Renewable Fuel Standards Have Some 'Leaks' We Need to Fill

by Andrew F. Quinlan ( Center for Freedom and Prosperity/The Hill) ... A refiner must earn RIN credits to meet its annual obligation by selling enough gallons of biofuel or by purchasing them — the credits, not the actual product — from others with a surplus. This policy often negatively effects smaller refiners, which are forced to purchase expensive credits that appreciate in cost every year to meet the government’s compliance standards.

The current requirements skirt dangerously close to the so-called “blend wall,” or the set of market conditions that limit the total percentage of ethanol that can be safely blended into gasoline without straining infrastructure and harming some existing vehicles. In short, the government is mandating the use of more ethanol than the country can bear on its own.

The only thing that prevented the RFS mandate from complete disaster is the authority that was granted to the EPA to reduce the requirements based on “inadequate domestic supply,” which it has done in recent years for certain sub-quotas like cellulosic biofuel.

The EPA also proposed in 2013 to reduce the total RFS mandate based on the blend wall, only to face heavy opposition from the ethanol lobby and their captured politicians.

Cruz (Senator Ted Cruz (R-TX)) may succeed in pushing a middle of the road solution, amending the RFS so that it works for everyone, including the ethanol industry. The law’s significant grant of authority to the executive branch provides opportunity for a compromise that can, at least for a while, relieve some of the pressure. Right now, RINs — the credits used to ensure compliance with the rule — are not provided for exported fuel. A regulatory change to allow exported fuel to count for RFS compliance would ease the pressure on refiners and the domestic fuel supply while not reducing the benefit to ethanol producers. And the change is environmentally neutral, since air in the U.S. is no more or less important than air anywhere else. READ MORE