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Friday RFS Roundup – 4/11

From food riots and revolutions to gas prices and pump labeling, the implications of ethanol are far and wide. In this week’s news roundup, we look at the diverse effects of the RFS, and the ways in which ethanol mandates affect not only the United States, but also those around the world.

  • Platts, “Maddening” US ethanol prices mimic RINs volatility: What better way to understand ethanol RINs (Renewable Identification Numbers) than by comparing them to high school politics? And Platts could not have depicted a more accurate picture of this “wacky” market by doing so. As RINs continue to play an increasing role skewing the marketplace, we are seeing an effect on gas prices and can expect “explosive volatility” at the pump this driving season.

In Short: “US ethanol prices in 2014 have become what RINs were in 2013 — volatile and downright wacky. In the opening three months of 2013, biofuels RINs went from the nerdy kid in freshman biology to a menacing and eccentric upper-classman that scared all the other kids in the cafeteria.”

  • Courthouse News Service, FTC to Require Detailed Alternative-Fuel Labels: Much like the warning labels we see on electric devices, The Federal Trade Commission (FTC) has proposed “new labeling requirements for blended gasoline to help consumers find the correct fuel for their cars.” With the devastating effects that ethanol can have on your vehicle and other small engines, consumers need to know what they are putting in their engines to avoid impending damage.

In Short: “The proposed labels would also contain the disclosures "may harm some vehicles" and "check owner's manual," because cars continue to have varying ethanol tolerances, which require more precise disclosure, according to the Alliance of Automobile Manufacturers, which was quoted in the action.”

  • MarketWatch, Ethanol price spike means you pay more for gasoline: Just in time for this summer’s driving season, gas prices are on the rise! While ethanol proponents tout its ability to lower gas prices, it’s actually increasing the cost per gallon to our fuel supply. We see this correlating relationship as consumer gasoline prices continue to rise and fall with ethanol’s price. Per the report, ethanol prices shot up 22% in March.

In Short: “Blending a $4-a-gallon product (ethanol) with a $2.50-a-gallon product (gasoline) has resulted in increases in the price of finished motor fuel, Kloza said, adding that high-priced ethanol has added about 10 cents a gallon or more to gas prices in recent weeks.”

  • Slate, A Revolution Marches on Its Stomach: In this Slate analysis, author Joshua Keating highlights the varying indicators of global unrest with one being the price of grain. To meet the growing demand of ethanol and other such biofuels, many countries, including the United States, divert food resources – corn and grain – to meet those government mandated levels.  As Keating notes, this is having a tremendous effect on worldwide stability.

In Short: “The United States as a whole grows more soybeans than China. And due to generous federal subsidies for ethanol, the United States isn’t even growing nearly the amount of food it could. Forty percent of our corn is going into fuel.”

A Coalition Against Bad Policy

We’ve said it once, and we’ll say it again… the ethanol mandate is everyone’s problem.

Oil refiners do oppose the ethanol mandate (primarily because of the looming blend wall), but they are hardly the only ones who take issue with the policy. Environmentalists, taxpayers, food producers, consumer protection groups of all types, anti-hunger advocates and even farmers have all spoken out against the RFS.

This year alone, our coalition has joined arms with even more poultry farmers who are struggling to feed their flocks due to the skyrocketing price of feed; gasoline retailers forced to stock a fuel that consumers neither know about nor want; and outdoor equipment groups grappling to find fuel that won’t damage their small engines.

On Thursday, April 10, Congressman Pete Welch (D-VT), Scott Faber of the Environmental Working Group, Rob Green of the National Council of Chain Restaurants and others will discuss how the ethanol mandate is impacting all Americans in an event hosted by The Hill Magazine in Washington, DC. You can watch the event on The Hill’s website or join the conversation on Twitter using #TheHillLive and #RFS2014.

How Much Are You Prepared to Pay For a Non-Existent Product?

As the most promising advanced biofuels producer in the U.S. narrowly escapes bankruptcy — again — the Senate is considering a plan to continue subsidizing the nonexistent fuel.

On Thursday, April 3, a bill known as the EXPIRE Act made its way out of the Senate Finance Committee. If passed, the EXPIRE Act would renew a slew of energy tax credits slated to expire, including the extension of the $1.01 tax credit for any cellulosic biofuel produced through 2015 — a measure that could cost taxpayers another $55 million.

