We find ourselves in a similar situation over America’s Renewable Fuel Standard, or RFS. As an industry and a nation, we are a third of the way to achieving an incredible goal: replacing 36 billion gallons of petroleum-based fuel with American-made biofuels by 2022. Remarkable progress has been made in the few years since the RFS was introduced by Republican President George W. Bush, and implemented with support of Democratic President Barack Obama. The RFS has driven a 19 percent reduction in American dependence on oil from unstable regions of the globe; while also providing alternatives at the pump that reduce GHG emissions by 20 percent.
Still, those who fear progress have spent hundreds of millions of dollars hectoring renewable fuel investors and supporters in Congress every step of the way.
The RFS needs to be able to run its course in order to prove out, but the (self) interests who oppose the RFS and its impact on their bottom lines are hoping to thwart this vision in order to maintain the status quo – they might prefer a world in which the light bulb remained dim and the world was absent of search engines.
Congress must stay true to the original leadership and vision exhibited and recognize the opportunity the RFS presents and to protect it, in this, high-growth stage with more tangible impact. Otherwise we risk destabilizing the renewable fuel industry and the hundreds of companies that have stepped up to help service and supply that industry with raw materials. Together these small to large companies have already invested billions of dollars, created more than 400,000 jobs, of particular importance in rural communities, while driving technological advances that never would have occurred without the RFS as an effective catalyst.
Some will argue that if renewable fuel were truly “worthy,” it would be able to succeed in the free market without government policy backing it. But even well-established industries receive government backing. Delta Air Lines received a $30 million grant from the state of Pennsylvania when it reopened the Monroe Energy Trainer refinery. Here are some considerations about the free market and transportation fuels:
First, there is no free market when it comes to fueling our vehicles. Even putting aside the fact that oil prices are determined by OPEC, there are a century’s worth of government subsidies – in the form of tax credits, land grants, and mineral rights – behind the incumbent infrastructure that supports petroleum-based fuel. Without that initial government support, oil likely would not have become the powerhouse it is today. That infrastructure presents an immense barrier to competition from renewable fuel. While we may agree that government influence in the market is not ideal, we should agree that government support to create alternatives to, or develop competition for, costly aging monopolies fosters improved energy efficiency. That is precisely what the RFS does.
Second, the RFS is not like previous, traditional government subsidies. It places no burden on the federal budget, except perhaps by reducing gas tax receipts (since gasoline with ethanol is cheaper than gasoline without).
Many RFS opponents have cried out that the renewable fuel credits created by the RFS (called Renewable Identification Numbers, or RINs) hurt Americans at the pump. However, the onus for that pressure can be placed squarely on oil refiners who prefer to purchase sufficient RINs from other refiners. This creates an artificial shortage, with increased demand and higher prices for RINs. In addition, the foot dragging has ensured, incumbent infrastructure hasn’t been upgraded to comply with the law. Meanwhile, the oil companies that made strategic investments in renewables can actually profit from higher RINs prices.
As a former Governor of Pennsylvania I often had to remind myself, and others, that an initiative’s benefits – and the time required to take root and truly achieve change, requires perseverance. America’s innovators throughout time have demonstrated one thing beyond a shadow of a doubt: all they need is a fair chance to commercialize their ideas. The RFS mandate provides a long term runway to achieve these goals. We remain obligated to afford it that chance.
Schweiker was governor of Pennsylvania from 2001 to 2003 and is senior vice-president of Renmatix, the leading producer of cellulosic sugars for the global renewable chemical and fuels markets.