Enviros Push Regulations to Double Price of Gas

Enviros Push Regulations to Double Price of Gas

In the face of the worst drought in decades, record high gasoline and diesel prices, and the fact that biofuels producers have yet to place a single gallon of cellulosic ethanol into U.S. fuel markets, a large number of Governors, members of Congress and stakeholders havecalled for either the repeal of the federal Renewable Fuel Standard or major reforms to the program. Support for an overhaul of the RFS program has come from all corners of the political debate, including Republican legislators (such as U.S. Senator Jim Inhofe, R-OK), Democratic legislators (like U.S. Senator Chris Coons, D-DE), refiners, agricultural stakeholders and even some environmental groups.

However, the fact that these environmental groups are publically calling for reforms to the RFS program does not stem from their concerns about fuel prices or recognition that government programs cannot force the creation or sales of products into markets when they are not ready for commercialization. Unfortunately, some of these groups are attempting to use the debate to replace one costly and inefficient program with one that is even worse – a national Low Carbon Fuel Standard (LCFS).

The National Low Carbon Fuel Standard Project is one of several environmental initiatives attempting to replace the RFS with an LCFS. The argument, according to the National LCFS Project and other environmental groups, is that the RFS has only succeeded in creating a market for increased use of corn-based ethanol. This is evident in the fact that the RFS has failed in its primary objective to encourage the development of advanced biofuel, including cellulosic ethanol which is currently not commercially viable. These groups argue that corn-based ethanol has a high lifecycle carbon-intensity due to the fact that the RFS forces us to take corn out of the world’s food markets, which will need to be replaced by corn grown outside the United States – resulting in the burning down of the Amazon rainforest, which acts as the world’s largest carbon sink. These groups conclude that rather than denying corn from the world’s food markets, we should force drivers to use “low carbon fuels” such as cellulosic ethanol, natural gas or electricity.

While the contours of the RFS repeal/reform debate are far from certain – any changes to the program will require legislation to get through a divided Congress and be signed by a President who supports the program (regardless of the outcome in November’s election) – there is no doubt that implementing a Low Carbon Fuel Standard would be very bad news for American drivers.

Designed as a cap-and-trade program for transportation fuels, an LCFS is designed to reduce the carbon intensity of the nation’s fuel pool through an aggressive program to force fuel switching from traditional fuels such as gasoline and diesel to “low carbon” fuels such as cellulosic ethanol, electricity or natural gas. Under a low carbon fuel standard, if a retailer cannot reduce the carbon intensity of the fuels that he is selling into a market through increased sales of low carbon fuels, he would have to buy credits from another entity that has earned them through such sales or stop selling traditional fuels into the market.

As discussed in several recent studies on LCFS, rationing traditional fuel supplies to meet the LCFS requirements will more than double gasoline prices and hammer the economy. One study, conducted by Charles Rivers Associates in 2010 found that a federal LCFS, such as the one pushed by the National LCFS Project, would raise gasoline prices by up to 180 percent over 10 years, eliminate up to 4.5 million jobs and reduce household purchasing power by up to $2,400 for the average family.

There is no question that the Renewable Fuel Standard has had many unintended consequences, which helps explain why we are entering into a significant national dialogue on the future of the program. However, replacing it with a Low Carbon Fuel Standard with its many intended consequences is hardly a step in the right direction for American drivers.