Renewable fuels are important to our future U.S. energy mix, with Energy Information Administration (EIA) projections pointing to consumption growth for ethanol and biofuels in the coming years.
However, mandating fuels that are not economically viable to produce translates into higher fuel costs and higher taxes for Americans. In an uncertain economy, it makes no sense to increase taxpayer burden—and add $16 billion to the U.S. deficit over the next 10 years—as Americans struggle to navigate a path toward prosperity.
Not only do biofuel mandates raise consumer food prices, but significant quantities of biofuels will not be cost competitive with gasoline without significant technological advances or spikes in petroleum prices. A Colorado State University study found that Renewable Fuel Standard (RFS)-mandated biofuels production will be so costly, that it is likely to increase ethanol prices by 18.8 percent, raising the cost of gasoline, which is required to be blended with ethanol.
Beyond making gasoline more expensive, the lower fuel economy of ethanol/gasoline blends means you’ll be spending a lot more time and money filling up at the pump. In fact, fuel that is 85 percent ethanol is more expensive than gasoline, even at today’s prices.
Meeting all RFS biofuels mandates would have an estimated social cost of $67 billion, according to an Oregon State University study. This includes taxpayer dollars diverted toward payments, grants, loans and loan guarantees that prop up biofuels development.
A Congressional Research Service study found that federal subsidies for ethanol production alone were estimated at more than $7.8 billion in 2011, including nearly $7.5 billion in (now-expired) tax credits.
Taxpayer dollars also fund government programs whose costs are rising as a result of increased biofuels production. The Congressional Budget Office said that ethanol-related food price increases have impacted supplemental nutrition and other income assistance programs. In 2009, this resulted in $600 to $900 million in additional federal spending. According to the National Research Council, these increases are permanent and the estimates are likely on the low end, especially when one considers impacts on other federal programs like Social Security, military food procurement and Supplemental Security Income.
Rising food prices from dramatically increased ethanol production have increased costs for meat and poultry producers, food companies, grocery shoppers, federal food programs and a host of small businesses across the country. According to the National Turkey Federation, corn prices have risen 64 percent since the RFS was created in 2005, and a study from the Government Accountability Office found that costs to small business retailers for installing new fuel dispensers could reach $100,000 per dispenser.