Just before the August congressional recess the House Energy and Commerce Committee issued a press release on its progress in reviewing the Renewable Fuel Standard (RFS), the nation’s biofuels policy. Since 2005 the RFS has established an annual mandate for the amount of renewable biofuels that must be used in America’s fuel supply. The August press release promised more “bipartisan collaboration” through the recess and included an eight-sentence joint statement from Fred Upton, the Republican chairman, and Henry Waxman, the ranking Democrat. The word “bipartisan” or reference to “both parties” or “both sides of the aisle” appeared in five of those sentences. With such apparent comity, Capitol Hill observers expected a proposal soon after Congress’s return.
Now those reform efforts are faltering, despite clear warning signs that the RFS is broken. In retrospect, too much bipartisanship may have created some of the very problems Congress now needs to repair. The RFS was established in 2005 but was greatly expanded in 2007 to what is in place today. The expanded structure was proposed by President George W. Bush in his 2007 State of the Union address. By December 2007, the Democratic Congress had codified it—and much more—in the Energy Independence and Security Act.
The result was not a well-considered consensus forged from principled debate but good old-fashioned logrolling. There were goodies for everyone. For the Bush administration there was a vast expansion in the volume of biofuels to be produced—from the then-existing mandate of 7.5 billion gallons of ethanol a year, to a future goal of 36 billion gallons. That was the administration’s response to what it called a “geopolitical imperative” to reduce dependence on foreign (primarily Middle Eastern) oil. “We’ve got to get off oil,” President Bush said, “for the sake of national security.”
For environmentalists who were skeptical about the scope of the plan and its potential environmental impact, there were new categories of biofuels, so-called advanced and cellulosic ethanol, along with strict guidelines for reducing greenhouse gas emissions and land-use regulations to control where and how the feedstocks used for biofuels would be harvested. For farm interests, there was an expanded mandate for corn ethanol and biodiesel made from soybean oil, which would boost commodity prices.
There were incentives for auto manufacturers and the autoworker unions to make more “flex-fuel” vehicles capable of running on biofuels. In 2006, United Auto Workers then-president Ron Gettelfinger had pressed for just that. He said the federal government should “aggressively promote the production, sale and use of alternative fuel vehicles,” with the exception of gas-electric hybrids because components for the latter were “currently manufactured overseas.” The RFS fulfilled that goal.
There were concessions to the opponents of the RFS, designed to lower their resistance. The livestock and food manufacturing industries—facing higher corn and soybean prices—were assured there would be “off-ramp” waivers triggered if grain prices began to cause them grief. And for the obligated parties, the oil refiners and fuel blenders, there was the ability to store and trade compliance credits to ease the burden of meeting the heightened mandates.
All of these provisions were stacked one on top of another. Some were linked, some worked at cross-purposes, some were based on wildly unrealistic assumptions, and all had unintended consequences—which is why Congress is now in the position of reviewing the RFS. Consider that while the 2007 measure prescribes an increased amount of biofuels to be used each year, total fuel use has been declining significantly—down more than 6 percent since 2007 and projected to keep going down. That fuel squeeze is displacing U.S.-produced gasoline, much of which is now being exported—ironically, in the name of energy independence.
Moreover, most of the advanced ethanol mandated for domestic use is being imported from Brazil. That’s because Congress mandated the use of cellulosic ethanol (made from grasses and other plant matter) before it had been commercially developed. Under the 2007 statute, a total of 1.85 billion gallons should have been used by U.S. motorists by now; less than 150,000 gallons have actually been produced. Something had to make up the difference under the category of advanced ethanol and Brazil’s sugar-cane version fit the bill. Pity that cellulosic was also the category of fuel that was supposed to provide the greatest environmental benefits.