DOE Study: RFS Boosts US Economy

By Bob Dinneen | April 01, 2013

As Congress and the country debate the renewable fuel standard (RFS), Big Oil and Big Food are flooding the zone with bought-and-paid-for “studies” seeking to discredit American ethanol and the public policies that promote its production and use. 

Fortunately, a recent research article about the RFS’s economic impact provides what’s needed to inform the debate: independently funded, scientifically based, bias-free findings. Published in the academic journal Biofuels and authored by researchers at the U.S. DOE’s Oak Ridge National Laboratory, the article, “Global economic effects of U.S. biofuel policy and the potential contribution from advanced biofuels,” is a must-read.      

The researchers’ conclusion: The RFS is producing positive economic effects for the United States, and the benefits will increase by 2022, when the RFS requires that 36 billion gallons of renewable fuels be blended into the nation’s transportation fuels.

The RFS is increasing the gross domestic product, reducing oil prices and decreasing oil imports. For all the talk about food versus fuel and indirect land use change, the RFS has only minimal impacts on global food markets and land use. 

When it comes to growing the gross domestic product, the RFS will contribute to a projected 0.8 percent increase by 2022. (For context, 0.8 percent of the current GDP is $121 billion.) As the researchers report, “The economic benefits of conventional and advanced biofuels are primarily from their effects in reducing the import and use of oil.” About half the economic benefits come from the RFS’ conventional biofuel requirements, with the remainder from advanced biofuels.

In a major economic benefit, the study shows that ethanol helps to hold down motor fuel prices. Looking forward to the full implementation of the RFS targets, the researchers find that increased use of renewable fuels will reduce motor fuel prices by 3 percent in 2015 and approximately 7 percent by 2022.

Why is ethanol so good for the economy? An important reason is that ethanol reduces America’s reliance on imported oil. From 2005 through 2012, as ethanol increased from 1 to 10 percent of the gasoline supply, U.S. dependence on imported petroleum products declined from 60 to 41 percent. What if America meets the RFS’ advanced biofuels requirements with imported sugarcane ethanol rather than domestically produced renewable fuels? There would be fewer benefits for American families. As the researchers write: “a greater reliance on [biofuel] imports could reduce the benefits of advanced biofuels significantly,” because “imported biofuels displace domestic production and, as with oil, increase payments for fuel to the [rest of the world].”

As for food prices and land use, the researchers report that ethanol’s impact is minimal. If the RFS’ goals are achieved, the study finds that prices for livestock, poultry and dairy prices will “remain stable or even decrease in some years” through 2030, while prices for food commodities and coarse grains will rise by less than 1 percent. Meanwhile, there will be “… a slight [net] reduction in global land use for agriculture.”

The bottom line: The RFS is an American success story.

That’s why it’s time to tell Congress: Don’t mess with the RFS!

Author: Bob Dinneen
President and CEO,
Renewable Fuels Association