The problem here remains the inability of advanced biofuels companies, like KiOR — the aforementioned near-failed company — to actually bring those fuels to market.

This chart compares the level of advanced biofuels the EPA expected (and mandated) be produced and the reality of the current market. There isn’t enough production for consumers to actually notice, let alone meet the mandate, and yet the ongoing cost of supporting the biofuel industry through mandates and subsidies is estimated at almost $160 billion from 2008 to 2022.

Gina McCarthy, EPA Administrator, said in a hearing on March 27, the “goal of the Renewable Fuel Standard” is “to get to advanced and cellulosic.” Yet, according to government Energy Information Administration, as far out as 2040 it is unlikely that we’ll be anywhere close to the mandated level of cellulosics.

That’s right, even the government predicts we won’t be able to meet the government’s own mandate. That makes sense.

With advanced biofuel producers on the brink of complete failure, the real winners of the Renewable Fuel Standard (RFS) are land-grabbing corn ethanol producers who continue to rake in record-high profits at the expense of American consumers. Despite being widely discredited as an environmentally-friendly fuel, corn ethanol continues to meet more than 80 percent of the RFS mandate.

Unfortunately, the technology simply does not yet exist to produce the amounts of advanced biofuels needed in today’s market and continuing to mandate ethanol production is driving us farther away from our goals.

Tell McCarthy and the EPA: lower the mandate and stop protecting dirty corn.

3 Things You Need To Know About The UN Climate Change Report & Biofuels

Yesterday, the United Nations Intergovernmental Panel on Climate Change (IPCC) stunned many when it officially reversed its stance on global biofuels policies, finding that biofuels are not an effective means of global warming mitigation. Furthermore, the use of biofuels has sweeping consequences for the environment, global food security and the health of developing nations.

Here’s what you need to know:

  1. Ethanol mandates could divert nine percent of U.S. water to biofuel production. The UN reports that if we continue on our current path, the  U.S. ethanol mandate, called the Renewable Fuel Standard (RFS), will drive 9 percent of U.S. water usage — nearly 1 of every 10 gallons —  toward ethanol production by 2030. If we have learned nothing from the recent drought in California and the 2012 drought, two of the worst in recorded history, it is that we are just one water shortage away from skyrocketing food prices here at home.
  2. Biofuels push up food prices for everyone. Speaking of higher food prices… the UN stated that the RFS could raise food prices (corn, wheat, rice and soybeans specifically) as much as 20 percent. Higher food prices affect all Americans and will especially hurt working families who rely on SNAP, the Supplemental Nutrition Assistance Program, and children who utilize subsidized school lunches.  
  3. Biofuels turn family farms to corporate profits. From a global perspective, biofuels production has dramatically shifted land ownership from citizens in developing countries to global corporations. These corporate land grabs force family farmers and indigenous people off of their land, pushing access to affordable food options out of reach for the world’s neediest populations.

A group of NGO’s have echoed many of the IPCC’s concerns, all while the U.S. Environmental Protection Agency is deliberating on a proposed reduction to the 2014 RFS.

This means that your voice matters more than ever.

Tell Gina McCarthy and the EPA: now that we know better, let’s do better.

NGO’s respond to UN biofuels reversal

As we wait for the Environmental Protection Agency to make the final ruling on the 2014 Renewable Fuel Standard, the U.N. Intergovernmental Panel on Climate Change reversed its stance on biofuels development in a report released this week. 

A group of NGO’s are echoing many of the IPCC’s concerns on climate change, global hunger and the environment.

Environmental Working Group Biofuels Research Analyst Emily Cassidy says:
"The UN panel’s findings should alert U.S. policymakers that mandating the production and use of corn ethanol threatens food security, intensifies competition for land and water and fails to reduce greenhouse gas emissions.”

Clean Air Task Force says:
“It’s increasingly unlikely that biofuels can play a significant role in climate change mitigation, and it’s increasingly clear that conventional biofuels like corn ethanol and palm biodiesel are net contributors to global warming… As climate change intensifies, the report finds, biofuel production will likely contribute to increased deforestation and land degradation, decreased biodiversity, less available freshwater, more land grabs, and greater food insecurity.

ActionAid USA Director of Policy and Campaigns Kristin Sundell says:
“The IPCC has made it clear that biofuels are not a solution to climate change. In fact, biofuel production is deepening the impact of climate change on vulnerable communities. It makes no sense to divert huge tracts of prime agricultural land from food to fuel just as changing climates and more extreme weather threatens harvests around the world.”

