#35

300 Natural Resources & Environment:Eliminate the Renewable Fuel Standard

Savings in Millions of Dollars
  • 2016
    5
  • 2017
    5
  • 2018
    5
  • 2019
    5
  • 2020
    5
  • 2021
    5
  • 2022
    6
  • 2023
    6
  • 2024
    6
  • 2025
    6
  • 2016-2020
    25
  • 2016-2025
    54

Sources

According to page 92 of EPA, “Fiscal Year 2015: Justification of Appropriation Estimates for the Committee on Appropriations,” March 2014, $96.5 million was spent in FY 2014 on federal vehicle and fuels standards and certification. Savings from this proposal assume that a fraction of that amount, $5 million in 2014, could be cut without the RFS. Both the current FY 2014 spending level and the alternative level of $91.5 million were increased at the same rate as discretionary spending for 2016–2025, according to the CBO’s most recent August 2014 baseline spending projections. The savings represent the difference between these two spending levels.

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Technical Notes on Scoring

CBO Baseline

Unless otherwise noted, calculations for savings for each recommendation relies on the most recent Congressional Budget Office baseline, as found in “An Update to the Budget and Economic Outlook: 2014 to 2024,” published August 27, 2014, has been used.

Savings “Totals”

While totals for the five and 10 year savings are provided by section and for the complete set of recommendations, there are two reasons they should not be viewed as representing total savings for The Budget Book.

First, as noted in the introduction, The Heritage Foundation would recommend that the savings realized in the Function 050 Defense section would stay within the Department of Defense to strengthen the nation’s defense capabilities.

Second, the numbers cannot be deemed to represent the realized savings if every single recommendation were adopted because policy changes made in one program can impact spending levels in other programs.  Thus, the numbers in the table do not reflect any potential interactions between the various policy changes affecting spending or savings.

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Heritage Recommendation:

Eliminate the Renewable Fuel Standard (RFS). This proposal saves $5 million in 2016 and $54 million over 10 years.

Rationale:

Renewable fuel standards will increase the cost of gas up to 26 cents a gallon. Get rid of them

Administered by the EPA and more commonly known as the ethanol mandate, the RFS mandates that refineries blend increasing amounts of ethanol into gasoline each year. By law, there must be 15 billion gallons (and no more) of corn-based ethanol and another 21 billion gallons of non-corn biofuels in the nation’s fuel supply by 2022. Even though Congress set target levels, the EPA officially sets the annual targets based on domestic gasoline and diesel production and administers a trading, credit, and waiver system among refiners.

The Congressional Budget Office recently published a report showing the RFS will increase gas prices by 13 cents to 26 cents per gallon as soon as 2017.1 Multiple federal agency and government-backed studies demonstrate the RFS has harmed Americans, driving up fuel and food prices. And, in January 2013, a U.S. Court of Appeals struck down the EPA’s requirement for cellulosic ethanol, calling it “unreasonable.”2 Congress should not mandate the use of certain fuels and should discontinue all funding for implementation of this unworkable program.

Endnotes

  1. Congressional Budget Office, “The Renewable Fuel Standard: Issues for 2041 and Beyond,” June 26, 2014,
    (accessed December 16, 2014). 

  2.  Christopher Doering, “Court Rules EPA Ethanol Mandate ‘Unreasonable’” USA Today, January 25, 2013,
    (accessed December 16, 2014).  

Renewable fuel standards will increase the cost of gas up to 26 cents a gallon. Get rid of them

Contributing Expert

Nicolas (Nick) Loris, an economist, focuses on energy, environmental and regulatory issues as the Herbert and Joyce Morgan fellow at The Heritage Foundation.

See publications by Nicolas Loris

Nicolas (Nick) LorisHerbert and Joyce Morgan Fellow

Heritage Experts

Jack Spencer oversees Heritage Foundation research on a wide range of domestic economic issues as director of the Roe Institute for Economic Policy Studies. Those topics include federal spending, taxes, energy and environment, regulation and retirement savings.

See publications by Jack Spencer

Jack SpencerVice President for the Institute for Economic Freedom and Opportunity

Katie Tubb is a Research Associate and Coordinator in the Thomas A. Roe Institute for Economic Policy Studies

See publications by Katie Tubb

Katie TubbResearch Associate and Coordinator

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