GAO: RFS Limited in Reducing Emissions

Reliance on Corn-Based Ethanol Seen as a Greenhouse Gas Weak Spot

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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A new report from the federal government concludes the Renewable Fuel Standard has had limited effects in reducing greenhouse gas emissions, a conclusion challenged by the USDA. (DTN/Progressive Farmer photo by Matthew Wilde)

OMAHA (DTN) -- The Renewable Fuel Standard has had limited effects on reducing greenhouse gas emissions and has likely led to modest gasoline price increases in the program's early years in states outside the Midwest, according to a new Government Accountability Office report on the effects of RFS.

The study conducted at the request of Sen. James Lankford, R-Okla., a noted critic of the RFS, drew criticism from the USDA's lead economist. Lankford requested the study as part of an effort to make the case to EPA for resetting RFS volumes on conventional biofuels to below 10%.

In response to the GAO report, USDA Chief Economist Robert Johansson expressed concern about the methodology used by the GAO.

"It reflects the views of a group of individuals rather than a synthesis of the latest research," he said in the letter. "Instead of assessing recent relevant literature regarding the greenhouse gas profile of corn ethanol, and the GHG impacts of the RFS, GAO chose to survey individuals it identified as subject experts and/or professional interests concerning corn ethanol -- particularly its GHG profile."

The GAO said in its report it interviewed 18 "experts we identified through snowball sampling based on expert referrals." In addition, the GAO said it interviewed industry stakeholders from petroleum, ethanol and agriculture, including the Renewable Fuels Association, POET, National Corn Growers Association, Growth Energy, Advanced Biofuels Association and the American Soybean Association.

When it comes to GHG reductions, the GAO said because the volume requirements for advanced biofuels, including cellulosic ethanol, have not materialized, the reliance on corn ethanol has lessened the effect of the RFS.

"The RFS's reliance on corn-starch ethanol to fill biofuel mandates has limited the ability of the RFS to reduce greenhouse gas emissions," the report said. "Specifically, as we reported in November 2016, most of the biofuel blended to date has been conventional corn-starch ethanol, which has a smaller potential to achieve greenhouse gas reductions compared with advanced biofuels. Because of this, several experts we interviewed for the November 2016 report raised concerns about the extent to which the RFS has achieved its design of reducing greenhouse gas emissions."

INFORMATION OUTDATED

In the letter to GAO, Johansson said the analysis used outdated information.

"GAO's value for the GHG benefits of corn ethanol appears to be the value developed by EPA in the 2010 regulatory impact analysis of the revised Renewable Fuel Standard -- this value being 21% lower than an energy equivalent quantity of gasoline," he wrote.

"GAO's conclusions do not reflect the ethanol industry today. A large and growing body of research has been published since 2010. The most recent studies assess the GHG benefits of corn ethanol at 39% to 47% lower than gasoline on an energy equivalent basis. While GAO correctly points out that the planned emissions reductions from advanced biofuels have not materialized, the reductions from conventional ethanol are significantly higher than previously thought. We believe that this should have been a key finding of the GAO."

When it comes to gasoline prices, the GAO said there were some regional increases caused by increased transportation and storage costs in locales outside the Midwest and that the RFS initially caused increases in refining investment costs "that over the long term reduced refining costs for gasoline."

STATE MANDATES

The GAO looked at state-level ethanol mandates to determine the effects on gas prices. It found in states like Minnesota and Missouri that have ethanol mandates, retail gasoline prices were lower by about 8 cents and 5 cents per gallon, respectively.

In states such as Hawaii, Oregon and Washington where ethanol mandates were in effect, gasoline prices were 2 cents to 8 cents higher.

"These results suggest that the RFS likely had gasoline price effects in other states that did not have statewide ethanol mandates but that incrementally began blending ethanol as a result of increasing RFS requirements that, by around 2010, had led to almost all gasoline sold in the United States being blended with 10% ethanol," GAO said.

Congress passed the original RFS in 2005. It was expanded and allocated among several categories of renewable fuels in 2007. The final 2007 rule was not finalized by the EPA until 2010.

Johansson said the GAO hasn't accounted for the economic benefits of the ethanol industry.

"This industry is generating jobs and economic benefits in rural communities and is providing solutions to the environmental challenges we face," he wrote.

"And contrary to the conclusion in GAO's report, the up-to-date and more recent peer-reviewed studies have all found that ethanol offers substantial aid increasing greenhouse gas benefits."

At the end of April, Lankford signed on to a letter, https://www.lankford.senate.gov/…, sent to EPA Administrator Andrew Wheeler by Sens. Jim Inhofe, R-Okla.; John Barrasso, R-Wyo.; John Boozman, R-Ark.; Bill Cassidy, R-La.; Shelley Moore Capito, R-W.V.; Susan Collins, R-Maine; John Cornyn, R-Texas; Tom Cotton, R-Ark.; Steve Daines, R-Mont.; Mike Enzi, R-Wyo.; Cindy Hyde-Smith, R-Miss.; John Kennedy, R-La.; Pat Toomey, R-Pa.; and Roger Wicker, R-Miss.

The lawmakers made the case an ethanol blend wall, which is when the amount of ethanol produced exceeds what can be blended in the market, is reason for dialing back the market to below E10. They argue that falling gasoline demand is a reason for dialing back.

The EPA reportedly is working on an RFS reset for release possibly sometime this year.

Read the GAO report here: https://www.gao.gov/…

Todd Neeley can be reached at todd.neeley@dtn.com

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Todd Neeley