The US Environmental Protection Agency (EPA) announced that it has not found evidence to support a finding of severe “economic harm” that would warrant granting a waiver of the Renewable Fuels Standard (RFS). The decision is based on economic analyses and modeling done in conjunction with the US Departments of Agriculture (USDA) and Energy (DOE).
In August, in light of drought conditions affecting the country, governors from several states requested a waiver of the national volume requirements for the renewable fuel standard program (RFS). EPA said that while it recognizes that this year’s drought has created significant hardships in many sectors of the economy, particularly for livestock producers, its analysis made clear that Congressional requirements for a waiver have not been met. Further, it found, waiving the RFS would have little, if any, impact on ethanol demand or energy prices over the time period analyzed.
To support the waiver decision, EPA conducted several economic analyses, including modeling of the impact that a waiver would have on ethanol use, corn prices, and food prices. EPA also looked at empirical evidence, such as the current price for renewable fuel credits, called RINs, which are used to demonstrate compliance with the RFS mandate.
The agency analyzed 500 scenarios, and in 89% of saw no impacts from the RFS program at all. Looking across all 500 scenarios, including those 11% of scenarios where RFS requirements would have an impact on the corn and other markets, the average impact on corn prices is only 7 cents a bushel, less than a 1% change in corn prices. Economic analyses of impacts in the energy sector, conducted with DOE, showed that waiving the mandate would not impact household energy costs.
EPA found that the evidence and information failed to support a determination that implementation of the RFS mandate during the 2012-2013 time period would severely harm the economy of a state, a region, or the United States, the standard established by Congress in the Energy Policy Act of 2005 (EPAct).
EPAct required EPA to implement a renewable fuels standard to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel. A waiver of the mandate requires EPA, working with USDA and DOE, to make a finding of “severe economic harm” from the RFS mandate itself.
This is the second time that EPA has considered an RFS waiver request. In both cases, analysis concluded that that the mandate did not impose severe harm. In 2008, the state of Texas was denied a waiver.