ActionAid USA Senior Policy Analyst Brandon Wu says:
“Climate change is already wreaking havoc on food security in developing nations. To avoid catastrophic impacts, especially on the world’s most vulnerable people, immediate financial assistance must be provided to help developing countries adapt to climate change.

Those who are least responsible for causing climate change are the most vulnerable to the climate impacts that are affecting crops and food security. In the United States, we are going to see food prices rise, but many people in developing nations may end up with no access to affordable food at all.”

We will continue to update this post as more organizations weigh in; until then, send a letter to Gina McCarthy at the EPA demanding consideration of the IPCC report.

The Cellulosic Bridge to Nowhere

Ethanol proponents have long claimed that advanced (cellulosic) biofuels — plant-based fuels not made from food sources — will replace corn ethanol, resolving the emissions and hunger problems that corn ethanol causes. And yet, despite government mandates and subsidies, cellulosic biofuels are still not produced at any commercial scale.

In mid-March, KiOR, the most promising cellulosic (advanced) biofuel venture to date, warned investors of impending bankruptcy. Despite taking advantage of $75 million in taxpayer loans and blowing through millions more in private funding, KiOR is nearly $280 million in debt and still asking the EPA for support through the Renewable Fuel Standard.

And while KiOR teeters on the brink of complete failure, producers of deceivingly dirty corn-ethanol are raking in record-high profits. It’s clearer than ever that the U.S. ethanol mandate, the Renewable Fuel Standard (RFS), is a bridge to nowhere except more environmentally destructive corn ethanol.

For all of the money being poured into second-generation biofuels, it is important to remember that we have not once met the mandate for those fuels.

Tell Gina McCarthy and the EPA: continuing to mandate food for fuel in hopes that one day second-generation biofuels will exist is no way to help the environment.

Mother Jones: Wall Street Investors Take Aim at Farmland

Tom Philpott, March 14, 2014 - In a couple of posts last fall (here and here), I showed that corporations don't do much actual farming in the United States. True, agrichemical companies like Monsanto and Syngenta mint fortunes by selling seeds and chemicals to farmers, and grain processors like Archer Daniels Midland and Cargill reap billions from buying crops cheap and turning them into pricey stuff like livestock feed, sweetener, cooking oil, and ethanol. But the great bulk of US farms—enterprises that generally have razor-thin profit margins—are run by independent operators.

That may be on the verge of changing. A recent report by the Oakland Institute documents a fledgling, little-studied trend: Corporations are starting to buy up US farmland, especially in areas dominated by industrial-scale agriculture, like Iowa and California's Central Valley. But the land-grabbing companies aren't agribusinesses like Monsanto and Cargill. Instead, they're financial firms: investment arms of insurance companies, banks, pension funds, and the like. In short, Wall Street spies gold in those fields of greens and grains.

Why are they plowing cash into such an inherently risky business with such seemingly low profit potential? For Wall Street, farmland represents a "reassuringly tangible commodity" with the potential for "solid, if not excellent, returns," the Oakland Institute notes—something clients are hungry for after being recently burned not long ago by credit-default swaps and securities backed by trashy mortgages. As the saying goes, you can't make more land; and as the Oakland Institute notes, "over the last 50 years, the amount of global arable land per capita shrank by roughly 45 percent, and it is expected to continue declining, albeit more moderately, going toward 2050."

Financial institutions and food-strapped countries like China and United Arab Emirates have already been snapping up land in the developing world, where prices are low and labor is cheap. But now, the Oakland Institute reports, pricey US land is also looking attractive, because it "boasts some of the world's most fertile soil, advanced industrial farm technology, strong private property rights, [and] federally subsidized crop insurance."

Read more >>

Taking a Look at the EPA Comments

As we know, last year, the Environmental Protection Agency (EPA) proposed a reduction to the 2014 Renewable Fuel Standard—lowering the mandated production volume of ethanol for refiners. In order to make it official, the EPA solicited comments from citizens and groups both in favor and opposed to this reduction.

At the end of January,  the comment period came to a close and we’d like to feature some of the disparate voices that spoke in favor of the reduction.

