Clinton’s Ethanol Plan Harms Rural America

Last month, presidential candidate Hillary Clinton released her “Plan for a Vibrant Rural America.” Despite Clinton’s claims, her plan will harm rural families. Moreover, by mandating expensive transportation fuels, Clinton’s plan amounts to a national gas tax.

Clinton Flip-Flopped on Ethanol “Gas Tax”

As a Senator, Clinton once adamantly opposed an early version of the Renewable Fuel Standard (RFS), which requires refiners to blend rising amounts of biofuel into gasoline. At the time, she said a renewable fuel mandate would raise gasoline prices at the pump. In a 2002 letter penned with three other senators, she even went as far as to call it “the equivalent of a new gasoline tax.” However, during her 2008 presidential run, Clinton flip-flopped and began supporting ethanol mandates—quite possibly in an attempt to curry favor with Iowans.

Clinton had it right the first time. The RFS functions as a tax on gasoline by mandating the use of expensive fuels, such as cellulosic ethanol. Her so-called “improvements” to the RFS will only make the mandate worse, hitting poor families hardest. Ultimately, it’s Americans that are paying for Clinton’s politically convenient “change of heart.”

Low Carbon, High Cost Fuel Standards

The ethanol portion of Clinton’s “Rural America” plan is summarized on her website:

“Strengthen the Renewable Fuel Standard so that it drives the development of advanced cellulosic and other advanced biofuels, protects consumers, improves access to E15, E85, and biodiesel blends, and provides investment certainty.”

This plan is backwards. The RFS already requires the use of cellulosic ethanol. Congress thought that cellulosic would be cost-effective by now and mandated the use of billions of gallons of it, but reality has proven Congress wrong. Clinton wants to double down on Congress’ inability to predict the future.

For example, in 2010 and 2011 no cellulosic biofuel was produced, despite Congress’s mandate. In 2012, only 20,069 RINs [a RIN is a “Renewable Identification Number” and is equivalent to a gallon of ethanol] cellulosic were produced and in 2013, 422,740 RINs were produced. While that sounds like a lot, it pales in comparison to the 1.75 billion RINs mandated by the RFS. Worse, cellulosic production crashed in 2014 back to 44,168 RINs. For 2015, the RFS calls for the use of 3 billion gallons of cellulosic ethanol, but so far, only 1.6 billion gallons of cellulosic biofuel have been produced and 227,000 gallons of cellulosic diesel.[1]

With cellulosic biofuel, there is a clear history of failure. This is an expensive fuel, but Clinton wants to further require the use of it. This is a recipe for higher fuel prices.

Clinton also extolls the virtues of E15 and E85 (E15 is fuel that is 15 percent ethanol and E85 is fuel that is 85 percent ethanol). The problem is that most cars on the road are not certified by the automakers as being able to safely use E15 and the majority of the time, E85 is more expensive (on an energy equivalent basis) compared to regular gasoline. Sometimes, E85 makes economic sense to use in a flex-fuel vehicle, but not all of the time. It is simple economics—if there was demand for E85, the federal government would not need to subsidize it as Clinton wants.

By favoring costly, non-existent cellulosic biofuels over corn-based ethanol, Clinton’s fuel mandate would resemble California’s Low Carbon Fuel Standard (LCFS). This would impose enormous costs on American motorists. As AEA previously explained:

Not only is an LCFS another inefficient and political mandate, but it is costly as well. According to a study by Boston Consulting Group on California’s LCFS, the program could increase the price of gasoline by more than $2.50 a gallon. SAIC looked at a possible Northeast/Mid-Atlantic LCFS and found that it would cost 147,000 jobs and reduce GDP by $27 billion. Moving from an RFS to an LCFS means that American motorists will pay more for fuel and suffer job losses and slower economic growth.[2]

Clinton’s Plan Would Hurt Rural Americans

Ironically, Clinton’s proposal could actually hurt many rural farmers by shifting the mandate from corn-based ethanol to advanced biofuels that aren’t derived from corn. Essentially, Clinton’s plan will disadvantage corn farmers and raise gasoline prices across the board, hitting rural Americans the hardest, especially those who log the most miles in their vehicles. In a way, this option is the worst of both worlds. Not only will it increase fuel prices, but her plan will hurt many of the “rural Americans” she claims to help.

Clinton’s proposal is similar to efforts in Congress aimed at repealing the corn-portion of the RFS. As discussed above, this would establish a LCFS that props up expensive, non-existent biofuels at the expense of corn farmers while burdening all Americans with gas prices that look like California’s—among the highest in the nation. This is why Congress should reject current partial-repeal proposals and eliminate the RFS entirely.

Conclusion

Clinton’s plan is framed as a boon to rural America, but one of its key facets—a modification to the RFS—will harm many rural families. Before she flip-flopped to pander to voters, Clinton was right to label renewable fuel mandates as a gas tax.

The economic realities are still the same. Mandating ethanol and advanced biofuels will lead to higher gasoline prices for motorists. In addition, the Clinton plan will turn the RFS into a California-style Low Carbon Fuel Standard, resulting in even more economic harm. In the end, the RFS is broken beyond repair and Clinton’s plan will only make it worse. Only a full repeal of the law will truly improve the lives of all Americans.

[1] See EPA, 2015 RFS2 Data, http://www3.epa.gov/otaq/fuels/rfsdata/2015emts.htm. Note, last year EPA changed the definition of cellulosic biofuel to include renewable CNG and renewable LNG as cellulosic biofuel. We are not counting those volumes in this because this isn’t the fuel Congress contemplated when it created the updated the RFS.

[2] Daniel Simmons, “Why Congress Should Fully Repeal the RFS,” American Energy Alliance, May 27, 2015, https://www.americanenergyalliance.org/2015/05/27/corn-ethanol-only-repeal-makes-the-rfs-worse/.