Mandating alternative fuels

17-Sep-2016 09:53

In other words, we are shifting regulatory priorities from the important goal of reducing the harm individuals impose on It also establishes a dangerous precedent: if agencies can justify regulations on the unsubstantiated premise that consumers and businesses (but not regulators) are irrational, then they can justify the expansive use of regulatory powers to control and constrain virtually all choices consumers and businesses make.The findings, interpretations and conclusions posted on are solely those of the authors and not of The Brookings Institution, its officers, staff, board, funders, or organizations with which they may have a relationship.Corn ethanol and advanced biofuels are two primary types of renewable fuels that receive both taxpayer subsidies and a guaranteed market through the RFS.As the industry attempts to move away from food-based feedstocks (primarily corn) toward the next generation of biofuels produced from agricultural residues and waste streams, defining the characteristics of a truly advanced biofuel has become incredibly important.

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Taxpayers have also paid out billions of dollars in subsidies, special interest tax breaks, and other supports to biofuels crop farmers, biodiesel companies, oil and gas companies that blend biofuels into gasoline or diesel, and several others along the supply chain.

On top of this, biofuels enjoy a guaranteed market: 36 billion gallons must be blended into fuel as mandated by the government through the Renewable Fuel Standard (RFS).

They also ignore the key policy implication of behavioral economics, which is that it is more effective to address poor decision-making through soft regulatory “nudges” such as providing clearer information to consumers, rather than going straight to using costly mandates that restrict choice.

Given the political unpopularity of the more economically sound approach of levying a tax on pollution, we are opting for policies that are advertised as environmental protection but are justified by weak claims of consumer protection.

Recent energy-efficiency mandates were advertised as “greenhouse gas initiatives,” but the environmental benefits were estimated to be small and were frequently outweighed by the costs they impose.For example, for the recent fuel economy mandates for passenger cars, the EPA estimated they would cost 2 billion, while the greenhouse-gas benefits would only be billion – and most of these benefits would go to countries outside of the US.

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