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RFS Compliance: Death Spiral or Investment in E85?

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  • Bruce A. Babcock
  • Sebastien Pouliot

Abstract

The American Petroleum Institute (API) commissioned NERA Economic Consulting to study "the economics and compliance issues related to the implementation of the Renewable Fuel Standard (RFS2)." NERA's October 2012 report finds that ethanol and biodiesel blend walls create insurmountable barriers to the amount of biofuels that can be consumed in the United States. Once these blend walls are hit, producers of gasoline and diesel will only be able to comply with biofuel blending mandates by reducing domestic sales of gasoline and diesel. NERA argues that such cuts will make it even more difficult to meet blending mandates in subsequent years, thus leading to further reductions in gasoline and diesel sales. This series of fuel sales reductions leads to an upward "death spiral" in fuel prices, with severe harm to the US economy.

Suggested Citation

  • Bruce A. Babcock & Sebastien Pouliot, 2013. "RFS Compliance: Death Spiral or Investment in E85?," Center for Agricultural and Rural Development (CARD) Publications 13-pb16, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:13-pb16
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    Cited by:

    1. Christensen, Adam & Hobbs, Benjamin, 2016. "A model of state and federal biofuel policy: Feasibility assessment of the California Low Carbon Fuel Standard," Applied Energy, Elsevier, vol. 169(C), pages 799-812.
    2. Christensen, Adam & Siddiqui, Sauleh, 2015. "Fuel price impacts and compliance costs associated with the Renewable Fuel Standard (RFS)," Energy Policy, Elsevier, vol. 86(C), pages 614-624.

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