GAO Reports Show Policy Makers Must Commit to RFS Goals

Two reports issued this week by the General Accounting Office (GAO) are being touted – unsurprisingly – by critics of the Renewable Fuel Standard (RFS) as proof of the biofuel-blending mandate’s failings. But, just as those who in the past have campaigned against the far-sighted energy policy, the detractors this week are putting a negative spin on what are essentially recommendations for improving the RFS. They are slanting the facts to justify their claims that the program must be ended.

The GAO reviewed the questions of whether the RFS program is going to meet its 2022 targets for reducing greenhouse gas emissions and for expanding production of U.S. renewable fuels in accordance with congressional statutes. Cited in particular by the watchdog agency was the shortfall in the production of advanced biofuels.

Advanced biofuels, which are defined as those that offer a reduction in greenhouse gas (GHG) emissions of 50 percent or more when compared to petroleum-based fuels, aren’t being produced at the levels called for by the RFS when it was strengthened and reauthorized by Congress in 2007. As an example, the GAO notes that in 2015, less than 5 percent of the 3 billion gallons of cellulosic ethanol called for by the RFS was produced. Cellulosic ethanol is a biofuel made from plant material such as corn stalks and leaves – even wood trimmings – that offers lifecycle GHG-emission reductions of at least 60 percent.

The report notes that EPA has reduced the RFS targets for advanced biofuels through waivers in each of the last four years, attributing the shortfall to high production costs. The GAO asserts that the investments in the research and development required to make advanced biofuels more cost-competitive with petroleum-based fuels “are unlikely in the current investment climate.”

But, a continued and more thorough reading of the reports shows that the GAO offers a number of proposals that the agency says can incrementally improve the investment climate for advanced biofuels.

Maintaining a consistent tax credit for biofuels, for example, rather than allowing it to periodically lapse and be reinstated – the second-generation biofuel producer tax credit has been allowed to expire about every two years – could reduce uncertainty and encourage investment in advanced biofuels.

Other suggestions cited in the GAO reports include making the producer credit more long-term, possibly up to 10 years; make the producer credit refundable to make sure biofuel producers receive the subsidy in early years when they are sustaining financial losses; and couple the producer tax credit with an investment tax credit to decrease capital costs and improve the financial incentives for building cellulosic biofuel plants.

In other words, an update to policies that give the advanced biofuels sector a chance to meet the economic, energy security and environmental goals Congress envisioned when it established the RFS, as well as help boost production within reach of the 2022 goal of 36 billion gallons.

Disheartening, however, was the announcement this week from House leadership that the $1-per-gallon blender tax credit for biodiesel, along with a variety of additional tax incentives promoting cellulosic ethanol production and alternative fuel infrastructure – all set to expire at the end of December – will not be renewed in the remaining “lame duck” days of this Congress. This is just the kind of policy inconsistency cited by GAO that is causing the shortfall in meeting the RFS goals.

It’s unfortunate that the GAO report tends to dissect the component parts of the RFS to focus on the shortfalls of advanced biofuels. A broader view of the program shows the RFS has boosted the production of biofuels, which, over time, are getting cleaner and cleaner. According to the DOE’s Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model, average corn ethanol reduces GHG emissions by 34 percent.  Meanwhile, gasoline produced from oil extracted from increasingly difficult locations is getting dirtier and dirtier, according to research from Steffen Mueller of the University of Illinois at Chicago’s Energy Resources Center, and Stefan Unnasch, managing director of Life Cycle Associates.

Conventional and cellulosic ethanol, as well as biomass-based diesel and advanced biofuels are all positive economic engines, and they bring many security and environmental benefits. When it comes to the RFS, it’s time to make sure the message is clearly heard – renewable fuels are important today, and will be even more important tomorrow. As the GAO reports suggest, it’s time for policy makers to steady the course with the RFS and implement resounding policies that can make the standard work the way Congress intended more than a decade ago.

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