 million tons of chemicals (two agricultural products which are a known cause of ground and surface water pollution) over what they would have consumed between 2005 and 2014 had the RFS not existed.

Big Corn Sellout (California Report): Key Findings

• The lower energy content of ethanol relative to gasoline (ethanol has roughly two-thirds of the energy content of gasoline) cost California consumers roughly $13.1 billion in higher fuel costs from 2005 to 2014. Moving forward, if the RFS remains intact, Californians will pay another $28.8 billion from 2015 to 2024. The vast majority of this $41.9 billion wealth transfer will go to out-of-state ethanol producers in the Midwest.
• “Food vs. fuel” competition for corn forced California dairy farmers to spend $598 million more on feed costs in 2012, while the state’s poultry farmers spent an additional $126 million.
• Over 20 years, the RFS will result in $31.6 billion in lost GDP growth in California by 2024, including lost labor income of almost $18 billion and lower labor demand of just over 347,000 job-years – the equivalent of 17,000 lost jobs per year.
• Ethanol production tied to the RFS has added 6.3 million metric tons of carbon dioxide-equivalent (CO2e) to the atmosphere since 2005, or the same amount of carbon emitted by 1.3 million cars in a year. The RFS also added more than 100,000 tons volatile organic compounds (VOCs) and nitrogen oxides (NOx), which together form ground-level ozone, or smog.
• In the San Francisco Bay Area, higher fuel costs from corn ethanol may exceed $4.3 billion between 2005 and 2024. Over the same period, the Bay Area could lose $2.74 billion in GDP growth, $1.63 billion in labor income and more than 1,300 jobs per year.
• Corn ethanol consumed in the Bay Area has generated an extra 655,000 metric tons of CO2e since 2005 – roughly equal to adding 138,000 cars to the road for one year – and produced more than 10,000 tons of smog-forming VOCs and NOx.
• According to a CRS-commissioned poll, 75 percent of voters in the Bay Area believe the corn ethanol mandate has a negative effect on the environment, and 72 percent says it’s making climate change worse.