NCPA - National Center for Policy Analysis

Renewable Fuel Standard Blocks an Innovative Way to Fuel America

April 11, 2012

The 2007 Renewable Fuel Standard (RFS) law has come under fire for a number of reasons, ranging from the unfair fees it imposed on oil refiners to its questionable environmental impact.  In addition to these concerns, a new issue has now been raised that the RFS is actually preventing market entry of a new, reliable fuel source, says Forbes.

Steven Sterin, president of the advanced fuels division at Dallas-based chemicals company Celanese, believes that the ethanol he creates from natural gas and coal can supplant the current regime of corn-derived fuel.  Broadly, he argues that he can produce fuel cheaper, faster, more consistently and at lower cost than traditional suppliers.  Nevertheless, his fuel is largely blocked by the RFS.

  • Because of the RFS, gasoline refiners are mandated to blend so much plant-based or renewable ethanol into the gas supply that it prevents Celanese from even competing for the market.
  • This has created an artificial demand for 14 billion gallons of ethanol for 2012.
  • To produce this ethanol, 5 billion bushels of corn (one-third of the total U.S. crop) were consumed, borrowing the use of 33 million acres of farmland.
  • Since the RFS was implemented, U.S. corn prices have tripled.

Advocates of the RFS argue that the prevention of fuels like Mr. Sterlin's and the promotion of ethanol fuels are necessary in the effort to gradually reduce emissions.  However, a 2010 study by researchers at Rice University found no reason to believe that the process of planting, tending, harvesting and processing corn into ethanol emits less carbon dioxide than does gasoline.

Sterlin has responded to this market obstruction by pointing out that his fuel will still find ample buyers in markets that are not so thoroughly controlled by Washington, such as the makers of paints, pharmaceuticals and textiles.

Additionally, the United States' haphazard attempt to reduce emissions by rejecting a viable fuel possibility does not dictate policies overseas.  Beijing issued permits to Celanese to create an 80-million-gallon-per-year ethanol addition at its Nanjing complex, compared with the 6-million-gallon-per-year plant the company operates in Texas.

Source: Christopher Helman, "How A Dumb Law Blocks A Great Way To Fuel America," Forbes, April 3, 2012.

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