National Research Council Committee on the Renewable Fuel Standard: Costly Program of Uncertain Benefits

Michael Giberson

Congress asked the National Research Council to evaluate the economics and environmental effects of the advanced biofuels mandate in the Renewable Fuels Standard (“RFS2”). The result? It isn’t pretty: barring unforeseen technological advances that dramatically reduce costs or oil prices consistently in the neighborhood of $190 a barrel or higher, RFS2 just doesn’t make much sense.

The real kicker is that the environmental benefits are uncertain and not necessarily positive. That is to say, promoting cellulosic ethanol, the supposedly more-environmentally friendly high-tech version of the fuel, may make the environmental worse.

The news was not welcomed at the Department of Agriculture. Agriculture Secretary Tom Vilsack sneered, “Facts? We don’t need no stinking facts.”

Well, not exactly in those words, but here he is quoted in the Des Moines Register:

Agriculture Secretary Tom Vilsack slammed the study as based on old data. “I think it’s unfortunate that reports that are based in my view on somewhat outdated information are basically suggesting we should give up the ghost,” he told reporters. He did not provide examples of data in the study that he considered outdated.

I ask you, is this the kind of “science-based” response you expected from this administration? The story also notes that the RFS2 mandate “calls for motorists to use 500 million gallons of cellulose-based fuel [in 2012] but the government estimates that as little as 3.5 million gallons will actually be produced.” So much for technology-forcing policies.

The politics of advanced biofuels are interesting in that most of the political support for the current version of ethanol-as-corporate-welfare is driven by Midwestern agribusiness interests, and especially corn growers. RFS2-quality fuels need not be corn based and hypothetically could be grown elsewhere, and I think that makes the current ethanol caucus at best a weak proponent of RFS2. But at present, corn-based ethanol needs RFS2 as a fig leaf to cover its own inadequacies as a pro-environment policy. In this political drama, current ethanol plays “bridge biofuel” to the forthcoming glories of advanced biofuels.

Well those forthcoming glories are highly uncertain of environmental benefit, but fairly certain to be expensive. We don’t want to go there, we don’t need the bridge.

3 thoughts on “National Research Council Committee on the Renewable Fuel Standard: Costly Program of Uncertain Benefits

  1. As a note, that was initially chaired by Lester Lave, who died earlier this year while the committee was still putting this together. He was a great policy economist and did some great work in the areas of benefit-cost analysis and risk analysis. Indeed, Risk Analysis published a special journal with a collection of his best work. It is definitely worth a look for anyone interested in regulatory policy.

  2. Thanks for passing along that note David. I was just today looking up some relatively early literature on the economics of – ethanol I think, or maybe automobile fuel economy (I have students working on both topics and now I don’t remember which it was) – and noted how often Lester Lave’s name showed up. Definitely a major contributor to energy regulatory and policy work.

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