The USA Renewable Fuels Standard (RFS) is often held up as an example of good policymaking by those who support government interventions in the fuel market (e.g. biofuel mandates) to promote the uptake of alternative fuels.

The RFS requires renewable biofuels (i.e. ethanol and biodiesel) to be blended with traditional transport fuels in increasing volumes each year.

During the first year of operation (i.e. 2006) the target was 4 billion gallons but progressive legislative changes since that time have seen the target volume rise to a requirement of 36 Billion gallons in 2022.

“To say that the RFS has been controversial in the USA is somewhat of an understatement’, said ACAPMA CEO Mark McKenzie.

“Like Europe and more lately Australia, the original targets were primarily justified by claims of accrued national environmental benefit – particularly, lower greenhouse gas emissions”, Mark continued.
Growing uncertainty about the nature of the true environmental benefit, coupled with concerns about food crops being used for fuel production, contributed to a growing national debate about the net benefit of the RFS to the American economy and its people.

Legislated improvements in vehicle fuel efficiency – and the likely potential electrification of the global vehicle fleet – have also raised questions about the merits of continuing to focus on an environmental strategy (i.e. biofuels adoption) that is likely to be superseded by changes in vehicle technologies in the near term.

Different to Australia, one of the concessions afforded to the retail fuel industry was the provision of an associated Federal Grants programme to provide financial assistance to fuel retailers who were required to adapt their infrastructure to accommodate the storage and dispensing of biofuels.
“Unfortunately, Australian policymakers have not chosen to provide similar programmes for fuel retailers meaning that the costs associated with the establishment of the biofuels industry are being wrongly shouldered by the fuel retail industry in Australia”, said Mark.

Over the last 18 months, debate surrounding the future of the RFS in the USA has intensified with the biofuels lobby, consumer interest groups and the conventional fuels industry petitioning the US Congress to support their various claims to either retain or amend the Standard.

Critics of the RFS point to the dubious nature of the environmental (particularly greenhouse claims) made by the powerful biofuels lobby, as well as concerns about the marginal benefits to end consumers and the failure to realise the employment benefits that were originally cited by the advocates of a biofuels mandate.

In fact, the debate about the net economic benefit to the USA agricultural industry has been openly challenged by government and industry studies that reached similar findings to the recent Australian Productivity Commission report (http://www.pc.gov.au/inquiries/completed/agriculture/report/agriculture.pdf) that concluded that such mandates come at a net cost to the Australian Agricultural industry and the community at large.
But there are signs that legislator support for the continued operation of the US biofuels laws may be waning.

In March 2017, Republican Congressman Greg Walden (the Chairman of the House Energy and Commerce Committee) indicated that the US EPA’s ethanol mandate is on the ‘short-list’ for repeal by the US Congress later this year.

In a strong statement against the use of government intervention in the competitive fuels market, Congressman Walden said that the goal of the repeal was to ‘put the consumer first and build policy from there’.

With an increasing body of independent government agencies questioning the merits of biofuel mandates in Australia, Australian politicians might do well to monitor US developments and take heed of the increasing body of literature challenging biofuels mandates.

“Our industry is not opposed to the use of biofuels by Australian motorists, but we are opposed to the introduction of legislative interventions to force sale of these fuels given the increasing body of national and international literature highlighting the adverse market competition and consumer consequences”, said Mark.

SHARE THIS ARTICLE: