The Exchange

Renewable Fuel Policy Instability Is a Jobs and Investment Killer

The Exchange

By Brent Erickson

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A U.S. commercial airliner at Bush Intercontinental Airport in Houston. (AP Photo/David J. Phillip)

A U.S. commercial airliner at Bush Intercontinental Airport in Houston. (AP Photo/David J. Phillip)

Most pundits don’t realize it but the Renewable Fuel Standard, or RFS, has led a renaissance in U.S. technology innovation. Following the establishment of the policy in 2005, companies across the United States made substantial investments to accelerate the development of cleaner-burning biofuels and new energy crops. Beyond biofuels, homegrown biotechnology advances are now being used to produce renewable chemicals and biobased products, including green plastics. The technology developed by these companies has the potential to mitigate the impact high and volatile global oil prices have on all facets of our economy while reducing gas prices at the pump for American consumers.

The RFS is also helping the U.S. keeps it lead in biotech innovation. Over the past five years, companies have invested nearly $5 billion within the United States to research and develop advanced biofuels. This research and development has already created more than 5,000 jobs here in the United States. Investors – including many international companies attracted by the economic opportunity here in the United States – are ready to commit additional dollars. Continued growth of the industry could create more than 800,000 jobs and $37 billion in economic activity by 2022.

Refineries standing in the way

But this progress is threatened by the oil refining industry’s anti-competitive harangue against the RFS and their campaign to destroy demand for alternative fuels. Refiners have not only refused to accept the spirit of the RFS law and blend more biofuels, but also mounted legal and legislative challenges to the policy that are meant to create uncertainty for investors and for policy makers. It is the height of unethical business behavior to block market access for a competitor, then cry wolf to Congress by saying the program is not working. The excuse given by some refiners: “we are not in the biofuels business, we are in the oil business.” Ironically, the oil industry was at the table when the RFS was created. Unfortunately, the oil refining industry’s efforts have delayed the implementation of new technologies by making it increasingly difficult to secure private investment in biorefinery construction.

Instability in the RFS – through either threatened repeal or legislative “reform” that would take years of additional rulemaking to implement – needlessly causes investor uncertainty. Companies – particularly multinational companies – can choose to commercialize the technology developed here in countries with more favorable policy and market environments. The United States would thereby lose to other countries the jobs and economic growth promised by the expansion of renewable fuel production capacity. The United States could also lose the opportunities that homegrown biotechnology innovations in renewable chemicals are generating.

Real benefits

Renewable fuels are already providing U.S. consumers some relief at the pump. There is a clear, undeniable benefit to using a lower-priced alternative to petroleum and lessening imports of oil for transportation fuels. One study calculated the average benefit across the nation at $1.09 per gallon in 2011.

This is the only bright spot in America’s ongoing pain at the pump. American consumers have drastically cut back on driving over the past several years due to high and unpredictable oil prices. In 2012, the average U.S. household spent $257 more on transportation fuel than in 2011 – even while driving substantially fewer miles. The 3.3 percent increase in gasoline prices in 2012 outpaced the 2.9 percent average growth in American’s incomes. Fuel price spikes both destroy demand for fuel and stall economic growth as America continues to recover from its economic recession.

Brazil has been a shining example of how a successful biofuels program can work and give consumers choice at the pump. Improving our transportation fuel infrastructure is not easy and the RFS is not perfect, but it is working. It has successfully accelerated commercialization of technologies that help to reduce our overwhelming reliance on foreign petroleum. The RFS was intended to provide exactly the type of long-term regulatory stability needed to send a signal to investors to develop a domestic biofuels industry. Continued attacks on the policy are designed to halt progress on a promising homegrown technology. At the end of the day, it is American consumers who will get gored if the oil bulls in the policy china shop are successful in impairing or repealing the RFS. And that is why Congress should stay the course.

Brent Erickson is Executive Vice President with the Biotechnology Industry Organization (BIO).

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