Today on National Journal’s Energy Experts Blog, I post a comment celebrating the Renewable Fuel Standard (RFS) as a triumph of centralized economic planning. You think I’m joking? Far from it. The RFS is working at least as well as other central planning schemes!
Well, okay, the RFS would be funny if it weren’t so destructive. A new report by NERA Economic Consulting warns that the RFS is heading for a “death spiral” — a vicious circle in which rising fuel costs, declining sales, and dwindling biofuel credits make compliance increasingly “infeasible.”
In one scenario analyzed by NERA, the death spiral produces a 30% increase in gasoline prices and a 300% increase in the cost of diesel fuel in 2015. Potential adverse macroeconomic impacts include a “$770 billion decline in GDP and a corresponding reduction in consumption per household of $2,700.” Ludwig von Mises coined a term for such debacles: “Planned Chaos.” [click to continue…]
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