Economic Impacts of the U.S. Renewable Fuel Standard: An Ex-Post Evaluation

Abstract

This paper examines the extent to which biofuel production has been driven over time by the U.S. Renewable Fuel Standard (RFS) and the extent to which it was driven by non-RFS policies and market forces. While the RFS has played a critical role in providing a secure environment to produce and use more biofuels, at least in the 2000s, it was not the only factor that encouraged the biofuel industry to grow. While the existing literature has successfully identified the key drivers of the growth in biofuels, it basically has failed to properly quantify the impacts and contributions of each of these drivers separately. This paper develops short- and long-run economic analyses, using Partial Equilibrium (PE) and Computable General Equilibrium (CGE) models, to differentiate the economic impacts of the RFS from other drivers that have helped biofuels to grow. Results show: 1) the bulk of the ethanol production prior to 2012 was driven by what was happening in the national and global markets for energy and agricultural commodities and by the federal and sometimes state incentives for biofuel production; 2) the medium-to long-run price impacts of biofuel production were not large; 3) due to biofuel production, regardless of the drivers, real crop prices have increased between 1.1 and 5.5% in 2004–11 with only one-tenth of the price increases were assigned to the RFS, 4) for 2011–16, the long-run price impacts of biofuels were less than the time period of 2004–11, as in the second period biofuel production increased at much slower rate; 5) biofuel production, regardless of the drivers, has increased the US annual farm incomes by $8.3 billion between 2004–11 with an extra additional annual income of $2.3 billion between 2011–2016; 6) the modeling practices provided in this paper assign 28% of the expansion in farm incomes of the period of 2004–2011 and 100% of the extra additional incomes of the period of 2011–16 to the RFS.

Development of R&D GREET 2023 Rev1 to Estimate Greenhouse Gas Emissions of Sustainable Aviation Fuels for 40B Provision of the Inflation Reduction Act

“…GTAP-BIO is an advanced extension of the standard GTAP model. It has been developed, improved, and used frequently to examine the economic and environmental consequences of energy-trade-economic-environmental policies and actions (Taheripour et al, 2010;Hertel et al, 2010;Beckman et al, 2012;Taheripour and Tyner, 2013;Taheripour and Tyner, 2014;Taheripour et al, 2016a;Brookes et al, 2017;Taheripour and Tyner, 2018;Yao et al, 2018;Taheripour et al, 2022;Busch et al, 2022). Taheripour et al (2017a) described the background of this model and Taheripour et al (2017b) developed the latest version of this model.…”

Factors Affecting Crop Prices in the Context of Climate Change—A Review

“…Many of the reviewed publications presented the short-to long-term effects of biofuel on crop prices through the direct effects of biofuel production or the indirect effect of biofuel policies [34,37,[46][47][48][49][50][51].…”

“…Condon et al [47] examined US corn crops and documented that (i) a billion-gallon expansion in ethanol production increased corn prices on average, across studies, by 2-3% and that (ii) the short-term impacts on corn prices per billion gallons of corn ethanol production in response to unexpected shocks were higher. Taheripour et al [34,46] analysed the medium-and long-term price impacts of the biofuel production of coarse grains (corn), soybeans, rapeseed, and other oilseeds in the USA in the period of 2004-2016 and revealed that the medium-to long-term price impacts of biofuel production were not large. Real crop prices increased between 1.1% and 5.5% in 2004-11 while only one tenth of the price increases was associated with the Renewable Fuel Standard (RFS) [46].…”

“…Taheripour et al [34,46] analysed the medium-and long-term price impacts of the biofuel production of coarse grains (corn), soybeans, rapeseed, and other oilseeds in the USA in the period of 2004-2016 and revealed that the medium-to long-term price impacts of biofuel production were not large. Real crop prices increased between 1.1% and 5.5% in 2004-11 while only one tenth of the price increases was associated with the Renewable Fuel Standard (RFS) [46]. A 20.8% increase in the supply of corn ethanol would cause a 5.3% increase in the price of this commodity [46].…”

A biofuels outlook for the U.S. and Brazil and what it might mean for sustainable development goal 7

“…Governments across the globe have mandated the use of ethanol and biodiesel with petroleum fuels (Palandri et al, 2019). For example, in 2005, the U.S. adopted the Renewable Fuels Standard, which mandated biofuel use (Taheripour et al, 2022;EPA, 2023). Indeed, biofuel use has increased globally (Figure 3).…”