Sens. Dianne Feinstein (D-Calif.) and Tom Coburn (R-Okla.) and eight co-sponsors introduced The Corn Ethanol Mandate Elimination Act of 2013, which proposes to eliminate the corn ethanol mandate within the Renewable Fuel Standard (RFS). The RFS requires that transportation fuel sold in the U.S. contains a minimum volume of ethanol or renewable fuels.
This legislation - and the bipartisan duo that produced it - is significant insofar as it lends additional focus to the severe need for reform in this area. Coburn and Feinstein also have a track record of success in dealing with this issue, having previously taken the helm of successful efforts to roll back the excessive subsidization of the ethanol industry. So in many real ways, this is progress.
The RFS lays out a schedule of increased non corn-based advanced biofuels to 21 billion gallons by 2022. However, there is no commercially viable technology to meet the advanced biofuels goal, which Congress was aware of when establishing the mandate.
The negative economic consequences resulting from the RFS are numerous. The corn mandate diverts a huge portion of the U.S. corn crop towards making fuel, which raises animal feed and food prices. These higher prices are an unjust tax on the poor and people on fixed incomes.
The RFS is also raising prices at the pump. A NERA Economic Consulting study concluded that the new Renewable Fuel Standards will cause a 30 percent gas price increase and a 300 percent diesel price increase in 2015. On top of raising prices, the RFS leads consumers to buy more gasoline because ethanol reduces fuel efficiency. U.S. News reports that ethanol delivers 25 percent fewer miles per gallon than gasoline does.
Furthermore, the RFS is intended to lower carbon dioxide emissions, and does not even succeed in its most important goal. Life-cycle analyses of corn ethanol production have shown that there is actually a negative effect from emissions associated with planting and harvesting. There would be a positive effect from advanced biofuels, but the technology is not currently commercially viable. The RFS is a broken federal policy that has sought for too long to mandate production and use of a fuel that is unfeasible.
While Feinstein and Coburn's bill has good intentions, it does not go nearly as far as it needs to. It only addresses corn-based ethanol and ignores all other types of ethanol that are equally as troublesome. Along these same lines, the EPA's recent positive steps to mitigate the effects of the RFS are laudable, but insufficient.
The recent EPA decision and The Corn Ethanol Mandate Elimination Act of 2013 are parts of a piecemeal approach to fixing the mess that is the RFS. Only a wholesale approach to the problem - repealing it in its entirety - will bring back certainty and reliability to fuel markets and stop the harmful impacts on consumers and businesses.
This flawed rule should not determine how much ethanol is in fuel. The marketplace will best make that determination and without hurting consumers in the process. The failure of the RFS mandate shows that policy initiatives which do not reflect economic, environmental, and technological realities will waste resources and ultimately not work.
Thorning is senior vice president and chief economist with the American Council for Capital Formation and director of research for its public policy think tank.