A diverse group of industries and activists from Boaters to Bakers, Environmentalists to Entrepreneurs, Ranchers to Riders, spoke up in favor of the reduction with some even calling for further reforms to the RFS. Even groups such as the Clean Air Task Force weighed in:

“…The Clean Air Task Force (CATF) is a non-profit environmental organization that works to protect the earth’s atmosphere by improving air quality and reducing global climate change through scientific research, public advocacy, technological innovation, and private sector collaboration…

… The reductions proposed by EPA are not only an appropriate response to the practical constraints related to the E10 blend wall, they are also appropriate in light of the negative environmental impacts associated with Conventional biofuels, especially corn ethanol…”

In addition to advocating for changes to production some groups even spoke out against E15, the controversial blend of 15 percent ethanol in gasoline, which was proposed as solution to meeting the mandate. The AAA said:

“We continue to have significant concerns surrounding the potential for vehicle damage and consumer harm from allowing E15 to come to market before appropriate education has been conducted and protections are in place…

…The bottom line is that E15 is not ready for primetime, as basic levels of consumer awareness and protection have not been met. Our consumer survey indicated that only five percent of Americans have heard of E15, and less than five percent of cars on the road are approved by automakers to use the fuel…”

However, the group suing suggesting to keep the mandate the same looks a bit more… homogenous.

Of the 218 groups who opposed the EPA’s proposed reduction, over 75 percent of these groups have strong ties to the ethanol industry. These groups included

  • 25 corn producers
  • 32 ag groups (farmers, farm unions/bureaus, etc.)
  • 50 biofuel producers
  • 42 biofuel allies (Renewable Fuels Association, National Biodiesel Board, etc.)
  • 18 biofuel vendors (groups that supply biofuel producers)

We hate to oversimplify, but it seems clear that these groups are fighting for a mandate that is only really helping one industry, in one part of the country, while leaving the rest of us out to dry.

That’s why we need to develop a smarter fuel future and reform the RFS.

Ethanol industry’s record profits

As you read this, the Environmental Protection Agency (EPA) is currently sifting through thousands of comments debating the merits of the EPA’s proposal to reduce the corn ethanol mandate for 2014.

The ethanol lobby is fighting hard for to defeat EPA’s proposal and maintain the status quo. Upon the announcement of the proposed reduction, the industry threatened to sue the EPA if they scaled back the Renewable Fuel Standard — a power that is well within their right, rarely used and the foundation of the much-touted “flexibility” of the policy.

For the effort that the Renewable Fuels Association is putting into lobbying, you’d think the industry was in dire straits…and yet:

The Minnesota Star-Tribune reported that “boom times are back in the ethanol business” and Financial Times writes “the US ethanol industry is enjoying bumper profits again, placing it in an awkward position as it battles plans by the Obama administration to scale back government support.”

According to Biofuel Benchmarking, an analytics service that tracks more than 40 U.S. ethanol plants, 2013 was the most profitable since the industry’s banner year of 2006.

“This reiterates that the industry is going to sustain itself,” said Paula Emberland, who manages Biofuel Benchmarking for Christianson & Associates of Willmar, Minn.

Michael Cox, an analyst with Piper Jaffray & Co. in Minneapolis, told the Star-Tribune that “ethanol’s strong showing illustrates how an industry launched with government subsidies now operates on basic supply and demand.”

And within the industry, producers are optimistic. Archer Daniels Midland: “We are expecting strong margins going into 2014.”

We can all agree this is great news. The market should determine how much ethanol is produced, not a mandate that unnecessarily eats up conservation land, drives up food prices, puts almost every car on the road at risk and demands more and more resources every year.

Tell Congress we don’t need a mandate.

The price you pay

NBC Nightly News shone a light this week on rising food prices that are impacting consumers across the United States.

While Brian Williams and the gang focused on the drought in California, it is important to note that these recent price increases are part of a longer-term trend.  Beef, poultry, milk and cheese prices have all been on the rise for nearly a decade—in fact, food prices are up 17.8 percent.

With the introduction of the Renewable Fuel Standard in 2005, the demand for ethanol increased making it more and more difficult for ranchers to feed their herds. By increasing the competition for and price of corn, the ethanol mandate has unintentionally been driving up the cost at the grocery store. By 2022, the RFS will increase food costs for Americans by $3 billion—annually—according to the Congressional Research Service.

And now the drought, which has been affecting various parts of the country since 2012, is making what is already bad, worse.

We can’t change the weather, but we can make changes to this failing policy. Tell Congress it’s time for a real solution.