Studies refute RFS waiver claims

Studies refute RFS waiver claims

Two separate studies concluded that waiving the Renewable Fuel Standard would not result in meaningfully lower corn prices.

Two separate studies released by leading university agricultural economists concluded that waiving the Renewable Fuel Standard (RFS) would not result in meaningfully lower corn prices. The analyses, released by Iowa State University and Purdue University, directly refute the suggestion from livestock and poultry groups that waiving the RFS would dramatically reduce corn prices and increase availability.

(For more, see: Ethanol waiver requests pick up)

The Purdue University analysis showed that the flexibility built into the RFS—namely the ability of refiners to use excess RIN credits accumulated in past years—serves to reduce corn price without a waiver being necessary. However, the Purdue economists found, if Environmental Protection Agency (EPA) did waive the RFS, corn prices might decrease further by approximately 5.6% in 2013.

Meanwhile, the Iowa State University analysis, an update to an earlier report, found that fully waiving the RFS would result in just a 7.4% reduction in corn price in the 2012/13 marketing year. As with the Purdue report, the flexibility enabled by surplus RIN credits was a significant factor in the ISU analysis.

“The desire by livestock groups to see additional flexibility on ethanol mandates may not result in as large a drop in feed costs as they hope,” wrote Iowa State Professor Bruce Babcock. “…the flexibility built into the Renewable Fuels Standard allowing obligated parties to carry over blending credits (RINs) from previous years significantly lowers the economic impacts of a short crop, because it introduces flexibility into the mandate.”

Similar comments came from the authors of the Purdue study. “A partial waiver certainly is not a ‘stroke of the pen’ solution…” to record high corn prices, they wrote. “Corn prices pushed higher by the worst U.S. drought in half a century would not necessarily moderate if the federal government's corn ethanol mandate were temporarily suspended,” according to a Purdue University press release announcing the release of the study.

The new reports from Iowa State and Purdue reinforce the findings of a recent analysis by economists at the University of Illinois, who concluded, “The EPA does not necessarily have the ability to substantially ease the plight of livestock producers in 2012-13 at the stroke of a pen. Waiving the RFS mandate for ethanol may have a smaller impact on the price of corn or the quantity of corn available for feed than many expect.”

RFA President and CEO Bob Dinneen said EPA is likely to rely on the type of information contained in these university studies as it considers a recent waiver request from the governors of North Carolina and Arkansas.

“These economic analyses compellingly show that waiving the RFS is unnecessary and would be ineffective in meaningfully reducing corn prices,” Dinneen said. “Congress and EPA built sufficient flexibilities into the RFS to ensure compliance is achievable even under the most abnormal and extreme circumstances, such as this summer’s drought. These studies recognize the impact of that built-in flexibility and show that a waiver would not significantly contribute any additional further relief from drought-induced high corn prices.”

Dinneen also noted that EPA’s analysis in response to a 2008 RFS waiver request found that a 5% reduction in corn price—similar to impacts found in the Purdue and Iowa State studies—resulted in just a 0.28% change in food prices, leading EPA to conclude that “…the most likely result is that the RFS would have no impact on ethanol production volumes in the relevant time frame, and therefore no impact on corn, food, or fuel prices.”

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.