The U.S. Environmental Protection Agency announced it will retain the current Renewable Fuel Standard (RFS), turning down requests for a waiver due to high corn prices. As corn prices spiked in the face of this summer’s drought, livestock and food organizations, and some state governors, petitioned the EPA to temporarily suspend the RFS, which currently mandates that fuel companies use 13.2 billion gallons of biofuel this year, with most of that being ethanol produced from corn. For 2013, the biofuel target expands to 13.8 billion gallons.
RFS opponents argue for flexibility in the mandate, allowing less ethanol production in years of tight supplies, while proponents believe the RFS is a key tool for shifting the country toward clean, renewable and domestic energy. Each side cites research supporting their position. Results of a study by economist Thomas E. Elam, president of FarmEcon LLC, for example, indicate the RFS causes considerable volatility in feed prices and inflated retail food prices.
Another study, from Iowa State University economist Bruce Babcock, PhD, indicated that eliminating the RFS would reduce corn prices by less than 5 percent.
Reflecting the divisive nature of the corn-ethanol issue, several groups had mixed reactions to the EPA’s decision.
25X’25, a coalition working toward a goal of securing 25 percent of the nation’s energy needs from renewable sources by the year 2025, praised the decision. "EPA's decision today finding no evidence that the federal Renewable Fuel Standard (RFS) is causing severe ‘economic harm’ and declining to grant a waiver of the ethanol requirements set by the RFS suggests that the standard is doing the job it was designed to do.
"The 2005 statute establishing the RFS gave EPA the authority to grant a waiver if the agency determined after a thorough review that the standard was proving to be causing widespread damage to the economy. In response to requests from a number of governors for a waiver, EPA conducted a wide range of economic analyses and modeling in conjunction with USDA and DOE, and found that requirements for a waiver had not been met and that waiving the RFS will have little, if any, impact.
The National Farmers Union NFU also supports retaining the RFS. issued the following statement after the U.S. Environmental Protection Agency (EPA) released its decision today to keep the Renewable Fuels StandardRFS) levels in place.
“We are pleased with EPA’s decision not to waive the Renewable Fuel Standard for this year,” says NFU president Roger Johnson. “The RFS has helped reduce our dependence on foreign oil from 60 percent in 2005 to 45 percent today and currently supports almost 500,000 American jobs and generates $53 billion in economic activity each year. Furthermore, the existing structure of the RFS provides sufficient market flexibility in case of a drought or other market disruption.”
NCBA, however, disputes the EPA ruling, as does the Texas and Southwestern Cattle Raisers Association (TSCRA).
“In light of the most widespread drought to face the country in more than 50 years, the refusal to grant this waiver is a blatant example of the flawed policy of the RFS,” says NCBA President J.D. Alexander, a cattle feeder from Pilger, Neb. “The artificial support for corn ethanol provided for by the RFS is only making the situation worse for cattlemen and women by driving up feed costs.”
In comments submitted by NCBA to EPA in October, NCBA stated that from December 2007 to August 2012, the cattle feeding sector of the beef industry lost a record $4 billion in equity due to high feed costs and economic factors that have negatively affected beef demand. According to U.S. Department of Agriculture (USDA) reports, corn prices have increased about 60 percent since June 15, 2012, and the near futures price is hovering around $8 per bushel.
“Our message to EPA and Administrator Jackson is how bad does it have to get for livestock producers before relief is brought to rural America?” Alexander asks. “Cattlemen and women are only asking for a level playing field,” Alexander said. “With EPA’s refusal to grant a waiver when faced with these conditions, it is clear the RFS is not working as Congress intended.”
Rancher and TSCRA president Joe Parker Jr. had a similar response. “It’s truly unbelievable that a government agency would ignore the fact that we are facing a dire corn shortage in this country,” he says. “By continuing to mandate that 40 percent of the very small U.S. corn crop go directly toward ethanol production, the government is escalating an already dire situation by bolstering an artificial market that will further push some ranching families out of business.”
Read the decision from EPA online.