Iowa State Univ., Center for Agricultural and Rural Development / by Bruce Babcock
[Renewable Fuels Association] New analysis from the Center for Agriculture and Rural Development (CARD) at Iowa State University suggests that calls for the immediate reduction, revision, or repeal of the Renewable Fuel Standard (RFS) would not achieve the stated goals of those industries calling for such action…
Professor Bruce Babcock, author of the study… analyzed 500 different scenarios assuming varying levels of corn yield this year. In his research, Babcock determined that a total waiver of the RFS would reduce corn prices less than 5% and cause less than a 5% reduction in ethanol production.
Babcock states the modest results are due to flexibilities in complying with the RFS in 2012 and 2013. Specifically, an estimated 2.4 billion excess Renewable Identification Numbers (RINs) can be used in place of physical gallons to demonstrate RFS compliance.
“[T]he 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,” wrote Babcock.
Removing the mandate altogether decreases corn prices by only $0.28 per bushel relative to the case where excess RINs are used for compliance. This is equivalent to roughly 3.5% of recent corn prices and 4.6% of the CARD study’s projected season-average.
In a blog post, Renewable Fuels Association (RFA) Vice President of Research and Analysis Geoff Cooper outlined the flexibility that exists in the RFS and how it can be used to ensure the RFS works as designed. Cooper’s blog can be read here.
“All available market data suggests that the Renewable Fuel Standard is working,” said RFA President and CEO Bob Dinneen. “Strong supplies of ethanol in storage and an abundance of RINs combine to make the RFS a workable and achievable program in 2012 and 2013…