In 2005, Congress and President Bush created a “renewable fuels standard” (RFS) This is a rule that requires that fuels such as ethanol be used as a substitute for petroleum-based fuel. The idea was supposedly to reduce oil imports, though it also had other effects. For one, it created a huge benefit for corn farmers, since corn is the primary ingredient in ethanol. And, as corn has been used for fuel instead of food for humans or animals, the RFS has driven up food prices. Lately, there has been discussion of modifying or eliminating the RFS.
The whole premise of the RFS is questionable, since it doesn’t necessarily make sense to use “renewable” energy if non-renewable energy is readily and cheaply available. Many people have been convinced that using up nonrenewable energy sources spells disaster down the road. This is simply not true.
When energy sources become scarcer, they become more expensive, which has historically resulted in innovation to discover more of the energy source (think fracking), and eventually a timely shift to different energy sources. When whale oil for lighting became scarce and more expensive in the 1800s due to increased difficulty in finding whales, people shifted to kerosene. (Which means, incidentally, that drilling for oil helped save the whales.) Kerosene gave way to natural gas lighting, which gave way to electric lighting. The methods of generating electricity have seen changes as well, as innovation, regulation, and changes in availability of fuels have altered the economics of energy.
Trying to force the adoption of another energy source, whether that is ethanol, wind energy, solar, or something else, means spending something valuable to conserve something cheap. Using “renewable” ethanol means using valuable farmland, water for irrigation, fertilizer (some of which is petroleum derived), tractors and tractor fuel for planting and harvesting, trucks for transportation of corn, fuel and water for distillation plants, and human labor. Cheaper energy sources are right under our noses.
But using ethanol means we’ll have more oil to use later, right? Yes. It means that we’ll use up the existing petroleum reserves at a somewhat slower rate, and will shift to other energy sources a little later. But it also means sacrificing all those valuable resources in the present—all the food that could have been grown on the farmland, all the water which could have irrigated other crops or increased stream flow for fishing and recreation, all the tractors and other vehicles, and the rest. It means, in short, less economic development now. It is economic development that gives us the tools to extract oil from harder-to-reach places, gives us innovations that increase the efficiency with which we use oil, and which will eventually replace petroleum. And it is economic development that saves lives. It is economic development from lower-cost energy today that reduces infant mortality and other causes of death, so that children have the chance to grow up, get an education, and become the innovators of the future.
Promoting ethanol so that Americans buy less fuel from foreign countries is also problematic. What sense does it make to expend vast amounts of domestic resources (which I’ve already enumerated) to produce ethanol here, when doing so makes the economy as a whole less competitive? Maybe we import less fuel as a result—but then we can’t compete in other ways because our energy costs are higher.
Apart from the flawed premise of the RFS, dramatic changes in US oil and gas production have rendered the initial rationale for the rule obsolete. Since 2007, when the RFS program was expanded, US oil production has increased by 82 percent, and oil imports have been cut by well over half. Concerns about increasing dependence on foreign oil began to look silly. But ironically, the RFS has driven up another kind of import: the US imports large amounts of sugar cane-derived ethanol from Brazil while exporting corn-derived ethanol to Brazil. Sugar cane ethanol satisfies an EPA requirement for “advanced fuel” while corn ethanol does not. Moving all that ethanol around drives up emissions for no good purpose. For more on this and the EPA’s incompetent handling of the RFS, see this.
The renewable fuels standard is a colossal waste, not good stewardship.
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