There was quite a bit going on while I was away on vacation this past week (I know… you must have missed me terribly) but one item which didn’t receive much media attention was an announcement from the EPA regarding ethanol, biofuel in general and the Renewable Fuel Standard. That was one subject which I harped about endlessly during the GOP primary race and few of the Republican candidates for the presidency inspired much hope that they would deal with this destructive policy in an assertive fashion. (Ted Cruz was the notable exception.)
I suppose I was already prepared for disappointment when Donald Trump was sworn into office, and that expectation was fulfilled this week. It seems that there will be some very minor tweaks made to slow the growth of the RFS mess, but not much more than that. (Des Moines Register)
The U.S. Environmental Protection Agency proposed new targets Wednesday for the amount of renewable fuels that must be blended into the nation’s fuel supply next year.
The agency proposes that the amount of conventional ethanol, typically made from corn, remain at 15 billion gallons in 2018.
But it dropped the level of cellulosic biofuel, considered the next generation of ethanol, to 238 million gallons from 311 million gallons.
Cellulosic ethanol in Iowa is made from corn cobs, husks and other biomass.
So rather than growing, the total amount of ethanol which will be forced into the nation’s gas supplies will remain static at 15 billion gallons. It’s somewhat ironic that the only real cuts are coming in the area of cellulosic biofuel, which is no better for your engine and still less efficient to burn than normal gasoline, but at least isn’t burning up food to make fuel out of it. It comes as no surprise that the coverage out of the Iowa press focuses on quotes from the Iowa Renewable Fuels Association, the same group which holds a gun to all Republican candidates’ heads if they want to make it through the caucuses there in one piece. But Bloomberg had a slightly more sane take on the subject.
The decision sets up a clash with oil refiners, which had argued the ethanol requirement exceeds a 10 percent “blend wall,” or the amount that can be easily blended into the fuel supply.
According to a May forecast from the U.S. Energy Information Administration, motor fuel demand is set to climb to about 143.5 billion gallons in 2018 from about 143 billion in 2017. Given that forecast, if the conventional renewable fuel quota were fulfilled entirely by ethanol, the fuel would represent 10.5 percent of total projected gasoline consumption…
The American Petroleum Institute, which represents oil producers and refiners, had asked the EPA to set lower quotas that would reflect about 9.7 percent of projected gasoline demand; some refiners had pushed a lower 9.5 percent.
Yes, we’re still going to allow this politically motivated and scientifically unsound policy to push us past the blend wall. And even more than that, none of these current talking points even begin to touch on the problems caused by the Renewable Identification Number (RIN) credit system and all the abuse which is excused under that program. I have a more full explanation of those problems in this piece from last year, but here’s the upshot of it.
The RFS mandates how much ethanol must be blended into the fuel supply as a way to “save the environment” but it’s turned into a gigantic political boondoggle. Part of this system involves the use of the Renewable Identification Number (RIN) credits which [Carl] Icahn is talking about. If a smaller refiner doesn’t have the capacity to create a sufficient amount of ethanol or can’t afford it when prices skyrocket, they need to purchase these RIN credits to make up for it. That turns the credits into the equivalent of a government endorsed, unregulated trading market. If enough pressure is applied to that system to make the credits unaffordable it could put the smaller refiners out of business, taking their jobs with them.
So what can we expect from Donald Trump and whoever he chooses to put in charge of the EPA? On the campaign trail Trump was more than disappointing on this subject. He went on record in Iowa calling for even higher ethanol mandates as opposed to ending this damaging program. (To be fair, so did pretty much all the candidates except Cruz and even he seemed to waver at times.) So was this all just campaign talk to win a few more votes in corn country or was Trump serious about it?
We have the answer to that question now. Credit where due when it comes to keeping your word, I suppose. Trump said he was going to continue to buttress this crony capitalist shell game and now he’s kept to his word. That will make him a bit more popular in Iowa (as if he needed the support at this point) but it doesn’t do much for the rest of us. The RIN credit trading game will continue and we’ll burn more food to make fuel that we no longer need in an era of American domestic energy production dominance. All in the name of keeping Iowa’s politicians happy.
To borrow a frequently seen quote from the President’s Twitter feed… Sad!