The Renewable Fuels Standard – which requires a certain percentage of ethanol (and biofuel diesel) be force-fed into the nation’s fuel supply – was sold to the public largely on the basis of the mandated fuels being . . . renewable
The idea being, ostensibly, to reduce dependence on foreign sources of fuel – and to promote homegrown jobs and industry.
As crazy as it sounds, that’s the situation – although it wasn’t intentional.
The problem is one of supply and demand. The demand created artificially – as a result of the RFS, which arbitrarily mandates the production of 15 billion gallons of renewables annually and the “blending” of a certain percentage of ethanol and biodiesel into the total volume of fuels that end up at your local gas n’ go.
Refineries and distributors are required to meet their quota of renewable fuels – or buy credits from someone else (not necessarily someone who actually produces the renewables)in order to satisfy the federal obligation. There is a secondary market for these tradable credits – which are called Renewable Identification Numbers (RINs).
Speculators have made a killing trading them, exploiting the federal RFS mandate much in the same way that Elon Musk has exploited federal carbon credits – which are similarly fungible – to generate cash for his loathsome electric car company. Laws on the books in states like California require every car company that wants to sell any cars in that state to aso sell a certain number of “zero emissions” electric cars. They can satisfy this mandate by purchasing the credits from Elon, which count just the same as if the company had actually built and sold its own electric cars.
Its one of the greatest scams going.
Because there isn’t sufficient production in the U.S. to meet the 15 billion gallon “renewable minimum,” refiners and distributors actually import renewables.
At the same time, renewables made in the USA are not credited under the RIN system if they are exported.
This has created some extremely perverse incentives.
Because of the way the regs are set up – refiners and distributors have little choice but to pony up for foreign renewables, in order to make up for any shortfall in domestic production or availability (renewables have a very short shelf life) and meet their federal renewable fuels quota.
Or, they can purchase RINs – at whatever the speculation-driven price happens to be.
Meanwhile, if they produce too much ethanol or biodiesel and want to sell it outside the U.S., they get no RIN credit for having produced it.
This doesn’t reduce U.S. dependence on foreign sources of fuel; it increases it. Not only that, resources – money – leaves the U.S. as well and goes into the pockets of foreign energy producers.
The traceable RINs also encourage foreign renewables because RIN credits can be assigned to renewables produced outside the U.S. and imported here.
And it’s not just a capacity – or production – problem, either. While the feds can continue mandate ever-higher renewable fuels quotas, the market has a finite capacity to use renewables.
Most “gas” currently sold in the U.S. is 10 percent ethanol (E10) but higher concentrations of ethanol cannot be used in cars not designed to accommodate it. This includes almost all passenger cars made before the 2001 model year, which amounts to millions of cars currently on the roads and likely to be on the road for many years to come.
Some newer cars can handle higher concentrations of ethanol, but it will takes years for the millions of cars that can’t to attrite out of circulation.
Getting rid of the quotas, period, would solve the problem – but the ethanol lobby is as powerful as several sith lords and the vested interests entrenched.
There is, however, an option that would triage the damage: Change the regs to allow the Renewable Fuels Standard to be met by both production and distribution internally as well as the exporting of any surplus, which would have the same RIN value as renewables used domestically.
Producers would at least not be punished for exporting surplus renewables, as under the current regime. At the same time, the artificial incentive to import foreign renewables could be tamped down by eliminating their eligibility for RINs.
Oddly, some of the major players – mostly very large, national-level refiners and distributors – are opposed to this common sense idea. Perhaps because they prefer a more captive (and artificial) market – for renewables (the actual fuels) as well as the RINs (the tradable credits), which they can leverage and which disproportionately advantage large producers at the expense of smaller, independent refiners and distributors.
There is a huge export market for ethanol and other biofuels. American companies – and American workers – shouldn’t be penalized for taking advantage of it. At the same time, American drivers shouldn’t have ethanol force-fed to them, nor have to pay artificially high fuel costs – driven up by speculation in RINs.
President Trump will reportedly be meeting with some of these big players sometime next week. As he promised to do on the campaign trail, he has a golden opportunity to put America first – even if it upsets a small band of crony capitalists.
The question is – will he?
. . .
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