Gasoline and diesel prices are on the ballot this November. While the war with Iran gets much of the blame for the recent price run-up, the country’s ill-advised, bipartisan mandates to use huge quantities of renewable fuels, primarily corn-based ethanol and soybean-based diesel, have driven up costs for far longer.
Almost 50 years ago, the U.S. enacted subsidies for corn ethanol production to reduce the country’s dependence on foreign oil and thereby increase energy security. These subsidies continue today and, under the Energy Policy Acts of 2005 and 2007, were expanded into a far broader Renewable Fuels Standard (RFS) that has grown in scope and complexity over time.
The RFS mandates four types of renewable fuels—cellulosic biofuels (e.g., ethanol made from switchgrass and corn stalks), biomass-based-diesel (made primarily from corn oil and soybean oil), and conventional biofuels (mostly corn-based ethanol).
The 2007 legislation directed total renewable volumes to increase from four billion gallons in 2006 to 36 billion gallons by 2022, with the EPA to determine levels thereafter. The RFS goals also changed, adding an emphasis on reducing pollution and greenhouse gas emissions.
Economic and technological realities intervened. Producing advanced biofuels proved to be more difficult and costly than politicians imagined. Consequently, the EPA reduced the mandated quantities. Next year, the EPA will require just over 27 billion gallons of biofuels, renewable diesel, and ethanol. Politics has taken precedence over whether these annual goals are advisable let alone technically achievable.
Recent estimates suggest the RFS has cost the U.S. over $250 billion between 2011 and 2025. And, according to the EPA’s most recent analysis, the RFS will cost the U.S. economy more than $40 billion in 2026 and 2027, while the estimated value of the energy security benefits will total a tiny fraction of that cost: around $800 million.
As for GHG reductions, the EPA concluded that the mandate might reduce annual emissions by 31 million metric tons (less than one percent of 2025 US emissions of about 4.8 billion metric tons) but could also increase total emissions, depending on how the renewable fuels are manufactured. The EPA also determined that the RFS has increased air pollution and greenhouse gas emissions and adversely affected water quality.
The EPA also estimated the overall cost impacts on gasoline and diesel fuel. For gasoline, the average cost impact compared to a no-RFS scenario was over five cents per gallon this year. The impact on diesel fuel was far greater: almost 20 cents/gallon in 2026, with an expected increase of 22 cents/gallon in 2027. Those higher costs reverberate throughout the economy: food costs rise as crops are diverted to manufacturing renewable fuels, and transportation costs rise as well.
The EPA’s analysis demonstrates that the RFS imposes high costs while providing negligible energy security and climate benefits. But the mandates have always had bipartisan political support: Republicans in Midwest states, where most RIN subsidies flow to agribusiness and ethanol manufacturers, rather than farmers, and Democrats who reflexively embrace anything with the word “renewable.”
Common sense would have terminated the RFS long ago. Sadly, politics and common sense rarely go together.
This article originally appeared at Real Clear Energy