Renewable Fuel Standard: Likely Effects on Gasoline Prices and Greenhouse Gas Emissions (GAO Report)

Policy Details

Policy Details

Last Action
Published.
Date of Last Action
Jun 3 2019
Date Introduced
Jun 3 2019
Publication Date
Jun 6 2019
Date Made Public
Jun 3 2019

SciPol Summary

The federal renewable fuel standard (RFS), enacted by Congress through the Energy Policy Act of 2005 and expanded through the Energy Independence and Security Act of 2007 (EISA), mandates that gasoline, diesel, and other transportation fuels sold in the US contain a certain (annually increasing) percentage of biofuels—that is fuels produced from renewable sources such as corn or other agricultural products.  Most prominent among these is ethanol, which drives a significant portion of demand for corn crops in the Midwest.  

Prior to 2005, ethanol was already in widespread use as a fuel additive that oxygenated fuel and prevented engine knock, replacing lead and MTBE which had proven harmful to human health and the environment. The Energy Policy Act and EISA mandated the use of biofuels in particular, in increasing percentages, to bolster US energy security and, in theory, reduce greenhouse gas (GHG) emissions.  

The RFS has, in fact, provided a steady source of income for Midwestern corn farmers, making it politically popular.  For example, the need to court support from Midwestern farmers and Senators is behind the Trump Administration's recent decision to allow the sale of E15—gasoline blended with 15% ethanol—year round.   

But the effect of the RFS on fuel prices and GHG emissions has been less clear.  In this report, the GAO concludes that the RFS has decreased gasoline prices by a few cents per gallon in Midwestern states, close to ethanol production sites, and higher by a few cents per gallon further afield, given the costs of transporting ethanol out of the Midwest.  

The GAO also concludes that the RFS has had little effect if any on GHG emissions, because the RFS has mainly been met to date using conventional corn ethanol, which has less potential for reducing GHG emissions than advanced biofuels.  This is unlikely to change, the GAO concludes, as "advanced biofuels have been uneconomical to produce at the volumes required by the RFS" and as a result, the Environmental Protection Agency (EPA) has waived most of the advanced biofuel requirements.