Last November, the Environmental Protection Agency (EPA) did something many didn’t think possible—they acknowledged reality. Every year EPA sets the amount of ethanol required by the Renewable Fuel Standard (RFS) and for the first time in history, EPA’s draft regulation lowered the overall ethanol mandate. Whether the final regulation lowers the mandate remains to be seen.   

The EPA’s acknowledgement of the reality of the RFS was a long time coming.

Elected officials from both sides of the aisle, along with industry groups ranging from restaurant owners to auto manufacturers, have explained that the mandate is a harmful policy that makes food and fuel more expensive. It can also damage engines, particularly smaller engines like boats motors, lawn mowers, and other yard equipment. The broad, bipartisan consensus has been that the ethanol mandate needs substantive reform, if not outright repeal.

In 2005, Congress passed the ethanol mandate and expanded it in 2007. The mandate requires refiners to blend 36 billion gallons annually of ethanol into gasoline by 2022. For 2014, EPA’s draft rule lowered the total biofuels mandate from 18.15 billion gallons to 15.21 billion gallons.

According to EPA, one of the reasons for the reduction is there is nowhere for all of the ethanol to go. The vast majority of cars and trucks warranty engines that use fuel that contains a maximum of 10 percent ethanol. Currently nearly all gasoline in the country already contains 10 percent ethanol.

While it’s good to see that EPA recognized the mandate had to be lowered because there was not enough gasoline to mix with ethanol without the ethanol content exceeding 10 percent, EPA remains disconnected from reality with respect to another component of this flawed federal policy, the cellulosic ethanol mandate.

It’s important to note that not all ethanol is the same. In 2007, for instance, Congress created mandates for various types of ethanol, most of which is made from corn.  But Congress also created a separate mandate for ethanol made from the inedible parts of plants. This type of ethanol is called cellulosic ethanol.

Cellulosic ethanol is an old, but very expensive technology. During World War I, there was a cellulosic ethanol facility in the United States, but it went out of business due to high costs. By mandating cellulosic ethanol use, Congress was trying to revive and create a new cellulosic ethanol industry and EPA has heavily promoted cellulosic ethanol.

Every year since 2010, EPA has set a level for cellulosic ethanol, and every year the cellulosic ethanol industry’s production is far less than EPA’s mandate. In 2010, EPA set the cellulosic mandate at 6.6 million gallons, but not a drop was produced commercially. In 2013, EPA set the mandate at 6 million gallons, but only 423,000 gallons were produced. This year, the agency set the draft cellulosic ethanol mandate at a whopping 17 million gallons. Obviously EPA is trying to force a cellulosic ethanol market that simply doesn’t exist for this phantom fuel.

Federal ethanol mandates run against consumer sensibilities. Add to that the fact that corn-based ethanol is not even as good for the environment as industry proponents claim and Agriculture Secretary Tom VilsackThomas J. VilsackUSDA: Farm-to-school programs help schools serve healthier meals OVERNIGHT MONEY: House poised to pass debt-ceiling bill MORE tacitly admits, and you’re left with no rational justification to continue this failed government policy.

In the absence of Congress repealing the renewable fuel standard, EPA’s proposal to lower the overall 2014 mandate levels represents a small step in the right direction. At the same time, however, EPA remains seemingly oblivious to its unrealistic cellulosic “phantom fuel” mandate. The signals are clear – the ethanol mandate is a failed federal policy that is long overdue for repeal. It’s time Washington bureaucrats started taking notice.

Pyle is president of the Institute for Energy Research.