The forced use of biofuels, euphemistically called the Renewable Fuel standard (RFS), was established in 2005. Then as now, the RFS requires refiners and importers of transportation fuels to add minimum amounts of ethanol or bio diesel to their fuel, or be subject to fines. The requirement has grown from 4 billion gallons in 2006 to 15 billion gallons for traditional ethanol for 2019. Existing legislation requires a completely unrealistic total of 36 billion gallons by 2022, including at least 16 billion gallons from cellulosic biofuels.
The current “rebellion” by Iowa biofuel leaders against the waivers of the FRS requirement that are being granted to small refiners is understandable. (The waivers allow small refiners to be exempt from adding bio-fuels to their gasoline or diesel.) All businesses that are dependent on government protection will fight back if they feel their favored status is being threatened. Biofuels producers and their suppliers (corn farmers), will lobby hard and loud to stop any reduction of the RFS.
Will the subsidies and use of force ever end? After 13 years of increasing subsidies, we now need to pass laws to start reducing, and over time end, the forced use of ethanol.
There has been a recent outpouring of letters to the editor and paid advertising in The Des Moines Register thanking President Trump for the EPA’s decision to allow E15 (gasoline with 15% ethanol) to be used year round. Many go on complain about the hardship waivers being granted to small refineries that exempt them from being forced to add ethanol to their gasoline under the Renewal Fuel Standard (RFS). They say the exemptions are costing corn farmers and ethanol producers billions of dollars and are undermining growth of the ethanol industry.
Since 2006, the RFS has required petroleum refiniries to add more and more ethanol to gasoline. (For 2019 the requirement is over 19 billion gallons.) Investment in and growth of the ethanol industry (and related corn purchases) have been greatly dependent on this use of government force. After 13 years, the industry has billions of dollars invested in over 200 production facilities, revenues of over $16 billion per year. Any yet, not only can it not wean itself off of government assistance, it continues to press government for more and more support.
Public Choice Theory tells us what to expect when government and special interests create an artificial market using government force. As investment and revenues reach billions of dollars, vested interests easily justify spending millions of dollars lobbying Congress to make sure the support continues. At the same time, each taxpayer pays such a relatively small amount that it is very difficult to raise money to lobby in opposition to these government programs.
But we must do what we can, so now is the time to urge Presidential candidates as well as elected representatives to work toward ending government subsidies and special support for all forms of energy.